SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
June 1, 1999
(Date of report)
VIANET TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
NEVADA 033-55254-19 87-0434285
(State of Incorporation) (Commission File Number) (IRS Employer ID)
</TABLE>
83 Mercer Street
New York, New York 10012
(Address of Principle Executive Offices)
(212) 219-7680
(Registrant's Telephone Number)
<PAGE>
ITEM 2. Business Combination
On April 5, 1999 the Company entered into an Arrangement Agreement (the
"Arrangement") to acquire all the outstanding shares of Develcon. The
Arrangement has received the approval of the Supreme Court of British Columbia,
the Securityholders and Debentureholders of Develcon.
The Arrangement provided for Develcon shareholders to receive one share of
common stock of the Company for every 30.75 shares of Develcon. The Arrangement
also provided that the Develcon convertible notes payable be converted into
5.9963 Develcon shares for each $1.00 principal amount of notes payable and that
interest which was accrued on the convertible notes payable but not paid shall
be forgiven. These shares also converted into Vianet shares in the ratio of one
share of the Company for every 30.75 shares of Develcon. Additionally, effective
upon closing, certain other creditors of Develcon agreed to either accept common
stock of Vianet as payment for amounts or portions of amounts owed to them and
have restructured the repayment schedule. In exchange for restructuring the
repayment schedule of its debt, if such debt has not been repaid by June 30,
1999, a lender of Develcon granted warrants to purchase 150,000 shares of Vianet
stock at the greater of $6.00 per share or 90% of the price per share of an
offering of no less than $2.5 million completed between May 15, 1999 and June
30, 1999. The warrants become exercisable over an approximate 24-month period
and expire on June 30, 2002. Upon completion of the Arrangement, defaults under
long-term debt agreements are expected to be cured.
On May 11, 1999, Develcon held it's Annual and Special Meeting of
Shareholders, at which time the Securityholders and Debentureholders approved
the Arrangement. The Arrangement became effective on May 18, 1999.
As a result of the closing of the Arrangement, the former shareholders and
creditors of Develcon, excluding the Company, hold approximately 2.3 million
shares of the approximate 8.4 million shares of common stock the Company has
outstanding.
ITEM 7. Appendicies
Arrangement Agreement
Plan of Arrangement
Securityholders' Resolution
Debentureholders' Resolution
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
Vianet Technologies, Inc.
(Registrant)
/s/ Peter Leighton
- -----------------------------------
By: Peter Leighton
President & CEO
<PAGE>
APPENDIX A
AMENDED AND RESTATED
ARRANGEMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT made as of the 5th day of April, 1999
BETWEEN:
VIANET TECHNOLOGIES, INC., a Nevada corporation,
(hereinafter referred to as "Vianet")
and
DEVELCON ELECTRONICS LTD., a corporation continued under the laws of Canada,
(hereinafter referred to as the "Corporation")
WHEREAS:
A. Vianet and the Corporation wish to propose an arrangement involving the
Corporation, the holders of common shares of the Corporation, the holders of
options and warrants issued by the Corporation, the holders of convertible
debentures issued by the Corporation, Vianet and a newly incorporated
wholly-owned subsidiary of Vianet ("Subco"), in order to reorganize the
Corporation's affairs and therefore wishes to carry out certain transactions on
the basis hereinafter set forth;
B. The parties hereto intend to carry out the transactions contemplated
herein pursuant to an arrangement under the CBCA;
C. In addition to the arrangement, the parties intend to enter into certain
other transactions including certain loans by Vianet to the Corporation;
D. The board of directors of the Corporation has determined that it would
be advisable and in the best interests of the Corporation for it to enter into
this Agreement;
E. The Corporation and Vianet Technologies, Inc. ("Vianet Delaware"), a
Delaware corporation and a predecessor to Vianet, entered into an Arrangement
Agreement dated as of the 12th day of February;
F. On March 22, 1999, Vianet Delaware merged with and into Radar Resources,
Inc. with Radar Resources, Inc. as the surviving corporation;
G. As part of the merger, Radar Resources, Inc. changed its name to Vianet
Technologies, Inc., being the party hereto;
H. The parties desire to amend and restate the above-noted Arrangement
Agreement to take into consideration certain matters arising as a result of the
above-noted merger;
NOW THEREFORE in consideration of the mutual covenants set out in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is acknowledged, Vianet and the Corporation agree as follows:
1. The Transactions
1.1 Process. Subject to the terms and conditions of this Agreement:
(a) as soon as reasonably practicable, the Corporation shall
apply to the Court pursuant to Section 192 of the CBCA for an order
approving the Arrangement and in connection with such application
shall:
<PAGE>
(i) in due course file, proceed with and diligently
prosecute an application for an Interim Order under Section
192(4) of the CBCA providing for, among other things, the calling
and holding of the Special Meeting for the purpose of the
Securityholders considering and, if deemed advisable, approving
the Arrangement and the calling and holding of the
Debentureholders Special Meeting, or circulation of a written
resolution to the Convertible Debentureholders, for the purpose
of the Convertible Debentureholders considering and, if deemed
advisable, approving the Arrangement and other procedural
matters; and
(ii) subject to obtaining the approval of the
Securityholders and Convertible Debentureholders as contemplated
in the Interim Order and as may be directed by the Court in the
Interim Order, take the steps necessary to submit the Arrangement
to the Court and apply for the Final Order;
and, subject to the fulfilment or waiver of the conditions set
forth in Schedules C and D, shall file with the Director Articles of Arrangement
and such other documents as may be required to give effect to the Arrangement;
(b) the Arrangement shall become effective on the Effective Date;
(c) as soon as reasonably practicable after the execution of this
Agreement, the Corporation shall call and hold the Special Meeting on or
before the Meeting Date to consider and approve, inter alia, the
Arrangement and Vianet shall provide commercially reasonable cooperation to
the Corporation in respect of this matter;
(d) as soon as is reasonably practicable after the execution of this
Agreement, the Corporation shall call and hold a meeting of, or circulate a
written resolution to, the Debentureholders on or before the Meeting Date
to consider and approve, inter alia, the Arrangement and Vianet shall
provide commercially reasonable cooperation in respect of this matter; and
(e) in furtherance of completing the Arrangement, Vianet and the
Corporation shall work together to prepare a management information
circular in connection with the Special Meeting and Debentureholders
Special Meeting (or the written resolution to be executed by the
Convertible Debentureholders in respect of those matters which would
otherwise be considered at the Debentureholders Special Meeting), relevant
filings and applications to be made by Vianet with the SEC and the NASD and
such other documents as may be necessary or desirable.
1.2 Compliance with Legislation. Vianet and the Corporation shall cause the
Arrangement to be implemented in compliance with the Legislation.
2. Conditions of Transaction
2.1 Conditions in Favor of Vianet. The obligations of Vianet to complete
the Arrangement shall be subject to the fulfilment, or the waiver by Vianet, of
the conditions set out in Schedule C, each of which is for the exclusive benefit
of Vianet and may be waived by Vianet at any time, in whole or in part, in its
sole discretion without prejudice to any other rights that it may have. The
obligations of Vianet to complete the Priority Advance shall be subject to the
fulfilment, or the waiver by Vianet, of the conditions precedent to the priority
advance set out in Schedule B and the conditions precedent in Sections (i), (j),
(k), (l), (q), (s), (t) and (u) of Schedule C (as they relate to the Priority
Advance and as of the date of the Priority Advance), each of which is for the
exclusive benefit of Vianet and may be waived by Vianet at any time, in whole or
in part, in its sole discretion without prejudice to any other rights that it
may have.
2.2 Conditions in Favor of the Corporation. The obligations of the
Corporation to complete the Arrangement shall be subject to the fulfilment, or
the waiver by the Corporation, of the conditions set out in Schedule D, each of
which is for the exclusive benefit of the Corporation and may be waived by the
Corporation at any time, in whole or in part, in its sole discretion without
prejudice to any other rights that it may have.
<PAGE>
3. Representations and Warranties
3.1 Representations and Warranties of the Corporation. The Corporation
represents and warrants to Vianet as to those matters set forth in Schedule E.
3.2 Representations and Warranties of Vianet. Vianet represents and
warrants to the Corporation as to those matters set forth in Schedule F.
4. Implementation of the Arrangement
4.1 General. Each of Vianet and the Corporation shall, and the Corporation
shall cause its Subsidiaries to and Vianet shall cause Subco to, use all
reasonable efforts to satisfy each of the conditions precedent to be satisfied
by it and to take, or cause to be taken, all other action and to do, or cause to
be done, all other things necessary, proper or advisable to permit the
completion of the Priority Advance and Arrangement in accordance with this
Agreement and to cooperate with each other in connection therewith, including
the following by the relevant Party:
(a) the Corporation will in a timely and expeditious manner and as
soon as practicable, but in any event not later than April 15, 1999, file,
proceed with and diligently prosecute an application to the Court under
Section 192(4) of CBCA for an Interim Order with respect to the
Arrangement; providing for, among other things, the calling and holding of
the Special Meeting for the purpose of the Securityholders considering and,
if deemed advisable, approving the Arrangement and the calling and holding
of the Debentureholders Special Meeting, or circulation of a written
resolution to the Convertible Debentureholders, for the purpose of the
Convertible Debentureholders considering and, if deemed advisable,
approving the Arrangement;
(b) the Corporation will, in a timely and expeditious manner and as
soon as practicable:
(i) comply with the terms of the Interim Order;
(ii) file the Information Circular in all jurisdictions where the
same is required to be filed and mail the same to Securityholders and
holders of Convertible Debentures as ordered by the Interim Order and
in accordance with applicable law, in all jurisdictions where the same
is required, complying in all material respects with all applicable
legal requirements on the date of mailing thereof;
(iii) convene the Special Meeting and Debentureholders Special
Meeting (or circulate a written resolution to the Debentureholders to
approve those matters which would otherwise be considered at the
Debentureholders Special Meeting) in each case as ordered by the
Interim Order;
(iv) subject to the provisions hereof, solicit proxies to be
voted at the Special Meeting and Debentureholders Special Meeting, if
any, in favor of the Arrangement;
(v) provide notice to Vianet of the Special Meeting and the
Debentureholders Special Meeting, if any, and allow Vianet's
representatives to attend the Special Meeting and the Debentureholders
Special Meeting, if any, unless such attendance is prohibited by the
Interim Order; and
(vi) conduct the Special Meeting and the Debentureholders Special
Meeting, if any, in accordance with the Interim Order, the by-laws of
the Corporation and any instrument governing such meeting, as
applicable, and as otherwise required by law;
<PAGE>
(c) the Corporation shall permit Vianet and its counsel to participate
fully in the preparation of all material to be filed by the Corporation
with the Court in connection with the Arrangement prior to the service and
filing of that material; the Corporation shall also provide counsel to
Vianet on a timely basis with copies of any notice of appearance and
evidence served on the Corporation or its counsel in respect of the
application for the Final Order or any appeal therefrom and of any notice
(written or oral) received by the Corporation indicating any intention to
appeal the Final Order;
(d) the Corporation will permit Vianet and its counsel to participate
fully in the preparation of all documentation to be sent to Securityholders
and holders of Convertible Debentures in connection with the approvals
being sought in respect of the Arrangement;
(e) each of the Parties shall cooperate with each other on a timely
basis in connection with the preparation of, and shall furnish to each
other such information as may be reasonably necessary for inclusion in, the
Information Circular and all documents and information necessary or
desirable to be filed by Vianet with the SEC or NASD in connection with the
Arrangement;
(f) the Information Circular shall be prepared by the Corporation in
accordance with all applicable laws and, without limiting the generality of
the foregoing, will provide the Securityholders and holders of Convertible
Debentures with information in sufficient detail to permit them to form a
reasoned judgment concerning the matters before them and such other
disclosure as is required by applicable law provided that, with respect to
the portions of the Information Circular relating solely to Vianet, the
Corporation will rely entirely upon the information provided by or on
behalf of Vianet expressly for the purpose of inclusion in the Information
Circular, without having to make or rely upon any independent inquiries as
to the accuracy or completeness thereof, and shall have no further
obligation, responsibility or liability for its accuracy, completeness or
correctness;
(g) the Corporation shall prepare (in co-operation with Vianet) the
Information Circular which shall include the Plan of Arrangement, a copy of
this Agreement and fairness opinion and the Corporation shall use
reasonable commercial efforts to mail the Information Circular to
Securityholders and holders of Convertible Debentures by no later than
April 20, 1999 (or such later date as may be agreed to by Vianet);
(h) the Corporation shall, subject to there being no Alternative
Proposal and the Corporation's board of directors receiving a "fairness
opinion" advising that the relevant aspects of the Arrangement are fair
from a financial point of view to the Securityholders, use all commercially
reasonable efforts to obtain the approval of the Securityholders to the
Arrangement at the Special Meeting in compliance with the Interim Order and
the Legislation and the Corporation covenants that, subject to there being
no Alternative Proposal and the Corporation's board of directors receiving
a "fairness opinion" advising that the relevant aspects of the Arrangement
are fair from a financial point of view to the Securityholders, the
Information Circular shall contain a recommendation of the board of
directors of the Corporation that the Securityholders approve the
Arrangement;
(i) the Corporation shall, subject to there being no Alternative
Proposal and the Corporation's board of directors receiving a "fairness
opinion" advising that the relevant aspects of the Arrangement are fair
from a financial point of view to the holders of the Convertible
Debentures, use all commercially reasonable efforts to obtain approval of
the Arrangement by the holders of the required majority of the principal
amount of the Convertible Debentures in accordance with the Interim Order
and the Legislation and terms of the Convertible Debentures and the
Corporation covenants, subject to there being no Alternative Proposal and
the Corporation's board of directors receiving a fairness opinion advising
that the relevant aspects of the Arrangement are fair from a financial
point of view to the holders of Convertible Debentures, the Information
<PAGE>
Circular shall contain a recommendation of the board of directors of the
Corporation that the holders of the Convertible Debentures approve the
Arrangement;
(j) subject to there being no Alternative Proposal and the
Corporation's board of directors receiving a fairness opinion as described
in Sections 4.1(h) and (i) above, the Corporation shall, in all public
comments (whether oral or written) in relation to the Arrangement, be
consistent with and supportive of the recommendation of the Corporation's
board of directors described in Sections 4.1(h) and (i); and neither the
board of directors of the Corporation nor the Corporation shall act or fail
to act in any way that might reasonably be expected to discourage
Securityholders or holders of Convertible Debentures from voting in favor
of the Arrangement or that might encourage Securityholders or holders
Convertible Debentures to vote against the Arrangement;
(k) the Corporation shall promptly reaffirm its recommendation of the
Plan of Arrangement by press release after: (i) any Acquisition Proposal
(which is determined not to be an Alternative Proposal) is publicly
announced or made; or (ii) Vianet has agreed to amend this Agreement to
provide for substantially similar or equivalent terms to those included in
any Proposed Alternative Transaction;
(l) the Corporation shall comply with such provisions of the Ontario
Securities Commission's Policy Statement No. 9.1 and the Quebec Securities
Commission's Policy Q-27 as are applicable in connection with the
Arrangement and the Priority Advance;
(m) each of the Corporation and Vianet shall effect or cause to be
effected all necessary or advisable registrations, filings and submissions
in connection with the Arrangement and the Priority Advance and in
compliance with the Legislation (including filings, if any, required by the
Investment Canada Act (Canada));
(n) each of the Parties shall obtain, prior to the Effective Date, all
licences, consents, approvals, authorizations and orders of Agencies as may
be necessary or desirable for the consummation of the Arrangement;
(o) the Corporation shall, and shall cause its Subsidiaries to,
provide notice regarding the Priority Advance and the Arrangement to, and
obtain all necessary or desirable waivers, consents and approvals or
releases regarding the Priority Advance and the Arrangement from, other
parties to agreements, understandings or other documents to which it is a
party or by which it is or its properties are bound or affected (including,
without limitation, loan agreements, leases, pledges, guarantees and
security);
(p) the Corporation shall co-operate with Vianet in obtaining any
approval, consent, waiver or order required to be obtained from any
regulatory or governmental authority or private party in connection with
the approval or completion of the Arrangement, including obtaining an
exemption order from the Commission des valeurs mobilieres du Quebec;
(q) the Corporation (and its Subsidiaries) and Vianet shall each use
reasonable commercial efforts to satisfy (or cause the satisfaction of) the
conditions precedent set forth in Schedules C and D, to the extent the same
is within its control and to take, or cause to be taken, all other action
and to do, or cause to be done, all other things necessary, proper or
advisable under applicable laws and regulations to complete the
Arrangement;
(r) each of the Corporation (and its Subsidiaries) and Vianet will not
take any action, refrain from taking any action, or permit any action to be
taken or not taken, inconsistent with this Agreement or which might
reasonably be expected to, directly or indirectly, interfere with or
adversely affect the consummation of the Arrangement;
<PAGE>
(s) the Corporation will, except for proxies and other non-substantive
communications with Securityholders and holders of Convertible Debentures,
furnish promptly to Vianet a copy of each material notice, report, schedule
or other document or communication delivered, filed or received by the
Corporation in connection with the Arrangement, the Special Meeting, the
Debentureholders Special Meeting or any other meeting of the Corporation's
security holders or class of security holders which all such holders, as
the case may be, are entitled to attend, any material filings under
applicable laws and any material dealings with regulatory agencies in
connection with, or in any way affecting, the transactions contemplated
herein;
(t) the Corporation will, subject to the approval of the Arrangement
at the Special Meeting and Debentureholders Special Meeting (or by written
resolution of the Convertible Debentureholders) in accordance with the
provisions of the Interim Order, as soon as practicable, but in any event
not later than May 17, 1999 file, proceed with and diligently prosecute an
application for the Final Order;
(u) the Corporation will comply with the terms of the Final Order and,
subject to the receipt of the Final Order and satisfaction or waiver of the
conditions set out in Schedule D, will file Articles of Arrangement and
such other documents as may be required to give effect to the Arrangement
with the Director in order for the Arrangement to become effective on or
before May 19, 1999;
(v) the Corporation shall use commercially reasonable efforts to
obtain approval in writing for the Arrangement within five (5) days from
the date hereof from shareholders who in aggregate hold not less than
twenty-five (25) million common shares of the Corporation and from the
holders of Existing Options described in Schedule G, such approval to be in
the form of a written agreement in form and substance satisfactory to
Vianet and to which Vianet shall be a party and pursuant to which each such
Person shall, among other things, (i) agree to vote to approve the
Arrangement at the Special Meeting and appoint Vianet or such Person as
Vianet may designate as such Securityholder's proxy for such meeting to
vote in the foregoing manner and in respect of all other matters considered
at the Special Meeting or any adjournment or extension thereof and appoint
Vianet or any such Person as Vianet may designate as such Securityholder's
attorney-in-fact and agent for, in the name of and on behalf of the
Securityholder to vote the Securityholder's Common Shares or Existing
Options, as the case may be, at the Special Meeting and (ii) agree to vote
to approve the Arrangement in such manner and form and by such date as may
be satisfactory to The Toronto Stock Exchange in order to obtain such
approvals and consents as may be necessary or desirable to obtain from The
Toronto Stock Exchange in connection with the Arrangement; and
(w) the Corporation shall use commercially reasonable efforts to
obtain approval in writing for the Arrangement within five (5) days from
the date hereof from holders of 75% of the principal amount of Convertible
Debentures, such approval to be in the form of a written agreement in form
and substance satisfactory to Vianet and to which Vianet shall be a party
and pursuant to which such holders of the Convertible Debentures shall,
among other things, agree to vote to approve the Arrangement at the
Debentureholders Special Meeting, or in the written resolution of the
holders of the Convertible Debentures to consider and approve the
Arrangement and appoint Vianet or such Person as Vianet may designate as
such holder of Convertible Debentures' proxy for such meeting to vote in
the foregoing manner and in respect of all other matters considered at such
meeting or any adjournment or extension thereof and appoint Vianet or any
such Person as Vianet may designate as such holder of Convertible
Debentures' attorney-in-fact and agent for, in the name of and on behalf of
such holder of Convertible Debentures, to exercise such holder of the
Convertible Debentures' right to vote at such meeting or in respect of such
written resolution.
<PAGE>
(x) subject to Section 4.1(y), as soon as practicable following the
Arrangement, Vianet shall file with the U.S. Securities and Exchange
Commission registration statements relating to the common shares of Vianet
(i) issued pursuant to the Arrangement (to the extent necessary or
desirable) and (ii) issuable upon exercise of the options and warrants
issued by Vianet pursuant to the Arrangement to holders of Existing Options
and Vianet shall use commercially reasonable efforts to make such
registration statement effective as soon as practicable after the filing
thereof unless in the reasonable opinion of Vianet, acting in good faith,
it is unlikely that such a registration statement would be made effective;
(y) provided that a registration statement has not been filed pursuant
to Section 4.1(x), the first registration statement filed by Vianet with
the U.S. Securities and Exchange Commission following the Arrangement (in
addition to possibly relating to other securities of Vianet) shall relate
to the common shares of Vianet (i) issued pursuant to the Arrangement (to
the extent necessary or desirable) and (ii) issuable upon exercise of the
options and warrants issued by Vianet pursuant to the Arrangement to
holders of Existing Options and Vianet shall use commercially reasonable
efforts to make such registration statement effective in respect of such
common shares of Vianet unless in the reasonable opinion of Vianet, acting
in good faith, it is unlikely that such a registration statement would be
made effective; and
(z) Vianet will use commercially reasonable efforts to have its common
shares authorized for quotation on The Nasdaq Small Cap Market as soon as
practicable following the Arrangement.
4.2 Defence of Proceedings. Each of Vianet and the Corporation shall
vigorously defend, or cause to be defended, any lawsuits or other legal
proceedings brought against it or any of its affiliates challenging this
Agreement or the completion of all or part of the Arrangement. None of Vianet or
the Corporation shall settle or compromise any claim brought in connection with
the Arrangement prior to the Effective Date by Persons that are or purport to be
holders of any of its securities without prior consultation with the other.
4.3 Business in the Ordinary Course. Prior to the Effective Date, unless
Vianet shall otherwise agree in writing (such agreement not to be unreasonably
withheld) or as otherwise expressly contemplated or permitted by this Agreement,
the Corporation shall (and shall cause each of its Subsidiaries to) conduct its
and their respective businesses in the ordinary course of business consistent
with past practice. Without limitation, the Corporation shall:
(a) not, and shall cause each of its Subsidiaries to not, do or permit
to occur any of the following (directly or indirectly) outside of the
ordinary course of business consistent with past practice, except to the
extent necessary to give effect to obligations under this Agreement or
otherwise existing as at February 12, 1999:
(i) issue, sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, dispose of or encumber:
(A) any securities, including, for greater certainty,
options or stock appreciation rights (other than the issuance of
Common Shares upon the exercise of the Existing Options or
conversion of the Convertible Debentures or the Convertible
Note); or
(B) any material assets;
(ii) amend or propose to amend articles or by-laws of the
Corporation or any of its Subsidiaries;
(iii) declare or make any distribution (in cash, securities or
other property) in respect of any securities, other than payments
required to be made in respect of the Convertible Debentures, the
Convertible Note and existing credit facilities;
<PAGE>
(iv) redeem, purchase or offer to purchase any securities;
(v) reorganize, amalgamate or merge with any other Person (other
than as contemplated hereby);
(vi) reduce its stated capital;
(vii) acquire or agree to acquire (by a merger, amalgamation,
acquisition of stock or assets or otherwise) any Person;
(viii) incur, or commit to incur, otherwise than under current
operating lines of credit, (i) any indebtedness for borrowed money
(except as contemplated hereunder) or (ii) any obligations for capital
expenditures (other than $50,000 per month for research and
development and demonstration equipment on the premises of the
Corporation or its clients) without the prior written consent of
Vianet, which shall not be unreasonably withheld; or
(ix) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 4.3(a);
(b) not, and shall cause each of its Subsidiaries to not, except in
the ordinary course of business and consistent with past practice or as
contemplated herein:
(i) without the approval of Vianet, enter into or modify any
employment, severance, collective bargaining or similar agreements or
arrangements with, or grant any salary increases, severance or
termination pay to, any officers or directors other than pursuant to
agreements in effect as at February 12, 1999 or pursuant to ongoing
labour negotiations;
(ii) in the case of employees who are not officers or directors,
take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay other than pursuant to
agreements and policies in effect as at February 12, 1999; or
(iii) adopt or amend any bonus, profit sharing compensation,
stock option, pension, retirement, deferred compensation, employment
or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any employee except to enable Common
Shares issued or issuable thereunder to vest and be voted at the
Special Meeting.
(c) use its commercially reasonable efforts to cause the current
insurance policies of it and its Subsidiaries not to be cancelled or
terminated or any other coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies
underwritten by insurance companies of nationally recognized standing
providing coverage substantially equal to or greater than the coverage
under the cancelled, terminated or lapsed policies for substantially
similar premiums are in full force and effect; and
(d) use its commercially reasonable efforts, and cause each of its
Subsidiaries to use its commercially reasonable efforts to preserve intact
their respective business organizations and goodwill, to keep available the
services of their respective officers and employees as a group and to
maintain satisfactory relationships with suppliers, distributors, customers
and others with whom they have business relationships.
4.4 Access to Information. The Corporation shall, and shall cause its
Subsidiaries and the officers, directors, employees and agents of it and its
Subsidiaries to, provide to Vianet and its officers, employees and agents
complete access at all reasonable times and on reasonable notice to the
respective businesses, properties, assets, officers, employees, agents, books
and records (including all financial, operating, personnel, compensation, tax
and other data and information) of the Corporation and its Subsidiaries as
Vianet or its respective officers, employees or agents, may reasonably request.
<PAGE>
5. Commitment to the Transaction.
5.1 Other Proposals.
(1) The Corporation shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any
of its Subsidiaries, solicit or encourage (including by way of furnishing
non-public information or entering into any form of agreement, arrangement
or understanding) the initiation of any inquiries or proposals regarding
any merger, amalgamation, arrangement, take-over bid, sale of substantial
assets, sale of treasury shares or similar transactions or any financings
which individually or in aggregate are in excess of Cdn.$1,000,000
involving the Corporation or any Subsidiaries of the Corporation (any of
the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"). Subject to compliance with Section 5.2, nothing
contained in this Section 5.1 or other provision of this Agreement shall
prevent the board of directors of the Corporation from responding to,
considering, negotiating, approving and recommending to the shareholders of
the Corporation an unsolicited bona fide written Acquisition Proposal for
which adequate financial arrangements have been made, which the board of
directors of the Corporation determines in good faith (after consultation
with its financial advisors, and after receiving a written opinion of
outside counsel, or advice of outside counsel that is reflected in the
minutes of the board of directors of the Corporation, to the effect that
the board of directors is required to do so in order to discharge properly
its fiduciary duties) would, if consummated in accordance with its terms,
result in a transaction more favorable to the shareholders of the
Corporation than the Arrangement (any such Acquisition Proposal being
referred to herein as an "Alternative Proposal").
(2) The Corporation shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than
Vianet) with respect to any actual or potential Acquisition Proposal. The
Corporation agrees not to release any third party from any confidentiality
or standstill agreement to which the Corporation and such third party is a
party.
(3) The Corporation shall notify Vianet of any existing Acquisition
Proposals and shall within one business day thereafter, notify Vianet of
any future Acquisition Proposal or any request for non-public information
relating to the Corporation or any of its Subsidiaries in connection with
an Acquisition Proposal or for access to the properties, books or records
of the Corporation or any Subsidiary by any Person that, to the knowledge
of the Corporation, informs any member of the board of directors of the
Corporation or its Subsidiaries that it is considering making, or has made,
an Acquisition Proposal. Such notice to Vianet shall be made, from time to
time, orally and in writing and shall indicate such details of the
proposal, inquiry or contact known to such Person as Vianet may reasonably
request including the identity of the Person making such proposal, inquiry
or contact.
(4) If the board of directors of the Corporation receives an
unsolicited request for material non-public information from a party who
proposes to the Corporation a bona fide Acquisition Proposal and the board
of directors of the Corporation determines that such proposal is an
Alternative Proposal pursuant to Section 5.1, then, and only in such case,
the Corporation may, subject to the execution of a confidentiality
agreement, provide such party with access to information regarding the
Corporation.
(5) The Corporation shall ensure that the officers, directors and
employees of the Corporation and its Subsidiaries and any investment
bankers or other advisors or representatives retained by the Corporation
are aware of the provisions of this Section, and the Corporation shall be
responsible for any breach of this Section 5.1 by such bankers, advisors or
representatives.
<PAGE>
5.2 Right of First Refusal. The Corporation covenants that neither the
board of directors of it or its Subsidiaries will approve or recommend to its
shareholder(s), and neither it nor any of its Subsidiaries will enter into any
agreement regarding, an Alternative Proposal (the "Proposed Alternative
Transaction") without providing Vianet with an opportunity to amend this
Agreement to provide for substantially similar or equivalent terms to those
included in the Proposed Alternative Transaction. In particular, the Corporation
covenants to provide Vianet with a copy of any Proposed Alternative Transaction
as executed by the party making the proposal, at least 5 days prior to its
proposed execution by the Corporation or any of its Subsidiaries. In the event
Vianet agrees to amend this Agreement as provided above, the Corporation
covenants to not enter into the Proposed Alternative Transaction.
6. Expenses
6.1 Reimbursement Expenses. If:
(a) the board of directors of the Corporation or any of its
Subsidiaries approves or recommends to its Shareholder(s), or the
Corporation or any of its Subsidiaries enters into, a Proposed Alternative
Transaction prior to the Closing Date; or
(b) the Corporation consummates any transactions relating to an
Acquisition Proposal prior to the sixth month anniversary of February 12,
1999;
then, unless this Agreement is terminated pursuant to Section 7.1(a), the
Corporation shall pay or cause to be paid to Vianet (or as it may direct) on the
day the circumstances in clause (a) occur (if the circumstances in clause (a)
occur) or on or prior to the consummation of any transactions relating to an
Acquisition Proposal (if the circumstances in clause (b) occur), a fee equal to
Cdn.$1,000,000 by bank draft in full and final satisfaction of a genuine
pre-estimate of Vianet's opportunity cost and all direct and indirect costs and
expenses paid or accrued by Vianet in connection with, relating to or arising
from the proposed Arrangement and all prior matters culminating in entering into
this Agreement and all ancillary matters including, all costs, fees and expenses
incurred in connection with financing arrangements pertaining to the Arrangement
and for its investment advisors and counsel. The Corporation agrees that the fee
is a genuine pre-estimate of the foregoing costs and expenses and not a penalty.
The Corporation shall not be liable to Vianet for any other direct or indirect
costs or expenses paid or accrued by Vianet in connection with the Arrangement.
This Section 6.1 is in addition and not in substitution of any other rights and
remedies which may be available to Vianet.
7. Termination of Agreement
7.1 Termination by Vianet. This Agreement may be terminated by Vianet at
any time before the Effective Date:
(a) with the written agreement of the Corporation;
(b) if the Arrangement has not been completed by the Closing Date;
(c) if it becomes apparent that, one or more of the conditions for the
benefit of Vianet in Schedule C cannot be satisfied and will not be waived
by Vianet prior to the Closing Date; or
(d) the board of directors or shareholders of the Corporation votes in
favor of an Alternative Proposal prior to the Closing Date or any senior
officer of the Corporation expresses its support for an Alternative
Proposal prior to the Closing Date.
7.2 Termination by Corporation. This Agreement may be terminated by the
Corporation at any time before the Effective Date:
(a) with the written agreement of Vianet;
(b) if the Arrangement have not been completed by the Closing Date;
<PAGE>
(c) if it becomes apparent that one or more of the conditions for the
benefit of the Corporation in Schedule D cannot be satisfied and will not
be waived by the Corporation prior to the Closing Date; or
(d) the Corporation makes a payment to Vianet pursuant to Section 6.1
and repays all amounts owing by the Corporation to Vianet at the time of
termination (including, the indebtedness of the Corporation to Jeremy
Posner which was assigned by Jeremy Posner to Vianet, which indebtedness is
evidenced by a Promissory Note issued by the Corporation to Jeremy Posner
in the principal amount of US$530,000 and dated December 12, 1997); or
(e) Vianet does not make the Priority Advance and all of the
conditions precedent in Section 9 of Schedule B and Sections (i), (j), (k),
(l), (q), (s), (t) and (u) of Schedule C (as they relate to the Priority
Advance and as of the date of the Priority Advance) have been satisfied.
7.3 Notice of Termination. If any Party proposes to terminate this
Agreement pursuant to Sections 7.1(c), in the case of Vianet, or 7.2(c), in the
case of the Corporation, it shall provide five days prior notice to the other
Party of its intention to do so, so as to permit that Party the opportunity to
provide reasonable satisfaction to such Party that the specified condition
precedent can be satisfied.
7.4 Obligations upon Termination. In the event of the termination of this
Agreement hereunder, this Agreement, except for Section 8 and the payment
obligations in Section 6, shall become void and of no further force and effect
and there shall be no liability on the part of any Party hereto or their
respective officers and directors, except to the extent that any such Party is
in default of any of its obligations hereunder.
8. Confidentiality and Public Disclosure
8.1 Confidential Information. Except as required by this Agreement or the
Legislation, this Agreement shall be kept strictly confidential and none of
Vianet or the Corporation shall make any public announcement or statement with
respect to this Agreement or the Arrangement without the approval of each other
Party, which approval:
(a) shall not be unreasonably withheld;
(b) may be oral; and
(c) may be given on behalf of a Party by its counsel.
The Parties shall consult with the other as to the timing and wording
of press releases or other disclosure required by the Legislation relating to
the Arrangement. Notwithstanding the foregoing, the Parties shall be entitled to
describe this Agreement and provide copies thereof to Agencies, their respective
boards of directors, entities whose approvals are required in connection with
the matters contemplated hereby and to those employees, bankers and professional
advisors that need to know details about this Agreement in order for the Parties
to perform their covenants or satisfy the conditions set out in this Agreement.
8.2 Idem. Each of the Parties shall (and shall cause each of its
Representatives (as defined below) to) hold in strictest confidence and not use
in any manner, other than as expressly contemplated by this Agreement, any
Confidential Information (as defined below).
For the purposes of this Section 8.2:
(a) "Confidential Information" at any time means any and all
confidential information disclosed by one Party or its Representatives to
the other in connection herewith but not including any information that has
become generally available to the public other than as a result of a
disclosure by the recipient or any of its Representatives in contravention
hereof.
<PAGE>
(b) "Representatives" means in respect of each of the Parties, its
affiliates and their respective directors, officers, employees, agents and
other representatives and advisers.
9. General Provisions
9.1 Assignment by Vianet. This Agreement shall enure to the benefit of and
be binding on the Parties and their respective successors and assigns. The
Corporation acknowledges and agrees that (a) prior to the Arrangement becoming
effective, Vianet Delaware may amalgamate, merge or enter into a business
combination or arrangement with another corporation (the "Pre-arrangement
Transaction"), which corporation is "public corporation" in the United States of
America or Canada and (b) such other corporation may be a successor to Vianet
and its rights and obligations and representations and warranties hereunder or
such other corporation may assume Vianet's obligations and representations and
warranties hereunder and be the assignee of Vianet's rights and benefits
hereunder. In the event a Pre-arrangement Transaction is effected and such other
corporation is not a successor to Vianet by operation of law as a result of the
Pre-arrangement Transaction, all references herein to Vianet shall be read as
references to such other corporation and Vianet shall have no rights or
obligations or representations and warranties hereunder whatsoever upon the
Pre-arrangement Transaction being effected; provided Vianet has provided written
notice to the Corporation regarding such substitution of such other corporation
for Vianet. Vianet may also assign its rights and obligations and
representations and warranties under this Agreement to one or more affiliates.
This Agreement shall not otherwise be assignable by any Party.
9.2 Binding Effect. This Agreement shall be binding upon and shall enure to
the benefit of and be enforceable by the Parties and their respective successors
and permitted assigns.
9.3 Expenses. Except as otherwise expressly provided in this Agreement,
each Party to this Agreement shall pay its own expenses incurred in connection
with this Agreement and the completion of the transactions contemplated hereby.
For greater certainty, the Corporation may be obligated to pay the fees and
expenses of an independent financial advisor in connection herewith and the
Independent Legal Advisor in connection with the Arrangement, which fees and
expenses are not expected to exceed $50,000 in the aggregate.
9.4 Time. Time shall be of the essence of this Agreement in each and every
matter or thing herein provided.
9.5 Non-Merger. Except where otherwise indicated, the covenants contained
in this Agreement shall survive its execution and delivery and the closing of
the transactions contemplated herein and the representations and warranties
contained herein shall survive for a period of three years from February 12,
1999 except for the representations and warranties which relate to incorporation
of a Person, due authorization of this Agreement, the enforceability of
obligations under this Agreement, title matters or intellectual property
matters, which will survive indefinitely. No investigation by or on behalf of
any Party shall mitigate, diminish or affect the representations and warranties
made by any other Party.
9.6 Notices.
(1) Each Party shall give prompt notice to the other of:
(a) the occurrence or failure to occur of any event, which
occurrence or failure causes, or could reasonably be expected to cause
any representation or warranty on its part contained in this Agreement
to be untrue or inaccurate in any respect at any time from February
12, 1999 to the Effective Date; and
(b) any failure of such party, or any officer, director, employee
or agent thereof to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement.
<PAGE>
(2) Vianet agrees that any notice given by it to Securityholders or
holders of Convertible Debentures pursuant to or in connection with the
Arrangement shall concurrently be provided to the Corporation and its
counsel.
(3) Any notice or other communication required or permitted to be
given hereunder shall be sufficiently given if delivered in person or if
sent by facsimile transmission (provided such transmission is confirmed):
(a) in the case of Vianet, to the following address:
Vianet Technologies, Inc.
83 Mercer Street
New York, NY 10012
Facsimile No.: (212) 966-1735
Attention: Messrs. Peter Leighton and Jeremy Posner
with a copy to
Chaiton & Chaiton
185 Sheppard Avenue West
Toronto, Ontario
M2N 1M9
Facsimile No.: (416) 218-1838
Attention: Harvey Tanzer
(b) in the case of the Corporation, to the following address:
Develcon Electronics Ltd.
18 Dyas Road
Toronto, Ontario
M3B 1V5
Facsimile No.: (416) 385-1592
Attention: Geoffrey H. Bennett
with a copy to
Lawson Lundell Lawson & McIntosh
1600-925 West Georgia Street
Vancouver, British Columbia
V6C 3L2
Facsimile No.: (604) 669-1620
Attention: Jerrold W. Schramm
or at such other address as the Party to which such notice or other
communication is to be given has last notified the party giving the same in the
manner provided in this Section, and if so given the same shall be deemed to
have been received on the date of such delivery or sending.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein (excluding any conflict of laws, rule or principle which
might refer such construction to the laws of another jurisdiction). Each party
hereto irrevocably submits to the non-exclusive jurisdiction of the courts of
Ontario with respect to any matter arising hereunder or related hereto.
9.8 Injunctive Relief. The Parties hereto agree that the remedy at law for
any breach of the provisions of this Agreement will be inadequate and that the
Party that is not in breach, on any application to a court, shall be entitled to
temporary and permanent relief, specific performance and any other equitable
relief against the other Party.
9.9 Currency. Except as expressly indicated otherwise, all sums of money
referred to in this Agreement are expressed and shall be payable in Canadian
dollars. All payments shall be in immediately available funds.
<PAGE>
9.10 Definitions. For the purposes of this Agreement, those terms defined
in Schedule A shall have the meanings attributed to them in that Schedule.
9.11 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
9.12 Entire Agreement. The Schedules hereto form an integral part of this
Agreement. This Agreement constitutes the entire obligation of the Parties with
respect to the subject matter hereof and shall supersede any prior expression of
interest or understandings with respect to the subject matter hereof and shall
supersede any prior expression of interest or understandings with respect to the
transactions contemplated hereby. For greater certainty, none of the Parties
makes any representation or warranty, express or implied, except as set forth
herein. This Agreement may be amended only by an instrument in writing signed by
the Parties.
9.13 Further Assurances. Each of the Parties shall do, and Vianet shall
cause Subco to do and the Corporation shall cause its Subsidiaries to do, all
acts and things (including, executing appropriate documents) reasonably
necessary to give full effect to the transactions contemplated in this
Agreement.
9.14 Counterparts. This Agreement may be signed in any number of
counterparts.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date
first written above.
VIANET TECHNOLOGIES, INC.
/s/ Jeremy Posner
By: (Signed) JEREMY POSNER
DEVELCON ELECTRONICS LTD.
/s/ Geoffrey H. Bennett
By: (Signed) GEOFFREY H. BENNETT
<PAGE>
SCHEDULE B
PRIORITY ADVANCE
Vianet will advance to the Corporation the sum of Cdn.$1,500,000 (the
"Loan") on the following terms and conditions:
1. Lender: Vianet Technologies Inc., New York, New York
2. Borrower: Develcon Electronics Ltd.
3. Instrument: Promissory Note issued pursuant to a loan agreement and
secured by a General Security Agreement
4. Priority: Prior to the Arrangement becoming effective the Loan will rank
in priority to all other secured indebtedness of the Corporation, other than the
existing indebtedness of the Corporation which is secured by a charge against a
non-material portion of the assets of the Corporation and the operating line of
credit provided to the Corporation by the Royal Bank of Canada in the maximum
amount of Cdn.$500,000. Following the Arrangement becoming effective, unless and
until Vianet enters into such transactions or arrangements pursuant to which it
will receive equity from Amalco equal to all amounts outstanding under all loans
from Vianet to the Corporation (including interest thereon), the loans from
Vianet to the Corporation (including interest thereon) will be postponed and
subordinated to the existing loans from each of EMAC Limited and Royal Bank
Capital Corporation to the Corporation.
5. Term: The outstanding principal together with all accrued and unpaid
interest thereon and any other costs or expenses in relation thereto shall be
due and payable on the earlier of (i) five (5) years from the date of advance or
(ii) repayment to Royal Bank Capital Corporation of its loan of $1,500,000 to
the Corporation dated November 2, 1995 or (iii) the occurrence of an "Event of
Default", as defined in the above-noted loan agreement, which shall include:
(a) termination of this Agreement by either Vianet or the Corporation
in accordance with Section 7.1 or 7.2 hereof, respectively;
(b) failure to pay when due, whether by acceleration or otherwise, any
and all amounts owing under the above-noted loan agreement; and
(c) a demand for repayment by a secured creditor as a result of a
default of an obligation to that secured creditor.
6. Interest: The prime rate of interest of Royal Bank of Canada plus two
(2) per cent per annum, compounded quarterly, interest payable quarterly.
7. In the event that, within the term of the Loan and before completion of
the Arrangement, the Corporation consummates any transactions relating to an
Acquisition Proposal, the full amount of the principal and the interest then
outstanding will be immediately payable.
The Loan is subject to due diligence review, but is intended to close
as soon as possible with a target date of not later than five (5) days from the
date of this Agreement.
Conditions Precedent:
Conditions precedent to making the Loan shall include:
(a) all secured creditors of the Corporation, other than Royal Bank of
Canada and entities holding charges against non-material portions of the
assets of the Corporation agreeing in writing that Vianet's security in
respect of the Loan shall rank in advance of their secured indebtedness
from the Corporation;
(b) the execution and delivery of the agreements described in Sections
4.1(v) and (w) of this Agreement within five (5) days of the date of this
Agreement;
<PAGE>
(c) the Corporation and Vianet entering into a loan agreement in
respect of the Loan;
(d) the rescheduling of the payment terms of the secured loan made by
Neil Jamieson to the Corporation evidenced by a promissory note issued by
the Corporation in favor of Neil Jamieson in the principal amount of
Cdn.$750,000 dated December 2, 1997; and
(e) all of the documents and instruments to be entered into in
connection with the Loan and in connection with those matters described
above shall be in form and substance satisfactory to Vianet, acting
reasonably.
<PAGE>
SCHEDULE C
CONDITIONS FOR THE BENEFIT OF VIANET
The obligations of Vianet to complete the Arrangement shall be subject to
the fulfilment by the Corporation, or the waiver by Vianet, of the following
conditions, each of which is for the exclusive benefit of Vianet and may be
waived by Vianet at any time, in whole or in part, in its sole discretion
without prejudice to any other rights that it may have:
(a) a plan of arrangement reflecting the material terms of the Plan of
Arrangement, in form and substance satisfactory to the Parties, shall have
been agreed to by the Parties prior to the Interim Order being granted;
(b) if Vianet so desires, the Plan of Arrangement in the form attached
hereto as Schedule H shall have been amended in a manner satisfactory to
Vianet, acting reasonably, including, to provide for the exchange or
conversion of securities held by Convertible Debentureholders and
Securityholders to securities of a kind and quantity provided for in
Section 3.1 of the Plan of Arrangement in an alternative manner to that
described therein or to take into consideration a Pre-Arrangement
Transaction;
(c) the Interim Order shall have been granted in form and substance
satisfactory to each of the Parties, acting reasonably, on or before April
15, 1999 and shall have not been set aside or modified in a manner
unacceptable to such Parties on appeal or otherwise;
(d) resolutions, in each case in form and substance satisfactory to
each of the Parties, acting reasonably, have been passed by the
Securityholders at the Special Meeting, on or before May 11, 1999, duly
approving the Arrangement in accordance with the Interim Order;
(e) resolutions, in form and substance satisfactory to each of the
Parties, acting reasonably, shall have been passed by the Convertible
Debentureholders at the Debentureholders Special Meeting (or by written
resolution), on or before May 11, 1999, duly approving the Arrangement in
accordance with the Interim Order;
(f) the Final Order shall have been granted in form and substance
satisfactory to each of the Parties, acting reasonably, on or before May
19, 1999 and shall have not been set aside or modified in a manner
unacceptable to such Parties on appeal or otherwise;
(g) the Articles of Arrangement relating to the Arrangement shall be
in form and substance satisfactory to each of the Parties, acting
reasonably;
(h) the Arrangement shall become effective on or before May 21, 1999;
(i) the board of directors of the Corporation shall have made, and
shall not have modified or amended or withdrawn, in any respect, an
affirmative recommendation in the Information Circular that the
Securityholders and Convertible Debentureholders approve the Arrangement;
(j) holders of not more than 2% of the issued and outstanding Common
Shares (after the conversion of the Convertible Debentures as contemplated
by Section 3.1(a) of the Plan or Arrangement) and no other holder of
securities of the Corporation shall have exercised rights of dissent in
relation to the Plan of Arrangement and the Corporation shall have provided
to Vianet the certificates of two officers of the Corporation certifying on
the Effective Date the number of Common Shares in respect of which, to
their knowledge, the holders have exercised their rights of dissent;
(k) there shall not exist any prohibition at law against any of the
Corporation, Subco or Vianet consummating the Arrangement;
(l) all necessary corporate action shall have been taken by the
Corporation to authorize the execution and delivery of this Agreement and
the consummation of the Priority Advance and the Arrangement;
<PAGE>
(m) the agreements described in Sections 4.1(v) and (w) have been
executed and delivered by all parties;
(n) all consents, orders, approvals and authorizations (including, all
Agency approvals) that are necessary or desirable in connection with the
Arrangement and Priority Advance shall have been obtained on terms
satisfactory to Vianet;
(o) the Corporation shall have performed in all material respects the
obligations to be performed by it under this Agreement on or before the
Effective Date;
(p) the representations and warranties of the Corporation set forth in
this Agreement shall be true and correct in all respects on and as of the
Effective Date (as if made on and as of that date) except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true
and correct as of such date;
(q) no judgment or order shall have been issued by any Agency, no
action, suit or proceeding shall have been threatened or taken or be
outstanding before or by any Agency or Person in Canada or elsewhere, and
no law, regulation or policy shall have been proposed, enacted, or
promulgated or applied,
(i) which could reasonably be expected to have the effect to
cease trade, enjoin, prohibit or impose material limitations or
conditions on the completion of the Arrangement, or
(ii) that, if the Arrangement were completed, could reasonably be
expected to be Materially Adverse to either Vianet, the Corporation or
its Subsidiaries or Amalco;
(r) Vianet shall have received a legal opinion from legal counsel to
the Corporation, in form and substance acceptable to Vianet and its legal
counsel, acting reasonably;
(s) all documents to be entered into in connection with the
Transactions shall be in form and substance satisfactory to Vianet, acting
reasonably;
(t) Vianet shall have conducted and completed its investigation of the
Corporation and its Subsidiaries, their respective businesses and assets,
and Vianet, in its sole discretion, shall have been satisfied in all
respects with the results of such investigation and shall not have
determined, acting reasonably, not to proceed with the Transactions on the
basis of such investigation;
(u) there shall not have been any change, condition, event or
occurrence that, individually or in the aggregate, has been, or could
reasonably be expected to be, Materially Adverse to the Corporation or its
Subsidiaries (including any decision to implement such a change made by the
board of directors of the Corporation or any of its Subsidiaries or senior
management of the Corporation or any of its Subsidiaries who believe that
confirmation of the decision by the board of directors of the Corporation
is probable);
(v) there shall not have been any change, condition, event or
occurrence beyond the control of Vianet or Subco that, individually or in
the aggregate, has been, or could reasonably be expected to be, Materially
Adverse to Vianet or Subco;
(w) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or financial occurrence of
national or international consequence or any law, regulation, action,
government regulation, inquiry or other occurrence of any nature whatsoever
that is or could reasonably be expected to be Materially Adverse to the
financial, banking or capital markets conditions in Canada or the United
States generally, or the financial condition, business, operations, assets,
affairs or prospects of Vianet, Subco, the Corporation and its Subsidiaries
or Amalco (subsequent to completion of the Arrangement);
<PAGE>
(x) the Information Circular shall contain a recommendation of the
board of directors of the Corporation that the holders of Common Shares and
Existing Options approve at the Special Meeting the Arrangement; and, that
the holders of the Convertible Debentures approve the Arrangement at the
Debentureholders Special Meeting (or by written resolutions);
(y) subject to obtaining such rulings, consents and approvals and
making such filings and payments as may be necessary or desirable, the
issuance by Vianet of common shares to the then shareholders of the
Corporation in connection with the Arrangement and the issuance by Vianet
of common shares pursuant to the exercise on or after the Effective Date of
options or warrants issued to holders of Existing Options pursuant to the
Arrangement shall be exempt from registration and prospectus requirements
in those provinces of Canada in which holders thereof reside at the time of
the Arrangement and, subject to obtaining such rulings, consents and
approvals and making such filings and payments as may be necessary or
desirable, the first trade of the shares of Vianet received by any such
holder will not be subject to any statutory hold period under the Canadian
provincial securities legislation where such holder resides provided that
the first trade by such holder is made in compliance with the provisions of
such securities legislation, that such holder is not a "control person" and
that no unusual effort is made to prepare the market for any such sale or
create a demand for such securities and no extraordinary commission or
consideration is paid in respect thereof;
(z) the issue of common shares of Vianet pursuant to the Arrangement
is exempt from the registration requirements of Section 5 of the (U.S.)
Securities Act of 1933 and the issuance of common shares by Vianet on the
exercise of options or warrants received upon the Arrangement becoming
effective by the holders of Existing Options will be exempt from the
registration requirements of Section 5 of the (U.S.) Securities Act of 1933
or included in an effective registration statement unless in the reasonable
opinion of Vianet, acting in good faith, it is unlikely that such a
registration statement would be made effective;
(aa) any required approvals or exemption orders of securities
administrators (including, state, provincial or federal and stock
exchanges) shall have been obtained;
(ab) there shall have been authorized for quotation on the Nasdaq OTC
Bulletin Board, at least 14 days prior to the Arrangement subject to
official notice of issuance and other normal conditions, the common stock
of Vianet;
(ac) all outstanding employment arrangements with Geoffrey H. Bennett,
Fran Sanda, R. Bruce Brydon, Michael Galca and Douglas Lindner shall be on
terms satisfactory to Vianet; and
(ad) to the extent that a "fairness opinion" is necessary or advisable
in connection with the Arrangement, the board of directors of the
Corporation shall have received a "fairness opinion" advising that the
relevant aspects of the Arrangement are fair from a financial point of view
to the Securityholders and the holders of the Convertible Debentures.
<PAGE>
SCHEDULE D
CONDITIONS FOR THE BENEFIT OF THE CORPORATION
The obligations of the Corporation to complete the Arrangement shall be
subject to the fulfilment by Vianet, or the waiver by the Corporation, of the
following conditions, each of which is for the exclusive benefit of the
Corporation and may be waived by the Corporation at any time, in whole or in
part, in its sole discretion without prejudice to any other rights that it may
have:
(a) a plan of arrangement reflecting the material terms of the Plan of
Arrangement, in form and substance satisfactory to the Parties, shall have
been agreed to by the Parties prior to the Interim Order being granted;
(b) the Interim Order shall have been granted in form and substance
satisfactory to each of the Parties, acting reasonably, on or before April
15, 1999 and shall have not been set aside or modified in a manner
unacceptable to such Parties on appeal or otherwise;
(c) resolutions, in each case in form and substance satisfactory to
each of the Parties, acting reasonably, shall have been passed by the
Securityholders at the Special Meeting, on or before May 11, 1999, duly
approving the Arrangement in accordance with the Interim Order;
(d) resolutions, in each case in form and substance satisfactory to
each of the Parties, acting reasonably, shall have been passed by the
Convertible Debentureholders at the Debentureholders Special Meeting (or by
written resolution), on or before May 11, 1999, duly approving the
Arrangement in accordance with the Interim Order;
(e) the Final Order shall have been granted in form and substance
satisfactory to each of the Parties, acting reasonably, on or before May
19, 1999 and shall have not been set aside or modified in a manner
unacceptable to such Parties on appeal or otherwise;
(f) the Articles of Arrangement relating to the Arrangement shall be
in form and substance satisfactory to each of the Parties, acting
reasonably;
(g) the Arrangement shall become effective on or before May 21, 1999;
(h) there shall not exist any prohibition at law against any of the
Corporation, Subco or Vianet consummating the Arrangement;
(i) all necessary corporate action shall have been taken by Vianet to
authorize the execution and delivery of this Agreement and the consummation
of the Priority Advance and the Arrangement;
(j) all consents, orders, approvals and authorizations (including, all
Agency approvals) that are necessary or desirable to be obtained in
connection with the Arrangement and Priority Arrangement shall have been
obtained;
(k) Vianet shall have performed in all material respects the
obligations to be performed by it under this Agreement on or before the
Effective Date;
(l) the representations and warranties of Vianet set forth in this
Agreement shall be true and correct in all respects on and as of the
Effective Date (as if made on and as of such date) except as affected by
the transactions contemplated or permitted by this Agreement and except to
the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have
been true and correct as of such date;
<PAGE>
(m) no judgment or order shall have been issued by any Agency, no
action, suit, or proceeding shall have been threatened or taken or be
outstanding before or by any Agency or Person in Canada or elsewhere, and
no law, regulation or policy shall have been proposed, enacted, or
promulgated or applied,
(i) which could reasonably be expected to have the effect to
cease trade, enjoin, prohibit or impose material limitations or
conditions on the completion of the Arrangement, or
(ii) that, if the Arrangement were completed, could reasonably be
expected to be Materially Adverse to either Vianet, Subco, the
Corporation or its Subsidiaries;
(n) the Corporation shall have received a legal opinion from legal
counsel to Vianet, in form and substance acceptable to the Corporation and
its legal counsel, acting reasonably to the effect that, among other
things, the issuance by Vianet of common shares to the then shareholders of
the Corporation in connection with the Arrangement and the issuance by
Vianet of common shares pursuant to the exercise of options or warrants
issued to holders of Existing Options pursuant to the Arrangement is exempt
from the registration and prospectus requirements of the Province of
Ontario;
(o) there shall not have been any change, condition, event or
occurrence that, individually or in the aggregate, has been, or could
reasonably be expected to be, Materially Adverse to Vianet or Subco
(including any decision to implement such a change made by the board of
directors of Vianet or Subco or senior management of Vianet or Subco who
believe that confirmation of the decision by the board of directors of
Vianet or Subco is probable);
(p) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or financial occurrence of
national or international consequence or any law, regulation, action,
government regulation, inquiry or other occurrence of any nature whatsoever
that is or could reasonably be expected to be Materially Adverse to the
financial, banking or capital markets conditions in Canada or the United
States generally, or the financial condition, business, operations, assets,
affairs or prospects of Vianet, Subco or Amalco (subsequent to the
completion of the Arrangement);
(q) the issue of common shares of Vianet pursuant to the Arrangement
is exempt from the registration requirements of Section 5 of the (U.S.)
Securities Act of 1933 and the issuance of common shares by Vianet on the
exercise of options or warrants received upon the Arrangement becoming
effective by the holders of Existing Options will be exempt from the
registration requirements of Section 5 of the (U.S.) Securities Act of 1933
or included in an effective registration statement;
(r) the Transactions, as proposed or with any amendment acceptable to
the Corporation, shall have been approved by the board of directors of the
Corporation;
(s) there shall have been authorized for quotation on the Nasdaq OTC
Bulletin Board, at least 14 days prior to the Arrangement subject only to
official notice of issuance and other normal conditions, the common stock
of Vianet;
(t) to the extent that a "fairness opinion" is necessary or advisable
in connection with the Arrangement, the board of directors of the
Corporation shall have received a "fairness opinion" advising that the
relevant aspects of the Arrangement are fair from a financial point of view
to the Securityholders of the Corporation and the holders of the
Convertible Debentures;
(u) all agreements to be entered into in order to give effect to the
Arrangement which are not contemplated herein (being agreements other than:
the agreements in connection with the Priority Advance) shall be in form
and substance satisfactory to the Corporation, acting reasonably;
<PAGE>
(v) any required approvals or exemption orders of securities
administrators (including, state, provincial or federal and stock
exchanges) shall have been obtained;
(w) subject to obtaining such rulings, consents and approvals and
making such filings and payments as may be necessary or desirable, the
issuance by Vianet of common shares to the then shareholders of the
Corporation in connection with the Arrangement and the issuance by Vianet
of common shares pursuant to the exercise on or after the Effective Date of
options or warrants issued to holders of Existing Options pursuant to the
Arrangement shall be exempt from registration and prospectus requirements
in those provinces of Canada in which holders thereof reside at the time of
the Arrangement and, subject to obtaining such rulings, consents and
approvals and making such filings and payments as may be necessary or
desirable, the first trade of the shares of Vianet received by any such
holder will not be subject to any statutory hold period under the Canadian
provincial securities legislation where such holder resides provided that
the first trade by such holder is made in compliance with the provisions of
such securities legislation, that such, holder is not a "control person"
and that no unusual effort is made to prepare the market for any such sale
or create a demand for such securities and no extraordinary commission or
consideration is paid in respect thereof;
(x) on or prior to the Arrangement, a current director of the board of
directors of the Corporation shall be elected to serve on the board of
directors of Vianet for a period of not less than one year;
(y) as soon as practicable following the Arrangement, Vianet shall
file with the U.S. Securities and Exchange Commission registration
statements relating to the common shares of Vianet (i) issued pursuant to
the Arrangement (to the extent necessary or desirable) and (ii) issuable
upon exercise of the options and warrants issued by Vianet pursuant to the
Arrangement to holders of Existing Options, unless in the reasonable
opinion of Vianet, acting in good faith, it is unlikely that such a
registration statement would be made effective and Vianet shall use
commercially reasonable efforts to make such registration statement
effective as soon as practicable after the filing thereof unless in the
reasonable opinion of Vianet, acting in good faith, it is unlikely that
such a registration statement would be made effective;
(z) provided that a registration statement has not been filed pursuant
to Section 4.1(y), the first registration statement filed by Vianet with
the U.S. Securities and Exchange Commission following the Arrangement (in
addition to possibly relating to other securities of Vianet) shall relate
to the common shares of Vianet (i) issued pursuant to the Arrangement (to
the extent necessary or desirable) and (ii) issuable upon exercise of the
options and warrants issued by Vianet pursuant to the Arrangement to
holders of Existing Options and Vianet shall use commercially reasonable
efforts to make such registration statement effective in respect of such
common shares of Vianet unless in the reasonable opinion of Vianet, acting
in good faith, it is unlikely that such a registration statement would be
made effective and;
(aa) Vianet will use commercially reasonable efforts to have its
common shares authorized for quotation on The Nasdaq Small Cap Market as
soon as practicable following the Arrangement;
(ab) in the event a Pre-arrangement Transaction is effected, the
shareholders of the "public" corporation entering into the Pre-arrangement
Transaction with Develcon will not be the majority shareholders in the
"public" corporation following the Pre-arrangement Transaction.
<PAGE>
SCHEDULE E
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
(a) Organization and Qualification. The Corporation has been duly
continued under the CBCA, is validly existing and has full corporate power
and authority to own its property and conduct its businesses as presently
owned and conducted.
(b) Capitalization. The authorized and issued capital of the
Corporation consists of an unlimited number of common shares and 5,555,510
Preferred Shares, of which only 45,086,104 Common Shares are issued and
outstanding as fully paid and non-assessable. Except for the Convertible
Debentures and Convertible Note and the Existing Options (the particulars
of which are set out in Schedule I and as contemplated hereby), there are
no options, warrants, conversion privileges, calls or other rights,
agreements, arrangements, commitments or obligations of the Corporation to
issue or sell any securities of the Corporation or securities or
obligations of any kind convertible into or exchangeable for any securities
of the Corporation or any other Person, nor are there outstanding any stock
appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or any other
attribute of the Corporation.
(c) Subsidiaries. Each of the Subsidiaries of the Corporation has been
duly incorporated under applicable law, is validly existing and has full
corporate or legal power and authority to own its property and conduct its
businesses as presently owned and conducted. All of the outstanding shares
of the capital stock and other ownership interests of the Subsidiaries are
owned by the Corporation and are validly issued, fully paid and
non-assessable and are owned free and clear of all material liens or
encumbrances other than as disclosed to Vianet in writing. There are no
options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating the Corporation or any of its
Subsidiaries to issue or sell any securities of any of those Subsidiaries
or securities or obligations of any kind convertible into or exchangeable
for securities or other ownership interests of any of those Subsidiaries or
any other Person. There are no outstanding stock appreciation rights,
equity or similar rights, agreements, arrangements or commitments based on
the book value, income or any other attribute of any of the Subsidiaries of
the Corporation.
(d) Authority Relative to this Agreement. The Corporation has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement by the Corporation have been duly authorized by the board of
directors of the Corporation and other corporate proceedings on the part of
the Corporation are necessary to authorize the execution and delivery of
this Agreement, except as may be required by the Interim Order, any Agency
or the Legislation. This Agreement has been duly executed and delivered by
the Corporation and constitutes a legal, valid and binding obligation of
the Corporation, enforceable by Vianet against the Corporation in
accordance with its terms except as may be limited by bankruptcy,
reorganization, insolvency and laws affecting the rights of creditors and
others and to the extent that equitable remedies are only available in the
discretion of the court from which they are sought. The execution and
delivery by the Corporation of this Agreement and performance by it of its
obligations hereunder will not result in:
(i) a material violation or breach of any provision of or
constitute a material default (or an event that with notice or lapse
of time or both would become a material default) under,
(A) its certificate or articles of incorporation or by-laws
or those of any of its Subsidiaries,
(B) any applicable law or, to its knowledge, any regulation,
order, judgment or decree (subject to obtaining the consents
referred to below), or
<PAGE>
(C) any agreement, arrangement or understanding to which it
or any of its Subsidiaries is a party or by which any of them or
their properties is bound or affected (subject to obtaining
necessary consents and approvals of relevant parties thereto),
(ii) other than as contemplated hereby, the imposition of any
encumbrance, charge or lien upon any of its assets or the assets of
any of its Subsidiaries that, individually or in the aggregate, could
reasonably be expected to be Materially Adverse to the Corporation or
its Subsidiaries.
Other than in connection with or in compliance with the provisions of the
Investment Canada Act (Canada), the Interim Order, the Legislation and the
requirements of The Toronto Stock Exchange, no authorization, consent or
approval of, or filing with, any Agency is necessary for the consummation by the
Corporation of its obligations under this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure by any
party to obtain or make would not, individually or in the aggregate, prevent or
materially delay the consummation of the Arrangement.
(e) Financial Statements and Disclosure Documents. The audited
financial statements of the Corporation prepared on a consolidated basis,
for and as at the years ended August 31, 1995, 1996, 1997 and 1998 together
with the interim unaudited financial statement of the Corporation for the
three-month period ended November 30, 1998, have been prepared in
accordance with generally accepted accounting principles as recommended in
the handbook of the Canadian Institute of Chartered Accountants applied on
a consistent basis and fairly present the consolidated financial position
of the Corporation and its Subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cashflows for the
periods indicated therein and are consistent with the books and records of
the Corporation and its Subsidiaries. Each of the annual reports, annual
information forms and management information circulars and other documents
filed by the Corporation with the Ontario Securities Commission
(collectively, the "Company Reports") are, as of their respective dates, in
compliance in all material respects with the Legislation and did not as at
such dates contain any "misrepresentation" within the meaning of the
Securities Act (Ontario). The Company Reports constitute all of the
documents filed or required to be filed with the Ontario Securities
Commission other than a confirmation of the mailing to the Corporation's
shareholders of the comparative audited financial statements of the
Corporation for its financial years ended August 31, 1998 and 1997 which
has not been filed with the Ontario Securities Commission or other Canadian
securities regulatory authorities. The management information circular and
such other documents as may be filed by the Corporation with the Ontario
Securities Commission in connection with the proposed Arrangement will be
as of their respective dates, in compliance in all material respects with
the Legislation and will not as at such dates contain any
"misrepresentation" within the meaning of the Securities Act (Ontario)
(provided that the Corporation makes no representation regarding
information to be contained in such circular provided by or on behalf of
Vianet or Subco). The financial statements of the Corporation, and such
other documents as may be provided by the Corporation to Vianet to be filed
by Vianet with the SEC or NASD in connection with the proposed Arrangement,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading. The
Corporation is in material compliance with all timely disclosure
obligations applicable to it under the Legislation other than as described
above. Each of the consolidated total assets of the Corporation and
consolidated annual net sales of the Corporation as set out in the
Corporation's audited financial statements for the year ended August 31,
1998, as determined in accordance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder, is less than US$25,000,000.
<PAGE>
(f) Absence of Certain Changes or Events. Since April 30, 1998, except
as has as been publicly disclosed in documents filed with the Ontario
Securities Commission or disclosed to Vianet in writing:
(i) except in connection with the Arrangement, the Corporation
and its Subsidiaries have conducted their respective businesses only
in the ordinary course;
(ii) the Corporation and its Subsidiaries have not declared or
made any distributions (in cash, securities or other property) to
securityholders and have not entered into any agreement, disposed of
any of their assets or incurred any indebtedness which, either
individually or in the aggregate, is material to the Corporation or
its Subsidiaries other than in the ordinary course of business, other
than a loan in the amount of U.S.$350,000 from EMAC Limited; and
(iii) there has not been any change, condition, event, or
occurrence that individually or in the aggregate, has been, or could
reasonably be expected to be, Materially Adverse to the Corporation or
its Subsidiaries (including any decision to implement such a change
made by the board of directors of the Corporation or any of its
Subsidiaries or senior management of the Corporation or any of its
Subsidiaries who believe that confirmation of the decision by the
board of directors of the Corporation is probable).
(g) Severance and Employment Agreements. There are no severance and
employment agreements with any individual, except as disclosed to Vianet in
writing, providing for severance or termination payments to any such
individual in excess of $100,000.
(h) Litigation. Except as disclosed in the financial statements of the
Corporation referred to in (e) or except as otherwise disclosed to Vianet
in writing, there are no claims, actions, proceedings, suits,
investigations or reviews pending or, to the best of the knowledge of the
Corporation, threatened in writing against the Corporation or any of its
Subsidiaries or any of their properties before any Agency that, either
individually or in the aggregate, if adversely determined would be
Materially Adverse to the Corporation or its Subsidiaries.
(i) No Material Adverse Judgment, Order or Decree. Neither the
Corporation or any of its Subsidiaries nor any of their properties is the
subject of any judgment, order or decree that is, or could reasonably be
expected to be, Materially Adverse to the Corporation or its Subsidiaries.
(j) Compliance. Except for any conflicts, defaults or violations that
could not, individually or in the aggregate (taking into account the impact
of any cross-defaults), reasonably be expected to be Materially Adverse to
the Corporation or its Subsidiaries, none of the Corporation or any of its
Subsidiaries in the operation of their respective businesses is in conflict
with, or in default (including cross defaults) under or violation of:
(i) its articles or by-laws or equivalent organizational
documents;
(ii) any law, rule, regulation, order, permit, judgement or
decree (including those relating to environmental matters) applicable
to it, or by which any of its properties is bound or affected,
including the Legislation other than as disclosed in (e) above; or
(iii) any agreement, arrangement or understanding of it or by
which any of its properties is bound or affected, except as disclosed
to Vianet.
(k) Property. Except as previously disclosed by the Corporation to
Vianet in writing, each of the Corporation and its Subsidiaries has good
and marketable title to all of its properties and assets (real and
personal, tangible and intangible, including leasehold interests) including
all the properties and assets reflected in the balance sheet forming part
of the financial statements referred to in (e), except as indicated in the
notes thereto, together with all additions thereto and less all
dispositions thereof in the ordinary course of business. In each case, such
property is subject to no lien of any kind except those liens expressly
permitted by the terms of any financing or security agreement to which the
Corporation or any of its Subsidiaries is a party or as is reflected in the
balance sheets forming part of the said financial statements, except where
the failure to have such title, individually or in the aggregate, would not
be Materially Adverse to the Corporation or its Subsidiaries. In each case,
no such property having a fair market value in excess of Cdn.$50,000 is
subject to a lien of any kind except in favor of Royal Bank of Canada,
Vianet or a Person which has or will, prior to the completion of the
Priority Advance, have entered into a subordination agreement with Vianet
in connection with the Priority Advance. All such property is in good
condition, reasonable wear and tear excepted.
<PAGE>
(l) Tax Matters. Each of the Corporation and its Subsidiaries has
correctly prepared and duly and timely filed all tax returns required to be
filed by it (except if not yet due), has paid all Taxes that are imposed
under any laws or by any relevant taxing authority that are due and payable
and has made adequate provision in the financial statements referred to in
(e) for the payment of all Taxes not then due and payable. Each of the
Corporation and its Subsidiaries has made adequate and timely installments
of the Taxes for the taxation period ending on or immediately before the
Effective Date and all tax returns filed by it have been duly and
accurately completed as required by applicable law. With respect to any
taxation period up to and including the Effective Date for which tax
returns have not yet been filed or for which Taxes are not yet due and
payable, each of them has only incurred liabilities for Taxes in the
ordinary course of its business. All tax returns have been filed through
and including the financial year ended August 31, 1998 and, except as
disclosed in writing to Vianet, there are no outstanding waivers of any
limitation periods or agreements providing for an extension of time for the
filing of any tax return or the payment of any Tax. None of the Corporation
or any of its Subsidiaries is subject to any assessments, levies, penalties
or interest with respect to Taxes that will result in any liability on its
part in respect of any period ending on or before the Effective Date in
excess of the amount provided for, and reserved against, in the financial
statements referred to in (e).
(m) Reporting Issuer. The Corporation is a security issuer under the
Securities Act of New Brunswick and a reporting issuer under the respective
Securities Acts of British Columbia, Alberta, Saskatchewan, Manitoba,
Ontario, and Newfoundland (and not any other jurisdiction) and is not in
material default of any requirement of such Acts or their respective
Regulations, other than as disclosed in (e) above and is in material
compliance with the rules and regulations of The Toronto Stock Exchange. No
order ceasing or suspending trading in securities of the Corporation or
prohibiting the transactions contemplated hereby has been issued and no
proceedings for such purpose are pending or have been threatened against
the Corporation, other than as disclosed in (e) above.
(n) Compliance with Law. The business of each of the Corporation and
its Subsidiaries is being conducted in all material respects in compliance
with applicable laws, regulations and ordinances of all authorities having
jurisdiction, other than as disclosed in (e) above.
(o) Agreements. Each agreement or contract between the Corporation or
any of its Subsidiaries and any other Person which is material to the
business of the Corporation or any of its Subsidiaries, as the case may be,
has been disclosed to Vianet in writing and each such agreement and
contract is and, as of the Effective Date will be, in full force and effect
and to the best of the Corporation's knowledge and belief (i) be valid,
binding and enforceable against each of the parties thereto in accordance
with its terms, (ii) no material breach or default will exist in respect
thereof on the part of any party thereto and (iii) no event will have
occurred which, with the giving of notice or the lapse of time or both,
would constitute such a material breach or default.
(p) Environmental Matters. The Corporation and each of its
Subsidiaries is and has at all times been in compliance in all material
respects with all applicable Canadian and United States federal,
provincial, state and local, and foreign laws, regulations, by-laws,
ordinances, orders, directives and decisions relating to environmental,
natural resources, health and safety matters. There is no suit, claim,
action or proceeding pending or threatened against the Corporation or any
of its Subsidiaries or, to the Corporation's knowledge, any basis therefor,
in respect of (i) non-compliance by the Corporation or any of its
Subsidiaries with any such laws, regulations, by-laws, ordinances, orders,
directives or decisions (ii) personal injury, wrongful death, other
tortious conduct, or relating to materials, commodities or products held,
used, sold, transferred, manufactured or disposed of by or on behalf of the
Corporation or any of its Subsidiaries, containing or incorporating any
hazardous or toxic materials, commodities or substances, or (iii) the
presence or release or threatened release into the environment of any
pollutant, contaminant, deleterious or toxic or hazardous material,
substance or waste, whether solid, liquid or gas (each a "Hazardous
Substance"), whether generated by the Corporation or any of its
Subsidiaries or located at or about a site leased or otherwise used by the
Corporation or any of its Subsidiaries or heretofore owned, leased or
otherwise used by the Corporation or any of its Subsidiaries or any
predecessor entity.
<PAGE>
(q) Intellectual Property.
(i) The Corporation and its Subsidiaries own, or have the right
to use, sell or license all Intellectual Property Rights (as defined
below) necessary or desirable for the conduct of their respective
businesses as presently conducted (such Intellectual Property Rights
being hereinafter collectively referred to as the "Develcon IP
Rights") and such rights to use, sell or licence are sufficient for
such conduct of their respective businesses;
(ii) Except as has been disclosed to Vianet by the Corporation in
writing, the Corporation and its Subsidiaries were the first and only
owners of the Develcon IP Rights and the Corporation and its
Subsidiaries are entitled to the exclusive and uninterrupted use of
the Develcon IP Rights; no Person other than the Corporation and its
Subsidiaries have any right, title or interest in any of the Develcon
IP Rights including the moral rights in any copyright works within the
Develcon IP Rights;
(iii) Except as has been disclosed to Vianet by the Corporation
in writing, the Corporation and its Subsidiaries are entitled to the
use of the Develcon IP Rights without payment or any royalty or other
fees;
(iv) Neither the manufacture, marketing, licence, sale or lawful
use of any product currently licenced or sold by the Corporation or
any of its Subsidiaries or currently under development by the
Corporation or any of its Subsidiaries violates any licence or
agreement between the Corporation or any of its Subsidiaries and any
third party or, to the knowledge of the Corporation, infringes any
Intellectual Property Rights of any other party; and there is no
pending or, to the best knowledge of the Corporation, threatened claim
or litigation contesting the validity, ownership or right to use,
sell, licence or dispose of any of Develcon IP Rights nor, to the best
knowledge of the Corporation, is there any basis for any such claim,
nor has the Corporation or any of its Subsidiaries received any notice
asserting that any Develcon IP Rights or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the
rights of any other party, nor, to the best knowledge of the
Corporation, is there any basis for any such assertion;
(v) The Corporation and its Subsidiaries have taken all steps in
accordance with customary industry practice which are necessary or
desirable to safeguard and maintain the secrecy and confidentiality
of, and its proprietary rights in, all Develcon IP Rights. No current
or prior officers, employees or consultants of the Corporation have
given notice to the Corporation of any claim of an ownership interest
in any Develcon IP Rights as a result of having been involved in the
development of such property while employed by or consulting to the
Corporation, or otherwise; and
(vi) All of the Corporation's and its Subsidiaries' permissions
and licences to use any of the Intellectual Property Rights of other
Persons have been previously disclosed to Vianet by the Corporation in
writing and are in full force and effect and neither the Corporation
nor any of its Subsidiaries nor the licensor of such Intellectual
Property Rights is in material default of its obligations thereunder.
As used herein the term "Intellectual Property Rights" shall mean all
worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyright,
copyright applications, mask works, franchises, licences, know-how, trade
secrets, customer lists, proprietary processes and formulae, all source and
object code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records.
<PAGE>
(r) Full Disclosure. None of the foregoing representations and
warranties and no document furnished by or on behalf of the Corporation to
Vianet in connection with the negotiation of the transactions contemplated
by this Agreement contain any untrue statement of a material fact or omit
to state any material fact necessary to make any such statement or
representation not misleading to a prospective purchaser of the shares of
the Corporation seeking full information as to the Corporation and the
Corporation's Subsidiaries and their respective properties, businesses and
affairs. Except for those matters disclosed in this Agreement, there are no
facts related to the Corporation's or its Subsidiaries' business not
disclosed in this Agreement which, if learned by Vianet, might reasonably
be expected to materially diminish Vianet's evaluation of the worth or
profitability of the Corporation or which, if learned by Vianet, might
reasonably be expected to deter Vianet from completing the transactions
contemplated by this Agreement on the terms of this Agreement.
<PAGE>
SCHEDULE F
REPRESENTATIONS AND WARRANTIES OF VIANET
(a) Organization and Qualification. Prior to a Pre-arrangement
Transaction occurring, Vianet Delaware was duly incorporated under the laws
of Delaware, validly existing and had full corporate power and authority to
own its property and conduct its businesses as presently owned and
conducted.
(b) Capitalization. Prior to a Pre-arrangement Transaction occurring,
the authorized capital of Vianet Delaware consisted of 3,000,000 common
shares and 1,000,000 undesignated preferred shares, of which only 1,027,318
common shares and 250,000 convertible preferred shares are issued and
outstanding as fully paid and non-assessable. Except as are contemplated by
the Arrangement, there are no options, warrants, conversion privileges,
calls or other rights, agreements, arrangements, commitments or obligations
of Vianet to issue or sell any securities of Vianet or securities or
obligations of any kind convertible into or exchangeable for any securities
of Vianet or any other person, nor are there outstanding any stock
appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or any other
attribute of Vianet.
(c) Authority Relative to this Agreement. Vianet has the requisite
corporate power and authority to enter into this Agreement and to perform
its obligations hereunder. The execution and delivery of this Agreement by
Vianet have been duly authorized by the board of directors of Vianet and no
other corporate proceedings on the part of Vianet are necessary to
authorize this Agreement and the transactions contemplated hereby, except
as may be required by any Agency or the Legislation. This Agreement has
been duly executed and delivered by Vianet and constitutes a legal, valid
and binding obligation of Vianet, enforceable by the Corporation against
Vianet in accordance with its terms except as maybe limited by bankruptcy,
reorganization, insolvency and laws affecting the rights of creditors and
others and to the extent that equitable remedies are only available in the
discretion of the court from which they are sought. The execution and
delivery by Vianet of this Agreement and performance by it of its
obligations hereunder will not result in:
(i) a material violation or breach of any provision of or
constitute a material default (or an event that with notice or lapse
of time or both would become a material default) under,
(A) its certificate or articles of incorporation or by-laws,
(B) any applicable law or, to its knowledge, any regulation,
order, judgment or decree (subject to obtaining the consents
referred to below), or
(C) any agreement, arrangement or understanding to which it
is a party or by which it or its properties is bound or affected,
(ii) the imposition of any encumbrance, charge or lien upon any
of its assets that, individually or in the aggregate, could reasonably
be expected to be Materially Adverse to Vianet.
Other than in connection with or in compliance with the provisions of the
Investment Canada Act (Canada), the Interim Order, the Legislation and the
requirements of the NASD, no authorization, consent or approval of, or filing
with, any Agency is necessary for the consummation by Vianet or Subco of its
obligations under this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure by any party to obtain or make
would not, individually or in the aggregate, prevent or materially delay the
consummation of the transactions contemplated by this agreement.
<PAGE>
(d) Authority Relative to the Arrangement. On or prior to the
Arrangement, Subco will have the requisite corporate power and authority to
perform its obligations under the Arrangement and the performance by Subco
of the terms of the Arrangement will have been duly authorized by the board
of directors of Subco and no other corporate proceedings on the part of
Subco will be necessary to authorize the same, except as may be required by
any Agency or the Legislation. The performance by Subco of its obligations
under the Arrangement will not result in:
(i) a material violation or breach of any provision of or
constitute a material default (or an event that with notice or lapse
of time or both would become a material default) under,
(A) its certificate or articles of incorporation or by-laws,
(B) any applicable law or, to its knowledge, any regulation,
order, judgment or decree (subject to obtaining the consents
referred to below), or
(C) any agreement, arrangement or understanding to which it
is a party or by which it or its properties is bound or affected,
(ii) the imposition of any encumbrance, charge or lien upon any
of its assets that, individually or in the aggregate, could reasonably
be expected to be Materially Adverse to Subco.
Other than in connection with or in compliance with the provisions of the
Investment Canada Act (Canada), the Interim Order and the Legislation, no
authorization, consent or approval of, or filing with, any Agency is necessary
for the consummation by Subco of its obligations under the Arrangement, except
for such authorizations, consents, approvals and filings as to which the failure
by any party to obtain or make would not, individually or in the aggregate,
prevent or materially delay the consummation of the transactions contemplated by
the Arrangement Agreement.
(e) Financial Statements and Disclosure Documents. The information in
respect of Vianet or Subco which will be filed by Vianet with the SEC and
NASD in connection with the Arrangement will, as of their respective dates,
be in compliance in all material respects with the Legislation and will not
as at such dates contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading.
(f) Absence of Certain Changes or Events. In the event there has not
been a Pre-Arrangement Transaction since the date of its incorporation,
there has not been any change, condition, event or occurrence that,
individually or in the aggregate, has been, or could reasonably be expected
to be, Materially Adverse to Vianet Delaware (including any decision to
implement such a change made by the board of directors of Vianet Delaware
or senior management of Vianet Delaware who believe that confirmation of
the decision by the board of directors of Vianet Delaware is probable). In
the event that a Pre-Arrangement Transaction has been effected then, since
the date of Vianet Delaware's incorporation, there has not been any
changes, condition, event or occurrence that, individually or in the
aggregate could be expected to be materially adverse to Vianet subsequent
to the Pre-Arrangement Transaction being effected (including any decision
to implement such a change made by the board of directors of Vianet or
senior management of Vianet who believe that confirmation of the decision
by the board of directors of Vianet is probable).
(g) Litigation. There are no claims, actions, proceedings, suits,
investigations or reviews pending or, to the best of the knowledge of
Vianet, threatened in writing against Vianet, Subco or any of their
respective properties before any Agency that, either individually or in the
aggregate, if adversely determined would be Materially Adverse to Vianet.
<PAGE>
(h) No Material Adverse Judgment, Order or Decree. None of Vianet,
Subco or their respective properties is the subject of any judgment, order
or decree that is, or could reasonably be expected to be, Materially
Adverse to Vianet.
(i) Compliance. Except for any conflicts, defaults or violations that
could not, individually or in the aggregate (taking into account the impact
of any cross-defaults), reasonably be expected to be Materially Adverse to
Vianet, each of Vianet and Subco in the operation of its respective
businesses is not in conflict with, or in default (including cross
defaults) under or violation of:
(i) its articles or by-laws or equivalent organizational
documents;
(ii) any law, rule, regulation, order, permit, judgement or
decree (including those relating to environmental matters) applicable
to it, or by which any of its properties is bound or affected,
including the Legislation; or
(iii) any agreement, arrangement or understanding of it or by
which any of its properties is bound or affected.
(j) Compliance with Law. The business of Vianet and its Subsidiaries
is being conducted in all material respects in compliance with applicable
laws, regulations and ordinances of all authorities having jurisdiction.
(k) Agreements. Each agreement or contract between Vianet or Subco and
any other Person which is material to the business of Vianet, is in full
force and effect and to the best of Vianet's knowledge and belief (i) is
valid, binding and enforceable against each of the parties thereto in
accordance with its terms, (ii) no material breach or default exists in
respect thereof on the part of any party thereto and (iii) no event has
occurred which, with the giving of notice or the lapse of time or both,
would constitute such a material breach or default.
(l) Property. Vianet has good and marketable title to all of its
material properties and assets (real and personal, tangible and intangible,
including leasehold interests).
(m) Subsidiaries. Immediately prior to the Arrangement, each of the
Subsidiaries of Vianet will be duly incorporated under applicable law,
validly existing and have full corporate or legal power and authority to
own its property and conduct its businesses and to perform its obligations
under this Agreement. All of the outstanding shares of the capital stock
and other ownership interests of the Subsidiaries will be owned by Vianet
and validly issued, fully paid and non-assessable and owned free and clear
of all material liens or encumbrances other than as disclosed to the
Corporation in writing. Immediately prior to the Arrangement, there will be
no options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating Vianet or any of its Subsidiaries to
issue or sell any securities of any of those Subsidiaries or securities or
obligations of any kind convertible into or exchangeable for securities or
other ownership interests of any of those Subsidiaries. Immediately prior
to the Arrangement, there will be no outstanding stock appreciation rights,
equity or similar rights, agreements, arrangements or commitments based on
the book value, income or any other attribute of any of the Subsidiaries of
Vianet.
(n) Vianet Share Price. As at February 12, 1999, the most recent
issuance by Vianet Delaware of common shares to a Person dealing with
Vianet Delaware at arm's length was equal to or greater than U.S.$4.00 per
share, which is equivalent to US$1.00 per common share of Vianet
immediately following the Merger.
<PAGE>
(o) Liabilities. Immediately prior to the Effective Date, Vianet will
have no liabilities other than those incurred in the ordinary course of its
business and Vianet shall not have a negative net worth.
(p) Due Issuance of Shares. When issued, common shares of Vianet
issued to the then shareholders of the Corporation pursuant to the
Arrangement and common shares of Vianet issued in connection with the
exercise of options and warrants received pursuant to the Arrangement by
holders of Existing Options, shall be duly and validly issued and fully
paid and non-assessable.
(q) Full Disclosure. None of the foregoing representations and
warranties and no document furnished by or on behalf of the Vianet to the
Corporation in connection with the negotiation of the transactions
contemplated by this Agreement contain any untrue statement of a material
fact or omit to state any material fact necessary to make any such
statement or representation not misleading to a prospective purchaser of
the shares of Vianet seeking full information as to Vianet and Vianet's
Subsidiaries and their respective properties, businesses and affairs.
Except for those matters disclosed in this Agreement, there are no facts
related to Vianet's or its Subsidiaries' business not disclosed in this
Agreement which, if learned by the Corporation, might reasonably be
expected to materially diminish the Corporation's evaluation of the worth
or profitability of Vianet or which, if learned by the Corporation, might
reasonably be expected to deter the Corporation from completing the
transactions contemplated by this Agreement on the terms of this Agreement.
<PAGE>
SCHEDULE G
CERTAIN HOLDERS OF EXISTING OPTIONS
<TABLE>
<CAPTION>
Name Options or Warrants Number of Develcon Shares
<S> <C> <C>
................................J. Posner Warrants 1,000,000
..............................N. Jamieson Warrants 1,000,000
...............................G. Bennett Options 600,000
.................................F. Sanda Options 245,000
................................B. Brydon Options 130,000
</TABLE>
<PAGE>
SCHEDULE H
PLAN OF ARRANGEMENT
UNDER SECTION 192 OF THE
CANADA BUSINESS CORPORATIONS ACT
1.1 Definitions
1.2 Sections and Headings. The division of this Plan of Arrangement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to a section or a Schedule
refers to the specified section of or Schedule to this Plan of Arrangement.
1.3 Number, Gender and Persons. In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, corporations, partnerships, associations,
trusts, unincorporated organizations, governmental bodies and other legal or
business entities of any kind.
Article 2. Arrangement Agreement.
2.1 Arrangement Agreement. This Plan of Arrangement is made pursuant to, is
subject to the provisions of and forms part of, the Arrangement Agreement.
Article 3. Arrangement.
3.1 Arrangement. Effective as of the Effective Time, the following will
occur and will be deemed to occur in the following order without any further
authorization, act or formality:
(a) Convertible Debentures: except as provided in Section 4.1,
(i) each of the then outstanding Convertible Debentures, the
trust indenture relating thereto and all amendments thereto and all
documents under which they are issued shall, without any further
action on the part of any Convertible Debentureholder or the trustee
under the trust indenture relating to the Convertible Debentures, be
amended and be deemed to be amended such that (A) the number of Common
Shares to which the holder thereof is entitled upon proper exercise
thereof in accordance with the terms of the Convertible Debentures
shall be equal to 5.9963 Common Shares for each Cdn. $1.00 principal
amount of Convertible Debentures and (B) all interest on the
Convertible Debentures which has accrued but not been paid shall be
forgiven;
<PAGE>
(ii) the rights pursuant to each of the then outstanding
Convertible Debentures to convert the principal amounts outstanding
thereunder into Common Shares shall, without any further action on the
part of any Convertible Debentureholder, be and be deemed to be
exercised to convert each Cdn. $1.00 principal amount of Convertible
Debentures into 5.9963 Common Shares;
(iii) Develcon shall, without any further action on the part of
Develcon, issue and be deemed to issue Common Shares to the
aforementioned holders of Convertible Debentures at the aforementioned
conversion ratio and each Convertible Debentureholder which becomes a
holder of Common Shares in accordance herewith shall be entered in the
register of holders of Common Shares. If the foregoing calculation
results in Convertible Debentures being exercisable for a fraction of
a Common Share, then the number of Common Shares subject to such
conversion will be rounded down to the nearest whole number of Common
Shares;
(iv) each of the Convertible Debentures shall, without any
further action on the part of any Convertible Debentureholder,
Develcon or the trustee under the trust indenture relating to the
Convertible Debentures, be cancelled and deemed to be cancelled;
(b) Amalgamation. The Corporation and Subco shall amalgamate and shall
continue as one corporation under the CBCA on the following terms and
conditions, without any further authorization, act or formality:
(i) Name. The name of the Amalgamated Corporation shall be
Develcon Electronics Ltd.
(ii) Registered Office. Until changed in accordance with the
CBCA, the place in Canada where the registered office of the
Amalgamated Corporation shall be situate is Toronto, Ontario and the
address of the registered office shall be 185 Sheppard Avenue West,
Toronto, Ontario M2N 1M9.
(iii) Business. There shall be no restrictions on the business
the Amalgamated Corporation may carry on.
(iv) By-Laws. The by-laws of Develcon shall, to the extent not
inconsistent with this Plan of Arrangement, be the by-laws of the
Amalgamated Corporation, until repealed or amended. A copy of the
proposed by-laws may be examined at the offices of Chaiton & Chaiton
located at 185 Sheppard Avenue West, Toronto, Ontario M2N 1M9.
(v) Classes and Number of Shares Authorized. The Amalgamated
Corporation shall be authorized to issue an unlimited number of shares
of one class designated as common shares.
(vi) Issued Shares.
(A) each issued and outstanding common share of Subco shall
be converted into one issued and fully paid and non-assessable
common share of the Amalgamated Corporation;
(B) except as provided in Section 4.1, each issued and
outstanding common share of Develcon shall be cancelled without
reimbursement of the capital represented thereby and the holder
shall receive from Vianet, in exchange therefor, 0.0325203 issued
and fully paid and non-assessable Vianet Share; and
(C) except as provided in Section 4.1, each holder of Common
Shares which becomes a holder of common shares of Vianet in
accordance with the Arrangement shall be entered in the register
of holders of common shares of Vianet.
<PAGE>
(vii) Directors. Until changed in accordance with the CBCA, there
shall be a minimum of one director and a maximum of fifteen directors
of the Amalgamated Corporation. The first directors of the Amalgamated
Corporation shall be:
<TABLE>
<CAPTION>
Name Address Resident Canadian(Yes or No)
<S> <C> <C>
Geoffrey Bennett 18 Dyas Road, Yes
North York, Ontario
Keith Gilbert 365 Bay Street Yes
10th Floor
Toronto, Ontario
Jeremy Posner 23 Be'er Sheva No
Jerusalem, Israel
</TABLE>
(viii) Financial Year End. Until otherwise determined by
resolution of the directors, the financial year of the Amalgamated
Corporation shall end on the last day of December in each year.
(ix) Effect of Amalgamation. On the date shown in the certificate
of arrangement:
(A) the property of Develcon and Subco shall continue to be
the property of the Amalgamated Corporation;
(B) the Amalgamated Corporation shall continue to be liable
for the obligations of Develcon and Subco;
(C) an existing cause of action, claim or liability to
prosecution relating to Develcon or Subco shall be unaffected;
(D) a civil, criminal or administrative action or proceeding
pending by or against Develcon or Subco may be continued to be
prosecuted by or against the Amalgamated Corporation; and
(E) the articles of arrangement shall be deemed to be the
articles of incorporation of the Amalgamated Corporation and,
except for the purposes of subsection 104(1) of the CBCA, the
certificate of arrangement is deemed to be the certificate of the
Amalgamated Corporation;
(x) Auditors. The auditors of the Amalgamated Corporation, until
the first annual meeting of shareholders shall be KPMG, unless such
auditors resign or are removed in accordance with the CBCA.
(xi) Share Transfer Restrictions. The right to transfer shares in
the Amalgamated Corporation shall be restricted in that no shares
shall be transferred without either:
(A) the consent of the directors of the Amalgamated
Corporation expressed by a resolution passed by the directors or
by an instrument or instruments in writing signed by a majority
of the directors, which consent may be given either prior or
subsequent to the time of transfer of such shares; or
(B) the consent of the holders of shares of the Amalgamated
Corporation to which are attached at least 50.1% of the votes
attaching to all shares of the Amalgamated Corporation for the
time being outstanding carrying voting rights either under all
circumstances or under some circumstances that have occurred and
are continuing, expressed by resolution passed by such
shareholders or by an instrument or instruments in writing signed
by such shareholders, which consent may be given either prior or
subsequent to the time of transfer of such shares.
<PAGE>
(xii) Private Company. The number of shareholders of the
Amalgamated Corporation, exclusive of persons who are in its
employment and exclusive of persons who, having been formerly in the
employment of the Amalgamated Corporation, were, while in that
employment, and have continued after termination of that employment to
be, shareholders of the Amalgamated Corporation shall be limited to
not more than 50, two or more persons who are joint registered holders
of one or more shares being counted as one shareholder and any
invitation to the public to subscribe for securities of the
Amalgamated Corporation shall be prohibited.
(xiii) Restrictions on Transfer of Vianet Shares. In addition to
any restrictions imposed by applicable laws, holders of the Vianet
Shares issued pursuant to Section 3.1(vi)(B) will only be entitled to
sell, transfer or otherwise dispose of any of such Shares as follows:
(A) twenty (20) percent of the Vianet Shares issued to such
holders pursuant to the Arrangement may be sold, transferred,
assigned or otherwise disposed of from and after the Effective
Date;
(B) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
sixth month anniversary of the Effective Date;
(C) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
twelfth month anniversary of the Effective Date;
(D) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
eighteenth month anniversary of the Effective Date;
(E) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
twenty-fourth month anniversary of the Effective Date;
provided, however, that the foregoing restrictions
shall not apply to any such holders issued less than 8,000 Vianet Shares
pursuant to the Arrangement and accordingly,
(F) certificates representing Vianet Shares issued to each
holder of common shares of Develcon under the Arrangement, as
contemplated by Section 5.1, shall be issued separately to
represent the Vianet Shares issued to such holder which may be
disposed of from and after the Effective Date (as contemplated by
Section 3.1(b)(xiii)(A) and from and after each of the various
anniversaries of the Effective Date (as contemplated by Section
3.1(b)(xiii)(B) through (E)). A legend to substantially the
following effect will be placed on certificates representing
Vianet Shares issued to such holders which are subject to the
restrictions set out in Section 3.1(b)(xiii)(B) through (E):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESALE
RESTRICTIONS RELATING TO THE PLAN OF ARRANGEMENT UNDER WHICH THEY WERE ISSUED
AND MAY NOT BE TRANSFERRED UNTIL [RELEVANT ANNIVERSARY OF EFFECTIVE DATE].
THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO
EFFECT GOOD DELIVERY OF THE SECURITIES REPRESENTED HEREBY. A CERTIFICATE WITHOUT
A LEGEND MAY BE OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT OF THE SHARES IN
CONNECTION WITH A SALE OF THE SECURITIES REPRESENTED HEREBY FROM AND AFTER THE
DATE SPECIFIED IN THE IMMEDIATELY PRECEDING PARAGRAPH OF THIS LEGEND (and any
additional legend required by applicable law); and
<PAGE>
(G) Vianet may give stop transfer instructions to the Vianet
Transfer Agent with respect to the Vianet Shares issued to such
holders pursuant to the Arrangement which are to be sold,
transferred, assigned or otherwise disposed of in contravention
of the restrictions set out in Section 3.1(b)(xiii)(B) through
(E).
(c) Existing Options. Each of the Existing Options will, without any
further action on the part of any holder of Existing Options, Develcon or
Vianet, be converted into a security of the same kind and nature except
that it shall entitle the holder to purchase that number of Vianet Shares
which the holder would have received from Vianet under the Arrangement had
the holder exercised its Existing Options for Common Shares immediately
before the Effective Date and the exercise price for such Vianet Shares
shall be as are set out in Appendix I hereto. If the foregoing calculation
results in the Existing Options of a holder being exercisable for a
fraction of a Common Share, then the number of Common Shares subject to
such conversion will be rounded down to the nearest whole number of Common
Shares. The Existing Options as so converted will (without further action
on the part of any holder of Existing Options, Develcon or Vianet) be
further modified as necessary to effect such conversion; provided, however,
the term, exercisability and all other terms and conditions of the Existing
Options will otherwise be unchanged by the provisions of this paragraph and
shall operate in accordance with their terms and the agreement, certificate
or other evidence of the Existing Options will represent the right
described in this Plan of Arrangement.
Article 4. Rights of Dissent.
4.1 Rights of Dissent. Holders of Common Shares outstanding immediately
before the cancellation thereof contemplated by Section 3.1(b)(vi)(B) may
exercise rights of dissent with respect to such shares pursuant to and in the
manner set forth in section 190 of the CBCA and this Section 4.1 in connection
with the Arrangement and holders who duly exercise such rights of dissent and
who:
(a) are ultimately determined to be entitled to be paid "fair value"
for their Common Shares under the CBCA shall be deemed to have transferred
such Common Shares to the Corporation for cancellation in accordance with
the CBCA; and
(b) are ultimately determined not to be entitled, for any reason, to
be paid "fair value" for their Common Shares shall be deemed to have
participated in the Arrangement on the same basis as any non-dissenting
holder of Common Shares and shall receive Vianet common shares on the basis
determined in accordance with Section 3.1(b)(vi) above but in no event
shall the Amalgamated Corporation be required to recognize such persons as
shareholders of the Amalgamated Corporation from and after the Effective
Date.
Holders of Convertible Debentures outstanding immediately before the
cancellation thereof contemplated by Section 3.1(a)(iv) may exercise rights of
dissent with respect to such Convertible Debentures pursuant to and in the
manner set forth in section 190 of the CBCA (as such provision would apply if
and to the extent that such holders were the holders of Common Shares that would
be issued to them after the conversion contemplated by Section 3.1(a)) and this
Section 4.1 in connection with the Arrangement and holders who duly exercise
such rights of dissent and who:
(c) are ultimately determined to be entitled to be paid "fair value"
for their Convertible Debentures shall be entitled to receive as such "fair
value", the "fair value" of the Common Shares into which the Convertible
Debentures of such holder would be converted pursuant to Section 3.1(a) but
for this Section 4.1(c) and shall be deemed to have transferred such
Convertible Debentures to the Corporation for cancellation in accordance
with the CBCA and the trust indenture relating thereto, as amended; and
<PAGE>
(d) are ultimately determined not to be entitled, for any reason, to
be paid "fair value" for their Convertible Debentures shall be deemed to
have participated in the Arrangement on the same basis as any
non-dissenting holder of Convertible Debentures and shall receive Vianet
Shares on the basis determined in accordance with Section 3.1(a) above but
in no event shall the Amalgamated Corporation be required to recognize such
persons as Convertible Debentureholders of the Amalgamated Corporation from
and after the Effective Date.
Article 5. Certificate and Fractional Shares.
5.1 Issuance of Certificates Representing Vianet Shares. After the
Effective Date, certificates and instruments formerly representing Common
Shares, Existing Options and Convertible Debentures shall represent only the
right to receive the certificates or other relevant instrument (i.e. option or
warrant) representing the Vianet Shares or options or warrants of Vianet which
the former holder is entitled to receive, after giving effect to Sections
3.1(b)(vi) and 3.1(c), subject to compliance with the requirements set forth in
this Section 5.1. As soon as practicable after the Effective Date, Vianet shall
forward or cause to be forwarded to each former Securityholder (other than
holders of Common Shares who have exercised their dissent rights) and each
former Convertible Debentureholder at the address of such holder as it appears
in the relevant register of Develcon a letter of transmittal containing, among
other things, instructions for obtaining delivery of the certificates or other
relevant instrument representing the Vianet Shares or options or warrants of
Vianet which the former holder is entitled to receive pursuant to this Plan of
Arrangement. Such former Securityholder or former Convertible Debentureholder,
as the case may be, shall be entitled to receive certificates or other relevant
instrument representing the Vianet Shares or options or warrants of Vianet which
the former holder is entitled to receive, after giving effect to Sections
3.1(b)(vi) and (3.1)(c) upon delivering the certificate or other relevant
instrument formerly representing such holder's Common Shares, Existing Options
or Debentures, as the case may be, to Vianet's Transfer Agent or as Vianet's
Transfer Agent may otherwise direct and in accordance with the instructions
contained in the letter of transmittal. Such certificate or other relevant
instrument formerly representing such holder's Common Shares, Existing Options
or Convertible Debentures, as the case may be, shall be accompanied by the
letter of transmittal, duly completed, and such other documents as Vianet's
Transfer Agent may reasonably require. Vianet's Transfer Agent shall register
the Vianet Shares or options or warrants of Vianet, as the case may be, in the
name of the relevant holder or as otherwise instructed in the letters of
transmittal, and shall deliver such Vianet Shares or options or warrants of
Vianet, as the case may be, as each such holder may direct in such letter of
transmittal, as soon as practicable after receipt by Vianet's Transfer Agent of
such documents.
5.2 Distributions with Respect to Unsurrendered Certificates. No dividends
or other distributions declared or made after the Effective Time with respect to
Vianet Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate which, immediately prior to the
Effective Time, represented outstanding Common Shares that were exchanged
pursuant to Section 3.1(b)(vi) hereof, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 5.3 hereof, and no
interest will be earned or payable on these proceeds, in each case, unless and
until such certificate shall be surrendered in accordance with Section 5.1
hereof. Subject to applicable law and to Section 5.1 hereof, at the time of such
surrender of any such certificate (or, in the case of clause (iii) below, at the
appropriate payment date), there shall be paid to the record holder of the
certificates representing whole Vianet Shares without interest, (i) the amount
of any cash payable in lieu of a fractional Vianet common share to which such
holder is entitled pursuant to Section 5.3 hereof, (ii) the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole Vianet Share, and (iii) the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Vianet Share.
<PAGE>
5.3 No Fractional Shares. For greater certainty all fractional interests of
Vianet Shares to be received by a holder of Common Shares pursuant to Section
3.1(b)(vi) hereof shall be aggregated and such holder shall be entitled to
receive that number of Vianet Shares rounded down to the nearest whole number.
No certificate or scrip representing a fractional Vianet Share shall be issued
to any holder of Common Shares who would otherwise be entitled to receive a
fraction of a Vianet Share pursuant to Section 3.1(b)(vi) hereof and such
fractional interest shall not entitle the owner thereof to vote or to exercise
any rights as a security holder of Vianet or the Amalgamated Corporation. In
lieu of any such fractional securities, each person entitled to a fractional
interest in a Vianet Share will receive in lieu thereof from Vianet an amount of
cash (rounded to the nearest whole cent), without interest, paid by Vianet by
cheque in Canadian dollars equal to that obtained by multiplying such fraction
by the quotient of 4 divided by 0.65.
5.4 Lost Certificates. If any certificate or instrument which immediately
prior to the Effective Time represented outstanding Common Shares, Existing
Options or Convertible Debentures that were exchanged pursuant to Section 3.1
hereof has been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, Vianet's Transfer Agent will issue in exchange for such lost, stolen
or destroyed certificate or instrument, a certificate or instrument representing
Vianet Shares (and any dividends or distributions with respect thereto pursuant
to Section 5.2 hereof and any cash pursuant to Section 5.3 hereof) or options or
warrants of Vianet, as the case may be, deliverable in respect thereof as
determined in accordance with Section 3.1 hereof. When authorizing such payment
in exchange for any lost, stolen or destroyed certificate, the Person to whom
certificates or instruments representing Vianet Shares or options or warrants of
Vianet, as the case may be, are to be issued shall, as a condition precedent to
the issuance thereof, give a bond satisfactory to Vianet and Vianet's Transfer
Agent in such sum as Vianet may direct or otherwise indemnify it or Vianet in a
manner satisfactory to Vianet and Vianet's Transfer Agent, acting reasonably,
against any claim that may be made against Vianet or Vianet's Transfer Agent
with respect to the certificate or instrument alleged to have been lost, stolen
or destroyed.
5.5 Extinguishment of Rights. Any certificate or instrument which
immediately prior to the Effective Time represented outstanding Common Shares,
Convertible Debenture or Existing Options that were exchanged or converted
pursuant to Section 3.1 hereof and which has not been deposited, with all other
instruments required by Section 5.1 hereof, on or prior to the tenth anniversary
of the Effective Date, shall cease to represent a claim or interest of any kind
or nature as a shareholder, option holder or warrant holder of Develcon or of
the Amalgamated Corporation or Vianet. On such date, the Vianet Shares or
options or warrants of Vianet, as the case may be, to which the former
registered holder of the share certificate or Convertible Debenture or Existing
Options referred to in the preceding sentence was ultimately entitled shall be
deemed to have been surrendered and shall be cancelled together with all
entitlements to dividends, distributions and interests thereon held for such
former registered holder for no consideration.
Article 6. Amendment
6.1 Plan of Arrangement Amendment. The parties to the Arrangement Agreement
reserve the right to amend, modify and/or supplement this Plan of Arrangement at
any time and from time to time provided that any such amendment, modification,
or supplement must be contained in a written document that is (i) agreed to in
writing by each of Develcon and Vianet, (ii) filed with the Court and, if made
following the Special Meeting or the Debentureholders Special Meeting, approved
by the Court, and (iii) communicated to the Securityholders and Convertible
Debentureholders in the manner required by the Court (if so required). Any
amendment, modification or supplement to this Plan of Arrangement may be
proposed by Develcon or Vianet at any time prior to or at the Special Meeting or
the Debentureholders Special Meeting (or written resolution of the holders of
the Convertible Debentures) (provided that Vianet shall have consented thereto
<PAGE>
in writing) with or without any other prior notice or communication, and if so
proposed and accepted by the persons voting at the Special Meeting and at the
Debentureholders Special Meeting (or written resolution of the holders of the
Convertible Debenture) (other than as may be required under the Interim Order),
shall become part of this Plan of Arrangement for all purposes. Any amendment,
modification or supplement to this Plan of Arrangement that is approved by the
Court following the Special Meeting or the Debentureholders Special Meeting (or
written resolution of the holders of the Convertible Debentures) shall be
effective only if it is consented to in writing by each of Develcon and Vianet.
Notwithstanding the foregoing, any amendment, modification or supplement to this
Plan of Arrangement may be made following the Effective Date unilaterally by
Vianet, provided that it concerns a matter which, in the reasonable opinion of
counsel to Vianet, is of an administrative nature required to better give effect
to the implementation of this Plan of Arrangement and such amendment,
modification or supplement is not materially prejudicial to the financial or
economic interest of any holder of securities of Vianet or in contravention of
the Final Order.
Article 7. Further Assurances
7.1 Other Documents and Instruments. Notwithstanding that the transactions
or events set out herein shall occur and shall be deemed to occur in the order
set out in this Plan of Arrangement without any further act or formality, Vianet
and Develcon agree to make, do and execute, or cause and cause to be made, done
and executed, all such further acts, deeds, agreements, transfers, assurances,
instruments or documents as may reasonably be required by any of them in order
further to document or evidence any of the transactions or events set out
herein, including, without limitation, any resolutions of directors authorizing
the issue, exchange, transfer, purchase for cancellation or donation of shares
and any share transfer powers evidencing the transfer of shares and any receipts
therefor.
<PAGE>
SCHEDULE I
EXISTING OPTIONS
<TABLE>
<CAPTION>
Security No of Common Shares Issuable upon Exercise Exercise/Conversion Price per Share
Warrants issued to Neil Jamieson
<S> <C> <C>
and Jeremy Posner 2,000,000 Cdn.$0.25
Employees' stock options 2,015,250 Cdn.$0.16 to Cdn.$1.38
Directors' stock options 250,000 Cdn.$0.08 to Cdn.$0.90
</TABLE>
4,265,250
<PAGE>
SCHEDULE J
OPTION/WARRANT EXCHANGE RATIO
<TABLE>
<CAPTION>
Share Value ? Vianet Develcon "DCL"
<S> <C> <C>
U.S.$1.00 CDN.$0.050 For Every 1,000 Existing DLC Options / Warrants
Holder thereof receives 32.520 Vianet Options on same terms
</TABLE>
<TABLE>
<CAPTION>
Price of Price of Price of Price of Price of Price of Price of Price of Price of Price of
DLC Vianet DLC Vianet DLC Vianet DLC Vianet DLC Vianet
Option Option Option Option Option Option Option Option Option Option
CDN.$ U.S.$ CDN.$ U.S.$ CDN.$ U.S.$ CDN.$ U.S.$ CDN.$ U.S.$
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.01 0.20 0.34 6.80 0.67 13.40 1.00 20.00 1.33 26.60
0.02 0.40 0.35 7.00 0.68 13.60 1.01 20.20 1.34 26.80
0.03 0.60 0.36 7.20 0.69 13.80 1.02 20.40 1.35 27.00
0.04 0.80 0.37 7.40 0.70 14.00 1.03 20.60 1.36 27.20
0.05 1.00 0.38 7.60 0.71 14.20 1.04 20.80 1.37 27.40
0.06 1.20 0.39 7.80 0.72 14.40 1.05 21.00 1.38 27.60
0.07 1.40 0.40 8.00 0.73 14.60 1.06 21.20 1.39 27.80
0.08 1.60 0.41 8.20 0.74 14.80 1.07 21.40 1.40 28.00
0.09 1.80 0.42 8.40 0.75 15.00 1.08 21.60 1.41 28.20
0.10 2.00 0.43 8.60 0.76 15.20 1.09 21.80 1.42 28.40
0.11 2.20 0.44 8.80 0.77 15.40 1.10 22.00 1.43 28.60
0.12 2.40 0.45 9.00 0.78 15.60 1.11 22.20 1.44 28.80
0.13 2.60 0.46 9.20 0.79 15.80 1.12 22.40 1.45 29.00
0.14 2.80 0.47 9.40 0.80 16.00 1.13 22.60 1.46 29.20
0.15 3.00 0.48 9.60 0.81 16.20 1.14 22.80 1.47 29.40
0.16 3.20 0.49 9.80 0.82 16.40 1.15 23.00 1.48 29.60
0.17 3.40 0.50 10.00 0.83 16.60 1.16 23.20 1.49 29.80
0.18 3.60 0.51 10.20 0.84 16.80 1.17 23.40 1.50 30.00
0.19 3.80 0.52 10.40 0.85 17.00 1.18 23.60 1.51 30.20
0.20 4.00 0.53 10.60 0.86 17.20 1.19 23.80 1.52 30.40
0.21 4.20 0.54 10.80 0.87 17.40 1.20 24.00 1.53 30.60
0.22 4.40 0.55 11.00 0.88 17.60 1.21 24.20 1.54 30.80
0.23 4.60 0.56 11.20 0.89 17.80 1.22 24.40 1.55 31.00
0.24 4.80 0.57 11.40 0.90 18.00 1.23 24.60 1.56 31.20
0.25 5.00 0.58 11.60 0.91 18.20 1.24 24.80 1.57 31.40
0.26 5.20 0.59 11.80 0.92 18.40 1.25 25.00 1.58 31.60
0.27 5.40 0.60 12.00 0.93 18.60 1.26 25.20 1.59 31.80
0.28 5.60 0.61 12.20 0.94 18.80 1.27 25.40 1.60 32.00
0.29 5.80 0.62 12.40 0.95 19.00 1.28 25.60 1.61 32.20
0.30 6.00 0.63 12.60 0.96 19.20 1.29 25.80 1.62 32.40
0.31 6.20 0.64 12.80 0.97 19.40 1.30 26.00 1.63 32.60
0.32 6.40 0.65 13.00 0.98 19.60 1.31 26.20 1.64 32.80
0.33 6.60 0.66 13.20 0.99 19.80 1.32 26.40 1.65 33.00
</TABLE>
- -----------
In essence, the formula works as follows:
1. The number of options are consolidated in the same ratios as the common
stock (i.e. 123:4 which results in 1,000 options in Develcon becoming 32.52
options in Vianet).
2. The price of the option in Vianet is in the same ratio to the sum of
U.S.$1.00 as the original Develcon option is to the "deal" price of Develcon
common shares, being CDN$$0.05 times the U.S.$1.00 Vianet share value; e.g. a
current Develcon option at CDN.$0.25 results in a Vianet option of U.S.$20.00
(0.25/0.05 ? 1.00 = 5.00)
<PAGE>
APPENDIX B
PLAN OF ARRANGEMENT
UNDER SECTION 192 OF THE
CANADA BUSINESS CORPORATIONS ACT
Article 1. Interpretation
1.1 Definitions
1.2 Sections and Headings. The division of this Plan of Arrangement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to a section or a Schedule
refers to the specified section of or Schedule to this Plan of Arrangement.
1.3 Number, Gender and Persons. In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, corporations, partnerships, associations,
trusts, unincorporated organizations, governmental bodies and other legal or
business entities of any kind.
Article 2. Arrangement Agreement.
2.1 Arrangement Agreement. This Plan of Arrangement is made pursuant to, is
subject to the provisions of and forms part of, the Arrangement Agreement.
Article 3. Arrangement.
3.1 Arrangement. Effective as of the Effective Time, the following will
occur and will be deemed to occur in the following order without any further
authorization, act or formality:
(a) Convertible Debentures: except as provided in Section 4.1,
(i) each of the then outstanding Convertible Debentures, the
trust indenture relating thereto and all amendments thereto and all
documents under which they are issued shall, without any further
action on the part of any Convertible Debentureholder or the trustee
under the trust indenture relating to the Convertible Debentures, be
amended and be deemed to be amended such that (A) the number of Common
Shares to which the holder thereof is entitled upon proper exercise
thereof in accordance with the terms of the Convertible Debentures
shall be equal to 5.9963 Common Shares for each Cdn. $1.00 principal
amount of Convertible Debentures and (B) all interest on the
Convertible Debentures which has accrued but not been paid shall be
forgiven;
(ii) the rights pursuant to each of the then outstanding
Convertible Debentures to convert the principal amounts outstanding
thereunder into Common Shares shall, without any further action on the
part of any Convertible Debentureholder, be and be deemed to be
exercised to convert each Cdn. $1.00 principal amount of Convertible
Debentures into 5.9963 Common Shares;
(iii) Develcon shall, without any further action on the part of
Develcon, issue and be deemed to issue Common Shares to the
aforementioned holders of Convertible Debentures at the aforementioned
conversion ratio and each Convertible Debentureholder which becomes a
holder of Common Shares in accordance herewith shall be entered in the
register of holders of Common Shares. If the foregoing calculation
results in Convertible Debentures being exercisable for a fraction of
a Common Share, then the number of Common Shares subject to such
conversion will be rounded down to the nearest whole number of Common
Shares;
<PAGE>
(iv) each of the Convertible Debentures shall, without any
further action on the part of any Convertible Debentureholder,
Develcon or the trustee under the trust indenture relating to the
Convertible Debentures, be cancelled and deemed to be cancelled;
(b) Amalgamation. The Corporation and Subco shall amalgamate and shall
continue as one corporation under the CBCA on the following terms and
conditions, without any further authorization, act or formality:
(i) Name. The name of the Amalgamated Corporation shall be
Develcon Electronics Ltd.
(ii) Registered Office. Until changed in accordance with the
CBCA, the place in Canada where the registered office of the
Amalgamated Corporation shall be situate is Toronto, Ontario and the
address of the registered office shall be 185 Sheppard Avenue West,
Toronto, Ontario M2N 1M9.
(iii) Business. There shall be no restrictions on the business
the Amalgamated Corporation may carry on.
(iv) By-Laws. The by-laws of Develcon shall, to the extent not
inconsistent with this Plan of Arrangement, be the by-laws of the
Amalgamated Corporation, until repealed or amended. A copy of the
proposed by-laws may be examined at the offices of Chaiton & Chaiton
located at 185 Sheppard Avenue West, Toronto, Ontario M2N 1M9.
(v) Classes and Number of Shares Authorized. The Amalgamated
Corporation shall be authorized to issue an unlimited number of shares
of one class designated as common shares.
(vi) Issued Shares.
(A) each issued and outstanding common share of Subco shall
be converted into one issued and fully paid and non-assessable
common share of the Amalgamated Corporation;
(B) except as provided in Section 4.1, each issued and
outstanding common share of Develcon shall be cancelled without
reimbursement of the capital represented thereby and the holder
shall receive from Vianet, in exchange therefor, 0.0325203 issued
and fully paid and non-assessable Vianet Share; and
(C) except as provided in Section 4.1, each holder of Common
Shares which becomes a holder of common shares of Vianet in
accordance with the Arrangement shall be entered in the register
of holders of common shares of Vianet.
(vii) Directors. Until changed in accordance with the CBCA,
there shall be a minimum of one director and a maximum of fifteen
directors of the Amalgamated Corporation. The first directors of
the Amalgamated Corporation shall be:
<TABLE>
<CAPTION>
Name Address Resident Canadian(Yes or No)
<S> <C> <C>
Geoffrey Bennett 18 Dyas Road, Yes
North York, Ontario
Keith Gilbert 365 Bay Street Yes
10th Floor
Toronto, Ontario
Jeremy Posner 23 Be'er Sheva No
Jerusalem, Israel
</TABLE>
<PAGE>
(viii) Financial Year End. Until otherwise determined by
resolution of the directors, the financial year of the Amalgamated
Corporation shall end on the last day of December in each year.
(ix) Effect of Amalgamation. On the date shown in the certificate
of arrangement:
(A) the property of Develcon and Subco shall continue to be
the property of the Amalgamated Corporation;
(B) the Amalgamated Corporation shall continue to be liable
for the obligations of Develcon and Subco;
(C) an existing cause of action, claim or liability to
prosecution relating to Develcon or Subco shall be unaffected;
(D) a civil, criminal or administrative action or proceeding
pending by or against Develcon or Subco may be continued to be
prosecuted by or against the Amalgamated Corporation; and
(E) the articles of arrangement shall be deemed to be the
articles of incorporation of the Amalgamated Corporation and,
except for the purposes of subsection 104(1) of the CBCA, the
certificate of arrangement is deemed to be the certificate of the
Amalgamated Corporation;
(x) Auditors. The auditors of the Amalgamated Corporation, until
the first annual meeting of shareholders shall be KPMG, unless such
auditors resign or are removed in accordance with the CBCA.
(xi) Share Transfer Restrictions. The right to transfer shares in
the Amalgamated Corporation shall be restricted in that no shares
shall be transferred without either:
(A) the consent of the directors of the Amalgamated
Corporation expressed by a resolution passed by the directors or
by an instrument or instruments in writing signed by a majority
of the directors, which consent may be given either prior or
subsequent to the time of transfer of such shares; or
(B) the consent of the holders of shares of the Amalgamated
Corporation to which are attached at least 50.1% of the votes
attaching to all shares of the Amalgamated Corporation for the
time being outstanding carrying voting rights either under all
circumstances or under some circumstances that have occurred and
are continuing, expressed by resolution passed by such
shareholders or by an instrument or instruments in writing signed
by such shareholders, which consent may be given either prior or
subsequent to the time of transfer of such shares.
(xii) Private Company. The number of shareholders of the
Amalgamated Corporation, exclusive of persons who are in its
employment and exclusive of persons who, having been formerly in the
employment of the Amalgamated Corporation, were, while in that
employment, and have continued after termination of that employment to
be, shareholders of the Amalgamated Corporation shall be limited to
not more than 50, two or more persons who are joint registered holders
of one or more shares being counted as one shareholder and any
invitation to the public to subscribe for securities of the
Amalgamated Corporation shall be prohibited.
(xiii) Restrictions on Transfer of Vianet Shares. In addition to
any restrictions imposed by applicable laws, holders of the Vianet
Shares issued pursuant to Section 3.1(vi)(B) will only be entitled to
sell, transfer or otherwise dispose of any of such Shares as follows:
<PAGE>
(A) twenty (20) percent of the Vianet Shares issued to such
holders pursuant to the Arrangement may be sold, transferred,
assigned or otherwise disposed of from and after the Effective
Date;
(B) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
sixth month anniversary of the Effective Date;
(C) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
twelfth month anniversary of the Effective Date;
(D) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
eighteenth month anniversary of the Effective Date;
(E) an additional twenty (20) percent of the Vianet Shares
issued to such holders pursuant to the Arrangement may be sold,
transferred, assigned or otherwise disposed of from and after the
twenty-fourth month anniversary of the Effective Date;
provided, however, that the foregoing restrictions shall not apply to any
such holders issued less than 8,000 Vianet Shares pursuant to the Arrangement
and accordingly,
(F) certificates representing Vianet Shares issued to each
holder of common shares of Develcon under the Arrangement, as
contemplated by Section 5.1, shall be issued separately to
represent the Vianet Shares issued to such holder which may be
disposed of from and after the Effective Date (as contemplated by
Section 3.1(b)(xiii)(A) and from and after each of the various
anniversaries of the Effective Date (as contemplated by Section
3.1(b)(xiii)(B) through (E)). A legend to substantially the
following effect will be placed on certificates representing
Vianet Shares issued to such holders which are subject to the
restrictions set out in Section 3.1(b)(xiii)(B) through (E):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESALE
RESTRICTIONS RELATING TO THE PLAN OF ARRANGEMENT UNDER WHICH THEY WERE ISSUED
AND MAY NOT BE TRANSFERRED UNTIL [RELEVANT ANNIVERSARY OF EFFECTIVE DATE].
THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO
EFFECT GOOD DELIVERY OF THE SECURITIES REPRESENTED HEREBY. A CERTIFICATE WITHOUT
A LEGEND MAY BE OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT OF THE SHARES IN
CONNECTION WITH A SALE OF THE SECURITIES REPRESENTED HEREBY FROM AND AFTER THE
DATE SPECIFIED IN THE IMMEDIATELY PRECEDING PARAGRAPH OF THIS LEGEND (and any
additional legend required by applicable law); and
(G) Vianet may give stop transfer instructions to the Vianet
Transfer Agent with respect to the Vianet Shares issued to such
holders pursuant to the Arrangement which are to be sold,
transferred, assigned or otherwise disposed of in contravention
of the restrictions set out in Section 3.1(b)(xiii)(B) through
(E).
(c) Existing Options. Each of the Existing Options will, without any
further action on the part of any holder of Existing Options, Develcon or
Vianet, be converted into a security of the same kind and nature except
that it shall entitle the holder to purchase that number of Vianet Shares
which the holder would have received from Vianet under the Arrangement had
the holder exercised its Existing Options for Common Shares immediately
before the Effective Date and the exercise price for such Vianet Shares
shall be as are set out in Appendix I hereto. If the foregoing calculation
results in the Existing Options of a holder being exercisable for a
fraction of a Common Share, then the number of Common Shares subject to
such conversion will be rounded down to the nearest whole number of Common
Shares. The Existing Options as so converted will (without further action
on the part of any holder of Existing Options, Develcon or Vianet) be
further modified as necessary to effect such conversion; provided, however,
the term, exercisability and all other terms and conditions of the Existing
Options will otherwise be unchanged by the provisions of this paragraph and
shall operate in accordance with their terms and the agreement, certificate
or other evidence of the Existing Options will represent the right
described in this Plan of Arrangement.
<PAGE>
Article 4. Rights of Dissent.
4.1 Rights of Dissent. Holders of Common Shares outstanding immediately
before the cancellation thereof contemplated by Section 3.1(b)(vi)(B) may
exercise rights of dissent with respect to such shares pursuant to and in the
manner set forth in section 190 of the CBCA and this Section 4.1 in connection
with the Arrangement and holders who duly exercise such rights of dissent and
who:
(a) are ultimately determined to be entitled to be paid "fair value"
for their Common Shares under the CBCA shall be deemed to have transferred
such Common Shares to the Corporation for cancellation in accordance with
the CBCA; and
(b) are ultimately determined not to be entitled, for any reason, to
be paid "fair value" for their Common Shares shall be deemed to have
participated in the Arrangement on the same basis as any non-dissenting
holder of Common Shares and shall receive Vianet common shares on the basis
determined in accordance with Section 3.1(b)(vi) above but in no event
shall the Amalgamated Corporation be required to recognize such persons as
shareholders of the Amalgamated Corporation from and after the Effective
Date.
Holders of Convertible Debentures outstanding immediately before the
cancellation thereof contemplated by Section 3.1(a)(iv) may exercise rights of
dissent with respect to such Convertible Debentures pursuant to and in the
manner set forth in section 190 of the CBCA (as such provision would apply if
and to the extent that such holders were the holders of Common Shares that would
be issued to them after the conversion contemplated by Section 3.1(a)) and this
Section 4.1 in connection with the Arrangement and holders who duly exercise
such rights of dissent and who:
(c) are ultimately determined to be entitled to be paid "fair value"
for their Convertible Debentures shall be entitled to receive as such "fair
value", the "fair value" of the Common Shares into which the Convertible
Debentures of such holder would be converted pursuant to Section 3.1(a) but
for this Section 4.1(c) and shall be deemed to have transferred such
Convertible Debentures to the Corporation for cancellation in accordance
with the CBCA and the trust indenture relating thereto, as amended; and
(d) are ultimately determined not to be entitled, for any reason, to
be paid "fair value" for their Convertible Debentures shall be deemed to
have participated in the Arrangement on the same basis as any
non-dissenting holder of Convertible Debentures and shall receive Vianet
Shares on the basis determined in accordance with Section 3.1(a) above but
in no event shall the Amalgamated Corporation be required to recognize such
persons as Convertible Debentureholders of the Amalgamated Corporation from
and after the Effective Date.
Article 5. Certificate and Fractional Shares.
5.1 Issuance of Certificates Representing Vianet Shares. After the
Effective Date, certificates and instruments formerly representing Common
Shares, Existing Options and Convertible Debentures shall represent only the
right to receive the certificates or other relevant instrument (i.e. option or
warrant) representing the Vianet Shares or options or warrants of Vianet which
the former holder is entitled to receive, after giving effect to Sections
3.1(b)(vi) and 3.1(c), subject to compliance with the requirements set forth in
this Section 5.1. As soon as practicable after the Effective Date, Vianet shall
forward or cause to be forwarded to each former Securityholder (other than
holders of Common Shares who have exercised their dissent rights) and each
former Convertible Debentureholder at the address of such holder as it appears
in the relevant register of Develcon a letter of transmittal containing, among
other things, instructions for obtaining delivery of the certificates or other
relevant instrument representing the Vianet Shares or options or warrants of
Vianet which the former holder is entitled to receive pursuant to this Plan of
Arrangement. Such former Securityholder or former Convertible Debentureholder,
<PAGE>
as the case may be, shall be entitled to receive certificates or other relevant
instrument representing the Vianet Shares or options or warrants of Vianet which
the former holder is entitled to receive, after giving effect to Sections
3.1(b)(vi) and (3.1)(c) upon delivering the certificate or other relevant
instrument formerly representing such holder's Common Shares, Existing Options
or Debentures, as the case may be, to Vianet's Transfer Agent or as Vianet's
Transfer Agent may otherwise direct and in accordance with the instructions
contained in the letter of transmittal. Such certificate or other relevant
instrument formerly representing such holder's Common Shares, Existing Options
or Convertible Debentures, as the case may be, shall be accompanied by the
letter of transmittal, duly completed, and such other documents as Vianet's
Transfer Agent may reasonably require. Vianet's Transfer Agent shall register
the Vianet Shares or options or warrants of Vianet, as the case may be, in the
name of the relevant holder or as otherwise instructed in the letters of
transmittal, and shall deliver such Vianet Shares or options or warrants of
Vianet, as the case may be, as each such holder may direct in such letter of
transmittal, as soon as practicable after receipt by Vianet's Transfer Agent of
such documents.
5.2 Distributions with Respect to Unsurrendered Certificates. No dividends
or other distributions declared or made after the Effective Time with respect to
Vianet Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate which, immediately prior to the
Effective Time, represented outstanding Common Shares that were exchanged
pursuant to Section 3.1(b)(vi) hereof, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 5.3 hereof, and no
interest will be earned or payable on these proceeds, in each case, unless and
until such certificate shall be surrendered in accordance with Section 5.1
hereof. Subject to applicable law and to Section 5.1 hereof, at the time of such
surrender of any such certificate (or, in the case of clause (iii) below, at the
appropriate payment date), there shall be paid to the record holder of the
certificates representing whole Vianet Shares without interest, (i) the amount
of any cash payable in lieu of a fractional Vianet common share to which such
holder is entitled pursuant to Section 5.3 hereof, (ii) the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole Vianet Share, and (iii) the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Vianet Share.
5.3 No Fractional Shares. For greater certainty all fractional interests of
Vianet Shares to be received by a holder of Common Shares pursuant to Section
3.1(b)(vi) hereof shall be aggregated and such holder shall be entitled to
receive that number of Vianet Shares rounded down to the nearest whole number.
No certificate or scrip representing a fractional Vianet Share shall be issued
to any holder of Common Shares who would otherwise be entitled to receive a
fraction of a Vianet Share pursuant to Section 3.1(b)(vi) hereof and such
fractional interest shall not entitle the owner thereof to vote or to exercise
any rights as a security holder of Vianet or the Amalgamated Corporation. In
lieu of any such fractional securities, each person entitled to a fractional
interest in a Vianet Share will receive in lieu thereof from Vianet an amount of
cash (rounded to the nearest whole cent), without interest, paid by Vianet by
cheque in Canadian dollars equal to that obtained by multiplying such fraction
by the quotient of 4 divided by 0.65.
5.4 Lost Certificates. If any certificate or instrument which immediately
prior to the Effective Time represented outstanding Common Shares, Existing
Options or Convertible Debentures that were exchanged pursuant to Section 3.1
hereof has been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, Vianet's Transfer Agent will issue in exchange for such lost, stolen
or destroyed certificate or instrument, a certificate or instrument representing
Vianet Shares (and any dividends or distributions with respect thereto pursuant
to Section 5.2 hereof and any cash pursuant to Section 5.3 hereof) or options or
warrants of Vianet, as the case may be, deliverable in respect thereof as
determined in accordance with Section 3.1 hereof. When authorizing such payment
in exchange for any lost, stolen or destroyed certificate, the Person to whom
certificates or instruments representing Vianet Shares or options or warrants of
Vianet, as the case may be, are to be issued shall, as a condition precedent to
the issuance thereof, give a bond satisfactory to Vianet and Vianet's Transfer
Agent in such sum as Vianet may direct or otherwise indemnify it or Vianet in a
manner satisfactory to Vianet and Vianet's Transfer Agent, acting reasonably,
against any claim that may be made against Vianet or Vianet's Transfer Agent
with respect to the certificate or instrument alleged to have been lost, stolen
or destroyed.
<PAGE>
5.5 Extinguishment of Rights. Any certificate or instrument which
immediately prior to the Effective Time represented outstanding Common Shares,
Convertible Debenture or Existing Options that were exchanged or converted
pursuant to Section 3.1 hereof and which has not been deposited, with all other
instruments required by Section 5.1 hereof, on or prior to the tenth anniversary
of the Effective Date, shall cease to represent a claim or interest of any kind
or nature as a shareholder, option holder or warrant holder of Develcon or of
the Amalgamated Corporation or Vianet. On such date, the Vianet Shares or
options or warrants of Vianet, as the case may be, to which the former
registered holder of the share certificate or Convertible Debenture or Existing
Options referred to in the preceding sentence was ultimately entitled shall be
deemed to have been surrendered and shall be cancelled together with all
entitlements to dividends, distributions and interests thereon held for such
former registered holder for no consideration.
Article 6. Amendment
6.1 Plan of Arrangement Amendment. The parties to the Arrangement Agreement
reserve the right to amend, modify and/or supplement this Plan of Arrangement at
any time and from time to time provided that any such amendment, modification,
or supplement must be contained in a written document that is (i) agreed to in
writing by each of Develcon and Vianet, (ii) filed with the Court and, if made
following the Special Meeting or the Debentureholders Special Meeting, approved
by the Court, and (iii) communicated to the Securityholders and Convertible
Debentureholders in the manner required by the Court (if so required). Any
amendment, modification or supplement to this Plan of Arrangement may be
proposed by Develcon or Vianet at any time prior to or at the Special Meeting or
the Debentureholders Special Meeting (or written resolution of the holders of
the Convertible Debentures) (provided that Vianet shall have consented thereto
in writing) with or without any other prior notice or communication, and if so
proposed and accepted by the persons voting at the Special Meeting and at the
Debentureholders Special Meeting (or written resolution of the holders of the
Convertible Debenture) (other than as may be required under the Interim Order),
shall become part of this Plan of Arrangement for all purposes. Any amendment,
modification or supplement to this Plan of Arrangement that is approved by the
Court following the Special Meeting or the Debentureholders Special Meeting (or
written resolution of the holders of the Convertible Debentures) shall be
effective only if it is consented to in writing by each of Develcon and Vianet.
Notwithstanding the foregoing, any amendment, modification or supplement to this
Plan of Arrangement may be made following the Effective Date unilaterally by
Vianet, provided that it concerns a matter which, in the reasonable opinion of
counsel to Vianet, is of an administrative nature required to better give effect
to the implementation of this Plan of Arrangement and such amendment,
modification or supplement is not materially prejudicial to the financial or
economic interest of any holder of securities of Vianet or in contravention of
the Final Order.
Article 7. Further Assurances
7.1 Other Documents and Instruments. Notwithstanding that the transactions
or events set out herein shall occur and shall be deemed to occur in the order
set out in this Plan of Arrangement without any further act or formality, Vianet
and Develcon agree to make, do and execute, or cause and cause to be made, done
and executed, all such further acts, deeds, agreements, transfers, assurances,
instruments or documents as may reasonably be required by any of them in order
further to document or evidence any of the transactions or events set out
herein, including, without limitation, any resolutions of directors authorizing
the issue, exchange, transfer, purchase for cancellation or donation of shares
and any share transfer powers evidencing the transfer of shares and any receipts
therefor.
<PAGE>
APPENDIX C
SECURITYHOLDERS' RESOLUTION
RESOLVED THAT:
1. The arrangement (the "Arrangement") proposed by Develcon Electronics
Ltd. ("Develcon" or the "Corporation") under section 192 of the Canada Business
Corporations Act on the terms and subject to the conditions set out in the Plan
of Arrangement attached as Appendix B to the Management Information Circular of
the Corporation dated April 9, 1999 (the "Information Circular"), as such Plan
of Arrangement has been or may be amended, modified and/or supplemented from
time to time in accordance with its terms, be and is hereby authorized, approved
and adopted;
2. The amended and restated arrangement agreement made as of April 5, 1999
between the Corporation and Vianet Technologies, Inc. (the "Arrangement
Agreement"), a copy of which Arrangement Agreement is attached as Appendix A to
the Information Circular, with such amendments, modifications and/or supplements
thereto made in accordance with the terms thereof as may be approved by any
director or officer of Develcon, such approval to be conclusively evidenced by
the execution and delivery of such amendments, modifications and/or supplements,
be and is hereby confirmed, ratified and approved;
3. Notwithstanding the passing of this resolution approving the Arrangement
or the approval of the Supreme Court of British Columbia, the board of directors
of Develcon is hereby authorized not to proceed with the Arrangement and to
revoke this resolution at any time prior to the Arrangement becoming effective
without further notice to or approval of the securityholders of the Corporation
and to determine not to proceed with the Arrangement; and
4. Any director or officer of Develcon is hereby authorized and directed
for and in the name of and on behalf of Develcon to execute, whether under the
corporate seal of the Corporation or otherwise, and to deliver, all such
documents, agreements, instruments and other writings, including, without
limitation, articles of arrangement in prescribed form, and to perform and do
all such other acts and things, as in the opinion of such director or officer
may be necessary or desirable in order to implement the Arrangement or otherwise
to give effect to this resolution or the matters contemplated hereby and by the
Arrangement Agreement.
<PAGE>
APPENDIX D
DEBENTUREHOLDERS' RESOLUTION
WHEREAS:
A. Develcon Electronics Ltd. ("Develcon" or the "Corporation") has proposed
an arrangement (the "Arrangement") under section 192 of the Canada Business
Corporations Act on the terms and subject to the conditions set out in the Plan
of Arrangement attached as Appendix B to the Management Information Circular of
Develcon dated April 9, 1999 (the "Information Circular"); and
B. The undersigned holders of convertible debentures of the Corporation
(the "Convertible Debentures") desire to approve the Arrangement, pursuant to
the terms of the interim order of the Supreme Court of British Columbia issued
on April 9, 1999;
RESOLVED THAT:
1. The Arrangement on the terms and conditions set out in the Plan of
Arrangement, as such Plan of Arrangement has been or may be amended, modified
and/or supplemented from time to time in accordance with its terms, be and is
hereby authorized, approved and adopted;
2. The amended and restated arrangement agreement made as of April 5, 1999
between the Corporation and Vianet Technologies, Inc. (the "Arrangement
Agreement"), a copy of which Arrangement Agreement is attached as Appendix A to
the Information Circular, with such amendments, modifications and/or supplements
thereto made in accordance with the terms thereof as may be approved by any
director or officer of Develcon, such approval to be conclusively evidenced by
the execution and delivery of such amendments, modifications and/or supplements,
be and is hereby confirmed, ratified and approved;
3. Notwithstanding the passing of this resolution approving the Arrangement
or the approval of the Supreme Court of British Columbia, the board of directors
of Develcon is hereby authorized not to proceed with the Arrangement and to
revoke this resolution at any time prior to the Arrangement becoming effective
without further notice to or approval of the holders of Convertible Debentures
and to determine not to proceed with the Arrangement;
4. Any director or officer of Develcon is hereby authorized and directed
for and in the name of and on behalf of Develcon to execute, whether under the
corporate seal of the Corporation or otherwise, and to deliver, all such
documents, agreements, instruments and other writings, including, without
limitation, articles of arrangement in prescribed form, and to perform and do
all such other acts and things, as in the opinion of such director or officer
may be necessary or desirable in order to implement the Arrangement or otherwise
to give effect to this resolution or the matters contemplated hereby and by the
Arrangement Agreement; and
5. This resolution may not be revoked, repealed or amended by the holders
of the Convertible Debentures and the provisions of the trust indenture dated as
of November 15, 1996, as amended, between the Corporation and Montreal Trust
Company of Canada, as trustee, providing for the issue of the Convertible
Debentures which confer upon the holders of Convertible Debentures the power to
amend, alter or repeal any Extraordinary Resolution (as defined in such trust
indenture) previously passed or approved by the holders of Convertible
Debentures are hereby amended to provide that no such power may be exercised in
respect of this resolution.
