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
Date of Report
(Date of earliest event reported): October 29, 1997
---------------
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21456 06-1361276
- ---------------- ------------ -----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of file number) Identification No.)
incorporation or
organization)
488 Main Avenue, Norwalk, Connecticut 06851
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: 203-849-2501
------------
<PAGE>
<PAGE>
Item 5. Other Events.
------------
General. On October 29, 1997, Electronic Retailing Systems
International, Inc. (the "Registrant") and Telepanel Systems Inc.
("Telepanel") executed a Combination Agreement dated such date (the
"Combination Agreement"), which provides for the combination of the
Registrant and Telepanel pursuant to a plan of arrangement under
Canadian law (the "Arrangement"). Under the terms of the
transaction (the "Transaction"), Telepanel will be recapitalized
and each common share, without par value (collectively, the
"Telepanel Common Shares"), of Telepanel will be exchanged for
.5566 of an exchangeable share (a newly created class of shares) of
Telepanel (collectively, the "Exchangeable Shares"). Each
Exchangeable Share will entitle the holder thereof to dividend and
other rights economically equivalent to those of one share of the
common stock, $.01 par value (the "ERS Common Stock"), of the
Registrant and, through a voting trust, to vote at meetings of
stockholders of the Registrant. The Exchangeable Shares will be
exchangeable, at the option of the holder, for ERS Common Stock, on
a share-for-share basis. As a result of the Transaction, the
Registrant will become the sole beneficial owner of the outstanding
Telepanel Common Shares.
Based on the exchange ratio (the "Exchange Ratio") of .5566
Exchangeable Shares for each Telepanel Common Share, the Registrant
will ultimately be required to issue up to 9,992,460 shares of ERS
Common Stock in exchange for all Exchangeable Shares issuable upon
exchange of the currently outstanding Telepanel Common Shares. In
addition, the Registrant will be required to issue up to
approximately 2,764,799 shares of ERS Common Stock in respect of
Exchangeable Shares exchanged for further Telepanel Common Shares
issuable pursuant to outstanding options, warrants and convertible
securities of Telepanel. In the event that, prior to the effective
date (the "Effective Date") of the Arrangement, Telepanel
consummates specified additional financings through the issuance of
convertible securities, the Exchange Ratio will be adjusted so as
not to be less than .5166 Exchangeable Shares for each Telepanel
Common Share.
The Exchangeable Shares. The Exchangeable Shares will be
exchangeable, at any time at the option of the holder, on a one-
for-one basis for shares of ERS Common Stock. Pursuant to a voting,
support and exchange trust agreement (the "Trust Agreement") to be
entered into on the Effective Date by the Registrant and Telepanel,
a trustee (the "Trustee"), as holder of one share (the "Voting
Share") of a class of newly-created special voting stock, $.01 par
value, of the Registrant, will be entitled to a number of votes on
all matters on which holders of ERS Common Stock are entitled to
vote equal to the number of Exchangeable Shares outstanding from
time to time that are not held by the Registrant or subsidiaries of
the Registrant. By furnishing instructions to the Trustee, such
holders of Exchangeable Shares will be able to exercise the same<PAGE>
<PAGE>
voting rights with respect to the Registrant as they would have
after exchange of their Exchangeable Shares for ERS Common Stock.
Holders of Exchangeable Shares will also be entitled to receive
dividends economically equivalent to any dividends paid on the ERS
Common Stock. The Trust Agreement will restrict the Registrant from
paying dividends on the ERS Common Stock unless equivalent
dividends are paid on the Exchangeable Shares. Holders of
Exchangeable Shares will also be entitled to participate in any
liquidation of the Registrant on the same basis as holders of ERS
Common Stock.
The Exchangeable Shares will, in effect, have no separate
economic rights against or in Telepanel and will have no separate
voting rights in Telepanel (other than certain limited class rights
required under the Canada Business Corporation Act and the right to
vote on any change in the fundamental terms of the shares
themselves or the related terms in the Trust Agreement).
Exchange of Exchangeable Shares for ERS Common Stock. Holders
of the Exchangeable Shares will be entitled at any time following
the effective time (the "Effective Time") of the Arrangement, upon
delivery of a certificate representing Exchangeable Shares and a
duly executed retraction request, to require Telepanel to redeem
such Exchangeable Shares in exchange for an equivalent number of
shares of ERS Common Stock. However, Telepanel must deliver all
such requests for redemption to the Registrant, whereupon the
Registrant instead of Telepanel has the right to purchase the
Exchangeable Shares that are the subject of the request for
redemption in exchange for an equivalent number of shares of ERS
Common Stock. If this right is not exercised, Telepanel is required
to effect the requested redemption. On December 31, 2002, subject
to acceleration in certain circumstances (the "Automatic Redemption
Date"), the Exchangeable Shares are subject to automatic redemption
by Telepanel in exchange for an equivalent number of shares of ERS
Common Stock. The Registrant has the overriding right, but not the
obligation, to acquire the outstanding Exchangeable Shares in
exchange for an equivalent number of shares of ERS Common Stock on
the last business day prior to the Automatic Redemption Date. In
exercising such overriding right, the Registrant will not be
required to purchase Exchangeable Shares from itself. If the
Registrant exercises the overriding right, Telepanel's obligation
to redeem the Exchangeable Shares on the Automatic Redemption Date
will terminate.
Management of the Registrant following Consummation of the
Arrangement. The Combination Agreement provides, in part, that the
Board of Directors of the Registrant will be expanded, at the
Effective Time, to consist of nine members, five of whom are
currently directors of the Registrant, three of whom are currently
directors of Telepanel and the remaining one of whom has been
designated by both the Registrant and Telepanel. The Registrant has<PAGE>
<PAGE>
agreed that, during the period from the Effective Time until its
second anniversary, the Registrant shall nominate and recommend
such persons for re-election to the Board of Directors of the
Registrant upon expiration of their terms. At the Effective Time,
the principal executive authority of the Registrant will be
exercised by a Corporate Executive Committee comprised of the
Chairman of the Board and two Vice Chairmen of the Board of the
Registrant, who will consist of Norton Garfinkle, currently
Chairman of the Board of the Registrant, Bruce F. Failing, Jr.,
currently Vice Chairman of the Board and Chief Executive Officer of
the Registrant, and Christopher Skillen, currently President and
Chief Executive Officer of Telepanel.
Conditions to the Arrangement; Effective Time. The obligations
of the Registrant and Telepanel to consummate the Arrangement are
subject to the satisfaction or waiver, where permissible, of
certain conditions set forth in the Combination Agreement,
including obtaining approval of the stockholders of the Registrant
and of Telepanel, the approval (without material condition or
costs) of the plan of arrangement contemplated by the Combination
Agreement by the Ontario Court of Justice (General Division), the
receipt of certain consents from the holders of debt of the
Registrant and Telepanel and the receipt of certain accountants'
letters relating to the Transaction's qualification for pooling-of-
interests accounting treatment. It is currently anticipated that
the Arrangement will become effective within ten business days of
the requisite stockholder approval in the first quarter of 1998.
Registrant Charter Amendments. In connection with the
approval of the Combination Agreement and the transactions
contemplated by the Combination Agreement, stockholders of the
Registrant will be asked to approve amendments to the certificate
of incorporation of the Registrant that will become effective at
the Effective Time, and will increase the number of authorized
shares of ERS Common Stock from 35,000,000 shares to 50,000,000
shares, and will create the Voting Share.
Termination. The Combination Agreement may be terminated prior
to the Effective Date, whether before or after approval of the
stockholders of the Registrant or Telepanel, in circumstances
specified in the Combination Agreement, including (i) mutual
agreement, (ii) breaches of representations, warranties or
covenants by the other party which have a material adverse effect,
(iii) failure of the stockholders of the Registrant or Telepanel to
approve the Transaction, (iv) failure of the conditions precedent
to closing to be satisfied by May 31, 1998 other than as a result
of a breach by the terminating party, and (v) issuance of a final
and nonappealable permanent injunction or other order preventing
consummation of the Arrangement. Under certain circumstances,
Telepanel may be required to cause the payment to the Registrant,
or the Registrant may be required to cause the payment to<PAGE>
<PAGE>
Telepanel, of a termination fee equal to five percent of the value
of Telepanel, depending on the circumstances of the termination.
Stock Exchange Listings. The Combination Agreement
contemplates the listing of the Exchangeable Shares on the Toronto
Stock Exchange, subject to the satisfaction of customary
requirements. There is no current intention to list the
Exchangeable Shares on any other stock exchange in Canada, the
United States or any other jurisdiction. The ERS Common Stock is
traded on the over-the-counter market, with price quotations
reported on The Nasdaq Stock Market, and on the Alternative
Investment Market of the London Stock Exchange. There is no current
intention to list the ERS Common Stock on any other stock exchange
in Canada, the United States or any other jurisdiction.
* * *
The full text of the Combination Agreement annexed hereto as
Exhibit 5(a) is hereby in its entirety incorporated by reference in
response to this item.
Item 7. Financial Statements and Exhibits.
---------------------------------
Exhibits.
The exhibits filed as part of this Current Report on Form 8-K
are listed in the attached Index to Exhibits.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By s/Bruce F. Failing, Jr.
---------------------------
Bruce F. Failing, Jr.
Vice Chairman of the Board and
Principal Executive Officer
Dated: November 3, 1997<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
5(a) - Combination Agreement dated as of October
29, 1997 between the Registrant and
Telepanel Systems Inc.
Exhibit 5(a)
COMBINATION AGREEMENT
BETWEEN
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
and
TELEPANEL SYSTEMS INC.
October 29, 1997
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 THE ARRANGEMENT AND RELATED MATTERS . . . . . . 1
1.1 The Arrangement and Related Matters . . . . . . . . 1
1.2 Adjustments in Exchange Ratio . . . . . . . . . . . 4
1.3 Dissenting Shares . . . . . . . . . . . . . . . . . 5
1.4 Telepanel Options . . . . . . . . . . . . . . . . . 5
1.5 Telepanel Warrants; Telepanel Convertible
Securities. . . . . . . . . . . . . . . . . . . . . 6
1.6 Other Effects of the Arrangement. . . . . . . . . . 7
1.7 Joint Management Information Circular/
Proxy Statement; Registration Statement . . . . . . 7
1.8 Reorganization. . . . . . . . . . . . . . . . . . . 8
1.9 "Pooling of Interests"; Affiliate Agreements. . . . 8
1.10 Material Adverse Effect . . . . . . . . . . . . . . 9
1.11 Currency. . . . . . . . . . . . . . . . . . . . . . 9
1.12 Best Efforts. . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF TELEPANEL . . 9
2.1 Organization; Good Standing; Qualification
and Power . . . . . . . . . . . . . . . . . . . . . 10
2.2 Capital Structure . . . . . . . . . . . . . . . . . 10
2.3 Authority . . . . . . . . . . . . . . . . . . . . . 12
2.4 Securities Regulatory Authority Reports;
Financial Statements. . . . . . . . . . . . . . . . 14
2.5 Information Supplied. . . . . . . . . . . . . . . . 15
2.6 Compliance with Applicable Laws . . . . . . . . . . 16
2.7 Title to Assets . . . . . . . . . . . . . . . . . . 16
2.8 Litigation. . . . . . . . . . . . . . . . . . . . . 17
2.9 Benefit Plans and Other Compliance. . . . . . . . . 18
2.10 Absence of Certain Changes or Events. . . . . . . . 19
2.11 Certain Agreements. . . . . . . . . . . . . . . . . 20
2.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . 21
2.13 Fees and Expenses . . . . . . . . . . . . . . . . . 22
2.14 Environmental Matters . . . . . . . . . . . . . . . 22
2.15 Interested Party Transactions . . . . . . . . . . . 23
2.16 Real Estate and Leases. . . . . . . . . . . . . . . 24
2.17 Material Contracts; No Defaults . . . . . . . . . . 25
2.18 Intellectual Property . . . . . . . . . . . . . . . 26
2.19 Insurance . . . . . . . . . . . . . . . . . . . . . 27
2.20 Restrictions on Business Activities . . . . . . . . 28
2.21 Books and Records . . . . . . . . . . . . . . . . . 28
2.22 Board Approval. . . . . . . . . . . . . . . . . . . 28
2.23 Vote Required.. . . . . . . . . . . . . . . . . . . 28
2.24 Fairness Opinion. . . . . . . . . . . . . . . . . . 29
2.25 Pooling Matters . . . . . . . . . . . . . . . . . . 29
<PAGE>
<PAGE>
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ERS . . . . . 29
3.1 Organization; Good Standing; Qualification and
Power. . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 Capital Structure. . . . . . . . . . . . . . . . . . 30
3.3 Authority. . . . . . . . . . . . . . . . . . . . . . 31
3.4 SEC Reports and Financial Statements . . . . . . . . 32
3.5 Information Supplied . . . . . . . . . . . . . . . . 33
3.6 Compliance with Applicable Laws. . . . . . . . . . . 34
3.7 Title to Assets. . . . . . . . . . . . . . . . . . . 34
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . 35
3.9 ERISA and Other Compliance.. . . . . . . . . . . . . 35
3.10 Absence of Certain Changes or Events . . . . . . . . 36
3.11 Certain Agreements . . . . . . . . . . . . . . . . . 37
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 37
3.13 Fees and Expenses. . . . . . . . . . . . . . . . . . 38
3.14 Environmental Matters. . . . . . . . . . . . . . . . 38
3.15 Interested Party Transactions. . . . . . . . . . . . 38
3.16 Certain Material Contracts . . . . . . . . . . . . . 39
3.17 Intellectual Property. . . . . . . . . . . . . . . . 39
3.18 Insurance. . . . . . . . . . . . . . . . . . . . . . 40
3.19 No Defaults. . . . . . . . . . . . . . . . . . . . . 40
3.20 Restrictions on Business Activities. . . . . . . . . 40
3.21 Books and Records. . . . . . . . . . . . . . . . . . 40
3.22 Board Approval . . . . . . . . . . . . . . . . . . . 41
3.23 Vote Required. . . . . . . . . . . . . . . . . . . . 41
3.24 Fairness Opinion . . . . . . . . . . . . . . . . . . 41
3.25 Pooling Matters. . . . . . . . . . . . . . . . . . . 41
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . 42
4.1 Interim Operations . . . . . . . . . . . . . . . . . 42
4.2 Shareholder Approval . . . . . . . . . . . . . . . . 46
4.3 Additional Affiliate Agreements. . . . . . . . . . . 46
4.4 Joint Proxy Statement. . . . . . . . . . . . . . . . 47
4.5 Regulatory Approvals . . . . . . . . . . . . . . . . 48
4.6 Necessary Consents; Certain Notices. . . . . . . . . 48
4.7 Access to Information and Properties . . . . . . . . 49
4.8 Satisfaction of Conditions Precedent . . . . . . . . 50
4.9 No Other Negotiations. . . . . . . . . . . . . . . . 50
4.10 Pooling. . . . . . . . . . . . . . . . . . . . . . . 54
4.11 Notification of Certain Matters;
Interim Financial Statements . . . . . . . . . . . . 54
4.12 Indemnification. . . . . . . . . . . . . . . . . . . 55
4.13 Closing; Listing . . . . . . . . . . . . . . . . . . 56
4.14 Continued Telepanel Operations . . . . . . . . . . . 56
4.15 Governance . . . . . . . . . . . . . . . . . . . . . 56
4.16 Installation Representation. . . . . . . . . . . . . 58
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH
PARTY . . . . . . . . . . . . . . . . . . . . . 59
5.1 Compliance with Law. . . . . . . . . . . . . . . . . 59
5.2 Government Consents. . . . . . . . . . . . . . . . . 59
5.3 SEC Filings. . . . . . . . . . . . . . . . . . . . . 59
5.4 Shareholder Approval . . . . . . . . . . . . . . . . 60
5.5 No Legal Action. . . . . . . . . . . . . . . . . . . 60
5.6 Tax Opinion. . . . . . . . . . . . . . . . . . . . . 60<PAGE>
<PAGE>
5.7 Pooling Opinion. . . . . . . . . . . . . . . . . . . 60
5.8 Court Approval . . . . . . . . . . . . . . . . . . . 60
5.9 OSC, Etc.. . . . . . . . . . . . . . . . . . . . . . 61
5.10 Appointment to ERS Board; ERS Charter Changes;
ERS By-Law Amendments. . . . . . . . . . . . . . . . 61
5.11 High Yield Bonds . . . . . . . . . . . . . . . . . . 61
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF
TELEPANEL . . . . . . . . . . . . . . . . . . . 61
6.1 Accuracy of Representations and Warranties . . . . . 61
6.2 Covenants. . . . . . . . . . . . . . . . . . . . . . 62
6.3 Absence of Material Adverse Effect . . . . . . . . . 62
6.4 Certified Resolutions. . . . . . . . . . . . . . . . 62
6.5 Third Party Consents . . . . . . . . . . . . . . . . 62
6.6 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . 63
6.7 Letter of ERS' Accountants . . . . . . . . . . . . . 63
6.8 Other Certificates . . . . . . . . . . . . . . . . . 63
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ERS. . . 63
7.1 Accuracy of Representations and Warranties . . . . . 63
7.2 Covenants. . . . . . . . . . . . . . . . . . . . . . 64
7.3 Absence of Material Adverse Change . . . . . . . . . 64
7.4 Dissenting Shares. . . . . . . . . . . . . . . . . . 64
7.5 Affiliate Agreements . . . . . . . . . . . . . . . . 64
7.6 Certified Resolutions; Capitalization. . . . . . . . 64
7.7 Third Party Consents . . . . . . . . . . . . . . . . 65
7.8 Resignations . . . . . . . . . . . . . . . . . . . . 65
7.9 Letter of Accountants for Telepanel. . . . . . . . . 65
7.10 Relief from Telepanel Reporting Obligations. . . . . 65
7.11 Telepanel Europe . . . . . . . . . . . . . . . . . . 65
7.12 Certain Adjustments. . . . . . . . . . . . . . . . . 66
7.13 Other Certificates . . . . . . . . . . . . . . . . . 66
ARTICLE 8 TERMINATION OF AGREEMENT. . . . . . . . . . . . 66
8.1 Termination. . . . . . . . . . . . . . . . . . . . . 66
8.2 Notice of Termination. . . . . . . . . . . . . . . . 67
8.3 Effect of Termination. . . . . . . . . . . . . . . . 67
8.4 Subsequent Payments. . . . . . . . . . . . . . . . . 67
ARTICLE 9 SURVIVAL OF REPRESENTATIONS . . . . . . . . . . 69
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . 69
10.1 Governing Law . . . . . . . . . . . . . . . . . . . 69
10.2 Assignment; Binding Upon Successors and Assigns . . 69
10.3 Severability. . . . . . . . . . . . . . . . . . . . 69
10.4 Counterparts. . . . . . . . . . . . . . . . . . . . 70
10.5 Other Remedies; Specific Performance. . . . . . . . 70
10.6 Amendment and Waivers . . . . . . . . . . . . . . . 70
10.7 Expenses. . . . . . . . . . . . . . . . . . . . . . 70
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . 70
10.9 Construction of Agreement . . . . . . . . . . . . . 72
10.10 No Joint Venture. . . . . . . . . . . . . . . . . . 72
10.11 Further Assurances. . . . . . . . . . . . . . . . . 72
10.12 Absence of Third Party Beneficiary Rights . . . . . 72<PAGE>
<PAGE>
10.13 Public Announcement . . . . . . . . . . . . . . . . 73
10.14 Entire Agreement. . . . . . . . . . . . . . . . . . 73
Exhibit 1.1 - Plan of Arrangement
Exhibit 1.1(b)(i) - Voting, Support and Exchange Trust Agreement
Exhibit 1.1(b)(ii) - ERS Charter Changes
Exhibit 1.9(a) - ERS Affiliate Agreement
Exhibit 1.9(b) - Telepanel Affiliate Agreement
Exhibit 4.4(b) - Letter from Price Waterhouse, Chartered
Accountants
Exhibit 4.4(c) - Letter from Price Waterhouse LLP
Exhibit 5.10 - ERS By-Law Amendments
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Additional Director........................ Section 4.15
Adjusted Telepanel Convertible Securities.. Section 2.2(d)
Adjusted Telepanel Options................. Section 1.4
Adjusted Telepanel Warrants................ Section 2.2(c)
Affiliate.................................. Section 4.3
Agreement.................................. Recitals
AIM........................................ Section 3.3(c)
Arrangement................................ Section 1.1(a)
best efforts............................... Section 1.11
Canadian GAAP.............................. Section 2.4(c)
CBCA....................................... Section 1.1(a)
Closing.................................... Section 4.13
Closing Date............................... Section 4.13
Closing Directors.......................... Section 4.15
Code....................................... Recitals
Confidentiality Agreement.................. Section 8.3
Court...................................... Section 1.1(a)
Currency................................... Section 1.10
DGCL....................................... Section 1.1(b)(iii)
Dissenting Shareholders.................... Section 1.3
Effective Date............................. Section 1.1(a)
Effective Time............................. Section 1.1(a)
Environmental Law.......................... Section 2.14
ERISA...................................... Section 3.9(a)
ERS........................................ Recitals
ERS Acquisition Agreement.................. Section 4.9(d)
ERS Balance Sheet Date..................... Section 3.10
ERS Board.................................. Recitals
ERS Charter Changes........................ Section 1.1(b)(ii)
ERS Common Stock........................... Section 1.1(a)(ii)
ERS Competing Transaction.................. Section 4.9(c)
ERS Disclosure Letter...................... Article 3
ERS Employee Plan.......................... Section 3.9(a)
ERS Group.................................. Section 4.15
ERS Indenture.............................. Section 4.1(a)
ERS Liens.................................. Section 3.7
ERS Notes.................................. Section 5.11
ERS Notice................................. Section 4.9(d)
ERS Options................................ Section 1.4(a)
ERS Pension Plan........................... Section 3.9(b)
ERS SEC Documents.......................... Section 3.4(a)
ERS Special Voting Stock................... Section 1.1(b)(ii)
ERS Stockholders Meeting................... Section 1.6(a)
ERS Subsidiaries........................... Section 3.1
ERS Superior Proposal...................... Section 4.9(d)
Exchange Act............................... Section 1.7(a)
Exchange Ratio............................. Section 1.1(a)(iii)
Exchangeable Shares........................ Section 1.1(a)(i)
Final Order................................ Section 1.1(a)
5% Senior Convertible Note................. Section 4.6
<PAGE>
<PAGE>
Governmental Entity........................ Section 2.3(c)
Group...................................... Section 4.15
Hazardous Substances....................... Section 2.14
HSR Act.................................... Section 2.3(c)
Initial Coverage........................... Section 4.12
Intellectual Property...................... Section 2.18
Interim Order.............................. Section 1.1(a)
ITA........................................ Recitals
Joint Proxy Statement...................... Section 1.7(a)
material................................... Section 1.9
Material Adverse Effect.................... Section 1.9
Measurement Date........................... Section 2.2
Nasdaq.................................... Section 2.3(c)
No Action Request.......................... Section 1.6(a)
Option/Warrant Share Equivalents........... Section 1.2
OSC........................................ Section 2.3(c)
PFIC....................................... Section 2.12
Plan of Arrangement........................ Section 1.1(a)
Registration Statement..................... Section 1.7(a)
SEC........................................ Section 1.4(b)
Securities Act............................. Section 1.4(b)
Senior Conversion Share Equivalents........ Section 1.2
Tax........................................ Section 2.12
Tax Returns................................ Section 2.12
Telepanel.................................. Recitals
Telepanel Agreements....................... Section 2.17
Telepanel Balance Sheet Date............... Section 2.10
Telepanel Board............................ Recitals
Telepanel Common Shares.................... Section 1.1(a)(i)
Telepanel Competing Transaction............ Section 4.9(a)
Telepanel Convertible Securities........... Section 2.2
Telepanel Disclosure Letter................ Section 2.1
Telepanel Employee Plans................... Section 2.9(a)
Telepanel Europe........................... Section 5.11
Telepanel Europe Incorporation Agreement... Section 4.5
Telepanel Europe Put Option................ Section 4.5
Telepanel Europe Shareholders Agreement.... Section 4.5
Telepanel Form 20-F........................ Section 2.17
Telepanel Group............................ Section 4.15
Telepanel Liens............................ Section 2.7(b)
Telepanel Notices.......................... Section 4.9(b)(i)
Telepanel Options.......................... Section 1.4
Telepanel Option Plan...................... Section 1.1(b)(ii)
Telepanel OSC Reports...................... Section 2.4(a)
Telepanel SEC Documents.................... Section 2.4(b)
Telepanel Share Equivalents................ Section 1.2
Telepanel Shareholders Meeting............. Section 1.7(a)
Telepanel Subsidiaries..................... Section 2.1
Telepanel Superior Proposal................ Section 4.9(b)(i)
<PAGE>
<PAGE>
Telepanel Warrants......................... Section 2.2
Term....................................... Section 4.15
TSE........................................ Section 2.3(c)
U.S. GAAP.................................. Recitals
Vengrowth Conversion Share Equivalents..... Section 1.2
Voting, Support and Exchange Trust
Agreement................................. Section 1.1(b)(i)
<PAGE>
<PAGE>
COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT (the "Agreement") is entered into
as of October 29, 1997 by and between Electronic Retailing Systems
International, Inc., a Delaware corporation ("ERS"), and Telepanel
Systems Inc., a corporation incorporated under the Canada Business
Corporations Act ("Telepanel").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Telepanel and
ERS have approved the transactions contemplated by this Agreement
and the Board of Directors of Telepanel (the "Telepanel Board") has
agreed to submit the Plan of Arrangement (as defined in Section
1.1) and the other transactions contemplated hereby to its
shareholders for approval and the Board of Directors of ERS (the
"ERS Board") has agreed to submit the ERS Charter Changes (as
hereinafter defined), the transactions contemplated by this
Agreement and related matters to its stockholders for approval; and
WHEREAS, the Arrangement is intended to be treated as (i) a
reorganization pursuant to the provisions of section 368 of the
United States Internal Revenue Code of 1986, as amended (the
"Code"), (ii) a "pooling of interests" under United States
generally accepted accounting principles ("U.S. GAAP") and (iii) a
reorganization of capital for purposes of section 86 of the Income
Tax Act (Canada) (the "ITA") to the extent that Exchangeable Shares
are received in exchange for Telepanel Common Shares.
NOW THEREFORE, in consideration of the mutual premises and
covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
THE ARRANGEMENT AND RELATED MATTERS
1.1 The Arrangement and Related Matters.
(a) The Arrangement. As promptly as practicable after the
execution of this Agreement, Telepanel will apply to the Ontario
Court of Justice (General Division) (the "Court") pursuant to
section 192 of the Canada Business Corporations Act (the "CBCA")
for an interim order in form and substance satisfactory to ERS
(such approval not to be unreasonably withheld or delayed) (the
"Interim Order") providing for, among other things, the calling and
holding of the Telepanel Shareholders Meeting (as defined below)
for the purpose of considering and, if deemed advisable, approving
the arrangement (the "Arrangement") under section 192 of the CBCA
and pursuant to the Plan of Arrangement in the form of Exhibit 1.1
hereto (with the date of the Joint Proxy Statement inserted in the
definition thereof contained therein, the number of Exchangeable
Shares [as hereinafter defined] exchangeable for each Telepanel
Common Share [as hereinafter defined] inserted in Section 2.5
thereof, and Section 2.8 thereof completed as set forth under
Section 1.5 hereof, in each case prior to the Closing [as<PAGE>
<PAGE>
hereinafter defined]), together with such amendments or
modifications thereto as are approved by both Telepanel and ERS
(the "Plan of Arrangement"). If the shareholders of Telepanel
approve the Arrangement, thereafter Telepanel will take the
necessary steps to submit the Arrangement to the Court and apply
for a final order of the Court approving the Arrangement in such
fashion as the Court may direct (the "Final Order"). At 12:01 a.m.
(the "Effective Time") on the date (the "Effective Date") shown on
the certificate of arrangement issued by the Director under the
CBCA giving effect to the Arrangement, the following reorganization
of capital and other transactions shall occur and shall be deemed
to occur in the following order without any further act or
formality:
(i) (a) the articles of incorporation of Telepanel
shall be amended, among other things, to (A) replace the
rights, privileges, restrictions and conditions attaching to
the common shares, without par value ("Telepanel Common
Shares"), of Telepanel with those set forth in Appendix A to
the Plan of Arrangement, and (B) authorize an unlimited number
of Exchangeable Shares ("Exchangeable Shares") having rights,
privileges, restrictions and conditions as set forth in
Appendix A to the Plan of Arrangement and (b) the By-laws of
Telepanel shall be amended as set forth in Appendix B to the
Plan of Arrangement;
(ii) Telepanel shall issue to ERS 1,000 of Telepanel
Common Shares in consideration of the delivery by ERS to
Telepanel of a number of shares of Common Stock, par value
$.01 per share, of ERS ("ERS Common Stock") equal to the
number of Exchangeable Shares exchangeable for 1,000 Telepanel
Common Shares in the Arrangement;
(iii) the Telepanel Common Shares (other than the
Telepanel Common Shares held by ERS and by holders who have
exercised their rights of dissent in accordance with Article
3 of the Plan of Arrangement and who are ultimately entitled
to be paid fair value for such shares) shall be exchanged for
Exchangeable Shares in a ratio of .5566 Exchangeable Shares
for each Telepanel Common Share (the ratio of .5566:1, as may
be adjusted pursuant to Section 1.2, the "Exchange Ratio"). No
fractional Exchangeable Shares will be delivered. In lieu
thereof, each holder of a Telepanel Common Share who otherwise
would be entitled to receive a fraction of an Exchangeable
Share shall be paid by Telepanel an amount determined in
accordance with the Plan of Arrangement;
(iv) upon the exchange referred to in paragraph (iii)
above, each holder of a Telepanel Common Share whose shares
shall have been so exchanged shall cease to be a holder, shall
have his, her or its name removed from the register of holders
of Telepanel Common Shares, and shall become a holder of a
number of fully paid Exchangeable Shares to which such holder<PAGE>
<PAGE>
is entitled as above described and such holder's name shall be
added to the register of holders of Exchangeable Shares;
(v) the stated capital attributable to the Exchangeable
Shares will be as set out in the Plan of Arrangement; and
(vi) all of the shares of ERS Common Stock delivered by
ERS to Telepanel under sub-paragraph (ii) immediately
preceding owned by Telepanel will be distributed to ERS.
(b) Ancillary Agreements. On or before the Effective Date:
(i) ERS, Telepanel and The Montreal Trust Company of
Canada (or if such trustee shall decline to serve, such other
Canadian trust company to be selected by ERS, which shall be
satisfactory to Telepanel, acting reasonably), shall execute
and deliver a Voting, Support and Exchange Trust Agreement in
the form set forth in Exhibit 1.1 (b)(i) hereto (dated as of
the Effective Date, with the Effective Date inserted in the
first reference therein to the articles of arrangement),
together with such amendments or modifications as are approved
by both Telepanel and ERS (the "Voting, Support and Exchange
Trust Agreement"); and
(ii) ERS shall file with the Secretary of State of
Delaware amendments to its Certificate of Incorporation
pursuant to the Delaware General Corporation Law (the "DGCL")
which, effective on the Effective Date, effect changes as set
forth in Exhibit 1.1(b)(ii) hereto (with the date of the
Voting, Support and Exchange Trust Agreement inserted
therein), together with such amendments or modifications as
are approved by both Telepanel and ERS (the "ERS Charter
Changes") and which shall:
(A) create one share of Special Voting Stock, par
value $.01 per share ("ERS Special Voting Stock"), of
ERS; and
(B) authorize the shares of ERS Common Stock to be
issued in the Arrangement and a sufficient number of
shares of ERS Common Stock so that the retraction and
exchange rights attached to the Exchangeable Shares
(including, without limitation, those issuable upon
exercise of the Telepanel Warrants [as defined in Section
2.2] and upon conversion of the Telepanel Convertible
Securities [as defined in Section 2.2]) and the rights of
holders of options issued pursuant to the Telepanel Stock
Option Plan (the "Telepanel Option Plan") (after giving
effect to the exchange described in Section 1.4 of this
Agreement) may be honored.
<PAGE>
<PAGE>
(c) Options; Warrants; Convertible Securities. Promptly after
the Effective Time: (i) ERS will notify in writing each holder of
a Telepanel Option (as defined in Section 1.4) of (x) the
adjustment of such Telepanel Option so as to constitute an Adjusted
Telepanel Option (as defined in Section 1.4), the number of
Exchangeable Shares that are then subject to such option, and the
exercise price of such option, as determined pursuant to Section
1.4 or (y) the exchange of such Telepanel Option for an ERS Option
(as defined in Section 1.4), the number of shares of ERS Common
Stock that are then subject to such option, and the exercise price
of such option, as determined pursuant to Section 1.4; and (ii) ERS
will notify in writing each holder of a Telepanel Warrant of the
adjustment of such Telepanel Warrant so as to constitute an
Adjusted Telepanel Warrant (as defined in Section 2.2(c)), the
number of Exchangeable Shares that are then subject to such
warrant, and the exercise price of such warrant, as set forth under
Section 2.2(c); and (iii) ERS will notify in writing each holder of
a Telepanel Convertible Security of the adjustment of such
Telepanel Convertible Security so as to constitute an Adjusted
Telepanel Convertible Security (as defined in Section 2.2(d)) and
the conversion price of such convertible security, as set forth
under Section 2.2(d).
1.2 Adjustments in Exchange Ratio.
(a) If, prior to the Effective Time, Telepanel enters into
the financing contemplated by Sections 4.1(a)(iii)(a) or
4.1(a)(vii)(a) of the Telepanel Disclosure Letter hereinafter
identified, or any portion thereof, and in connection with such
financing Telepanel shall at any time potentially be obligated to
issue Telepanel Common Shares, or warrants or options with respect
thereto, the number of Exchangeable Shares exchangeable for each
Telepanel Common Share in the Arrangement shall be adjusted
downwards from .5566 so that the product obtained by multiplying
(i) the sum of all Telepanel Common Shares then outstanding, plus
the Telepanel Share Equivalents (as hereinafter defined), by (ii)
the number of Exchangeable Shares exchangeable for each Telepanel
Common Share in the Arrangement, shall equal 11,274,790 (with the
Exchange Ratio adjusted downwards from .5566:1 to equal the ratio
of such number of Exchangeable Shares to 1).
(b) For purposes hereof:
(i) the "Telepanel Share Equivalents" shall mean the
Option/Warrant Share Equivalents, the Vengrowth Conversion
Share Equivalents and the Senior Conversion Share Equivalents
(in each case, as hereinafter defined) plus 250,000;
(ii) the "Option/Warrant Share Equivalents" shall mean
the quotient obtained by dividing (x) the aggregate of each
product obtained by multiplying a Telepanel Common Share
issuable upon exercise of a Telepanel Option or a Telepanel
Warrant outstanding by the difference (but not less than zero)<PAGE>
<PAGE>
obtained by subtracting the exercise price thereof (expressed
in Canadian dollars) from Cdn. $4.05, by (y) Cdn. $4.05;
(iii) the "Vengrowth Conversion Share Equivalents" shall
mean the quotient obtained by dividing the aggregate
outstanding principal amount of the Vengrowth Debenture (as
defined in the Telepanel Disclosure Letter) by Cdn. $3.05; and
(iv) the "Senior Conversion Share Equivalents" shall
mean the quotient obtained by dividing the aggregate
outstanding principal amount of the 5% Senior Convertible
Notes (as defined in the Telepanel Disclosure Letter) by
U.S.$2.55.
1.3 Dissenting Shares.
Holders of Telepanel Common Shares may exercise rights of
dissent with respect to such shares in connection with the
Arrangement pursuant to and in the manner set forth in section 190
of the CBCA and Section 3.1 of the Plan of Arrangement (such
holders referred to as "Dissenting Shareholders"). Telepanel shall
give ERS (i) prompt notice of any written demands of a right of
dissent, withdrawals of such demands, and any other instruments
served pursuant to the CBCA and received by Telepanel and (ii) the
opportunity to participate in all negotiations and proceedings with
respect to such rights.
1.4 Telepanel Options.
(a) Election. At the Effective Time, after the actions
described in Sections 1.1(a) and (b), each of the then outstanding
options granted by Telepanel to purchase Telepanel Common Shares
(collectively, the "Telepanel Options") granted under the Telepanel
Option Plan will at the option of the holder:
(x) by virtue of the terms thereof, be adjusted so as to
constitute an option (an "Adjusted Telepanel Option") to
purchase that number of Exchangeable Shares determined by
multiplying the number of Telepanel Common Shares subject to
such Telepanel Option at the Effective Time by the number of
Exchangeable Shares exchangeable for each Telepanel Common
Share pursuant to the Exchange Ratio, at an exercise price per
Exchangeable Share, expressed in United States dollars, equal
to the exercise price per Telepanel Common Share of such
Telepanel Option immediately prior to the Effective Time,
expressed in United States dollars, divided by the number of
Exchangeable Shares exchangeable for each Telepanel Common
Share pursuant to the Exchange Ratio; or
(y) be exchanged for an option (an "ERS Option") to
purchase that number of shares of ERS Common Stock determined
by multiplying the number of Telepanel Common Shares subject
to such Telepanel Option at the Effective Time by the number<PAGE>
<PAGE>
of Exchangeable Shares exchangeable for each Telepanel Common
Share pursuant to the Exchange Ratio, at an exercise price per
share of ERS Common Stock, expressed in United States dollars,
equal to the exercise price per Telepanel Common Shares of
such Telepanel Option immediately prior to the Effective Time,
expressed in United States dollars, divided by the number of
Exchangeable Shares exchangeable for each Telepanel Common
Share pursuant to the Exchange Ratio.
If the foregoing calculation results in an adjusted or exchanged
Telepanel Option being exercisable for a fraction of an
Exchangeable Share or of a share of ERS Common Stock, as the case
may be, then the number of Exchangeable Shares or shares of ERS
Common Stock, as the case may be, subject to such option will be
rounded down to the nearest whole number of shares and the total
exercise price for the option will be reduced by the exercise price
of the fractional share. The Adjusted Telepanel Options and the ERS
Options will provide that the term, exercisability, vesting
schedule and all other terms and conditions of the Telepanel
Options will otherwise continue with respect to the Adjusted
Telepanel Options and the ERS Options, respectively; except that,
pursuant to Section 13 of the Telepanel Option Plan, the Telepanel
Board shall, as advised by counsel for ERS and confirmed by counsel
for Telepanel, in each case acting reasonably, require that each
Adjusted Telepanel Option shall be exercisable subject to such
provisions as will ensure that the issuance of the Exchangeable
Shares thereunder shall be exempt from the registration
requirements of Section 5 of the United States Securities Act of
1933, as amended (the "Securities Act"). Continuous employment with
Telepanel or any of the Telepanel Subsidiaries (as hereinafter
defined) prior to the Effective Time will be credited to the holder
of a Telepanel Option or of an ERS Option for purposes of
determining the number of Exchangeable Shares or shares of ERS
Common Stock, as the case may be, subject to exercise under an
adjusted or exchanged Telepanel Option after the Effective Time.
(b) Registration. ERS will cause the ERS Common Stock
issuable upon exchange of the Exchangeable Shares issuable upon
exercise of the Adjusted Telepanel Options, and the ERS Common
Stock issuable upon exercise of an ERS Option, to be registered
pursuant to the Securities Act on an appropriate form or forms
promulgated by the United States Securities and Exchange Commission
(the "SEC") as soon as reasonably practicable after the Effective
Time and will use its best efforts to maintain the effectiveness of
such registration statement or registration statements for so long
as such Adjusted Telepanel Options or ERS Options, as the case may
be, shall remain outstanding. ERS will reserve a sufficient number
of shares of ERS Common Stock for issuance upon exchange of the
Exchangeable Shares issuable upon exercise of the Adjusted
Telepanel Options, and for issuance upon exercise of the ERS
Options, pursuant to this section.
<PAGE>
<PAGE>
1.5 Telepanel Warrants; Telepanel Convertible Securities.
(a) ERS will reserve a sufficient number of shares of ERS
Common Stock for issuance upon exchange of the Exchangeable Shares
issuable upon the exercise of the Adjusted Telepanel Warrants in
accordance with Section 2.2(c) hereof.
(b) ERS will reserve a sufficient number of shares of ERS
Common Stock for issuance upon exchange of the Exchangeable Shares
issuable upon the conversion of the Adjusted Telepanel Convertible
Securities in accordance with Section 2.2(d) hereof.
1.6 Other Effects of the Arrangement.
At the Effective Time: (a) the directors of Telepanel will be
as set forth in the Plan of Arrangement prior to the Effective Time
by written consent of a majority of the persons designated to be
Closing Directors (as hereinafter defined); (b) the officers of
Telepanel will be as set forth in the Plan of Arrangement prior to
the Effective Time by written consent of a majority of the persons
designated to be Closing Directors; (c) each Telepanel Common Share
and each Telepanel Option and each Telepanel Warrant and each
Telepanel Convertible Security outstanding immediately prior to the
Effective Time will be exchanged or adjusted, as the case may be,
as provided in Section 1.1 or Section 1.4 or as set forth in
Section 2.2(c) or Section 2.2(d); and (d) the Arrangement will,
from and after the Effective Time, have all of the effects provided
by applicable law, including, without limitation, the CBCA.
1.7 Joint Management Information Circular/
Proxy Statement; Registration Statement.
(a) As promptly as practicable after execution of this
Agreement, ERS and Telepanel shall cooperate in the preparation of
a preliminary joint management information circular and proxy
statement (the "Joint Proxy Statement"), which shall be filed by
ERS with the SEC, and in the preparation and filing with the SEC of
any other documents required by the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
in connection with the Arrangement. The Joint Proxy Statement shall
constitute (i) the management information circular of Telepanel
with respect to the special meeting of the shareholders of
Telepanel to be held with respect to the approval of Telepanel's
shareholders of this Agreement and the Arrangement (the "Telepanel
Shareholders Meeting"); and (ii) the proxy statement of ERS with
respect to the annual or special meeting of stockholders of ERS to
be held with respect to the approval by ERS' stockholders of the
issuance of the ERS Common Stock in connection with this Agreement,
the ERS Charter Changes and related matters (in addition to such
other matters as ERS may elect to submit to its stockholders at
such meeting) (the "ERS Stockholders Meeting"). ERS and Telepanel
shall use their respective best efforts to cause the Joint Proxy
Statement to be cleared by the SEC under the Exchange Act. If ERS<PAGE>
<PAGE>
determines upon the advice of its counsel that it is necessary to
file a registration statement (together with any other registration
statement hereinafter referenced in this sentence, the
"Registration Statement") in order to register the shares of ERS
Common Stock to be issued from time to time after the Effective
Time upon exchange of the Exchangeable Shares, then ERS shall file
the Registration Statement with the SEC and, if necessary, shall
use its best efforts to maintain the effectiveness of such
registration, or to file and maintain such other registration
statement, in order to register the shares of ERS Common Stock to
be issued from time to time after the Effective Time upon exchange
of the Exchangeable Shares, for such period as such Exchangeable
Shares remain outstanding; and ERS and Telepanel shall take all
such action as may be required under state or provincial blue sky
or securities laws in connection with the issuance of such shares
of ERS Common Stock and the Arrangement. Notwithstanding anything
herein to the contrary, ERS shall be under no obligation to file or
maintain the Registration Statement if it shall have determined on
the advice of its counsel that the issuance of shares of ERS Common
Stock upon exchange of the Exchangeable Shares after the Effective
Time is exempt from the registration requirements of Section 5 of
the Securities Act. In connection with such determination, ERS,
with the cooperation and assistance of Telepanel, shall prepare and
file with the SEC a request for no action (the "No Action Request")
seeking to confirm the availability of such an exemption by virtue
of Sections 3(a)(9) and/or 3(a)(10) of the Securities Act.
(b) Each party shall promptly furnish to the other party all
information concerning such party and its shareholders as may be
reasonably required in connection with any action contemplated by
this Section 1.7. The Registration Statement, if filed, and the
Joint Proxy Statement shall comply in all material respects with
all applicable requirements of law. Each of ERS and Telepanel will
notify the other promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Registration Statement, if filed,
and the Joint Proxy Statement or for additional information, and
will supply the other with copies of all correspondence with the
SEC or its staff with respect to the Registration Statement or the
Joint Proxy Statement. Whenever any event occurs which should be
set forth in an amendment or supplement to the Registration
Statement or the Joint Proxy Statement, ERS or Telepanel, as the
case may be, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff, and/or mailing to
stockholders of ERS and Telepanel, such amendment or supplement.
1.8 Reorganization.
The parties intend to adopt this Agreement and the Plan of
Arrangement as a plan of reorganization under section 368 of the
Code, and the parties intend to adopt the Arrangement as a
reorganization of capital of Telepanel under section 86 of the ITA<PAGE>
<PAGE>
to the extent that Exchangeable Shares are received in exchange for
Telepanel Common Shares.
1.9 "Pooling of Interests"; Affiliate Agreements.
The parties intend that the Arrangement be treated as a
"pooling of interests" under U.S. GAAP. Contemporaneously with the
execution of this Agreement, ERS has obtained and delivered to
Telepanel from its Affiliates (as hereinafter defined) an agreement
in the form of Exhibit 1.9(a) hereto (collectively, the "ERS
Affiliate Agreements"); and Telepanel has obtained and delivered to
ERS from its Affiliates an agreement in the form of Exhibit 1.9(b)
hereto (collectively, the "Telepanel Affiliate Agreements").
1.10 Material Adverse Effect.
In this Agreement, any reference to any event, change or
effect being "material" with respect to a party means any event,
change or effect material to the condition (financial or
otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of such party and
its subsidiaries, taken as a whole. In this Agreement, the term
"Material Adverse Effect" used with respect to a party means any
event, change or effect that is, or is reasonably likely to be,
materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of
operations or prospects of such party and its subsidiaries, taken
as a whole; provided, however, that a Material Adverse Effect shall
not include or be deemed to result from any change in the market
value of ERS Common Stock or Telepanel Common Shares or any adverse
effect resulting from changes in general economic conditions or
changes affecting the business of both Telepanel and ERS in
developing, manufacturing, marketing, selling, distributing and
maintaining electronic shelf label systems; and, provided, further,
that, for purposes of Sections 2.10(i), 3.10(i), 6.3 and 7.3
hereof, the term "Material Adverse Effect" shall not extend to any
events, changes or effects not materially worse than, or
representing a materially different trend in, prior comparable
events, changes or effects with respect to the same party.
1.11 Currency.
Unless otherwise specified, all references in this Agreement
to "dollars" or "$" shall mean United States dollars.
1.12 Best Efforts.
For purposes of this Agreement, the term "best efforts" shall
be interpreted to mean an obligation of such party to use every
reasonable commercial effort and shall not be interpreted to
require such party to enter into any agreement or undertaking to
pay or otherwise confer anything of value to or for the benefit of
a third party (except for fees of Governmental Entities [as<PAGE>
<PAGE>
hereinafter defined] and securities exchanges and except as
otherwise expressly provided herein), to guarantee any obligation,
to make whole or keep well a third party or the like or to take any
other action which would have an unreasonably adverse effect on the
business of such party or which would cause the transactions
contemplated by this Agreement and the Arrangement not to qualify
for pooling-of-interests accounting treatment under U.S. GAAP.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TELEPANEL
Telepanel hereby represents and warrants to ERS that:
2.1 Organization; Good Standing; Qualification and Power.
Each of Telepanel and (i) each corporation, partnership,
company, joint venture, and other entity in which Telepanel
beneficially owns or controls, directly or indirectly, more than
50% of the equity, voting rights, profits interest, capital, or
other similar interest thereof and (ii) Telepanel Europe S.A. (the
"Telepanel Subsidiaries") is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
formation, has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as
now being conducted, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect on
Telepanel. Section 2.1 of the letter dated the date of this
Agreement and delivered by Telepanel to ERS concurrently herewith
(the "Telepanel Disclosure Letter") (such letter, by this
reference, incorporated into this Agreement) sets forth a correct
and complete list of the Telepanel Subsidiaries, the number of each
such subsidiary's outstanding capital stock or other ownership
interest owned by Telepanel or another Telepanel Subsidiary and a
correct and complete list of each jurisdiction in which each of
Telepanel and each Telepanel Subsidiary is duly qualified and in
good standing to do business, together with the name of each
corporation, partnership, joint venture, business trust or other
legal entity in which Telepanel or any Telepanel Subsidiary,
directly or indirectly, beneficially or legally owns or holds any
capital stock or other proprietary interest and Telepanel's direct
or indirect ownership interest therein. Neither Telepanel nor any
Telepanel Subsidiary, directly or indirectly, beneficially or
legally owns or holds any capital stock of ERS. Telepanel has
delivered to ERS complete and correct copies of the articles of
incorporation and bylaws of Telepanel, and of each Telepanel
Subsidiary, as amended to the date of this Agreement and currently
in effect.
<PAGE>
<PAGE>
2.2 Capital Structure.
(a) Stock and Options. The authorized capital stock of
Telepanel consists of an unlimited number of Common Shares of which
17,952,677 shares were issued and outstanding as of the date hereof
(the "Measurement Date"). No shares of any class or series of the
capital stock of Telepanel are held as treasury stock. All
outstanding Telepanel Common Shares have been, and all Telepanel
Common Shares issuable upon exercise of Telepanel Options and the
warrants (the "Telepanel Warrants") and the convertible securities
(the "Telepanel Convertible Securities") identified pursuant to
Section 2.2(b) hereof will be duly authorized and validly issued,
fully paid and non-assessable and issued without violation of any
pre-emptive rights. Telepanel has delivered to ERS true and
complete copies of each form of stock option agreement evidencing
the Telepanel Options. All issued and outstanding shares of the
capital stock or other proprietary interest of each of the
Telepanel Subsidiaries are owned as set forth in Section 2.2(a) of
the Telepanel Disclosure Letter, have been duly authorized and
validly issued, are fully paid and non-assessable, issued without
violation of any preemptive rights, are not subject to any right of
rescission, and have been offered, issued, sold and delivered by
Telepanel or the applicable Telepanel Subsidiary in compliance with
all registration, qualification and prospectus requirements (or
applicable exemptions therefrom) of applicable federal, provincial,
state and applicable foreign securities laws. All of the shares of
the capital stock or other proprietary interest of the Telepanel
Subsidiaries are owned as set forth in Section 2.2(a) of the
Telepanel Disclosure Letter, free and clear of all security
interests, liens, claims, pledges, agreements, limitations on
voting rights, charges or other encumbrances of any nature
whatsoever.
(b) No Other Commitments. Except as disclosed in Section
2.2(b) of the Telepanel Disclosure Letter, there are no
subscriptions, options, warrants, calls, rights, commitments,
conversion rights or agreements of any character to which Telepanel
or any of the Telepanel Subsidiaries is a party or by which
Telepanel or any of the Telepanel Subsidiaries is bound obligating
Telepanel or any of the Telepanel Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any shares of
capital stock or other proprietary interest of Telepanel or any of
the Telepanel Subsidiaries or securities convertible into or
exchangeable for shares of capital stock or other proprietary
interest of Telepanel or any of the Telepanel Subsidiaries, or
obligating Telepanel or any of the Telepanel Subsidiaries to grant,
extend or enter into any such option, warrant, call, right,
commitment, conversion right or agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not require the adjustment of the number,
or price, of any securities subject to any of the Telepanel Options
or the Telepanel Warrants or the Telepanel Convertible Securities,
pursuant to any anti-dilution provisions therein or otherwise,<PAGE>
<PAGE>
except as set forth under Sections 1.4 and 2.2(c) and (d) hereof.
Except as disclosed in Section 2.2(b) of the Telepanel Disclosure
Letter, there are no voting trusts or other agreements or
understandings to which Telepanel is a party or of which Telepanel
is aware with respect to the voting of the capital stock or other
proprietary interest, or control, of Telepanel or any of the
Telepanel Subsidiaries.
(c) Telepanel Warrants. At the Effective Time, after the
actions described in Sections 1.1(a) and (b) hereof, each of the
outstanding Telepanel Warrants will, without further action on the
part of any holder thereof and by virtue of the terms thereof, be
adjusted so as to constitute a warrant (an "Adjusted Telepanel
Warrant") to purchase that number of Exchangeable Shares determined
by multiplying the number of Telepanel Common Shares subject to
such Telepanel Warrant at the Effective Time by the number of
Exchangeable Shares exchangeable for each Telepanel Common Share
pursuant to the Exchange Ratio, at an exercise price per
Exchangeable Share, expressed in United States dollars, equal to
the exercise price per Telepanel Common Share of such Telepanel
Warrant immediately prior to the Effective Time, expressed in
United States dollars, divided by the number of Exchangeable Shares
exchangeable for each Telepanel Common Share pursuant to the
Exchange Ratio. The Adjusted Telepanel Warrants will provide that
the term, exercisability and all other terms and conditions of the
Telepanel Warrants will otherwise continue with respect to the
Adjusted Telepanel Warrants, except as contemplated by Section 7.12
hereof.
(d) Telepanel Convertible Securities. At the Effective Time,
after the actions described in sections 1.1(a) and (b), each of the
outstanding Telepanel Convertible Securities will, without further
action on the part of any holder thereof and by virtue of the terms
thereof, be adjusted so as to constitute a convertible security (an
"Adjusted Convertible Security") to purchase Exchangeable Shares,
at a conversion price per Exchangeable Share, expressed in United
States dollars, equal to the conversion price per Telepanel Common
Share of such Telepanel Convertible Security immediately prior to
the Effective Time, expressed in United States dollars, divided by
the number of Exchangeable Shares exchangeable for each Telepanel
Common Share pursuant to the Exchange Ratio. The Adjusted Telepanel
Convertible Securities will provide that the term, convertibility
and all other terms and conditions of the Telepanel Convertible
Securities will otherwise continue with respect to the Adjusted
Telepanel Convertible Securities, except as contemplated by Section
7.12 hereof.
(e) Registration Rights. Except as disclosed in Section
2.2(e) of the Telepanel Disclosure Letter, Telepanel is not under
any obligation to register any of its securities under any
securities laws.
<PAGE>
<PAGE>
2.3 Authority.
(a) Corporate Action. Telepanel has all requisite corporate
power and authority to enter into this Agreement and, subject to
approval of the Arrangement by the shareholders of Telepanel and by
the Court, to perform its obligations hereunder and to consummate
the Arrangement and the other transactions contemplated by this
Agreement. The execution and delivery of this Agreement by
Telepanel and, subject to approval of the Arrangement by the
shareholders of Telepanel and by the Court, the consummation by
Telepanel of the Arrangement and the other transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Telepanel. This Agreement has been
duly executed and delivered by Telepanel and this Agreement is the
valid and binding obligation of Telepanel, enforceable in
accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other
similar laws affecting or relating to enforcement of creditors'
rights generally and (ii) general equitable principles.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement or the Plan of Arrangement by
Telepanel, nor the consummation of the transactions contemplated
hereby or thereby by Telepanel, nor compliance with the provisions
hereof or thereof by Telepanel will: (i) result in any breach or
violation of the articles of incorporation or bylaws of Telepanel
or the comparable governing instruments of any of the Telepanel
Subsidiaries or, subject to compliance with the regulatory
requirements specified under Section 2.3(c) hereof, any law, rule,
regulation, writ, judgment, injunction, decree, determination,
award or other order of any Governmental Entity (as hereinafter
defined) binding upon Telepanel or any of the Telepanel
Subsidiaries; (ii) except as disclosed in Section 2.3(b) of the
Telepanel Disclosure Letter, result in any breach or violation of
or cause a default (with or without notice or lapse of time, or
both), or require any consent or approval, under, or give rise to
a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any benefit under, or
result in the creation of any lien, security interest, charge or
encumbrance upon, or right of first refusal or other option to
purchase or acquire, any of the properties or assets of Telepanel
or any of the Telepanel Subsidiaries under, any term, condition or
provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other contract or agreement applicable to
Telepanel or any of the Telepanel Subsidiaries or their respective
properties or assets, other than any such breaches, violations,
rights, defaults, losses, liens, security interests, charges or
encumbrances or rights of first refusal or options which,
individually or in the aggregate, would not have a Material Adverse
Effect on Telepanel; or (iii) except for the requirement under the
CBCA that the Arrangement be approved by the holders of at least
two-thirds (or such other proportion as may be set out in the
Interim Order) of the outstanding Telepanel Common Shares who are<PAGE>
<PAGE>
permitted to, and who do, vote in accordance with the CBCA at the
Telepanel Shareholders Meeting, require any vote of the holders of
issued and outstanding Telepanel Common Shares.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency, regulatory body or commission or
other governmental authority or instrumentality, whether federal,
provincial, state, or local and whether domestic or foreign (each,
a "Governmental Entity"), is required to be obtained by Telepanel
or any of the Telepanel Subsidiaries in connection with the
execution and delivery of this Agreement or the Plan of Arrangement
or the consummation of the transactions contemplated hereby or
thereby, except for: (i) the filing with the Ontario Securities
Commission (the "OSC"), all other Canadian provincial securities
regulatory authorities having jurisdiction and the Court of the
Joint Proxy Statement; (ii) (A) the filing with the SEC of the No
Action Request, (B) the filing with and clearance by the SEC of the
Joint Proxy Statement, and all information and other documents
required by the SEC under the Exchange Act in connection therewith,
and (C) the filing with the SEC of such reports under the Exchange
Act and the rules and regulations promulgated by the SEC thereunder
as may be required in connection with this Agreement and the
transactions contemplated hereby; (iii) approval of the Court of
the Arrangement and the filings of the Articles of Arrangement and
any other required amalgamation, arrangement or other documents as
required by the CBCA; (iv) such filings, authorizations, orders and
approvals as may be required under the Securities Act (Ontario) and
other relevant Canadian securities statutes, any other applicable
provincial or state securities laws and the rules of The Toronto
Stock Exchange (the "TSE") and such filings as may be required
under the rules of The Nasdaq Stock Market, Inc. ("Nasdaq"); (v)
such filings and notifications and other compliance as may be
necessary under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"); and (vi) any required notices and
filings under the Investment Canada Act.
2.4 Securities Regulatory Authority Reports;
Financial Statements.
(a) Canadian Compliance. Since December 31, 1993, Telepanel
has filed all forms, reports and documents with the OSC required to
be filed by it pursuant to the Securities Act (Ontario) and the
regulations promulgated thereunder, the comparable statutes and
regulations of all other Canadian provinces, and the applicable
policies and rules of the OSC and all other Canadian provincial
securities regulatory authorities having jurisdiction (such forms,
reports and documents collectively, the "Telepanel OSC Reports"),
all of which complied when filed in all material respects with all
then applicable requirements of such statutes, regulations,
policies and rules. None of the Telepanel OSC Reports, at the time
filed or as subsequently amended, contained any untrue statement of<PAGE>
<PAGE>
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading.
(b) SEC Reports. Telepanel has filed each report, schedule,
registration statement definitive proxy statement and other filing
with the SEC (the "Telepanel SEC Documents"), which Telepanel was
required to file with the SEC on or after December 31, 1993 and,
within the twelve months prior to the date hereof, all Telepanel
SEC Documents have been timely filed. As of their respective dates
or, in the case of registration statements, their effective dates
(or, if amended by a filing prior to the date of this Agreement,
then on the date of such filing), none of the Telepanel SEC
Documents (including all schedules thereto and documents
incorporated by reference therein) contained any untrue statement
of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading, and the Telepanel SEC Documents complied when filed
in all material respects with the then applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and the
rules and regulations promulgated by the SEC thereunder.
(c) Financial Statements. The audited consolidated financial
statements (including the related notes and schedules thereto) of
Telepanel contained in or incorporated by reference to the
Telepanel OSC Reports and the Telepanel SEC Documents, without
limitation for its fiscal year ended January 31, 1997, and the
unaudited consolidated financial statements (including the related
notes and schedules thereto) of Telepanel contained in or
incorporated by reference to the Telepanel OSC Reports and the
Telepanel SEC Documents, without limitation for its fiscal six
months ended July 31, 1997, complied as to form in all material
respects with the then applicable accounting requirements and the
published rules and regulations of the OSC and of the SEC with
respect thereto, were prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP") applied
on a consistent basis during the periods involved (except as may
have been indicated in the notes thereto) and present fairly the
consolidated financial position and the consolidated results of
operations and cash flows of Telepanel and its consolidated
subsidiaries as of the dates or for the periods presented therein,
subject in the case of unaudited statements to normal year-end
audit adjustments which are described therein. Except as disclosed
in the Telepanel OSC Reports or in Section 2.4(c) of the Telepanel
Disclosure Letter, and other than those incurred after July 31,
1997 in the ordinary course of business, neither Telepanel nor any
of the Telepanel Subsidiaries has any liabilities, accrued,
contingent or otherwise, that, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect on
Telepanel.
<PAGE>
<PAGE>
2.5 Information Supplied.
None of the information relating to Telepanel or any of the
Telepanel Subsidiaries contained in this Agreement or in the
Telepanel Disclosure Letter, in the Telepanel OSC Reports and in
the Telepanel SEC Documents, taken as a whole, contains any untrue
statement of a material fact or omits to state a material fact
required to be stated herein or therein or necessary in order to
make the statements herein or therein, in light of the
circumstances in which they were made, not misleading. None of the
information with respect to Telepanel, its directors, officers,
stockholders or any Telepanel Subsidiary included or incorporated
by reference in the Joint Proxy Statement (and, if filed, the
Registration Statement) will, at the time the Joint Proxy Statement
is mailed to the shareholders of Telepanel and at the time of the
Telepanel Shareholders Meeting (and, if filed, at the time the
Registration Statement is declared effective and at the time of any
post-effective amendment thereto prior to the Effective Time),
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they are made, not misleading. The Joint Proxy Statement will
comply as to form in all material respects with the provisions of
the CBCA and applicable Canadian securities laws and the rules and
regulations promulgated thereunder, and with all applicable United
States securities laws.
2.6 Compliance with Applicable Laws.
Telepanel and the Telepanel Subsidiaries have complied, in the
conduct of their respective businesses, with all applicable
federal, provincial, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto, except where the failure to comply would not be
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on Telepanel. Telepanel has not been
notified by any Governmental Entity of any investigation with
respect to Telepanel or any of the Telepanel Subsidiaries that is
pending or threatened, nor has any Governmental Entity notified
Telepanel of such entity's intention to conduct the same, that
would be reasonably likely to have a Material Adverse Effect on
Telepanel. Each of Telepanel and the Telepanel Subsidiaries has all
permits, licenses, certificates of authority, orders, and approvals
of, and has made all filings, applications and registrations with,
federal, state, local, and foreign governmental or regulatory
bodies that are required in order to permit it or such subsidiary
to carry on its business as it is presently conducted, except for
such permits, licenses, certificates, orders, filings, applications
and registrations, the failure to have or make which, individually
or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect on Telepanel. All such permits, licenses,
certificates of authority, orders and approvals are in full force
and effect, there has been no default or breach thereunder, and<PAGE>
<PAGE>
there is no pending or, to the best of the knowledge of Telepanel,
threatened proceeding under which any may be revoked, terminated or
suspended, except insofar as would not, individually or in the
aggregate, have a Material Adverse Effect on Telepanel. The
execution and delivery of this Agreement, and the consummation of
the Arrangement, will not adversely affect or otherwise impair the
ability of Telepanel or the Telepanel Subsidiaries, as the case may
be, fully to enjoy the benefits of any such permits, licenses,
certificates of authority, orders or approvals.
2.7 Title to Assets.
(a) Each of Telepanel and the Telepanel Subsidiaries has good
and marketable title to its properties (other than property as to
which it is lessee, in which case it has a valid leasehold
interest), except for such defects in title that, individually or
in the aggregate, would not be reasonably likely to have a Material
Adverse Effect on Telepanel, in each case free and clear of all
Telepanel Liens (as hereinafter defined). All real and tangible
personal property owned or leased by Telepanel and each of the
Telepanel Subsidiaries is in good repair and is operational and
usable in the operation of Telepanel, subject to normal wear and
tear, except for such property whose failure to be in such
condition would not be reasonably likely to have a Material Adverse
Effect on Telepanel. All leases and licenses pursuant to which
Telepanel or the Telepanel Subsidiaries lease or license personal
and intangible property from others are in good standing, valid and
effective in accordance with their respective terms, and there is
not, under any of such leases or licenses, any existing default, or
event of default (or event which with notice or lapse of time, or
both, would constitute a default, or would constitute a basis for
a claim of force majeure or other claim of excusable delay or
non-performance), other than any such default, event or claim that,
individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect on Telepanel. Telepanel and the
Telepanel Subsidiaries lease or own all properties and assets
necessary for the operation of their respective businesses as
presently conducted, and the assets and properties of Telepanel and
the Telepanel Subsidiaries include all of the assets, of every kind
and nature, whether tangible or intangible, and wherever located,
which are utilized by Telepanel or the Telepanel Subsidiaries in
the conduct of their respective businesses, in each case other than
any assets or properties the failure to lease or own which would
not, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect on Telepanel.
(b) For purposes of this Agreement, the term "Telepanel Lien"
shall be defined to mean any mortgage, deed of trust, security
interest, pledge, lien, or other charge or encumbrance of any
nature whatsoever except: (a) liens disclosed in the financial
statements contained in or incorporated by reference to the
Telepanel SEC Documents; (b) liens for taxes, assessments, or
governmental charges or levies not yet due and delinquent; (c)<PAGE>
<PAGE>
liens consisting of zoning or planning restrictions, easements,
permits, any other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property by
Telepanel or any of the Telepanel Subsidiaries and (d) liens
disclosed in Section 2.7 of the Telepanel Disclosure Letter.
2.8 Litigation.
Except as disclosed in Section 2.8 of the Telepanel Disclosure
Letter, there are no suits, actions, arbitrations, demands, claims
or proceedings pending or, to the best of the knowledge of
Telepanel, threatened against Telepanel or any of the Telepanel
Subsidiaries that, individually or in the aggregate, would, if
determined adversely, be reasonably likely to have a Material
Adverse Effect on Telepanel nor are there any judgments, decrees,
injunctions, writs, stipulations, determinations, awards, rules or
orders of any Governmental Entity or arbitrator outstanding against
Telepanel or any of the Telepanel Subsidiaries that individually or
in the aggregate would be reasonably likely to have a Material
Adverse Effect on Telepanel.
2.9 Benefit Plans and Other Compliance.
(a) Section 2.9 of the Telepanel Disclosure Letter identifies
all bonus, deferred compensation, incentive compensation, share
purchase, share option, stock appreciation, phantom stock, savings,
profit sharing, severance or termination pay, health or other
medical, life, disability or other insurance (whether insured or
self-insured, supplementary unemployment benefit, pension,
retirement, supplementary retirement and every other written or
formal benefit plan, program, agreement or arrangement involving
direct or indirect compensation or benefits (including any
employment agreements entered into between Telepanel or any of the
Telepanel Subsidiaries and any employee of Telepanel or any of the
Telepanel Subsidiaries, maintained or contributed to by Telepanel
of any of the Telepanel Subsidiaries (or under which Telepanel or
any Telepanel Subsidiary has any present or future obligation or
ability) for the benefit of any employee of Telepanel or any
Telepanel Subsidiary or their respective dependents or
beneficiaries (collectively, the "Telepanel Employee Plans").
(b) There has been no amendment to, written interpretation
of, or announcement by Telepanel or any of the Telepanel
Subsidiaries relating to, or change in employee participation or
coverage under, any Telepanel Employee Plan that would increase
materially the expense of maintaining such Telepanel Employee Plan
above the level of the expense incurred in respect thereof for the
fiscal year ended January 31, 1997.
<PAGE>
<PAGE>
(c) All of the Telepanel Employee Plans are, and have been
since their establishment, duly registered where required by
legislation (including registration with the relevant tax
authorities where such registration is required to qualify for tax
exemption or other beneficial tax status) and are in good standing
under, and in material compliance with, all statutes, orders, rules
and regulations, including the ITA and provincial pension standards
legislation, which are applicable to the Telepanel Employee Plans.
(d) All employer and, if applicable, employee contributions
under the Telepanel Employee Plans due from Telepanel or any
Telepanel Subsidiary have been or will be remitted in a timely
manner through the Effective Time as required by applicable
legislation or have been accrued on Telepanel's or any such
Telepanel Subsidiary's financial statements as of January 31, 1997.
(e) To the best of the knowledge of Telepanel, no event has
occurred and there has been no failure to act on the part of
Telepanel or any Telepanel Subsidiary, any funding agent or any
administrator of any of the Telepanel Employee Plans that could
subject Telepanel, any Telepanel Subsidiary, any officer or
director or either of them or the fund of any Telepanel Employee
Plan to the imposition of any tax, penalty or other disability,
including the failure to maintain sufficient funds, with respect to
any such plan, whether by way of indemnity or otherwise.
(f) No Telepanel Employee Plan constitutes a multi-employer
pension plan.
(g) All Telepanel Employee Plans are maintained outside of
the United States for the benefit of persons all of whom are United
States non-resident aliens.
2.10 Absence of Certain Changes or Events.
Except as disclosed, respectively, in the corresponding
clauses of Section 2.10 of the Telepanel Disclosure Letter, the
Telepanel OSC Reports and Telepanel SEC Documents filed prior to
the date of this Agreement, since July 31, 1997 (the "Telepanel
Balance Sheet Date"), there has not been: (i) any change or
development or combination of changes or developments which,
individually or in the aggregate, constitutes a Material Adverse
Effect on Telepanel or would be reasonably likely to result in a
Material Adverse Effect on Telepanel; (ii) any declaration, setting
aside or payment of any dividend or other distribution with respect
to Telepanel's capital stock, or, directly or indirectly, any
redemption, purchase, or other acquisition or disposition of any
shares of Telepanel capital stock by Telepanel or any Telepanel
Subsidiary; (iii) any change by Telepanel in its accounting
methods, principles or practices; (iv) any writing down or writing
off the value of any material assets of Telepanel or any Telepanel
Subsidiary other than in the ordinary course of business; (v) any
incurrence of any liability or obligation under agreements or<PAGE>
<PAGE>
otherwise, except current liabilities entered into or incurred in
the ordinary course of business consistent with past practice, any
issuance of any notes or other corporate debt securities or payment
or discharge of any outstanding indebtedness, except in the
ordinary course of business consistent with past practice, or any
waiver of any of its rights, in each case by Telepanel or any
Telepanel Subsidiary; (vi) any mortgage, pledge or subjection to
any Telepanel Lien of any assets or properties, entering into of
any lease of real property or buildings, or, except in the ordinary
course of business, entering into of any lease of machinery or
equipment, or sale or transferring any tangible or intangible asset
or property, in each case by Telepanel or any Telepanel Subsidiary;
(vii) any material increase in or material modification of the
compensation payable or to become payable by any of Telepanel or
the Telepanel Subsidiaries to any of its directors, officers, or
employees, except in the ordinary course of business consistent
with past practice (provided, however, that in no event was any
such increase in compensation made with respect to any director,
officer or employee earning in excess of $30,000 per annum, except
as identified in Section 2.10(vii) of the Telepanel Disclosure
Letter); (viii) any bonus, pension, option, deferred compensation,
or retirement payment, severance, profit sharing, or like payment
to any director, officer or employee, except as required by the
terms of plans or arrangements existing prior to such date
(provided, however, that in no event was any such payment made with
respect to any employee or agent earning in excess of $30,000 per
annum, except as identified in Section 2.10(viii) of the Telepanel
Disclosure Letter); (ix) any execution or other entering into of
any salary, wage, severance, or other compensation agreement with
a term of one year or longer with any director, officer or employee
or any contribution to any trust or plan for the benefit of any
director, officer or employee, except as required by the terms of
plans or arrangements existing prior to such date; (x) any entering
into of any transaction other than in the ordinary course of
business consistent with past practice, in each case by Telepanel
or any Telepanel Subsidiary, except in connection with the
execution and performance of this Agreement and the transactions
contemplated hereby; (xi) any damage, destruction, or loss to any
assets or properties of Telepanel or any Subsidiary (whether or not
covered by insurance) except for damage, destruction or loss
occurring in the ordinary course of business which, individually or
in the aggregate, would not have a Material Adverse Effect on
Telepanel; (xii) any acquisition or sale of a material amount of
property or assets of Telepanel or any Telepanel Subsidiary, other
than in the ordinary course of business consistent with past
practice; or (xiii) to the knowledge of Telepanel, any labor
dispute or charge of unfair labor practice (other than routine
individual grievances), any activity or proceeding by a labor union
or representative thereof to organize any employees of Telepanel or
any Telepanel Subsidiary or any campaign conducted to solicit
authorization from employees to be represented by such labor union
that, in any such case under this clause (xiii), would be
reasonably likely to have a Material Adverse Effect on Telepanel.<PAGE>
<PAGE>
2.11 Certain Agreements.
Except as disclosed in Section 2.11 of the Telepanel
Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director, officer or
employee of Telepanel or any of the Telepanel Subsidiaries from
Telepanel or any of the Telepanel Subsidiaries, under any Telepanel
Employee Plan, Telepanel Benefit Arrangement or otherwise, (ii)
materially increase any benefits otherwise payable under any
Telepanel Employee Plan or Telepanel Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any
such benefits, including but not limited to the time of exercise of
stock options. Telepanel and each Telepanel Subsidiary is in
compliance in all material respects with all applicable laws,
agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters. Set
forth in Section 2.11 of the Telepanel Disclosure Letter is a list
of all employees of Telepanel and each Telepanel Subsidiary
entitled to receive annual compensation in excess of $30,000 and
their respective positions, job descriptions and salaries. Except
for those unions identified in Section 2.11 of the Telepanel
Disclosure Letter, no union or other collective bargaining unit has
been certified or recognized by Telepanel or any Telepanel
Subsidiary as representing any of their respective employees.
Telepanel and each Telepanel Subsidiary believes it has
satisfactory labor relations; nothing has come to Telepanel's
attention as a result of the negotiation or entering into of this
Agreement that would lead Telepanel to believe that the
consummation of the transactions contemplated hereby will have a
Material Adverse Effect on Telepanel with respect to labor
relations; and Telepanel has no knowledge that any of its
"executive officers" (as defined under Rule 3b-7 pursuant to the
Exchange Act) intends to leave its employ. Neither Telepanel nor
any of the Telepanel Subsidiaries has an employment contract or
material consulting agreement currently in effect that is not
terminable at will or upon reasonable notice (other than agreements
with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions), except as
such termination rights are limited under applicable employment
laws.
2.12 Taxes.
(a) Telepanel and each of the Telepanel Subsidiaries have
timely filed, or caused to be filed, all Tax Returns (as defined
below) required to be filed by them (all of which returns were
correct and complete in all material respects) and have paid, or
caused to be paid, all Taxes (as defined below) that are due and
payable, in each case except for any such Tax Returns or Taxes the<PAGE>
<PAGE>
non-filing or non-payment of which have not had and would not be
reasonably likely to have a Material Adverse Effect on Telepanel,
and Telepanel has provided adequate accruals in accordance with
Canadian GAAP in its financial statements for any Taxes that have
not been paid, whether or not shown as being due on any returns.
Since the Telepanel Balance Sheet Date, no material Tax liability
has been assessed, proposed to be assessed, incurred or accrued
other than in the ordinary course of business. Neither Telepanel
nor any Telepanel Subsidiary has received any written notification
that any material issues have been raised (and are currently
pending) by Revenue Canada, the United States Internal Revenue
Service or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the
Tax Returns referred to above, and no waivers of statutes of
limitations have been given or requested with respect to Telepanel
or any of the Telepanel Subsidiaries, in each case except for any
such written notices or waivers which have not had and would not be
likely to have a Material Adverse Effect on Telepanel. To the best
of the knowledge of Telepanel, there are no material proposed (but
unassessed) additional Taxes and none have been asserted. No Tax
liens have been filed other than for Taxes not yet due and payable.
None of Telepanel or any of the Telepanel Subsidiaries (i) has made
an election to be treated as a "consenting corporation" under
section 341(f) of the Code, (ii) is a "personal holding company"
within the meaning of section 542 of the Code or (iii) is a party
to any Tax sharing or other similar agreement or arrangement of any
nature with any other person pursuant to which Telepanel or any of
the Telepanel Subsidiaries has or could have any liabilities in
respect of Taxes. Telepanel is not, and has not been, at any time
within the last five years prior to the date hereof, a "United
States real property holding corporation" within the meaning of
Section 897 of the Code. Neither Telepanel, any corporation to
which Telepanel is the successor in a reorganization described in
section 368(a) of the Code nor any Telepanel Subsidiary has, for
any prior taxable year, been a "passive foreign investment company"
(a "PFIC") within the meaning of section 1296 of the Code, and, on
the basis of its income and assets for the current taxable year to
date, would not be a PFIC for such year.
(b) As used in this Agreement, "Tax" and "Taxes" means, with
respect to any entity, (A) all income taxes (including any tax on
or based upon net income, gross income, income as specially
defined, earnings, profits or selected items of income, earnings or
profits) and all capital, gross receipts, environmental, sales,
use, ad valorem, value added, transfer, franchise, license,
withholding, payroll, employment, Canada or Quebec Pension Plans,
excise, severance, utility, compensation, social security, workers'
compensation, unemployment insurance or compensation, stamp,
occupation, premium, property, windfall profits taxes, alternative
or add-on minimum taxes, goods and services tax, customs duties or
other taxes, fees, imports, assessments or charges of any kind
whatsoever, together with any interest and any penalties or
additional amounts imposed by any taxing authority (domestic or<PAGE>
<PAGE>
foreign) on such entity, and any interest, penalties, additional
taxes and additions to tax imposed with respect to the foregoing,
and (B) any liability for the payment of any amount of the type
described in the immediately preceding clause (A) as a result of
being a "transferee" (within the meaning of section 6901 of the
Code or any other applicable law) of another entity or a member of
an affiliated or combined group. As used in this Agreement, "Tax
Returns" means all returns, declarations, reports, information
returns and statements relating to Taxes.
2.13 Fees and Expenses.
Except for the fees and expenses set forth in Section 2.13 of
the Telepanel Disclosure Letter payable to Deutsche Morgan Grenfell
Inc., neither Telepanel nor any of the Telepanel Subsidiaries, nor
any director, officer, agent or employee thereof, has paid or
become obligated to pay any fee or commission to any broker, finder
or intermediary in connection with the transactions contemplated by
this Agreement.
2.14 Environmental Matters.
(a) Except as disclosed in the Telepanel OSC Reports, neither
Telepanel nor any Telepanel Subsidiary: (i) has filed any notice
under any Environmental Law (as hereinafter defined) indicating
past or present treatment, storage, or disposal of a hazardous
waste or reporting a spill or release of a Hazardous Substance (as
hereinafter defined) or other substance into the environment, in
each case in violation of law wherein such violation, individually
or in the aggregate, would have a Material Adverse Effect on
Telepanel, or (ii) has any liability, contingent or otherwise,
under any Environmental Law in connection with any release of any
Hazardous Substance, or other substance on property, now or
formerly owned or leased by Telepanel or any of the Telepanel
Subsidiaries, which, individually or in the aggregate, would have
a Material Adverse Effect on Telepanel. No Hazardous Substances
have been generated, treated, stored or disposed of or placed in
violation of any Environmental Law on any property owned or leased
by Telepanel or any Telepanel Subsidiary or on or into any waste
disposal site owned or operated by a third party except for
violations which, individually or in the aggregate, would not have
a Material Adverse Effect on Telepanel.
(b) "Environmental Law" means any applicable federal,
provincial, state, foreign or local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval,
consent, common law, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any Government Entity,
(x) relating to the protection, preservation or restoration of the
environment (including, without limitation, air, surface water,
groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or to human
health or safety, or (y) the exposure to, or the use, storage,<PAGE>
<PAGE>
recycling, treatment, generation, transportation, processing,
handling, labelling, production, release or disposal of Hazardous
Substances, in each case as amended and as now in effect.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive
or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance containing
any such substance as a component.
2.15 Interested Party Transactions.
Except as disclosed in the Telepanel OSC Reports filed prior
to the date of this Agreement, no officer or director of Telepanel
or any "affiliate" or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act) of any such person
has had, either directly or indirectly, except for the legal rights
of stockholders in Telepanel, a material interest in (i) any person
or entity which purchases from or sells, licenses or furnishes to
Telepanel or any of the Telepanel Subsidiaries any goods, property,
technology or intellectual or other property rights or services, or
is a competitor of Telepanel, or (ii) (other than contracts or
agreements relating to the remuneration of such officer or director
and related matters) any contract or agreement to which Telepanel
or any of the Telepanel Subsidiaries is a party or by which it may
be bound or affected, or any property, real or personal, tangible
or intangible, used in or pertaining to the business of Telepanel
or any Telepanel Subsidiary.
2.16 Real Estate and Leases.
(a) Set forth in Section 2.16 of the Telepanel Disclosure
Letter is a brief description of every parcel of real estate owned
by Telepanel or any Telepanel Subsidiary (including, in each case,
a description of the improvements and uses, the annual taxes
payable and depreciation reserve of any improvements), and lease
agreements (including, in each case, the annual rental payable and
the expiration date, the cost and depreciation reserve of any
leasehold improvements and a brief description of the property
covered) under which Telepanel or any of the Telepanel Subsidiaries
is lessee of, or holds or operates, any real estate owned by any
third party. Each of such leases and agreements is in full force
and effect and constitutes a legal, valid and binding obligation of
the respective parties thereto. Neither Telepanel nor any Telepanel
Subsidiary is in default under any such lease or agreement, nor, is
any other party to any such lease or agreement in default
thereunder, and no event has occurred, or is alleged to have
occurred, which constitutes, or with lapse of time or giving of
notice or both would constitute, a default by any party to any such
lease or agreement, or a basis for a claim of force majeure or
other claim of excusable delay or non-performance thereunder other
than with respect to any default, event or claim which,
individually or in the aggregate, would not have any Material
Adverse Effect on Telepanel.<PAGE>
<PAGE>
(b) Telepanel or a Telepanel Subsidiary has good, clear and
marketable title to the properties set forth in Section 2.16 of the
Telepanel Disclosure Letter and all fixtures thereon in fee simple
absolute, subject to no Telepanel Liens. There is no option or
right held by any third party to purchase any such properties or
any part thereof, or any of the fixtures and equipment thereon. All
buildings, driveways and other improvements on such properties,
respectively, are within its boundary lines, and no improvements on
adjoining properties extend across the boundary lines onto such
properties.
(c) The foundation, floor and roof of the buildings and all
other structural and mechanical components of the properties owned
or leased by Telepanel or the Telepanel Subsidiaries are sound and
free of any structural, mechanical or other defect, and all
heating, ventilating, air conditioning, electrical, plumbing and
other mechanical systems and equipment thereon are in good working
order, in each case except insofar as would not, individually or in
the aggregate, have a Material Adverse Effect on Telepanel. There
are no condemnation or eminent domain proceedings pending or
threatened with respect to the properties owned or leased by
Telepanel or any Telepanel Subsidiary, all required certificates of
occupancy and other government permits necessary to utilize such
properties as they are presently utilized have been obtained, and
such properties, and the operation thereof, conform to all existing
building, zoning, and other laws and ordinances relating to their
use or occupancy, in each case except insofar as would not,
individually or in the aggregate, have a Material Adverse Effect on
Telepanel.
2.17 Material Contracts; No Defaults.
(a) As used in this Agreement, the term the "Telepanel
Agreements" shall mean all mortgages, indentures, notes,
agreements, contracts, leases, licenses, franchises, obligations,
instruments or other commitments, arrangements or understandings of
any kind, whether written or oral, binding or non-binding, to which
Telepanel or any of the Telepanel Subsidiaries is a party or by
which Telepanel or any of the Telepanel Subsidiaries or any of
their respective properties may be bound or affected, other than
those which by their terms have expired prior to the date hereof.
There is no Telepanel Agreement which is material to Telepanel and
which is not otherwise listed as an exhibit to the Annual Report on
Form 20-F of Telepanel for the fiscal year ended January 31,1997
(the "Telepanel Form 20-F"). Set forth, respectively, in the
corresponding clauses of Section 2.17 of the Telepanel Disclosure
Letter is a list, without regard to materiality, of each of the
following Telepanel Agreements which is not otherwise listed as an
exhibit in the Telepanel Form 20-F: (i) any order or commitment or
agreement for the sale or lease or rental by Telepanel or any
Telepanel Subsidiary of an electronic shelf label system or portion
thereof; (ii) any mortgage, indenture, note, installment obligation
or other instrument, agreement or arrangement for or relating to<PAGE>
<PAGE>
any borrowing of money by Telepanel or any Telepanel Subsidiary;
(iii) any guaranty, direct or indirect, by Telepanel or any
Telepanel Subsidiary of any obligation for borrowings or otherwise,
excluding endorsements made for collection in the ordinary course
of business; (iv) any Telepanel Agreement made other than in the
ordinary course of its business or providing for the grant of any
preferential rights to purchase or lease any assets of Telepanel or
any Telepanel Subsidiary, except for such agreements which,
individually and in the aggregate, are not material to Telepanel;
(v) any obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business, assets or
stock of other companies; (vi) any collective bargaining agreement
with any trade or labor union; (vii) any Telepanel Agreement to
which any officer or director of Telepanel or any "affiliate" or
"associate" (as defined under Section 2.15 hereof) is a party;
(viii) any Telepanel Agreement containing noncompetition or other
limitations restricting the conduct of the business of Telepanel or
any Telepanel Subsidiary; (ix) any partnership, shareholder
agreement, joint venture or similar agreement; and (x) any contract
which imposes material geographic or territorial limitations on the
conduct of business by Telepanel or any of the Telepanel
Subsidiaries (excluding customary area of interest provisions
relating to specific properties and similar restrictions entered
into in the ordinary course of business and which do not have a
significant impact on their ability to conduct business generally
in that geographic area). As of the date hereof, the net hedge and
future positions is not materially different from that existing on
the Telepanel Balance Sheet Date.
(b) No event has occurred, or, is, to the best of the
knowledge of Telepanel, alleged to have occurred, which constitutes
or with lapse of time or giving of notice or both, would constitute
a default or a basis for a claim of force majeure or other claim of
excusable delay or non-performance by Telepanel or any Telepanel
Subsidiary under any Telepanel Agreements, except for any such
default or claim which, individually or in the aggregate, would not
have a Material Adverse Effect on Telepanel. To the best of the
knowledge of Telepanel, no party with whom Telepanel or any
Telepanel Subsidiary has any Telepanel Agreement is in default in
the performance of any covenant or condition thereunder or has
failed in performance thereunder by reason of a claim of force
majeure or other claim of excusable delay or non-performance
thereunder, except for any such default or claim which,
individually or in the aggregate, would not have a Material Adverse
Effect on Telepanel.
2.18 Intellectual Property.
(a) Set forth in Section 2.18 of the Telepanel Disclosure
Letter is a list of all of Telepanel's and each Telepanel
Subsidiary's patents, registered and common law trademarks, service
marks, tradenames, copyrights, licenses and other similar rights
and applications for each of the foregoing. Except as disclosed in<PAGE>
<PAGE>
Section 2.18 of the Telepanel Disclosure Letter, (i) Telepanel and
each of its Subsidiaries owns, or is licensed to use (in each case,
clear of any Telepanel Liens), all Intellectual Property (as
defined below) used in or necessary for the conduct of its
businesses as currently conducted and has not transferred,
assigned, alienated, limited or encumbered the Intellectual
Property or its interest therein in any way; (ii) to Telepanel's
knowledge, the use, copying, modification, transmission or
licensing of any Intellectual Property by Telepanel and each
Telepanel Subsidiary and the conduct of its businesses as currently
conducted, does not infringe on or otherwise violate the
Intellectual Property, contractual rights or obligations or other
rights whatsoever of any person and is in accordance with any
applicable permit, license, waiver, assignment, authorization,
approval or agreement pursuant to which Telepanel or any Telepanel
Subsidiary acquired the right to use, copy, modify or license any
Intellectual Property; (iii) to Telepanel's knowledge, no service,
product (or component thereof), or process used, licensed,
performed, manufactured, copied, transmitted or modified, by and/or
for, or supplied by or to Telepanel and each Telepanel Subsidiary
infringes or otherwise violates the Intellectual Property or
contractual rights or obligations or other rights whatsoever of any
other person; and (iv) to the knowledge of Telepanel, no person is
challenging, infringing on or otherwise violating any right of
Telepanel or any Telepanel Subsidiary with respect to any
Intellectual Property owned or use by and/or licensed to or by
Telepanel and any Telepanel Subsidiary and no person has
instituted, given notice of or threatened any claim, demand,
proceeding or action against Telepanel or any Telepanel Subsidiary,
with respect to or alleging any infringement or violation by
Telepanel or any Telepanel Subsidiary of the Intellectual Property,
contractual rights or obligations or other rights whatsoever, of
that person. Neither Telepanel nor any Telepanel Subsidiary has,
except as set forth in Section 2.18 of the Telepanel Disclosure
Letter, granted any outstanding licenses or other rights, and has
no obligations to grant licenses or other rights, under any
Intellectual Property.
(b) For purposes of this Agreement "Intellectual Property"
shall include all copyrights (including all assignable interests as
a user or licensee), integrated circuit topography rights, mask
works, registered and unregistered trademarks, service marks, brand
names, logos, certification marks, trade dress, assumed names,
trade names, industrial designs and other indications of origin,
any improvements therein or derivatives thereof, the goodwill
associated with any of the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register
any of the foregoing, including any extension, modification or
renewal of any such registration or application; inventions,
processes, improvements, discoveries and ideas, whether patentable
or not in any jurisdiction; patents, applications for patents
(including divisions, derivatives, reexaminations, continuations,
continuations in part and renewal applications), and any renewals,<PAGE>
<PAGE>
extensions or reissues thereof, in any jurisdiction; non-public
information, trade secrets, know-how, formulae, processes,
inventions, and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person;
writings, computer programs, compilations, derivatives works,
topographies, and other works, whether copyrightable or not in any
jurisdiction; registrations or applications for registration of
copyrights in any jurisdiction, and any renewals, extensions or
reversions thereof; the benefit of all waivers of moral rights; and
any similar intellectual or industrial property, proprietary
rights; and any claims, rights of compensation or causes of action
arising out of or related to any infringement or misappropriation
of any of the foregoing.
2.19 Insurance.
Telepanel and each of the Telepanel Subsidiaries have their
respective assets, and the various occurrences which may arise in
the conduct of their respective businesses, insured against loss or
damages as is appropriate to their businesses and assets in such
amounts and against such risks as are customarily carried and
insured against by owners of comparable businesses and assets, and
such insurance coverage is set forth in Section 2.19 of the
Telepanel Disclosure Letter. Telepanel and each Telepanel
Subsidiary has complied with such insurance policies and has
received no notices of any pending or threatened terminations or
premium increases with respect to such policies, and such policies
will not be modified or terminated or lapse by reason of the
transactions contemplated by this Agreement.
2.20 Restrictions on Business Activities.
There is no material agreement, judgment, injunction, order or
decree binding upon Telepanel or any Telepanel Subsidiary that has
or could reasonably be expected to have the effect of prohibiting
or impairing any business practice of Telepanel or any Telepanel
Subsidiary, any acquisition of property by Telepanel or any
Telepanel Subsidiary or the conduct of business by Telepanel or any
Telepanel Subsidiary as currently conducted in a manner that would
be reasonably likely to have a Material Adverse Effect on
Telepanel.
2.21 Books and Records.
The books, records and accounts of Telepanel and the Telepanel
Subsidiaries (a) have in all material respects been maintained in
accordance with good business practices on a basis consistent with
prior years and (b) are stated in reasonable detail and in all
material respects accurately and fairly reflect the transaction and
disposition of the respective assets of Telepanel and the Telepanel
Subsidiaries. Telepanel has devised and maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (w) transactions are executed in accordance with<PAGE>
<PAGE>
management's general or specific authorization; (x) transactions
are recorded as necessary (i) to permit preparation of financial
statements in conformity with Canadian GAAP, U.S. GAAP or any other
criteria applicable to such statements and (ii) to maintain
accountability for assets; (y) access to assets is permitted only
in accordance with management's general or specific authorization;
and (z) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
2.22 Board Approval.
The Telepanel Board has, as of the date hereof: (i)
unanimously approved this Agreement and the Arrangement; (ii)
determined that the Agreement is in the best interests of the
shareholders of Telepanel and (iii) recommended that the
shareholders of Telepanel approve this Agreement and the
Arrangement.
2.23 Vote Required.
The affirmative vote of two-thirds of the votes cast by the
holders of the outstanding Telepanel Common Shares entitled to be
cast (or such other vote as may be set out in the Interim Order) is
the only vote of the holders of any class or series of Telepanel's
capital stock necessary to approve this Agreement and the
Arrangement.
2.24 Fairness Opinion.
The Telepanel Board has received an opinion from Deutsche
Morgan Grenfell, Inc. that the terms of the Arrangement are fair to
the holders of Telepanel Common Shares from a financial point of
view.
2.25 Pooling Matters.
Neither Telepanel nor any of the Telepanel Subsidiaries nor
any of their Affiliates have, to Telepanel's knowledge and based
upon consultation with its independent auditors, taken or agreed to
take any action that (without giving effect to this Agreement, the
transactions contemplated hereby or actions related thereto, or any
action taken or agreement to be taken by ERS or any of its
Affiliates) is reasonably likely to prevent ERS from accounting for
the business combination to be effected by the Agreement as a
"pooling of interests" under U.S. GAAP or Rule 1-02 of Regulation
S-X of the SEC.
<PAGE>
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ERS
ERS hereby represents and warrants to Telepanel (subject to
the matters set forth in Article 3 of the letter dated the date of
this Agreement and delivered by ERS to Telepanel concurrently
therewith [the "ERS Disclosure Letter"] [such letter by this
reference incorporated into this Agreement] with respect to the
United States Investment Company Act of 1940 and the rules and
regulations thereunder) that:
3.1 Organization; Good Standing; Qualification and Power.
Each of ERS and each corporation, partnership, company, joint
venture and other entity in which ERS beneficially owns or
controls, directly or indirectly, more than 50% of the equity,
voting rights, profits interest, capital or other similar interest
thereof (the "ERS Subsidiaries"), is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its formation, has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect on
ERS. Section 3.1 of the ERS Disclosure Letter sets forth a correct
and complete list of the ERS Subsidiaries, the percentage of each
such subsidiary's outstanding capital stock or other ownership
interest owned by ERS or another subsidiary of ERS and a correct
and complete list of each jurisdiction in which each of ERS and
each ERS Subsidiary is duly qualified and in good standing to do
business. Neither ERS nor any ERS Subsidiary, directly or
indirectly, beneficially or legally owns or holds any capital stock
of Telepanel. ERS has delivered to Telepanel complete and correct
copies of the certificate of incorporation and bylaws of ERS, and
the certificate of incorporation and bylaws, or partnership
agreement, of each ERS Subsidiary, as amended to the date of this
Agreement and currently in effect.
3.2 Capital Structure.
(a) Stock. The authorized capital stock of ERS consists of
35,000,000 shares of ERS Common Stock and 2,000,000 shares of
preferred stock, $1.00 par value, of which 21,114,689 shares of ERS
Common Stock were issued and outstanding as of the Measurement
Date. No shares of any class or series of the capital stock of ERS
are held as treasury stock. All issued and outstanding shares of
ERS Common Stock have been duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of
any pre-emptive rights. All issued and outstanding shares of the
capital stock or other proprietary interest of each of the ERS<PAGE>
<PAGE>
Subsidiaries are owned as set forth in Section 3.2(a) of the ERS
Disclosure Letter, have been duly authorized and validly issued,
are fully paid and nonassessable, issued without violation of any
preemptive rights, are not subject to any right of rescission, and
have been offered, issued, sold and delivered by ERS or the
applicable ERS Subsidiary in compliance with all registration,
qualification and prospectus requirements (or applicable exemptions
therefrom) of applicable federal, provincial and state securities
laws. All of the shares of capital stock of the ERS Subsidiaries
are owned by ERS free and clear of all security interests, liens,
claims, pledges, agreements, limitations on ERS's voting rights,
charges or other encumbrances of any nature whatsoever, except as
set forth in Section 3.2(a) of the ERS Disclosure Letter.
(b) No Other Commitments. Except as disclosed in Section
3.2(b) of the ERS Disclosure Letter, there are no subscriptions,
options, warrants, calls, rights, commitments, conversion rights or
agreements of any character to which ERS or any of the ERS
Subsidiaries is a party or by which ERS or any of the ERS
Subsidiaries is bound obligating ERS or any of the ERS Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or
sold, any shares of capital stock or other proprietary interest of
ERS or any of the ERS Subsidiaries or securities convertible into
or exchangeable for shares of capital stock or other proprietary
interest of ERS or any of the ERS Subsidiaries, or obligating ERS
or any of the ERS Subsidiaries to grant, extend or enter into any
such option, warrant, call, right, commitment, conversion right or
agreement. Except for the obligations of ERS pursuant to this
Agreement and as disclosed in Section 3.2(a) of the ERS Disclosure
Letter, there are no voting trusts or other agreements or
understandings to which ERS is a party or of which ERS is aware
with respect to the voting of the capital stock or other
proprietary interest, or control, of ERS or any of the ERS
Subsidiaries.
3.3 Authority.
(a) Corporate Action. ERS has all requisite corporate power
and authority to enter into this Agreement and, subject to approval
by the stockholders of ERS of this Agreement, the ERS Charter
Changes and the issuance of ERS Common Stock in connection with the
Arrangement upon exchange of the Exchangeable Shares and to
approval of the Arrangement by the Court, to perform its
obligations hereunder and to consummate the Arrangement and the
other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by ERS and, subject to approval by
the stockholders of ERS of this Agreement, the ERS Charter Changes
and the issuance of ERS Common Stock in connection with the
Arrangement upon exchange of the Exchangeable Shares and to
approval of the Arrangement by the Court, the consummation by ERS
of the Arrangement and the other transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of ERS. This Agreement has been duly executed and delivered by<PAGE>
<PAGE>
ERS and this Agreement is the valid and binding obligation of ERS,
enforceable in accordance with its terms, except that such
enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to
enforcement of creditors' rights generally, and (ii) general
equitable principles.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement or the Plan of Arrangement by ERS,
nor the consummation of the transactions contemplated hereby or
thereby by ERS, nor compliance with the provisions hereof or
thereof by ERS will: (i) result in any breach or violation of the
articles of incorporation or bylaws of ERS or the comparable
governing instruments of any of the ERS Subsidiaries or, subject to
compliance with the regulatory requirements specified under Section
3.3(c) and the matters set forth in Section 3.3(b) of the ERS
Disclosure Letter, any law, rule, regulation, writ, judgment,
injunction, decree, determination, award, or other order of any
Governmental Entity binding upon ERS or any of the ERS
Subsidiaries; (ii) except as disclosed in Section 3.3(b) of the ERS
Disclosure Letter, result in any breach or violation of or cause a
default (with or without notice or lapse of time, or both), or
require any consent or approval, under, or give rise to a right of
termination, amendment, cancellation or acceleration of any
obligation contained in, or the loss of any benefit under, or
result in the creation of any lien, security interest, charge or
encumbrance upon, or right of first refusal or other option to
purchase or acquire, any of the properties or assets of ERS or any
of the ERS Subsidiaries under, any term, condition or provision of
any loan or credit agreement, note, bond, mortgage, indenture,
lease or other contract or agreement applicable to ERS or any of
the ERS Subsidiaries or their respective properties or assets,
other than any such breaches, violations, rights, defaults, losses,
liens, security interest, charges or encumbrances or rights of
first refusal or options which, individually or in the aggregate,
would not have a Material Adverse Effect on ERS; or (iii) require
the affirmative vote of the holders of greater than a majority of
the issued and outstanding shares of ERS Common Stock.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained by ERS or any of the
ERS Subsidiaries in connection with the execution and delivery of
this Agreement or the Plan of Arrangement or the consummation of
the transactions contemplated hereby or thereby, except for (i)(A)
the filing with the SEC of the No Action Request, (B) the filing
with the SEC of the Registration Statement, if required, and all
information and other documents required by the SEC under the
Securities Act in connection therewith, and the SEC's approval
thereof and order with respect thereto, (C) the filing with and
clearance by the SEC of the Joint Proxy Statement, and all
information and other documents required by the SEC under the
Exchange Act in connection therewith, and (D) the filing with the<PAGE>
<PAGE>
SEC of such reports under the Exchange Act and the rules and
regulations promulgated by the SEC thereunder as may be required in
connection with this Agreement and the transactions contemplated
hereby; (ii) the filing with the Secretary of State of Delaware of
a certificate of amendment to ERS' certificate of incorporation
setting forth the ERS Charter Changes and appropriate documents
with the relevant authorities of states and other jurisdictions in
which ERS is qualified to do business; (iii) such filings,
authorizations, orders and approvals as may be required under
foreign laws, state securities laws and the rules of Nasdaq or the
Alternative Investment Market of the London Stock Exchange ("AIM");
(iv) such filings and notifications and other compliance as may be
necessary under the HSR Act; (v) any required notices and filings
under the Investment Canada Act; and (vi) such approvals and
consents as may be required of the Connecticut Development
Authority.
3.4 SEC Reports and Financial Statements.
(a) SEC Reports. Since December 31, 1993, ERS has filed each
report, schedule, registration statement and definitive proxy
statement and other filings required to be filed by it with the SEC
(the "ERS SEC Documents"). As of their respective dates or, in the
case of registration statements, their effective dates (or, if
amended by a filing prior to the date of this Agreement, then on
the date of such filing), none of the ERS SEC Documents (including
all schedules thereto and documents incorporated by reference
therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the
ERS SEC Documents complied when filed in all material respects with
the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder.
(b) Financial Statements. The audited consolidated financial
statements (including the related notes and schedules thereto) of
ERS included in or incorporated by reference to the ERS SEC
Documents, without limitation for its fiscal year ended December
31, 1996, and the unaudited consolidated financial statements
(including the related notes and schedules thereto) of ERS
contained in the ERS SEC Documents, without limitation for its
fiscal six months ended June 30, 1997, complied as to form in all
material respects with the then applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with U.S. GAAP applied on a
consistent basis during the periods involved (except as may have
been indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q promulgated by the
SEC) and fairly present (subject, in the case of the unaudited
statements, to normal, year-end audit adjustments which are
described therein) the consolidated financial position of ERS and<PAGE>
<PAGE>
its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for
the respective periods then ended. Except as disclosed in the ERS
SEC Documents or Section 3.4(b) of the ERS Disclosure Letter, and
other than those incurred after June 30, 1997 in the ordinary
course of business, neither ERS nor any of the ERS Subsidiaries has
any liabilities, accrued, contingent or otherwise, that,
individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect on ERS.
3.5 Information Supplied.
None of the information relating to ERS or any of the ERS
Subsidiaries contained in this Agreement or in the ERS Disclosure
Letter and in the ERS SEC Documents, taken as a whole, contains any
untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary in order
to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading. None of the
information with respect to ERS, its directors, officers,
stockholders or any ERS Subsidiary, included or incorporated by
reference in the Joint Proxy Statement (and, if filed, the
Registration Statement) will, at the time the Joint Proxy Statement
is mailed to the stockholders of ERS and at the time of the ERS
Stockholders Meeting (and, if filed, at the time the Registration
Statement is declared effective and at the time of any post-
effective amendments thereto prior to the Effective Time), contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they are made, not misleading. The Joint Proxy Statement will
comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated by the
SEC thereunder.
3.6 Compliance with Applicable Laws.
ERS and the ERS Subsidiaries have complied, in the conduct of
their respective businesses, with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto, except where the
failure to comply would not be reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on ERS. ERS has
not been notified by any Governmental Entity of any investigation
with respect to ERS or any ERS Subsidiary that is pending or
threatened, nor has any Governmental Entity notified ERS of such
entity's intention to conduct the same, that would be reasonably
likely to have a Material Adverse Effect on ERS. Each of ERS and
the ERS Subsidiaries has all permits, licenses, certificates of
authority, orders, and approvals of, and has made all filings,
applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in
order to permit it or such subsidiary to carry on its business as<PAGE>
<PAGE>
it is presently conducted, except for such permits, licenses,
certificates, orders, filings, applications and registrations, the
failure to have or make which, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on
ERS. All such permits, licenses, certificates of authority, orders
and approvals are in full force and effect, there has been no
default or breach thereunder, and there is no pending or, to the
best of the knowledge of ERS, threatened proceeding under which any
may be revoked, terminated or suspended, except insofar as would
not, individually or in the aggregate, have a Material Adverse
Effect on ERS. The execution and delivery of this Agreement, and
the consummation of the Arrangement, will not adversely affect or
otherwise impair the ability of ERS or the ERS Subsidiaries, as the
case may be, fully to enjoy the benefits of any such permits,
licenses, certificates of authority, orders or approvals.
3.7 Title to Assets.
(a) Each of ERS and the ERS Subsidiaries has good and
marketable title to its properties (other than property as to which
it is lessee, in which case it has a valid leasehold interest),
except for such defects in title that, individually or in the
aggregate, would not be reasonably likely to have a Material
Adverse Effect on ERS, in each case free and clear of all ERS Liens
(as hereinafter defined). All real and tangible personal property
owned or leased by ERS and each of the ERS Subsidiaries is in good
repair and is operational and usable in the operation of ERS,
subject to normal wear and tear, except for such property whose
failure to be in such condition would not be reasonably likely to
have a Material Adverse Effect on ERS. All leases and licenses
pursuant to which ERS or the ERS Subsidiaries lease or license
personal and intangible property from others are in good standing,
valid and effective in accordance with their respective terms, and
there is not, under any of such leases or licenses, any existing
default, or event of default (or event which with notice or lapse
of time, or both, would constitute a default, or would constitute
a basis for a claim of force majeure or other claim of excusable
delay or non-performance) other than any such default, event or
claim that, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on ERS. ERS and
the ERS Subsidiaries lease or own all properties and assets
necessary for the operation of their respective businesses as
presently conducted, and the assets and properties of ERS and the
ERS Subsidiaries include all of the assets, of every kind and
nature, whether tangible or intangible, and wherever located, which
are utilized by ERS or the ERS Subsidiaries in the conduct of their
respective businesses, in each case other than any assets or
properties the failure to lease or own which would not,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on ERS, and in each case subject to the
matters disclosed in Section 3.7(a) of the ERS Disclosure Letter.
<PAGE>
<PAGE>
(b) For purposes of this Agreement, the term "ERS Lien" shall
be defined to mean any mortgage, deed of trust, security interest,
pledge, lien, or other charge or encumbrance of any nature
whatsoever except: (a) liens disclosed in the financial statements
contained in or incorporated by reference to the ERS SEC Documents;
(b) liens for taxes, assessments, or governmental charges or levies
not yet due and delinquent; (c) liens consisting of zoning or
planning restrictions, easements, permits, any other restrictions
or limitations on the use of real property or irregularities in
title thereto which do not materially detract from the value of, or
impair the use of, such property by ERS or any of the ERS
Subsidiaries and (d) liens disclosed in Section 3.7(b) of the ERS
Disclosure Letter.
3.8 Litigation.
There are no suits, actions, arbitrations, demands, claims or
proceedings pending or, to the best of the knowledge of ERS,
threatened against ERS or any of the ERS Subsidiaries that,
individually or in the aggregate, would, if determined adversely,
be reasonably likely to have a Material Adverse Effect on ERS nor
are there any judgments, decrees, injunctions, writs, stipulations,
determinations, awards, rules or orders of any Governmental Entity
or arbitrator outstanding against ERS or any of the ERS
Subsidiaries that, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect on ERS.
3.9 ERISA and Other Compliance.
(a) All contributions due from ERS or any of the ERS
Subsidiaries through the Effective Time with respect to any
"employee benefit plan" (the "ERS Employee Plans"), as defined in
Section 3(3) of the U.S. Employee Retirement Income Security Act of
1974, as amended ("ERISA"), have been or will be timely made as
required under ERISA or any applicable legislation, other than any
such failure which would not have a Material Adverse Effect on ERS.
Each ERS Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including, without limitation, ERISA
and the Code, which are applicable to such ERS Employee Plans,
other than any non-compliance which would not have a Material
Adverse Effect on ERS.
(b) No ERS Employee Plan which individually or collectively
would constitute an "Employee Pension Benefit Plan", as defined in
Section 3(2) of ERISA (collectively, the "ERS Pension Plan")
constitutes, or since the enactment of ERISA constituted, a "multi-
employer plan", as defined in Section 3(37) of ERISA.
(c) No "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any
ERS Employee Plan which is covered by Title I of ERISA which would
have a Material Adverse Effect on ERS, excluding transactions<PAGE>
<PAGE>
effected pursuant to a statutory or administrative exemption. Any
ERS Pension Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been qualified during
the period from its adoption to date, and the trust forming a part
thereof is exempt from tax pursuant to Section 401(a) of the Code.
3.10 Absence of Certain Changes or Events.
Except as disclosed in the ERS SEC Documents filed prior to
the date of this Agreement or as disclosed, respectively, in the
corresponding clauses of Section 3.10 of the ERS Disclosure Letter,
since June 30, 1997 (the "ERS Balance Sheet Date") there has not
been: (i) any change or development or combination of changes or
developments which, individually or in the aggregate, constitutes
a Material Adverse Effect on ERS or would be reasonably likely to
result in a Material Adverse Effect on ERS; (ii) any declaration,
setting aside or payment of any dividend or other distribution with
respect to ERS's capital stock, or, directly or indirectly, any
redemption, purchase or other acquisition or disposition of any
shares of ERS' capital stock by ERS or any ERS Subsidiary; (iii)
any change by ERS in its accounting methods, principles or
practices; (iv) any writing down or writing off of the value of any
material assets other than in the ordinary course of business; (v)
any material increase in or material modification of the
compensation or benefits payable or to become payable by any of ERS
or the ERS Subsidiaries to any directors or "executive officers"
(as defined under Rule 3b-7 pursuant to the Exchange Act) of ERS,
except in the ordinary course of business; (vi) any acquisition or
sale of a material amount of property or assets other than in the
ordinary course of business; or (vii) to the knowledge of ERS, any
labor dispute or charge of unfair labor practice (other than
routine individual grievances), any activity or proceeding by a
labor union or representative thereof to organize any employee of
ERS or any ERS Subsidiary or any campaign conducted to solicit
authorization from employees to be represented by such labor union
that, in any such case under this clause (vii), would be reasonably
likely to have a Material Adverse Effect on ERS.
3.11 Certain Agreements.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or "executive officer" (as defined
under Rule 3b-7 pursuant to the Exchange Act) of ERS from ERS or
any of the ERS Subsidiaries, under any ERS Employee Plan or
otherwise, (ii) materially increase any benefits otherwise payable
under any ERS Employee Plan or (iii) result in the acceleration of
the time of payment or vesting of any such benefits, including but
not limited to the time of exercise of stock options. Nothing has
come to ERS's attention as a result of the negotiation or entering
into of this Agreement that would lead ERS to believe that the<PAGE>
<PAGE>
consummation of the transactions contemplated hereby will have a
Material Adverse Effect to ERS on labor relations; and ERS has no
knowledge that any of its "executive officers" (defined as
aforesaid) intends to leave its employ.
3.12 Taxes.
ERS and each of the ERS Subsidiaries have timely filed, or
caused to be filed, all Tax Returns required to be filed by them
(all of which returns were correct and complete in all material
respects) and have paid, or caused to be paid, all Taxes that are
due and payable in each case except for any such Tax Returns or
Taxes the non-filing or non-payment of which have not had and would
not be reasonably likely to have a Material Adverse Effect on ERS,
and ERS has provided adequate accruals in accordance with U.S. GAAP
in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns. Since the ERS
Balance Sheet Date, no material Tax liability has been assessed,
proposed to be assessed, incurred or accrued other than in the
ordinary course of business. Neither ERS nor any ERS Subsidiary has
received any written notification that any material issues have
been raised (and are currently pending) by the United States
Internal Revenue Service, Revenue Canada or any other taxing
authority, including, without limitation, any sales tax authority,
in connection with any of the Tax Returns referred to above, and no
waivers of statutes of limitations have been given or requested
with respect to ERS or any of the ERS Subsidiaries, in each case
except for any such written notices or waivers which have not had
and would not be likely to have a Material Adverse Effect on ERS.
To the best of the knowledge of ERS, there are no material proposed
(but unassessed) additional Taxes and none have been asserted. No
Tax liens have been filed other than for Taxes not yet due and
payable. None of ERS or any of the ERS Subsidiaries (i) has made an
election to be treated as a "consenting corporation" under section
341 (f) of the Code, (ii) is a "personal holding company" within
the meaning of section 542 of the Code or (iii) is a party to any
Tax sharing or other similar agreement or arrangement of any nature
with any other person pursuant to which ERS or any of the ERS
Subsidiaries has or could have any liabilities in respect of Taxes.
Neither ERS nor any of the ERS Subsidiaries is a "specified
financial institution" or a "specified person" in relation to any
such institution each as defined in subsection 248(1) of the ITA
except in the event that ERS or any ERS Subsidiary is or will
become at the Effective Time a "specified financial institution" or
a "specified person" in relation to any such institution solely
because Telepanel was a "specified financial institution". ERS is
not, and has not been, at any time within the last five years prior
to the date hereof, a "United States real property holding
corporation" within the meaning of section 897 of the Code. No ERS
Subsidiary or any corporation to which any ERS Subsidiary is the
successor in a reorganization described in section 368(a) of the
Code for any prior taxable year, has been a "PFIC" within the
meaning of section 1296 of the Code, and on the basis of its income<PAGE>
<PAGE>
and assets for the current taxable year to date, would not be a
PFIC for such year.
3.13 Fees and Expenses.
Except for the fees and expenses set forth in Section 3.13 of
the ERS Disclosure Letter payable to Patricof & Co. Capital Corp.,
neither ERS nor any of the ERS Subsidiaries, nor any director,
officer, agent or employee thereof, has paid or become obligated to
pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.14 Environmental Matters.
Except as disclosed in the ERS SEC Documents, neither ERS nor
any ERS Subsidiary: (i) has filed any notice under any
Environmental Law indicating past or present treatment, storage or
disposal of a hazardous waste or reporting a spill or release of a
Hazardous Substance or other substance into the environment, in
each case in violation of law wherein such violation, individually
or in the aggregate, would have a Material Adverse Effect on ERS,
or (ii) has any liability, contingent or otherwise, under any
Environmental Law in connection with any release of any Hazardous
Substance, or other substance on property, now or formerly owned or
leased by ERS or any of the ERS Subsidiaries, which, individually
or in the aggregate, would have a Material Adverse Effect on ERS.
No Hazardous Substances have been generated, treated, stored or
disposed of or placed in violation of any Environmental Law on any
property owned or leased by ERS or any ERS Subsidiary or on or into
any waste disposal site owned or operated by a third party except
for violations which, individually or in the aggregate, would not
have a Material Adverse Effect on ERS.
3.15 Interested Party Transactions.
Except as disclosed in the ERS SEC Documents filed prior to
the date of this Agreement, no officer or director of ERS or any
"affiliate" or "associate" (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had,
either directly or indirectly, except for the legal rights of
stockholders of ERS, a material interest in (i) any person or
entity which purchases from or sells, licenses or furnishes to ERS
or any of the ERS Subsidiaries any goods, property, technology or
intellectual or other property rights or services, or is a
competitor of ERS, or (ii) except as disclosed in Section 3.15 of
the ERS Disclosure Letter, any contract or agreement to which ERS
or any of the ERS Subsidiaries is a party or by which it may be
bound or affected (other than contracts or agreements relating to
the remuneration of such officer or director and related matters)
or any property, real or personal, tangible or intangible, used in
or pertaining to the business of ERS or any ERS Subsidiary.
<PAGE>
<PAGE>
3.16 Certain Material Contracts.
Except for the contracts, agreements, leases and commitments
listed in Section 3.16 of the ERS Disclosure Letter, neither ERS
nor any of the ERS Subsidiaries is a party to or bound by: (i) any
contract which imposes material geographic or territorial
limitations on the conduct of business by ERS or any of the ERS
Subsidiaries (excluding customary area of interest provisions
relating to specific properties and similar restrictions entered
into in the ordinary course of business and which do not have a
significant impact on their ability to conduct business generally
in that geographic area); or (ii) any joint venture or partnership
agreement. As of the date hereof, the net hedge and future position
is not materially different from that existing on the ERS Balance
Sheet Date.
3.17 Intellectual Property.
Set forth in Section 3.17(a) of the ERS Disclosure Letter is
a list of all of ERS' and each ERS Subsidiary's patents, registered
and common law trademarks, service marks, tradenames, copyrights,
licenses and other similar rights and applications for each of the
foregoing. Except as disclosed in Section 3.17(b) of the ERS
Disclosure Letter, (a) ERS and each of its Subsidiaries owns, or is
licensed to use (in each case, clear of any ERS Liens), all
Intellectual Property used in or necessary for the conduct of its
businesses as presently conducted and has not transferred,
assigned, alienated, limited or encumbered the Intellectual
Property or its interest therein in any way; (b) to ERS's
knowledge, the use, copying, modification, transmission or
licensing of any Intellectual Property by ERS and each Subsidiary
and the conduct of its businesses as currently conducted, does not
infringe on or otherwise violate the Intellectual Property,
contractual rights or obligations or other rights whatsoever of any
person and is in accordance with any applicable permit, license,
waiver, assignment, authorization, approval or agreement pursuant
to which ERS or any Subsidiary acquired the right to use, copy,
modify or license any Intellectual Property; (c) to ERS's
knowledge, no service, product (or component thereof), or process
used, licensed, performed, manufactured, copied, transmitted or
modified, by and/or for, or supplied by or to ERS and each ERS
Subsidiary infringes or otherwise violates the Intellectual
Property or contractual rights or obligations or other rights
whatsoever of any other person; and (d) to the knowledge of ERS, no
person is challenging, infringing on or otherwise violating any
right of ERS or any ERS Subsidiary with respect to any Intellectual
Property owned or used by and/or licensed to or by ERS and any ERS
Subsidiary and no person has instituted, given notice of or
threatened any claim, demand, proceeding or action against ERS or
any ERS Subsidiary, with respect to or alleging any infringement or
violation by ERS or any ERS Subsidiary of the Intellectual
Property, contractual rights or obligations or other rights
whatsoever, of that person.<PAGE>
<PAGE>
3.18 Insurance.
ERS and each of the ERS Subsidiaries have their respective
assets insured against loss or damages as is appropriate to their
businesses and assets in such amounts and against such risks as are
customarily carried and insured against by owners of comparable
businesses and assets, and such insurance coverage will be
continued in full force and effect to and including the Effective
Time.
3.19 No Defaults.
To ERS's knowledge, neither it nor any of the ERS Subsidiaries
is in default under, and there exists no event, condition or
occurrence which, after notice or lapse of time, or both, would
constitute such a default by ERS or any of the ERS Subsidiaries
under, any contract or agreement to which ERS or any of the ERS
Subsidiaries is a party and which would, if terminated due to such
default, have, insofar as can reasonably be foreseen, a Material
Adverse Effect on ERS.
3.20 Restrictions on Business Activities.
There is no material agreement, judgment, injunction, order or
decree binding upon ERS or any ERS Subsidiary that has or could
reasonably be expected to have the effect of prohibiting or
impairing any business practice of ERS or any ERS Subsidiary, any
acquisition of property by ERS or any ERS Subsidiary or the conduct
of business by ERS or any ERS Subsidiary as currently conducted in
a manner that would be reasonably likely to have a Material Adverse
Effect on ERS, in each case except as disclosed in Schedule 3.20 of
the ERS Disclosure Letter.
3.21 Books and Records.
The books, records and accounts of ERS and the ERS
Subsidiaries (a) have in all material respects been maintained in
accordance with good business practices on a basis consistent with
prior years and (b) are stated in reasonable detail and in all
material respects accurately and fairly reflect the transactions
and disposition of the assets of ERS. ERS has devised and maintains
a system of internal accounting controls sufficient to provide
reasonable assurances that (w) transactions are executed in
accordance with management's general or specific authorization; and
(x) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with U.S. GAAP or
any other criteria applicable to such statements and (ii) to
maintain accountability for assets, (y) access to assets is
permitted only in accordance with management's general or specific
authorization; and (z) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
<PAGE>
<PAGE>
3.22 Board Approval.
The ERS Board has, as of the date hereof, unanimously: (i)
approved this Agreement and the ERS Charter Changes; (ii)
determined that the transactions contemplated by this Agreement are
in the best interests of the stockholders of ERS; and (iii)
recommended that the stockholders of ERS approve this Agreement and
the ERS Charter Changes.
3.23 Vote Required.
The affirmative vote or votes of the holders of a majority of
the outstanding shares of ERS Common Stock are the only votes of
the holders of any class or series of ERS' capital stock necessary
to approve this Agreement and the transactions contemplated
hereunder.
3.24 Fairness Opinion.
The ERS Board has received an opinion from Patricof & Co.
Capital Corp. that the terms of the Arrangement are fair to the
holders of ERS Common Stock from a financial point of view.
3.25 Pooling Matters.
Neither ERS nor any of the ERS Subsidiaries or their
Affiliates have, to ERS's knowledge and based upon consultation
with its independent auditors, taken or agreed to take any action
that (without giving effect to this Agreement, the transactions
contemplated hereby or actions related thereto, or any action taken
or agreed to be taken by Telepanel or any of its Affiliates) is
reasonably likely to prevent ERS from accounting for the business
combination to be effected by the Arrangement as a "pooling of
interests" under U.S. GAAP or Rule 1-02 of Regulation S-X of the
SEC.
ARTICLE 4
COVENANTS
4.1 Interim Operations.
(a) Telepanel covenants and agrees as to itself and with
respect to the Telepanel Subsidiaries, that, from and after the
date hereof until the Effective Time, except insofar as ERS shall
otherwise consent and except as required by this Agreement:
(i) The business of it and the Telepanel Subsidiaries
will be conducted only in the ordinary and usual course in all
material respects and, to the extent consistent therewith, it
and the Telepanel Subsidiaries will use all reasonable efforts
to preserve their business organizations intact and maintain<PAGE>
<PAGE>
their existing relations with customers, suppliers, employees
and business associates.
(ii) It will not: (A) sell or pledge or agree to sell
or pledge any stock or other proprietary interest owned by it
in any of the Telepanel Subsidiaries; (B) amend its Articles
of Incorporation or Bylaws; (C) split, combine or reclassify
any outstanding capital stock, or make any other change in its
capital structure; (D) declare, set aside or pay any dividend
payable in cash, stock or property with respect to any of its
capital stock; (E) repurchase, redeem or otherwise acquire, or
permit any Telepanel Subsidiary to purchase or otherwise
acquire, directly or indirectly, any shares of capital stock
of Telepanel or ERS or any securities convertible into or
exercisable for any shares of capital stock of Telepanel or
ERS; or (F) enter into any material transaction not in the
ordinary course of its business, consistent with past
practice.
(iii) Except as described in Section 4.1(a)(iii) of the
Telepanel Disclosure Letter, neither it nor any of the
Telepanel Subsidiaries will: (A) issue, sell, pledge, dispose
of or encumber, or authorize or propose the issuance, sale,
pledge, disposition or encumbrance of, any shares of, or
securities convertible into or exchangeable for, or options,
puts, warrants, calls, commitments or rights of any kind to
acquire, any shares of its capital stock of any class other
than Telepanel Common Shares issuable pursuant to Telepanel
Options, Telepanel Warrants and Telepanel Convertible
Securities outstanding on the date hereof; (B) transfer,
lease, license, guarantee, sell, mortgage, pledge or dispose
of, or subject to any Telepanel Lien, any other material
property or assets or encumber any material property or assets
or (subject to sub-paragraph (vii) of this paragraph (a))
incur or modify any indebtedness or other liability, or
guaranty of any liability of any person or entity, in each
case under this clause (B) other than in the ordinary and
usual course of business consistent with past practice; or (C)
make any material acquisition of, or investment in, assets,
stock or other securities of any other person or entity other
than the wholly-owned Telepanel Subsidiaries.
(iv) Except as may be required to satisfy contractual
obligations existing as of the date hereof and the
requirements of applicable law, neither it nor any of the
Telepanel Subsidiaries will establish, adopt, enter into,
make, amend in any material respect or make any material
elections under any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, employee stock ownership, deferred
compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees.<PAGE>
<PAGE>
(v) It will not implement any change in its accounting
principles, practices or methods, other than as may be
required by Canadian GAAP and will maintain its books and
records in accordance with good business practices, on a basis
consistent with past practice.
(vi) It and the Telepanel Subsidiaries will comply in
all material respects with all laws, rules, regulations,
writs, statutes, ordinance, judgments, injunctions, decrees,
determinations, awards, and other orders of every court,
government and governmental agency and instrumentality,
domestic or foreign, applicable to it and to the conduct of
its business and perform in all material respects all its
obligations without default.
(vii) Except as set forth in Section 4.1(a)(vii) of the
Telepanel Disclosure Letter, it and the Telepanel Subsidiaries
will not incur, or agree to incur, any indebtedness for money
borrowed, except in the ordinary course of business under
Telepanel's line of credit dated January 8, 1996 with The
Toronto-Dominion Bank, in an aggregate amount not in excess of
the maximum amount thereof permitted on the date hereof plus
$1,000,000.
(viii) Except as set forth in Section 4.1(a)(viii) of the
Telepanel Disclosure Letter (but in no event so as to result
in a breach, upon consummation of Closing or at the Effective
Time, under Section 4.05 of the Indenture dated as of January
24, 1997 [the "ERS Indenture"] between ERS and United States
Trust Company of New York), it and the Telepanel Subsidiaries
will not make any loans, advances or contributions to, or
investments in, any other person other than as permitted by
the ERS Indenture (as if Telepanel and the Telepanel
Subsidiaries were "Restricted Subsidiaries" thereunder).
(ix) It and the Telepanel Subsidiaries will maintain
and pay all premiums with respect to all policies of insurance
relating to its business, and its assets and properties, as
are presently held in its name and timely renew all such
policies.
(x) It and the Telepanel Subsidiaries will not make
any change materially adverse to it in the terms of any
material Telepanel Agreement, nor, except as set forth in
Section 4.1(a)(x) of the Telepanel Disclosure Letter, approve,
amend or modify any Telepanel Agreement to which any director,
officer or "affiliate" (within the meaning of Section 405 of
the Securities Act) is a party (in each case other than
remuneration arrangements in the ordinary course of business).
<PAGE>
<PAGE>
(xi) Except as set forth in Section 4.1(a)(xi) of the
Telepanel Disclosure Letter, it and the Telepanel Subsidiaries
will not take any action described in Section 2.10(vii)
through (ix), inclusive, hereof, nor amend, modify,
supplement, or in any way change any plan or arrangement
established for the benefit of its employees.
(xii) It and the Telepanel Subsidiaries will not settle
or compromise any litigation involving the payment of, or an
agreement to pay over time an amount in cash, notes, or other
property, or pay, discharge or satisfy claims, liabilities or
obligations (absolute, accrued, contingent or otherwise and
whether due or to be come due) which involves payments or
commitments to make payments exceeding $100,000 in the
aggregate, other than (A) liabilities or obligations incurred
in the ordinary course of business and consistent with past
practice, and (B) scheduled repayments of current portions of
and interest on long-term indebtedness or repayments under
existing credit agreements.
(xiii) Neither it nor any of the Telepanel Subsidiaries
will authorize or enter into an agreement to take any of the
actions referred to in paragraphs (i) through (xii) above.
(b) ERS covenants and agrees as to itself and with respect to
the ERS Subsidiaries that, from and after the date hereof until the
Effective Time, except insofar as Telepanel shall otherwise consent
and except as required by this Agreement:
(i) The business of it and the ERS Subsidiaries will be
conducted only in the ordinary and usual course in all
material respects and, to the extent consistent therewith, it
and the ERS Subsidiaries will use all reasonable efforts to
preserve their business organizations intact and maintain
their existing relations with customers, suppliers, employees
and business associates.
(ii) It will not: (A) sell or pledge or agree to sell or
pledge any stock or other proprietary interest owned by it in
any of the ERS Subsidiaries; (B) amend its Certificate of
Incorporation or Bylaws; (C) split, combine or reclassify any
outstanding capital stock, or make any other change in its
capital structure; (D) declare, set aside or pay any dividend
payable in cash, stock or property with respect to any of its
capital stock; or (E) repurchase, redeem or otherwise acquire,
or permit any ERS Subsidiary to purchase or otherwise acquire,
directly or indirectly, any shares of capital stock of
Telepanel or ERS or any securities convertible into or
exchangeable for any shares of capital stock of Telepanel or
ERS; or (F) enter into any material transaction not in the
ordinary course of business.
<PAGE>
<PAGE>
(iii) Except as described in Section 4.1(b)(iii) of the
ERS Disclosure Letter, neither it nor any of the ERS
Subsidiaries will: (A) issue, sell, pledge, dispose of or
encumber, or authorize or propose the issuance, sale, pledge,
disposition or encumbrance of, any shares of, or securities
convertible into or exchangeable for, or options, puts,
warrants, calls, commitments or rights of any kind to acquire,
any shares of its capital stock of any class, other than ERS
Common Stock issuable pursuant to options outstanding on the
date hereof or granted within the limits of option plans
heretofore approved by the ERS Board or issuable pursuant to
warrants and conversion rights outstanding on the date hereof;
or (B) transfer, lease, license, guaranty, sell, mortgage,
pledge or dispose of, or subject to any ERS Lien, any other
material property or assets or encumber any material property
or assets or incur or modify any indebtedness or other
liability, or guaranty of any liability of any person or
entity, in each case under this clause (B) other than in the
ordinary and usual course of business.
(iv) It will not implement any change in its accounting
principles, practices or methods, other than as may be
required by US GAAP and will maintain its books and records in
accordance with good business practices, on a basis consistent
with past practice.
(v) It and the ERS Subsidiaries will comply in all
material respects with all laws, rules, regulations, writs,
statutes, ordinance, judgments, injunctions, decrees,
determinations, awards, and other orders of every court,
government and governmental agency and instrumentality,
domestic or foreign, applicable to it and to the conduct of
its business and perform in all material respects all its
obligations without default.
(vi) It and the ERS Subsidiaries will not incur, or agree
to incur, any indebtedness for money borrowed, except in the
ordinary course of business in connection with letters of
credit under existing facilities with The Bank of New York or
renewals or replacements thereof.
(vii) It and the ERS Subsidiaries will not make any
loans, advances or contributions to, or investments in, any
other person other than as permitted by the ERS Indenture.
(viii) It and the ERS Subsidiaries will maintain and pay
all premiums with respect to all policies of insurance
relating to its business, and its assets and properties, as
are presently held in its name and timely renew all such
policies.
<PAGE>
<PAGE>
(ix) It and the ERS Subsidiaries will not approve, amend
or modify any agreement to which any director, officer or
"affiliate" (within the meaning of Section 405 of the
Securities Act) is a party (in each case other than
remuneration arrangements in the ordinary course of business).
(x) It and the ERS Subsidiaries will not settle or
compromise any litigation involving the payment of, or an
agreement to pay over time an amount in cash, notes, or other
property, or pay, discharge or satisfy claims, liabilities or
obligations (absolute, accrued, contingent or otherwise and
whether due or to be come due) which involves payments or
commitments to make payments exceeding $100,000 in the
aggregate, other than (A) liabilities or obligations incurred
in the ordinary course of business, and (B) scheduled
repayments of current portions of and interest on long-term
indebtedness or repayments under existing credit agreements.
(xi) Neither it nor any of its Subsidiaries will
authorize or enter into an agreement to take any of the
actions referred to in paragraphs (i) through (x) above.
4.2 Shareholder Approval.
Telepanel, acting through its Board of Directors, will call
the Telepanel Shareholders Meeting and ERS, acting through its
Board of Directors, will call the ERS Shareholders Meeting, each to
be held as promptly as practicable after the SEC has indicated that
it has no further comments on the Joint Proxy Statement (or, if the
Registration Statement [other than a shelf Registration Statement]
is filed, the date on which such Registration Statement is declared
effective by the SEC), but in no event earlier than 30 days after
the notice of such meeting, to submit this Agreement, the
Arrangement and related matters for the consideration and approval
of the Telepanel shareholders and this Agreement, the ERS Charter
Changes and related matters for consideration and approval of the
ERS shareholders. Such approval will be recommended by the
Telepanel Board, and by the ERS Board, subject in each case to the
fiduciary obligations of such directors. Such meetings will be
called, held and conducted, and any proxies will be solicited, in
compliance with applicable law.
4.3 Additional Affiliate Agreements.
To ensure the Arrangements will be accounted for as a "pooling
of interests" under U.S. GAAP and to ensure compliance with Rule
145 of the rules and regulations promulgated by the SEC under the
Securities Act, Telepanel will use its best efforts to procure the
signature and delivery of additional Telepanel Affiliate Agreements
from each person or entity becoming an Affiliate promptly after the
execution and delivery of this Agreement. To ensure that the
arrangement will be accounted for as a "pooling of interests" under
U.S. GAAP, ERS will use its best efforts to procure the signature<PAGE>
<PAGE>
and delivery of additional ERS Affiliate Agreements from each
person or entity becoming an Affiliate promptly after the execution
and delivery of this Agreement. For purposes of this Agreement,
"Affiliate" shall have the meaning referred to in Rule 145 under
the Securities Act.
4.4 Joint Proxy Statement.
(a) Telepanel and ERS will contemporaneously mail the Joint
Proxy Statement to their respective shareholders promptly after the
Registration Statement, if filed, becomes effective or (if the
shares of ERS Common Stock to be issued from time to time after the
Effective Time upon the exchange of Exchangeable Shares are exempt
from the registration requirements of Section 5 of the Securities
Act or if a shelf Registration Statement is required by the SEC
with respect thereto) as promptly as practicable for the purpose of
considering and voting upon the Arrangement at the Telepanel
Shareholders Meeting and the ERS Charter Changes and related
matters at the ERS Stockholders Meeting, and, if necessary, after
the Joint Proxy Statement shall have been so mailed, promptly
circulate amended supplemental or supplemented proxy materials and,
if required in connection therewith, resolicit proxies. Telepanel
shall include in the Joint Proxy Statement the recommendation of
its Board of Directors described in Section 4.2 hereof, and ERS
shall include in the Joint Proxy Statement the recommendation of
its Board of Directors described in Section 4.2 hereof. Neither
Telepanel nor ERS shall use any proxy material in connection with,
respectively, the Telepanel Shareholder Meeting and the ERS
Stockholders Meeting without the prior approval of the other party,
which shall not be unreasonably withheld or delayed. Each of
Telepanel and ERS will promptly provide all information relating to
its business or operations necessary for inclusion in the Joint
Proxy Statement to satisfy all requirements of all applicable U.S.
and Canadian state, provincial and federal corporate and securities
laws. Telepanel shall be solely responsible for any statement,
information or omission in the Joint Proxy Statement relating to it
or its Affiliates based upon written information furnished by it.
Telepanel will not provide to its shareholders or publish any
material concerning it or its Affiliates that violates applicable
Canadian law, the Securities Act or the Exchange Act with respect
to the transactions contemplated hereby. ERS shall be solely
responsible for any statement, information or omission in the Joint
Proxy Statement relating to it or its Affiliates based upon written
information furnished by it. ERS will not provide to its stock-
holders or publish any material concerning it or its Affiliates
that violates applicable Canadian law, the Securities Act or the
Exchange Act with respect to the transactions contemplated hereby.
Each of Telepanel and ERS shall use its best efforts to solicit
from its stockholders proxies in favor of the proposals set forth
in the Joint Proxy Statement, and shall take such action reasonably
necessary or, in the opinion of the other party, reasonably helpful
to secure a favorable vote for the purpose of approving the
proposals set forth in the Joint Proxy Statement. At the request of<PAGE>
<PAGE>
ERS, reasonably made, Telepanel shall adjourn its stockholders'
meeting to a later date, if (x) the requisite vote of holders of
Telepanel Common Shares has not been obtained or (y) ERS shall
otherwise request an adjournment in order to attempt to increase
the percentage of the vote in favor of the foregoing.
(b) Telepanel shall cause to be delivered to ERS a letter of
Price Waterhouse, Chartered Accountants, Telepanel's independent
auditors, dated a date within two business days before the date of
mailing of the Joint Proxy Statement and addressed to ERS, in form
and substance reasonably satisfactory to ERS, to the effect set
forth in Exhibit 4.4(b) hereto.
(c) ERS shall cause to be delivered to Telepanel a letter of
Price Waterhouse LLP, ERS' independent auditors, dated a date
within two business days before the date of mailing of the Joint
Proxy Statement and addressed to Telepanel, in form and substance
reasonably satisfactory to Telepanel, to the effect set forth in
Exhibit 4.4(c) hereto.
4.5 Regulatory Approvals.
Each of Telepanel and ERS will promptly execute and file, or
join in the execution and filing of, any application or other
document that may be necessary in order to obtain the
authorization, approval or consent of any Governmental Entity which
may be reasonably required, or which the other party may reasonably
request in connection with the consummation of the transactions
contemplated by this Agreement. Each of Telepanel and ERS will use
its best efforts to obtain promptly all such authorizations,
approvals and consents. Without limiting the generality of the
foregoing, as promptly as practicable after it becomes required,
each of Telepanel and ERS shall file with the Federal Trade
Commission and the Antitrust Division of the Department of Justice,
a pre-Arrangement notification report under the HSR Act and shall
make such filings as are necessary under the Investment Canada Act.
In addition, Telepanel shall promptly make application to the OSC
and other relevant Canadian securities regulatory authorities
seeking the orders and rulings contemplated by Section 7.11.
4.6 Necessary Consents; Certain Notices.
During the term of this Agreement, each of Telepanel and ERS
will use its best efforts to obtain such written consents,
authorizations, approvals and waivers and take such other actions
as may be necessary or appropriate, in addition to those set forth
in Section 4.5, to allow the consummation of the transactions
contemplated hereby and the preservation of the respective rights
and assets of the parties. Without limiting the generality of the
foregoing, ERS shall submit to Telepanel for prior review and
comment (which shall not be unreasonably withheld or delayed) any
information circular distributed generally to the holders of the
ERS Notes (as hereinafter defined) in order to satisfy the<PAGE>
<PAGE>
condition set forth under Section 5.11 hereof. In addition,
promptly after the date hereof Telepanel shall submit to ERS for
prior review and comment (which shall not be unreasonably withheld
or delayed) such notice or notices of the transactions contemplated
hereby as may be required pursuant to the counterparts of the Put
Option (collectively, the "Telepanel Europe Put Option"), the
Incorporation Agreement (the "Telepanel Europe Incorporation
Agreement"), and the Shareholders Agreement (the "Telepanel Europe
Shareholders Agreement"), in each case relating to Telepanel Europe
(as hereinafter defined), insofar as any rights thereunder shall
become exercisable as a result of the Arrangement and the
transactions contemplated hereby, and shall deliver such notice or
notices so that the period of exercise of such rights, if any,
shall expire prior to the Closing Date. Telepanel shall also
consult with ERS with respect to the documentation of the 5% Senior
Convertible Notes (as defined in the Telepanel Disclosure
Schedule), and any agreements related thereto, which prior to
completion shall be submitted to ERS for review and confirmation,
such confirmation not to be unreasonably delayed or withheld (such
confirmation to be deemed unreasonably withheld if on grounds other
than the inclusion of provisions (x) constituting a material
departure from the term sheet therefor, and any drafts thereof,
heretofore provided to ERS, (y) that, if in effect on the date
hereof, would have required additional disclosure in any material
respect in the Telepanel Disclosure Letter in order to have made
the representations, warranties and covenants of Telepanel
contained herein accurate on the date hereof, or (z) that would
require any further modifications, waivers or consents, as
contemplated under Section 5.11 hereof, after they have initially
been obtained).
4.7 Access to Information and Properties.
Each of Telepanel and ERS will allow the other party and its
agents reasonable access, during ordinary business hours, to the
files, books, records, properties, assets, operations, personnel
and offices of Telepanel and each Telepanel Subsidiary, or ERS and
each ERS Subsidiary, as applicable, as such other party shall
reasonably request, including, without limitation, any and all
information relating to Telepanel's or ERS's electronic shelf
labelling systems, customer orders, Taxes, commitments, contracts,
leases, licenses and real, personal and intangible property and
financial condition. Each of Telepanel and ERS will cause its
accountants and other advisers to cooperate with the other party
and its agents in making available to such other party all
information reasonably requested, including, without limitation,
the right to examine all working papers pertaining to all Tax
Returns and financial statements prepared or audited by such
persons subject to the execution of customary access or
indemnification agreements among the parties with respect to such
review. The rights of access and inspection pursuant to this
Section 4.7 shall be subject to the Confidentiality Agreement
referred to in Section 8.3. Each party shall furnish the other<PAGE>
<PAGE>
party with copies of all filings with the OSC and the SEC
subsequent to the date hereof, which shall be prepared in
accordance with the rules and regulations promulgated by,
respectively, the OSC and the SEC if any such filings are made
prior to the Effective Time.
4.8 Satisfaction of Conditions Precedent.
During the term of this Agreement, each of Telepanel and ERS
will use its best efforts to satisfy or cause to be satisfied all
the conditions precedent that are set forth in Articles 5, 6 and 7,
and will use its best efforts to cause the Arrangement and other
transactions contemplated by this Agreement to be consummated.
4.9 No Other Negotiations.
(a) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement
in accordance with its terms, Telepanel and the Telepanel
Subsidiaries shall not, and shall use their best efforts to see
that their respective directors do not, and shall not permit their
respective officers, employees, representatives, investment
bankers, agents and affiliates to, directly or indirectly: (i)
solicit, initiate or engage in discussions or negotiations with any
person, encourage submission of any inquiries, proposals or offers
by, or take any other actions intended or designed to facilitate
the efforts of any person, other than ERS, relating to the possible
acquisition of, or business combinations with, Telepanel or any of
the Telepanel Subsidiaries (whether by way of arrangement,
amalgamation, take-over bid, tender offer, purchase of capital
stock, purchase of assets or otherwise) or any material portion or
its or their capital stock or assets (with any such efforts by any
such person, including a firm proposal to make such acquisitions or
combination, to be referred to as a "Telepanel Competing
Transaction"); (ii) provide non-public information with respect to
Telepanel or any of the Telepanel Subsidiaries, or afford any
access to the properties, books or records of Telepanel or its
Subsidiaries, to any person, other than ERS, relating to a possible
Telepanel Competing Transaction by any person other than ERS; (iii)
make or authorize any statement, recommendation or solicitation in
support of any possible Telepanel Competing Transaction by any
person, other than by ERS; or (iv) enter into an agreement with any
person, other than ERS, providing for a possible Telepanel
Competing Transaction. Telepanel, the Telepanel Subsidiaries, and
their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates, shall immediately cease
any and all existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the
foregoing.
<PAGE>
<PAGE>
(b) (i) Notwithstanding the foregoing, if at any time after
the date of this Agreement and prior to the date of the Telepanel
Shareholders' Meeting, the Telepanel Board determines in good
faith, acting reasonably, and after consultation with counsel, that
it is necessary to do so in order to comply with its fiduciary
duties to Telepanel shareholders, Telepanel may, in response to a
Telepanel Superior Proposal (as hereinafter defined) which was not
solicited by it or which did not otherwise result from a breach of
Section 4.9(a) and subject to providing prior written notice of its
decision to take such action to ERS (the "Telepanel Notice") and
compliance with subparagraph (ii) immediately succeeding, (x)
furnish information with respect to Telepanel and the Telepanel
Subsidiaries to any person making a Telepanel Superior Proposal
pursuant to a customary confidentiality agreement and (y)
participate in discussions (but not negotiations) to clarify the
terms of such Telepanel Superior Proposal; provided, however, that
neither Telepanel nor the Telepanel Board nor any committee thereof
shall: (x) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to ERS, the approval or recommendation
by the Telepanel Board or such committee of this Agreement or the
Plan of Arrangement; (y) approve or recommend, or propose publicly
to approve or recommend, any Telepanel Competing Transaction, other
than by ERS; or (z) cause Telepanel to enter into any letter of
intent, agreement-in-principle, acquisition agreement or any other
similar agreements (each a "Telepanel Acquisition Agreement")
related to any Telepanel Competing Transaction, other than with
ERS. For the purposes of this Agreement, a "Telepanel Superior
Proposal" means any formal proposal made by a third party to
acquire, directly or indirectly, all of the Telepanel Common Shares
then outstanding or all or substantially all of the assets of
Telepanel or with respect to any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Telepanel and otherwise on terms which the
Telepanel Board determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized reputation)
to be materially more favorable to Telepanel shareholders than the
combination contemplated by this Agreement and for which financing,
to the extent required, is then committed or which, in the good
faith judgment of the Telepanel Board, is reasonably capable of
being obtained by such third party. Telepanel shall be permitted to
deliver only one Telepanel Notice with respect to each person
making a Telepanel Superior Proposal.
(ii) In addition to the obligations of Telepanel set
forth in paragraphs (a) and (b)(i) of this Section 4.9, Telepanel
shall immediately advise ERS orally and in writing of any requests
for any information or of any Telepanel Competing Transaction,
other than by ERS, the material terms and conditions of such
request or Telepanel Competing Transaction and the identity of the
person making such request or Telepanel Competing Transaction.
Telepanel will keep ERS reasonably informed of the status and
details (including amendments or proposed amendments) of any such
request or Telepanel Competing Transaction, other than with ERS.<PAGE>
<PAGE>
(iii) Nothing contained in Paragraph (a) of Section 4.9
shall prohibit Telepanel from making any disclosure to Telepanel's
shareholders if, in the good faith judgment of the Telepanel Board,
after consultation with outside counsel, failure so to disclose
would violate its obligations under applicable law; provided,
however, that neither Telepanel nor the Telepanel Board nor any
committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement or
the Plan of Arrangement or approve or recommend, or propose
publicly to approve or recommend, a Telepanel Competing
Transaction.
(iv) ERS may, in its sole discretion, prior to the
holding of the Telepanel Shareholders Meeting, amend the terms of
the Plan of Arrangement to increase the consideration payable to
Telepanel's shareholders pursuant thereto, by delivering such
amended Plan of Arrangement to Telepanel before the holding of the
Telepanel Shareholders Meeting, provided that such amendment shall
not materially delay the consummation of the Arrangement.
(c) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement
in accordance with its terms, ERS and the ERS Subsidiaries shall
not, and shall use their best efforts to see that their respective
directors do not, and shall not permit their respective officers,
employees, representatives, investment bankers, agents and
affiliates to, directly or indirectly: (i) solicit, initiate or
engage in discussions or negotiations with any person, encourage
submission of any inquiries, proposals or offers by, or take any
other action intended or designed to facilitate the efforts of any
person, other than Telepanel, relating to the possible acquisition
of, or business combination with, ERS or any of the ERS
Subsidiaries (whether by way of merger, consolidation, takeover
bid, tender offer, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its or their capital stock or
assets, wherein such acquisition or combination could reasonably be
expected to materially impede, interfere with, prevent or delay the
Arrangement or the transactions contemplated by this Agreement or
which could reasonably be expected to materially reduce the
benefits to Telepanel of the Arrangement or the transactions
contemplated by this Agreement (with any such efforts by any such
person, including a firm proposal to make such an acquisition or
combination, to be referred to as an "ERS Competing Transaction");
(ii) provide non-public information with respect to ERS or any of
the ERS Subsidiaries, or afford any access to the properties, books
or records of ERS or the ERS Subsidiaries, to any person, other
than Telepanel, relating to a possible ERS Competing Transaction by
any person other than Telepanel; (iii) make or authorize any
statement, recommendation or solicitation in support of any
possible ERS Competing Transaction by any person, other than by
Telepanel; or (iv) enter into an agreement with any person, other
than Telepanel, providing for a possible ERS Competing Transaction.
ERS, the ERS Subsidiaries, and their respective directors,<PAGE>
<PAGE>
officers, employees, representatives, investment bankers, agents
and affiliates, shall immediately cease any and all existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(d) (i) Notwithstanding the foregoing, if at any time after
the date of this Agreement and prior to the date of the ERS
Stockholders' Meeting, the ERS Board determines in good faith,
acting reasonably, and after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary duties to
ERS stockholders, ERS may, in response to an ERS Superior Proposal
(as hereinafter defined) which was not solicited by it or which did
not otherwise result from a breach of Section 4.9(c) and subject to
providing prior written notice of its decision to take such action
to Telepanel (the "ERS Notice") and compliance with subparagraph
(ii) immediately succeeding, (x) furnish information with respect
to ERS and the ERS Subsidiaries to any person making an ERS
Superior Proposal pursuant to a customary confidentiality agreement
and (y) participate in discussions (but not negotiations) to
clarify the terms of such ERS Superior Proposal; provided, however,
that neither ERS nor the ERS Board nor any committee thereof shall:
(x) withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to Telepanel, the approval or recommendation by
the ERS Board or such committee of this Agreement or the Plan of
Arrangement; (y) approve or recommend, or propose publicly to
approve or recommend, any ERS Competing Transaction, other than by
Telepanel; or (z) cause ERS to enter into any letter of intent,
agreement-in-principle, acquisition agreement or any other similar
agreements (each an "ERS Acquisition Agreement") related to any ERS
Competing Transaction, other than with Telepanel. For the purposes
of this Agreement, an "ERS Superior Proposal" means any formal
proposal made by a third party to acquire, directly or indirectly,
all of the ERS Common Stock then outstanding or all or sub-
stantially all of the assets of ERS or with respect to any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving ERS, in each case
wherein such acquisition or other transaction could reasonably be
expected to materially impede, interfere with, prevent or delay the
Arrangement or the transactions contemplated by this Agreement or
which could reasonably be expected to materially reduce the
benefits to Telepanel of the Arrangement or the transactions
contemplated by this Agreement, and otherwise on terms which the
ERS Board determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized reputation)
to be materially more favorable to ERS stockholders than the
combination contemplated by this Agreement and for which financing,
to the extent required, is then committed or which, in the good
faith judgment of the ERS Board, is reasonably capable of being
obtained by such third party. ERS shall be permitted to deliver
only one ERS Notice with respect to each person making an ERS
Superior Proposal.
<PAGE>
<PAGE>
(ii) In addition to the obligations of ERS set forth in
paragraphs (c) and (d)(i) of this Section 4.9, ERS shall
immediately advise Telepanel orally and in writing of any requests
for any information or of any ERS Competing Transaction, other than
by Telepanel, the material terms and conditions of such request or
ERS Competing Transaction and the identity of the person making
such request or ERS Competing Transaction. ERS will keep Telepanel
reasonably informed of the status and details (including amendments
or proposed amendments) of any such request or ERS Competing
Transaction, other than with Telepanel.
(iii) Nothing contained in Paragraph (c) of Section 4.9 shall
prohibit ERS from making any disclosure to ERS' stockholders if, in
the good faith judgment of the ERS Board, after consultation with
outside counsel, failure so to disclose would violate its
obligations under applicable law; provided, however, that neither
ERS nor the ERS Board nor any committee thereof shall withdraw or
modify, or propose publicly to withdraw or modify, its position
with respect to this Agreement or the Plan of Arrangement or
approve or recommend, or propose publicly to approve or recommend,
an ERS Competing Transaction, other than with Telepanel.
4.10 Pooling.
Neither Telepanel nor ERS will take or agree to take any
action that it has reason to believe would prevent ERS from
accounting for the business combination to be effected by the
Arrangement as a "pooling of interests" under U.S. GAAP or Rule 1-
02 of Regulation S-X of the SEC.
4.11 Notification of Certain Matters;
Interim Financial Statements.
(a) Between the date hereof and the Effective Time, each
party will give prompt notice in writing to the other party, of:
(i) the occurrence, or failure to occur, of any event, which
occurrence or failure would be likely to cause any of its
representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect from the date hereof
to the Effective Time, (ii) any notice or other communication from
any person alleging that the consent of such person is or may be
required in connection with the transactions contemplated by this
Agreement, (iii) any notice or other communication from any
Governmental Entity in connection with the transactions
contemplated by this Agreement, (iv) any actions, suits, claims,
investigations or proceedings commenced or, to the best of its
knowledge, threatened against the notifying party or any subsidiary
or relating to or involving or otherwise affecting the notifying
party or which relate to the consummation of the transactions
contemplated by this Agreement, and (v) any material failure of the
notifying 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 hereunder. The giving of any<PAGE>
<PAGE>
such notice under this Section 4.11 shall in no way change or
modify the representations and warranties or the conditions to
either party's obligations contained herein or otherwise affect the
remedies available to either party hereunder.
(b) Within 45 days after the end of each calendar quarter
after the date of this Agreement, Telepanel will deliver to ERS
unaudited consolidated statements of income for such calendar
quarter and the corresponding calendar quarter of the preceding
fiscal year. All such financial statements shall be true and
correct in accordance with Canadian GAAP consistently applied and
shall fairly present, in conformity with such principles as so
utilized, the consolidated financial position, results of
operations and cash flows of Telepanel as at the date or for the
periods indicated (and shall be accompanied by a certificate of the
chief financial or accounting officer of Telepanel to such effect),
except as otherwise indicated in such statements and subject to
normal and recurring year-end audit adjustments which would not,
individually or in the aggregate, have a Material Adverse Effect on
Telepanel. All unaudited financial statements delivered pursuant to
this Paragraph (b) shall be prepared on a basis consistent with the
unaudited consolidated financial statements of Telepanel referenced
under Section 2.4(c).
4.12 Indemnification.
(a) ERS agrees that all rights to indemnification or
exculpation now existing in favor of the directors or officers (the
"Indemnified Parties") of Telepanel or any Telepanel Subsidiary as
provided in its articles of incorporation or by-laws, a copy of
which has been provided to ERS prior to the date of the execution
of this Agreement, in effect on the date hereof shall survive the
Arrangement and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(b) Telepanel shall use its best efforts to obtain a
commitment for coverage with respect to matters occurring prior to
the Effective Time, such coverage to become effective at the
Effective Time and remain in effect for not less than one year from
the Effective Time, and be substantially equivalent to that in
effect under the current policies of the directors' and officers'
liability insurance maintained by Telepanel, and which is not
materially less advantageous, and with no gaps or lapses in
coverages (hereinafter referred to as the "Initial Coverage"). The
cost of such insurance shall be consistent with the amount set
forth in the memorandum dated October 1, 1997 furnished by
Telepanel to ERS; and, subject to the foregoing, ERS shall, prior
to the expiration of such commitment, pay the premium for such
insurance so as to obtain such coverage effective at the Effective
Time, such amount to be refundable to ERS in the event this
Agreement terminates prior to Closing. ERS shall further use its
best efforts to obtain coverage with respect to matters occurring
prior to the Effective Time, such coverage to become effective upon<PAGE>
<PAGE>
the expiration of the Initial Coverage and remain in effect for not
less than five years thereafter, and be substantially equivalent to
that in effect under the current policies of the directors' and
officers' liability insurance maintained by Telepanel, and which is
not materially less advantageous, and with no gaps or lapses in
coverage.
4.13 Closing; Listing.
The parties shall regularly communicate and consult with each
other with respect to the fulfillment of the various conditions to
the obligations under this Agreement of the parties hereto. Subject
to the termination of this Agreement as provided in Article 8, the
closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of ERS, 488 Main Street,
Norwalk, Connecticut on a date (the "Closing Date") and at a time
to be mutually agreed upon by the parties, which date shall be no
later than ten business days after all conditions to Closing set
forth herein shall have been satisfied or waived (other than
conditions with respect to actions the parties shall take at
Closing). Concurrently with the Closing, the Plan of Arrangement
will be filed with the Director under the CBCA. ERS will use its
best efforts to cause the shares of ERS Common Stock issuable from
time to time upon exchange of the Exchangeable Shares to be listed
at the Effective Time on Nasdaq. Telepanel will use its best
efforts to cause the Exchangeable Shares to be listed at the
Effective Time on the TSE.
4.14 Continued Telepanel Operations.
ERS does not presently have any plan or intention to liquidate
Telepanel, to merge Telepanel with or into another corporation, or
to sell or otherwise dispose of any of the stock of Telepanel
(whether acquired pursuant to the Arrangement or pursuant to the
exchange of any shares of Telepanel stock for shares of ERS stock).
4.15 Governance.
(a) Board of Directors.
(i) ERS shall take such action as may be necessary so that the
ERS Board of Directors will be expanded at the Effective Time
pursuant to ERS' By-Laws, amended as contemplated by Section 5.10
hereof, to include the following nine members: (x) five members
designated by ERS prior to the filing with the SEC of the
preliminary Joint Proxy Statement from among the incumbent members
of the ERS Board (the "ERS Group"); three members designated by
Telepanel prior to the filing with the SEC of the preliminary Joint
Proxy Statement from among the incumbent members of the Telepanel
Board (the "Telepanel Group"; each of the ERS Group and the
Telepanel Group referred to as a "Group") and an additional
director (the "Additional Director"), who shall be a person with
operating expertise and be mutually acceptable to ERS and Telepanel<PAGE>
<PAGE>
and shall have been designated by both ERS and Telepanel prior to
the mailing of the Joint Proxy Statement to the stockholders of
either party (all such directors, referred to as the "Closing
Directors"). During the period from the Effective Time until the
second anniversary thereof (the "Term"), ERS shall nominate and
recommend for re-election to the ERS Board of Directors, upon
expiration of their terms, the Closing Directors. If during the
Term any director included in a Group resigns or is unable to serve
for any reason, such vacancy shall be filled with a designee chosen
by the remaining members of that director's Group and thereafter
ERS shall nominate and recommend such designee for election to the
ERS Board of Directors as provided in the immediately preceding
sentence and such director shall be deemed a member of such Group.
If during the Term the Additional Director resigns or is unable to
serve for any reason, such vacancy shall be filled by action of the
ERS Board and thereafter ERS shall nominate and recommend such
successor for election to the ERS Board as hereinabove provided.
(ii) ERS shall take such action as shall be necessary so
that, at the Effective Time, it will be governed by the provisions
set forth below:
(A) the following new section shall be added after
Section 12 of Article IV of ERS' By-Laws:
"Section 13. Approval of Certain Actions. Notwith-
standing the provisions contained in Section 8 of this Article
IV (and without limiting any provision contained in Section 9
of this Article IV), until the second anniversary of the
Closing Date the affirmative vote of at least two-thirds of
the Directors then serving, at a meeting at which a quorum is
present, shall be required to authorize the following acts of
the Board of Directors:
(a) appointment of a principal executive officer of
the Corporation under Section 1 of Article V; and
(b) any fundamental change in the business of the
Corporation and its subsidiaries, taken as a whole, from
the business conducted thereby on the Closing Date and
any business related, ancillary or complementary thereto
and any business utilizing any technology, know-how,
patents, processes, copyrights or other intellectual
property now or hereafter developed thereby."
; and
(B) Article XIV of ERS' By-Laws shall be amended to read
as follows:<PAGE>
<PAGE>
"ARTICLE XIV
AMENDMENTS
Subject to the provisions of the Certificate of
Incorporation, these By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the stockholders or
by the Board of Directors at any regular meeting of the
stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors;
provided, however, that until the second anniversary of
Closing (as defined in the Combination Agreement dated October
29, 1997 [the "Combination Agreement"] between the Corporation
and Telepanel Systems, Inc.), the size of the Board of
Directors, as set forth in Section 1 of Article IV, and the
provisions of Section 13 of Article IV, may only be amended by
the affirmative vote of at least two-thirds of the Board of
Directors or by a vote of the Corporation's stockholders
holding and voting in favor thereof a majority of the voting
power of the shares of the Corporation entitled to vote
thereon, at any annual stockholders' meeting or at any special
stockholders' meeting."
(b) Senior Management Structure.
(i) ERS shall take such action as shall be necessary so that,
at the Effective Time, the following Article IVA shall be added
after Article IV of ERS' By-Laws:
"ARTICLE IVA
CORPORATE EXECUTIVE COMMITTEE
There shall be a Corporate Executive Committee, which
shall consist of the Chairman of the Board and each Vice
Chairman of the Board, and such other officers of the
Corporation as may from time to time be determined by the
Board of Directors. The Corporate Executive Committee, under
the direction of the Board of Directors, shall have general
and active management of the business of the Corporation,
shall see that all orders and resolutions of the Board of
Directors are carried into effect and, as a body, shall
exercise the principal executive authority of the Corporation.
All decisions of the Corporate Executive Committee shall
require the concurrence of a majority of its members."
(ii) ERS shall take such action as may be necessary so that,
at the Effective Time, Norton Garfinkle, Bruce F. Failing, Jr. and
Christopher Skillen shall be appointed to the three-person
Corporate Executive Committee of the Board of Directors established
in accordance with and subject to the provisions of the By-Laws of
ERS, amended as contemplated under Section 5.10 hereof.
<PAGE>
<PAGE>
(iii) ERS shall take such action as may be necessary so that,
at the Effective Time, Norton Garfinkle shall be appointed to the
office of Chairman of the Board of ERS, Bruce F. Failing, Jr. shall
be appointed to the office of Vice Chairman of the Board,
Christopher Skillen shall be appointed to the office of Vice
Chairman of the Board and William Erdman shall be appointed to the
office of Executive Vice President-Chief Operating Officer of ERS,
in accordance with and subject to the provisions of the By-Laws of
ERS, amended as contemplated under Section 5.10 hereof.
4.16 Installation Representation.
Subsequent to the date hereof, ERS and Telepanel shall use
their best efforts to enter into an agreement on or prior to
November 30, 1997, upon terms commercially reasonable to each,
pursuant to which ERS shall represent Telepanel in connection with
installation of Telepanel electronic shelf label systems in the
United States, without limitation containing such reasonable
provisions as shall address the anticipated working capital needs
of Telepanel in connection therewith in an amount up to U.S.
$4,000,000, until the earlier of closing or termination of this
Agreement.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
The obligations of each of Telepanel and ERS to consummate the
Arrangement are subject to the fulfillment or satisfaction on or
before Closing, of each of the following conditions (any one or
more of which may be waived by such party, but only in a writing
signed by such party):
5.1 Compliance with Law.
There shall be no order, decree or ruling by any governmental
agency or threat thereof, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Arrangement,
which would prohibit or render illegal the transactions
contemplated by this Agreement.
5.2 Government Consents.
There shall have been obtained on or before the Closing such
material permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the Arrangement
by any regulatory authority having jurisdiction over the parties
and the actions herein proposed to be taken, including but not
limited to requirements under applicable federal, provincial and
state securities laws and the compliance with, and expiration or
termination of any applicable waiting period under the HSR Act.
<PAGE>
<PAGE>
5.3 SEC Filings.
The Registration Statement, if filed, shall have been declared
effective under the Securities Act prior to the first date on which
the Joint Proxy Statement is mailed to stockholders (or, if a shelf
Registration Statement is required by the SEC, the shelf
Registration Statement shall have been declared effective under the
Securities Act effective on or before the Effective Date) and, at
or prior to the time required, any approvals of state or provincial
securities administrators shall have been obtained; at the Closing
the Registration Statement shall not be the subject of any
stop-order or proceedings seeking a stop-order or similar
restraining order; and the Joint Proxy Statement shall at the
Closing not be subject to any similar proceedings commenced or
threatened by the SEC or the OSC.
5.4 Shareholder Approval.
This Agreement and the Arrangement shall have been approved
and adopted by the Telepanel shareholders in accordance with the
rules of the TSE and Nasdaq, applicable law and Telepanel's
articles of incorporation and bylaws; and the Agreement and the
Arrangement and the ERS Charter Changes shall have been approved
and adopted by the ERS stockholders in accordance with the rules of
Nasdaq, AIM, applicable law and ERS' certificate of incorporation
and by-laws.
5.5 No Legal Action.
No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of
the Arrangement shall have been issued by any Canadian or U.S.
federal, provincial or state court or any foreign court or tribunal
and remain in effect, nor shall any proceeding be pending or
threatened which is reasonably likely to result in any of the
foregoing.
5.6 Tax Opinion.
Telepanel shall have received (i) an opinion reasonably
satisfactory to Telepanel and to ERS of Tory Tory DesLauriers &
Binnington, counsel for Telepanel, to the effect that the
Arrangement will be generally treated for Canadian federal income
tax purposes as a reorganization of capital for purposes of section
86 of the ITA for those Telepanel shareholders who hold their
Telepanel Common Shares as capital property for purposes of the ITA
to the extent that Exchangeable Shares are received in exchange for
Telepanel Common Shares, and such other tax opinions as are
customary in these transactions and (ii) an opinion reasonably
satisfactory to Telepanel and to ERS from Cravath, Swaine & Moore,
U.S. special counsel for Telepanel, to the effect that, although
not free from doubt, the Arrangement should generally be treated<PAGE>
<PAGE>
for U.S. federal income tax purposes as a tax-free reorganization
under section 368 of the Code.
5.7 Pooling Opinion.
ERS shall have received from Price Waterhouse LLP an opinion,
in form and substance reasonably satisfactory to Telepanel and ERS,
that the Arrangement will be treated as a "pooling of interests"
for purposes of U.S. GAAP.
5.8 Court Approval.
The Court shall have issued its final order approving the
Arrangement and such order shall (a) not impose any material
conditions or costs, (b) be in form and substance reasonably
satisfactory to ERS and Telepanel (such approvals not to be
unreasonably withheld or delayed by ERS or Telepanel) and (c)
reflect the terms hereof.
5.9 OSC, Etc.
All necessary orders shall have been obtained from the OSC and
other relevant Canadian securities regulatory authorities in
connection with the Arrangement.
5.10 Appointment to ERS Board; ERS Charter Changes;
ERS By-Law Amendments.
ERS shall have filed with the Secretary of State of Delaware
a certificate of amendment to its Certificate of Incorporation
pursuant to the DGCL, effective on the Effective Date, setting
forth the ERS Charter Changes. The amendments to ERS' by-laws in
the form thereof attached hereto as Exhibit 5.10 shall have been
adopted by the Board of Directors of ERS, and the restructuring of
the ERS Board and management provided for in Section 4.15 shall be
effected, in each case effective on the Effective Date.
5.11 High Yield Bonds.
All modifications of, or waivers or consents under or in
connection with, ERS' Senior Discount Notes due 2004 (the "ERS
Notes") and the ERS Indenture necessary in order to consummate the
transactions contemplated hereby, and after the Effective Time to
permit Telepanel to perform its obligations under the Adjusted
Telepanel Options, the Adjusted Telepanel Warrants and the Adjusted
Telepanel Convertible Securities and (unless waived by ERS) after
the Effective Time to permit prepayment of any liabilities of
Telepanel or the Telepanel Subsidiaries existing at the Effective
Time, in each case under this Section 5.11 as if Telepanel and each
of the Telepanel Subsidiaries were a "Restricted Subsidiary" under
the ERS Indenture and as if Telepanel Europe S.A. ("Telepanel
Europe") were also a "Joint Venture" thereunder, shall have been
effected or obtained (and in a manner so that neither Telepanel nor<PAGE>
<PAGE>
any Telepanel Subsidiary shall be obligated to become a guarantor
under the ERS Indenture).
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF TELEPANEL
The obligations of Telepanel to consummate the Arrangement are
subject to the fulfillment or satisfaction on or before the
Closing, of each of the following conditions (any one or more of
which may be waived by Telepanel, but only in a writing signed by
Telepanel):
6.1 Accuracy of Representations and Warranties.
The representations and warranties of ERS set forth in Article
3 shall be true and accurate in all material respects when made and
on and as of the Closing Date with the same force and effect as if
they had been made at the Closing (except for representations and
warranties which are as of a specific date or which relate to a
specific period other than or not including the Closing Date, as
the case may be, and except for changes therein contemplated or
permitted by this Agreement and provided, however, that if any such
representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been satisfied,
such representation or warranty must be true and accurate; and
Telepanel shall receive a certificate to such effect executed by
ERS's Chairman or Chief Executive Officer and its Chief Financial
Officer.
6.2 Covenants.
ERS shall have performed and complied in all material respects
with all of its covenants required to be performed by it under this
Agreement and the Plan of Arrangement on or before Closing, and
Telepanel shall receive a certificate to such effect signed by
ERS's Chairman or Chief Executive Officer and its Chief Financial
Officer.
6.3 Absence of Material Adverse Effect.
Since the date of this Agreement, there shall not have been
one or more events or changes that has had or would be reasonably
likely to have a Material Adverse Effect on ERS.
6.4 Certified Resolutions.
Telepanel shall have received a certificate of the Secretary
or an Assistant Secretary of ERS, in form and substance reasonably
satisfactory to Telepanel, with respect to the authorization by its
board of directors and stockholders of the execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein, the number of authorized shares of ERS Common<PAGE>
<PAGE>
Stock as of the Closing Date, the number of issued and outstanding,
fully-paid and non-assessable shares of the capital stock of ERS as
of such date, and the number of shares of ERS Common Stock subject
to issuance upon exercise of options and warrants, convertible
securities and similar obligations on such date.
6.5 Third Party Consents.
All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from,
governmental and regulatory bodies required to consummate the
transactions contemplated hereby shall have been made or obtained,
and all other notices, consents or waivers with respect to the
transactions contemplated by this Agreement, identified in Section
2.3(b) of the Telepanel Disclosure Letter or in Section 3.3(b) of
the ERS Disclosure Letter or the failure to obtain which would have
a Material Adverse Effect on Telepanel or on ERS, shall have been
made or obtained.
6.6 FIRPTA.
Telepanel shall have received from ERS a certification
complying with the Code and the regulations thereunder, in form and
substance reasonably satisfactory to Telepanel, duly executed and
acknowledged, certifying that an interest in ERS does not
constitute a "United States real property interest" within the
meaning of Section 897 of the Code.
6.7 Letter of ERS' Accountants.
Telepanel shall have received a letter of Price Waterhouse
LLP, ERS' independent auditors, dated the Closing Date, addressed
to Telepanel, in form and substance reasonably satisfactory to
Telepanel, making the statements required by Section 4.4(c), on the
basis of procedures set forth therein carried out by them not more
than three business days prior to the Closing Date.
6.8 Other Certificates.
Telepanel shall have received such additional certificates,
instruments and other documents, in form and substance reasonably
satisfactory to Telepanel, as Telepanel shall have reasonably
requested in connection with compliance with the conditions set
forth in this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF ERS
The obligations of ERS to consummate the Arrangements are
subject to the fulfillment or satisfaction on or before the
Closing, of each of the following conditions (any one or more of
which may be waived by ERS, but only in a writing signed by ERS):<PAGE>
<PAGE>
7.1 Accuracy of Representations and Warranties.
The representations and warranties of Telepanel set forth in
Article 2 shall be true and accurate in all material respects when
made and on and as of the Closing Date with the same force and
effect as if they had been made at the Closing (except for
representations and warranties which are as of a specific date or
which relate to a specific period other than or not including the
Closing Date, as the case may be, and except for changes therein
contemplated or permitted by this Agreement and provided, however,
that if any such representation or warranty is already qualified by
materiality, for purposes of determining whether this condition has
been satisfied, such representation or warranty must be true and
accurate, except to the extent the failure of such representations
and warranties to be true and accurate has not had and would not be
reasonably likely to have a Material Adverse Effect on Telepanel;
and ERS shall receive a certificate to such effect executed by
Telepanel's Chief Executive Officer and Chief Financial Officer.
7.2 Covenants.
Telepanel shall have performed and complied in all material
respects with all of its covenants required to be performed by it
under this Agreement and the Plan of Arrangement on or before the
Closing, and ERS shall receive a certificate to such effect signed
by Telepanel's Chief Executive Officer and Chief Financial Officer.
7.3 Absence of Material Adverse Change.
Since the date of this Agreement, there shall not have been
one or more events or changes that has had or would be reasonably
likely to have a Material Adverse Effect on Telepanel.
7.4 Dissenting Shares.
Telepanel shall not have received on or prior to the Effective
Time notice from the holders of more than eight percent of the
Telepanel Common Shares of their intention to exercise their rights
of dissent under section 190 of the CBCA.
7.5 Affiliate Agreements.
ERS shall have received executed originals of Telepanel
Affiliate Agreements from each officer and director of Telepanel
and each other holder of securities of Telepanel who, in the
opinion of counsel for ERS, may be an Affiliate.
7.6 Certified Resolutions; Capitalization.
(a) ERS shall have received a certificate of the Secretary or
an Assistant Secretary of Telepanel in form and substance
reasonably satisfactory to ERS, with respect to the authorization
by the board of directors and the stockholders of Telepanel of the<PAGE>
<PAGE>
execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, the number of authorized
Telepanel Common Shares as of the Closing Date, the number of
issued and outstanding, fully paid and non-assessable shares of the
capital stock of Telepanel as of such date, and the number of
Telepanel Common Shares subject to issuance upon exercise of the
Telepanel Options and the Telepanel Warrants and Telepanel
convertible securities or similar obligations on such date.
(b) ERS shall have received assurances, reasonably
satisfactory to it, that at and after the Effective Time, there
shall not exist any security, option, warrant, right, put, call,
subscription, agreement, commitment, understanding or claim of any
kind, fixed or contingent (including the Telepanel Options and the
Telepanel Warrants and the Telepanel Convertible Securities), that
directly or indirectly calls for Telepanel or any of the Telepanel
Subsidiaries to acquire, issue, deliver or sell, or to cause to be
acquired, issued, delivered or sold, any shares of the capital
stock of or equity interest in Telepanel or any Telepanel
Subsidiary or obligating Telepanel or any Telepanel Subsidiary to
grant, extend or enter into any of the foregoing (in each case
other than the rights of the holders of Exchangeable Shares
pursuant to the Arrangement).
7.7 Third Party Consents.
All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from,
governmental and regulatory bodies required to consummate the
transactions contemplated hereby shall have been made or obtained,
and all other notices, consents or waivers with respect to the
transactions contemplated by this Agreement, identified in Section
2.3(b) of the Telepanel Disclosure Letter or in Section 3.3(b) of
the ERS Disclosure Letter or the failure to obtain which would have
a Material Adverse Effect on Telepanel or on ERS, or otherwise to
change the fiscal year end of Telepanel and any of the Telepanel
Subsidiaries in such manner as shall be determined by ERS, shall
have been made or obtained.
7.8 Resignations.
ERS shall have received the resignations of all such officers
and directors of Telepanel and each Telepanel Subsidiary requested
by it or all such officers and directors have ceased to hold
office.
7.9 Letter of Accountants for Telepanel.
ERS shall have received a letter of Price Waterhouse,
Chartered Accountants, Telepanel's independent auditors, dated the
Closing Date, addressed to ERS, in form and substance reasonably
satisfactory to ERS, making the statements required by Section
4.4(b) on the basis of procedures set forth therein carried out by<PAGE>
<PAGE>
them, respectively, not more than three business days prior to the
Closing Date.
7.10 Relief from Telepanel Reporting Obligations.
Orders or rulings shall have been obtained, on terms at least
as favorable to the parties as those customarily obtained in
transactions similar to the Arrangement, which relieve Telepanel,
following the Effective Time, of ongoing filing and reporting
obligations under the Securities Act (Ontario) and other relevant
Canadian securities laws on condition that ERS file with the OSC
and other relevant Canadian securities regulatory authorities
copies of its reports and filings made in accordance with
applicable United States securities laws and otherwise on
conditions acceptable to ERS, acting reasonably.
7.11 Telepanel Europe.
Insofar as exercisable as a result of the Arrangement and the
transactions contemplated hereby, all rights under the Telepanel
Europe Put Option shall have been exercised and settled or shall
have expired, and all rights under Section 10.2 of the Telepanel
Europe Incorporation Agreement, if any, shall have been waived, and
all rights under Section 5 of the Telepanel Europe Shareholders
Agreement, if any, shall have been waived; and, subject to the
commitment by ERS to reserve a sufficient number of shares of ERS
Common Stock for issuance upon exchange of such Exchangeable
Shares, each of the Telepanel Europe Put Option and all
counterparts of the Call Option relating to Telepanel Europe shall
have been appropriately amended, upon such terms and subject to
such conditions as shall be reasonably satisfactory to ERS, so
that, for purposes of calculation of the "price/earnings ratio"
thereunder, references to the promisor shall be deemed references
to ERS, and, for purposes of settlement following the exercise of
any option thereunder, references to common stock of the promisor
shall be deemed references to ERS Common Stock.
7.12 Certain Adjustments.
All adjustments in the terms of the Telepanel Options, the
Telepanel Warrants and the Telepanel Convertible Securities, solely
in accordance with the terms thereof in effect on the date hereof
or prior to the Effective Time, reasonably requested by ERS, shall
have been effected.
7.13 Other Certificates.
ERS shall have received such additional certificates,
instruments and other documents, in form and substance reasonably
satisfactory to ERS, as it shall have reasonably requested in
connection with compliance with the conditions set forth in this
Agreement.
<PAGE>
<PAGE>
ARTICLE 8
TERMINATION OF AGREEMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Arrangement
by the stockholders of ERS or shareholders of Telepanel:
(a) by mutual agreement of Telepanel and ERS;
(b) by Telepanel, if there has been a breach by ERS in any
material respect of any representation, warranty, covenant or
agreement set forth in this Agreement on the part of ERS and which
ERS fails to cure within 15 business days after written notice
thereof from Telepanel (except that no cure period shall be
provided for a breach by ERS which by its nature cannot be cured),
or if any representation of ERS shall not be true in all material
respects as of the Effective Time (with such exceptions therein as
are permitted by Section 6.1 hereof);
(c) by ERS, if there has been a breach by Telepanel in any
material respect of any representation, warranty, covenant or
agreement set forth in this Agreement on the part of Telepanel and
which Telepanel fails to cure within 15 business days after written
notice thereof from ERS (except that no cure period shall be
provided for a breach by Telepanel which by its nature cannot be
cured), or if any representation of Telepanel shall not be true in
all material respects as of the Effective Time (with such
exceptions therein as are permitted by Section 7.1 hereof);
(d) by either party (provided that such party is not then in
breach of this Agreement) if the shareholders of Telepanel do not
approve the Arrangement at the Telepanel Shareholders Meeting or
the stockholders of ERS do not approve at the ERS Stockholders
Meeting this Agreement and the ERS Charter Changes;
(e) by either Telepanel or ERS, if all the conditions for
Closing the Arrangement shall not have been satisfied or waived and
the Closing shall not have occurred on or before 5:00 p.m. New York
time on May 31, 1998, other than as a result of a breach of this
Agreement by the terminating party or a breach by any of the
Affiliates of the Affiliate Agreements referred to in Section 4.3;
or
(f) by either party, if a permanent injunction or other order
by any U.S. or Canadian federal, provincial or state court shall
have been issued and shall have become final and nonappealable
which would make illegal or otherwise restrain or prohibit the
consummation of the Arrangement.
<PAGE>
<PAGE>
8.2 Notice of Termination.
Any termination of this Agreement under Section 8.1 above will
be effective by the delivery of written notice by the terminating
party to the other party hereto.
8.3 Effect of Termination.
In the case of any termination of this Agreement as provided
in this Article 8, this Agreement shall be of no further force and
effect (except as provided in Section 8.4 or in Article 10) and
nothing herein shall relieve any party from liability for any
breach of this Agreement. No termination of this Agreement shall
affect the obligations contained in the separate Confidentiality
Agreement dated August 6, 1997 between Telepanel and ERS (the
"Confidentiality Agreement").
8.4 Subsequent Payments.
(a) If this Agreement is terminated pursuant to this Article
8 (other than under Sections 8.1(a) or (b), and except if the ERS
stockholders have disapproved the Agreement and the ERS Charter
Changes), and within six months after termination Telepanel
consummates a Telepanel Competing Transaction which was the subject
of a Telepanel Notice, other than with ERS, or Telepanel enters
into a Telepanel Acquisition Agreement relating to a Telepanel
Competing Transaction which was the subject of a Telepanel Notice,
other than with ERS, and such transaction is within such period or
thereafter consummated, Telepanel shall, upon consummation, cause
any third party with whom it has consummated such Telepanel
Competing Transaction to pay to ERS (by wire transfer in
immediately available funds) the sum of:
(x) an amount equal to 5% of the consideration that
would have been payable to Telepanel and its shareholders
under this Agreement; plus
(y) the aggregate out-of-pocket expenses paid or payable
by ERS in connection with this Agreement and the transactions
contemplated hereby.
(b) If this Agreement is terminated pursuant to this Article
8 (other than under Sections 8.1(a) or (c), and except if the
Telepanel shareholders have disapproved the Arrangement), and
within six months after termination ERS consummates an ERS
Competing Transaction which was the subject of an ERS Notice, other
than with Telepanel, or ERS enters into an ERS Acquisition
Agreement relating to an ERS Competing Transaction which was the
subject of an ERS Notice, other than with Telepanel, and such
transaction is within such period or thereafter consummated, ERS
shall, upon consummation, cause any third party with whom it has
consummated such ERS Competing Transaction to pay to Telepanel (by
wire transfer in immediately available funds) the sum of:<PAGE>
<PAGE>
(x) an amount equal to 5% of the consideration that
would have been payable to the Telepanel shareholders under
this Agreement; plus
(y) the aggregate out-of-pocket expenses paid or payable
by Telepanel in connection with this Agreement and the
transactions contemplated hereby.
(c) For purposes of this Section 8.4, the aggregate
consideration that would have been payable to the Telepanel
shareholders under this Agreement shall be calculated as the
product obtained by multiplying: (A) the product obtained by
multiplying (i) number of Telepanel Common Shares outstanding upon
termination of this Agreement by (ii) the number of Exchangeable
Shares exchangeable for each Telepanel Common Share pursuant to the
Exchange Ratio; by (B) the Current Market Price (as defined in the
Voting, Support and Exchange Trust Agreement) in respect of a share
of ERS Common Stock on the date of termination of this Agreement.
(d) Telepanel and ERS agree that, in view of the nature of
the issues likely to arise in the event of termination in the
circumstances described in this Section 8.4, it would be
impracticable or extremely difficult to fix the actual damages
resulting from such termination and proving actual damages,
causation and foreseeability in the case of such termination would
be costly, inconvenient and difficult. In requiring payment of the
amounts as set forth herein, it is the intent of the parties to
provide, as of the date of this Agreement, for a liquidated amount
of damages. Such liquidated amount shall be deemed full and
adequate damages for such termination and is not intended by either
party to be a penalty.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS
All representations, warranties and covenants of the parties
contained in this Agreement will remain operative and in full force
and effect, regardless of any investigation made by or on behalf of
the parties to this Agreement, until the earlier of the termination
of this Agreement or the Effective Time, whereupon such
representations, warranties and covenants will expire (except for
covenants that by their terms survive for a longer period).
<PAGE>
<PAGE>
ARTICLE 10
MISCELLANEOUS
10.1 Governing Law.
The internal laws of the State of New York (irrespective of
its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto.
10.2 Assignment; Binding Upon Successors and Assigns.
Neither party may assign any of its rights or obligations
under this Agreement without the prior written consent of the other
party. This Agreement will be binding upon and inure to the benefit
of the parties and their respective successors and permitted
assigns.
10.3 Severability.
If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of
such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties.
The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic,
business and other purposes of the void or unenforceable provision.
10.4 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute
one and the same instrument. This Agreement will become binding
when one or more counterparts hereof, individually or taken
together, will bear the signatures of all the parties reflected
hereon as signatories.
10.5 Other Remedies; Specific Performance.
Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by
law on such party, and the exercise of any one remedy will not
preclude the exercise of any other. The parties each recognize that
any breach of the terms of this Agreement may give rise to
irreparable harm for which money damages would not be an adequate
remedy, and accordingly agree that, in addition to other remedies,
any non-breaching party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement<PAGE>
<PAGE>
and to enforce the terms and provisions of this Agreement by a
decree of specific performance in any action instituted in any
court of the United States or Canada or any state or province
thereof having jurisdiction without the necessity of proving the
inadequacy as a remedy of money damages.
10.6 Amendment and Waivers.
Any term or provision of this Agreement may be amended, and
the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound
thereby. The waiver by a party of any breach hereof or default in
the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This
Agreement may be amended by the parties hereto at any time before
or after approval of the Telepanel shareholders or the ERS
stockholders, but, after such approval, no amendment will be made
which by applicable law requires the further approval of the
Telepanel shareholders or the ERS stockholders without obtaining
such further approval.
10.7 Expenses.
Each party will bear its respective expenses including legal
fees incurred with respect to this Agreement, and the transactions
contemplated hereby.
10.8 Notices.
All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if
contained in a written instrument and shall be deemed given if
delivered personally, telecopied or sent by nationally recognized
overnight courier to the parties at the following address (or at
such other address for a party as shall be specified by like
notice):
If to Telepanel: Telepanel Systems, Inc.
245 Riviera Drive
Markham, Ontario
Canada L3R SJ9
Attention: Christopher Skillen, President
Telecopy No: (905) 477-9528
With a copy to: Tory Tory DesLauriers & Binnington
Suite 3000 Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Ontario
Canada M5K 1N2
<PAGE>
<PAGE>
Attention: Barry Reiter and Patricia Koval
Telecopy No.: (416) 865-7380
and to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, N.Y. 10019
Attention: William P. Rogers, Jr.
Telecopy No.: (212) 474-3700
If to ERS: Electronic Retailing Systems
International, Inc.
488 Main Avenue
Norwalk, Connecticut 06851
Attention: Norton Garfinkle
Chairman of the Board
Telecopy No.: (203) 849-2501
With a copy to: Krugman Chapnick & Grimshaw LLP
Park 80-Plaza West Two
Saddle Brook, New Jersey 07663-5819
Attention: Howard Kailes
Telecopy No.: (201) 845-9627
and to: Stikeman, Elliott
Commerce Court West
Suite 5300, P.O. Box 85
Toronto, Ontario
Canada M5L 1B9
Attention: Ian Douglas
Telecopy No.: (416) 947-0866
All such notices and other communications shall be deemed to
be effective upon receipt by the party to whom given; provided that
any notice or other communication that is received other than
during regular business hours of the recipient shall be deemed to
have been given at the opening of business on the next business day
of the recipient.
10.9 Construction of Agreement.
This Agreement has been negotiated by each party and its
attorneys and the language will not be construed for or against
either party. A reference to a section or an exhibit will mean a
section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the
construction of this Agreement, which will be considered as a
whole.<PAGE>
<PAGE>
10.10 No Joint Venture.
Nothing contained in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of
the parties. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No
party will have the power to control the activities and operations
of any other and the status of each is, and at all times, will
continue to be, that of an independent contractor with respect to
the other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any
authority or relationship in contravention of this section.
10.11 Further Assurances.
Each party agrees to cooperate fully with the other party and
to execute such further instruments, documents and agreements and
to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the
transactions described in and contemplated by this Agreement and to
carry into effect the intents and purposes of this Agreement.
10.12 Absence of Third Party Beneficiary Rights.
No provision of this Agreement is intended, nor will any
provision be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any client,
customer, affiliate, stockholder or partner of any party or any
other person or entity except as specifically provided otherwise
herein and, except as so provided, all provisions of this Agreement
will be personal solely between the parties to this Agreement.
Anything contained herein to the contrary notwithstanding, the
Indemnified Parties are intended beneficiaries of Section 4.12
hereof.
10.13 Public Announcement.
Upon execution of this Agreement, ERS and Telepanel promptly
will issue a joint press release approved by both parties
announcing the Arrangement. Thereafter, any and all publicity, and
notices by the parties hereto to other parties (other than
Governmental Entities), concerning the Arrangement and the other
transactions contemplated by this Agreement shall be subject to the
prior approval of both parties, except that ERS or Telepanel may
issue such press releases, and make such other disclosures
regarding the Arrangement, as it determines in good faith (after
consultation with legal counsel) are required under applicable
securities laws or by the Nasdaq or the TSE or the AIM rules;
provided that to the extent reasonably practicable each party
making any such disclosure will provide advance notice to the other
of the form and content of any such disclosure and opportunity to
comment promptly thereon, and will in any case promptly deliver a<PAGE>
<PAGE>
copy of such disclosure, in the form in which the disclosure was
released, to the other party.
10.14 Entire Agreement.
This Agreement and the exhibits constitute the entire
understanding and agreement of the parties with respect to the
subject matter and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or
implied, written or oral, between the parties with respect to the
subject matter other than the Confidentiality Agreement, which
shall remain in full force and effect. The express terms of this
Agreement control and supersede any course of performance or usage
of the trade inconsistent with any of the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Combination Agreement as of the date first above written in the
City of New York, State of New York, United States of America.
ELECTRONIC RETAILING SYSTEMS TELEPANEL SYSTEMS INC.
INTERNATIONAL, INC.
By: s/Norton Garfinkle By: s/Christopher Skillen
------------------------ ----------------------------
Chairman President and Chief Executive
Officer
<PAGE>
<PAGE>
Exhibit 1.1
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE
CANADA BUSINESS CORPORATIONS ACT
<PAGE>
<PAGE>
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
1.1. Definitions.
In this Plan of Arrangement unless something in the subject
matter or context is inconsistent therewith;
"Arrangement" means the arrangement under Section 192 of the
CBCA on the terms and subject to the conditions set out in this
Plan of Arrangement, subject to any amendments thereto made in
accordance with section 5.1 or made at the direction of the Court
in the Final Order.
"Business Day" means any day other than a Saturday, a Sunday
or a day when banks are not open for business in either or both of
New York, New York and Toronto, Ontario.
"CBCA" means the Canada Business Corporations Act, as amended.
"Corporation" means Telepanel Systems Inc., a corporation
existing under the laws of Canada.
"Court" means the Ontario Court of Justice (General Division).
"Current Market Price" has the meaning set out in Section 1.1
of the Exchangeable Share Provisions.
"Depositary" means The Montreal Trust Company of Canada at its
principal office in Toronto, Ontario.
"Dissent Procedures" means the procedures referred to in
section 3.1.
"Effective Date" means the date shown on the certificate of
arrangement issued by the Director under the CBCA giving effect to
the Arrangement.
"Effective Time" means 12:01 a.m. (Toronto time) on the
Effective Date.
"ERS" means Electronic Retailing Systems International, Inc.,
a corporation existing under the laws of the State of Delaware.
<PAGE>
<PAGE>
"ERS Common Stock" means the shares of common stock, par value
U.S.$0.01 per share, of ERS, having voting rights of one vote per
share and not limited to a fixed sum or percentage of par value in
respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding-up of ERS, as
constituted on the date hereof (but including any stock into which
it subsequently may be changed, reclassified or converted pursuant
to a recapitalization, reconstruction, reorganization or
reclassification of, or an amalgamation, merger, liquidation or
similar transaction affecting, such shares).
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares,
which are set forth in paragraph 3 of Schedule A of Appendix A
hereof.
"Exchangeable Shares" means the Exchangeable Shares of the
Corporation.
"Final Order" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any time
prior to the Effective Time.
"Meeting" means the special meeting of the shareholders of the
Corporation to be held to consider the Arrangement.
"Proxy Statement" means the Joint Management Information
Circular/Proxy Statement of the Corporation dated .
"Subsidiary" means any corporation more than 50% of the
outstanding stock of which, by vote, is owned, directly or
indirectly, by another corporation, by one or more other
Subsidiaries of that other corporation, or by that other
corporation and one or more other Subsidiaries of it and, when used
with reference to the Corporation, includes Telepanel Europe S.A.
"Telepanel Common Shares" means the common shares, without par
value, of the Corporation.
"Transfer Agent" has the meaning set forth in Section 1.1 of
the Exchangeable Share Provisions.
1.2. Sections and Headings.
The division of this Plan of Arrangement into articles and
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 an article, section or Appendix refers to the
specified article or section of or Appendix to this Plan of
Arrangement.<PAGE>
<PAGE>
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, companies, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business
entities of any kind.
1.4 Payments.
All payments to be made hereunder shall be made without
interest and less any tax required by law to be deducted and
withheld. Notwithstanding the provisions of Article 4, any cheque
deliverable to a holder of Exchangeable Shares whose address as
recorded in the securities register of the Corporation is in the
United States shall be payable in the U.S. dollar equivalent of the
amount due to such holder.
ARTICLE 2
ARRANGEMENT
2.1. Binding Effect.
This Plan will become effective on, and be binding on and
after, the Effective Time on (i) the Corporation and its
Subsidiaries, (ii) ERS and its Subsidiaries, (iii) all holders of
Telepanel Common Shares, (iv) all holders of Exchangeable Shares,
and (v) all holders of securities exchangeable for or convertible
into Telepanel Common Shares.
2.2. Events Sequential.
At the Effective Time, each of the provisions of this Article
2 shall occur and be deemed to occur in the order set out below,
without any further act or formality.
2.3. Amendment of Articles and By-laws.
The articles of the Corporation shall be amended as set out in
the articles of amendment annexed as Appendix A hereto; and the by-
laws of the Corporation shall be amended as set out in Appendix B
hereto.
2.4. Issue of Common Shares.
The Corporation shall issue to ERS 1,000 Telepanel Common
Shares in consideration of the delivery by ERS to the Corporation
of a number of shares of ERS Common Stock equal to the number of
Exchangeable Shares exchangeable for 1,000 Telepanel Common Shares<PAGE>
<PAGE>
in the Arrangement. The amount added to the stated capital account
maintained for the Telepanel Common Shares with respect to the
Telepanel Common Shares issued pursuant to this Section 2.4 shall
be equal to the product obtained when the Current Market Price on
the Effective Date is multiplied by the number of shares of ERS
Common Stock delivered as aforesaid.
2.5. Exchange of Telepanel Systems Common Shares.
(1) Each Telepanel Common Share (other than the Telepanel
Common Shares held by ERS and holders who have exercised their
rights of dissent in accordance with Article 3 and who are
ultimately entitled to be paid fair value for such shares) shall be
exchanged for fully paid and non-assessable Exchangeable
Shares. No fractional Exchangeable Shares will be delivered. In
lieu thereof, each holder of a Telepanel Common Share who otherwise
would be entitled to receive a fraction of an Exchangeable Share
shall be paid by the Corporation an amount determined in accordance
with Section 4.3 hereof.
(2) Upon the exchange referred to in Section 2.5(1), each
holder of a Telepanel Common Share whose share is so exchanged
shall be deemed to grant the rights set out in Articles 5, 6 and 7
of the Exchangeable Share Provisions, shall cease to be such a
holder, shall have its name removed from the register of holders of
Telepanel Common Shares and shall become a holder of the number of
Exchangeable Shares to which such holder is entitled as a result of
the exchange referred to in section 2.5(1) and such holder's name
shall be added to the register of holders of Exchangeable Shares
accordingly.
(3) The amount added to the stated capital account maintained
for the Exchangeable Shares with respect to the Exchangeable Shares
issued pursuant to this Section 2.5 shall be equal to the aggregate
amount of stated capital attributable to the Telepanel Common
Shares that are exchanged for Exchangeable Shares pursuant to this
Section 2.5 thereby excluding the stated capital attributable to
the fractional shares for which payment is made as contemplated in
sub-section 1 above.
2.6. ERS Common Stock Held by the Corporation.
The Corporation shall distribute all of the shares of ERS
Common Stock delivered by ERS to Telepanel under Section 2.4 hereof
held by the Corporation to ERS for no consideration.
2.7. Exchange and Call Rights.
ERS shall be entitled to enforce the exchange right and call
rights set out in Articles 5, 6 and 7 of the Exchangeable Share
Provisions and in exercising such rights ERS will not be required
to purchase Exchangeable Shares from itself.<PAGE>
<PAGE>
2.8. Directors and Officers of the Corporation.
(1) The directors of the Corporation will be ,
and .
(2) The officers of the Corporation shall be ,
in the position of President, and , in the
position of Secretary.
ARTICLE 3
RIGHTS OF DISSENT
3.1. Rights of Dissent.
(1) Holders of Telepanel Common Shares may exercise rights of
dissent with respect to such shares in connection with the
Arrangement pursuant to and in the manner set forth in section 190
of the CBCA except that, notwithstanding the provisions of section
190 of the CBCA, holders who duly exercise such rights of dissent
and who:
(a) are ultimately entitled to be paid fair value for
their Telepanel Common Shares shall (i) be deemed to have
transferred their Telepanel Common Shares to the Corporation
for cancellation and such shares shall be cancelled at the
Effective Time and (ii) not be entitled to any other payment
or consideration including any payment that would be payable
under the Arrangement had such holders not exercised their
right of dissent; or
(b) are ultimately not entitled, for any reason, to be
paid fair value for their Telepanel Common Shares shall be
deemed to have participated in the Arrangement on the same
basis as any non-dissenting holder of Telepanel Common Shares
pursuant to Section 2.5.
In no case shall the Corporation be required to recognize such
holders as holders of Telepanel Common Shares after the Effective
Time, and the names of such holders of Telepanel Common Shares
shall be deleted from the register of holders of Telepanel Common
Shares at the Effective Time.
(2) Holders of Telepanel Common Shares who are ultimately
entitled to be paid fair value for their Telepanel Common Shares in
accordance with Section 3.1(1)(a) shall be paid by the Corporation
with money provided by the Corporation.
<PAGE>
<PAGE>
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1. Issuance of Certificates.
As soon as practicable after the Effective Date, the
Corporation shall deposit with the Depositary, for the benefit of
the holders of Telepanel Common Shares exchanged pursuant to
Section 2.5, certificates representing the Exchangeable Shares
issued in exchange for their outstanding Telepanel Common Shares.
Upon surrender to the Depositary for cancellation of a certificate
which immediately prior to the Effective Time represented
outstanding Telepanel Common Shares that were exchanged for
Exchangeable Shares, together with such other documents and
instruments as would have been required to effect the transfer of
the shares formerly represented by such certificate under the CBCA
and such additional documents and instruments as the Depositary and
the Corporation may reasonably require, the holder of such
surrendered certificate shall be entitled to receive in exchange
therefor, and the Depositary shall deliver to such holder, a
certificate representing that number (rounded down to the nearest
whole number) of Exchangeable Shares that such holder has the right
to receive and a cheque for (i) any dividends or distributions with
respect thereto then payable pursuant to Section 4.2 and (ii) any
cash in lieu of a fractional Exchangeable Share payable pursuant to
Section 4.3, and the certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Telepanel
Common Shares that is not registered in the transfer records of the
Corporation, a certificate representing the proper number of
Exchangeable Shares may be issued to the transferee if the
certificate representing such Telepanel Common Shares is presented
to the Depositary accompanied by all documents required by the
Depositary and the Corporation to evidence and effect such
transfer. Until surrendered as contemplated by this Section 4.1,
each certificate which immediately prior to the Effective Time
represented outstanding Telepanel Common Shares that were exchanged
for Exchangeable Shares shall be deemed at any time after the
Effective Time to represent only the right to receive, upon such
surrender, the certificate representing Exchangeable Shares as
contemplated by this Section 4.1 and, at the time or times as set
forth in Section 4.2, a cheque for (i) any dividends or
distributions with a record date after the Effective Time
theretofore paid or payable with respect to Exchangeable Shares as
contemplated by Section 4.2 and (ii) a cash payment in lieu of any
fractional Exchangeable Share as contemplated by Section 4.3.
4.2. Distributions with Respect to Unsurrendered Certificates.
No dividends or other distributions declared or made after the
Effective Time with respect to Exchangeable Shares with a record
date after the Effective Time shall be paid to the holder of any<PAGE>
<PAGE>
unsurrendered certificate that, immediately prior to the Effective
Time, represented outstanding Telepanel Common Shares and no cash
payment in lieu of any fractional share shall be paid to any such
holder pursuant to Section 4.3, unless and until such certificate
shall be surrendered in accordance with Section 4.1. Subject to
applicable law 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 registered
holder of a certificate representing whole Exchangeable Shares (i)
the amount of any cash payable in lieu of a fractional Exchangeable
Share to which such holder is entitled pursuant to Section 4.3,
(ii) the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such
whole Exchangeable Shares 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 Exchangeable Shares.
4.3. No Fractional Shares.
No certificates or scrip representing fractional Exchangeable
Shares shall be issued upon the surrender of certificates for
exchange pursuant to Section 4.1 and no dividend, stock split or
other change in the capital structure of the Corporation shall
relate to any such fractional security and such fractional
interests shall not entitle the owner thereof to vote or to
exercise any rights as a security holder of the Corporation. In
lieu of any such fractional securities, each person entitled to a
fractional interest in an Exchangeable Share will receive an amount
of cash (rounded to the nearest whole cent) equal to the product
obtained when such fraction is multiplied by the Current Market
Price on the Effective Date, such amount to be provided to the
Depositary by the Corporation upon request.
4.4. Lost Certificates.
If any certificate which immediately prior to the Effective
Time represented outstanding Telepanel Common Shares that are
exchanged pursuant to Section 2.5 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,
the Depositary will issue in exchange for such lost, stolen or
destroyed certificate, a certificate representing Exchangeable
Shares (and a cheque for any dividends or distributions with
respect thereto pursuant to Section 4.2 and any cash for a
fractional share pursuant to Section 4.3) deliverable in respect
thereof. When authorizing such payment in exchange for any lost,
stolen or destroyed certificate, the person to whom a certificate
representing Exchangeable Shares is to be issued shall, as a
condition precedent to the issuance thereof, give a bond
satisfactory to the Corporation and the Depositary in such sum as
the Corporation may direct or otherwise indemnify the Corporation,<PAGE>
<PAGE>
ERS and the Depositary in a manner satisfactory to them against any
claim that may be made against the Corporation, ERS or the
Depositary with respect to the certificate alleged to have been
lost, stolen or destroyed.
4.5. Extinguishment of Rights.
Notwithstanding any of the other provisions hereof, any
certificate which immediately prior to the Effective Time
represented outstanding Telepanel Common Shares that were exchanged
pursuant to Section 2.5 and has not been surrendered with all other
instruments required by Section 4.1 on or prior to the sixth
anniversary of the Effective Date shall cease to represent a claim
or interest of any kind or nature as a shareholder of the
Corporation. On such date, the Exchangeable Shares to which the
former registered holder of such certificate was ultimately
entitled shall be deemed to have been surrendered to the
Corporation together with all entitlements to dividends,
distributions and cash for fractional interests thereon held for
such former registered holder for no consideration.
ARTICLE 5
AMENDMENT
5.1. Plan of Arrangement Amendment.
(1) The Corporation reserves 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 an a written document that is (i) agreed to by
ERS, (ii) filed with the Court and, if made following the Meeting,
approved by the Court and (iii) communicated to holders of
Telepanel Common Shares in the manner required by the Court (if so
required).
(2) Any amendment, modification or supplement to this Plan of
Arrangement may be proposed by the Corporation at any time prior to
or at the Meeting (provided that ERS shall have consented thereto)
with or without any other prior notice or communication, and, if so
proposed and accepted by the persons voting at the Meeting (other
than as may be required under the Court's interim order), shall
become part of this Plan of Arrangement for all purposes.
(3) Any amendment, modification or supplement to this Plan of
Arrangement that is approved by the Court following the Meeting
shall be effective only (i) if it is consented to by the
Corporation, (ii) if it is agreed to by ERS and (iii) if required
by applicable law, it is approved as required by the holders of the
Telepanel Systems Common Shares or the Exchangeable Shares, as the
case may be.
<PAGE>
<PAGE>
APPENDIX A
Consumer and
Corporate Affairs Canada
FORM 4
ARTICLES OF AMENDMENT
(SECTION 27 or 177)
Canada Business
Corporations Act
1. Name of Corporation 2. Corporation No.
Telepanel Systems Inc. 211083-1
Systemes Telepanel Inc.
3. The articles of the above-named corporation are amended as follows:
See Schedule "A"
Date Signature Title
, 199
FOR DEPARTMENT USE ONLY
Filed
<PAGE>
<PAGE>
SCHEDULE "A"
1. to create an unlimited number of Exchangeable Shares
2. to change the rights, privileges, restrictions and conditions
attaching to the Common Shares so as to provide that such rights,
privileges, restrictions and conditions are as follows:
1.1 Dividends
Subject to the prior rights of the holders of the Exchangeable
Shares and any other shares ranking senior to the Common Shares
with respect to priority and the payment of dividends, the
holders of Common Shares shall be entitled to receive dividends
and the Corporation shall pay dividends thereon, as and when
declared by the board of directors of the Corporation out of the
assets of the Corporation properly applicable to the payment of
dividends, in such amount and in such form as the board of
directors may form time to time determine and all dividends that
the directors may declare on the Common Shares shall be declared
and paid in equal amounts per share on all Common Shares at the
time outstanding.
2.1 Dissolution
In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, or any other
distribution of assets of the Corporation among its shareholders
for the purpose of winding-up its affairs, subject to the prior
rights of the holders of the Exchangeable Shares and any other
shares ranking senior to the Common Shares with respect to
priority and the distribution of assets upon dissolution,
liquidation or winding-up, the holders of the Common Shares shall
be entitled to participate rateably in any distribution of the
assets of the Corporation for the purposes of winding-up its
affairs.
3.1 Voting Rights
The holders of the Common Shares shall be entitled to receive
notice of and to attend all meetings of the shareholders of the
Corporation and shall have one vote for each Common Share held at
all meetings of the shareholders of the Corporation, except for
meetings at which only holders of another specified class or
series of shares of the Corporation are entitled to vote
separately as a class or series.
3. to provide that the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares are as follows:
<PAGE>
EXCHANGEABLE SHARE PROVISIONS
ARTICLE 1
INTERPRETATION
1.1. Definitions.
In these Exchangeable Share Provisions, unless something in
the subject matter or context is inconsistent therewith:
"Automatic Exchange Right" has the meaning set out in Section
5.3(2).
"Automatic Redemption Date" means the date for the automatic
redemption by the Corporation of Exchangeable Shares pursuant to
Article 7 of these share provisions, which date shall be the first
to occur of (a) December 31, 2002, (b) the date selected by the ERS
Board of Directors at a time when less than 15% of the Exchangeable
Shares issuable on the Effective Date (other than Exchangeable
Shares held by ERS and its Subsidiaries and as such number of
shares may be adjusted as deemed appropriate by the Board of
Directors to give effect to any subdivision or consolidation of or
stock dividend on the Exchangeable Shares, any issuance or
distribution of rights to acquire Exchangeable Shares, any issue or
distribution of other securities or rights or evidences of
indebtedness or assets, or any other capital reorganization or
other transaction involving or affecting the Exchangeable Shares)
are outstanding, (c) the Business Day prior to the record date for
any meeting or vote of the shareholders of the Corporation to
consider any matters on which the holders of Exchangeable Shares
would be entitled to vote as shareholders of the Corporation, but
excluding any meeting or vote as described in clause (d) below or
(d) the Business Day following the day on which the holders of
Exchangeable Shares fail to take the necessary action at a meeting
or other vote of holders of Exchangeable Shares, if and to the
extent such action is required, to approve or disapprove, as
applicable, any change to, or in the rights of the holders of,
Exchangeable Shares, if the approval or disapproval, as applicable,
of such change would be required to maintain the economic and legal
equivalence of the Exchangeable Shares and the ERS Common Stock.
"Board of Directors" means the board of directors of the
Corporation.
"Business Day" means any day other than a Saturday, a Sunday
or a day when banks are not open for business in either or both of
New York, New York and Toronto, Ontario.
"CBCA" means the Canada Business Corporations Act, as amended.
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"CDA Average Market Price" means, in respect of a share of ERS
Common Stock for any specified period, the average of the daily
closing prices for the business days during such period (as
proportionally adjusted for any stock dividend, split, combination
of reclassification that took effect during such period). The
closing price for each day shall be the last reported sales price
regular way or, in case no such reported sales price took place on
such day, the average of the last reported bid and asked prices
regular way, in either case on the principal national securities
exchange on which the ERS Common Stock is listed or admitted to
trading (or if the ERS Common Stock is not at the time admitted or
listed to trading or any such exchange, then such price as shall be
equal to the average of the last reported sale price, as reported
on the Nasdaq National Market System on such day, or if the ERS
Common Stock is not so reported by Nasdaq on such day or if on any
day in question the security shall not be quoted on Nasdaq, then
such price shall be equal to the last reported bid and asked prices
on such day as reported by The National Quotation Bureau
Incorporated [or any similar reputable quotation and reporting
service, if such quotation is not reported by The National
Quotation Bureau Incorporated]); provided, however, that if the ERS
Common Stock is not traded in such manner that the quotations
referred to in this definition are available for the period
required hereunder, the CDA Average Market Price shall be
determined by the ERS Board of Directors or, if such determination
cannot be made, by a nationally recognized investment banking firm
selected by the ERS Board of Directors (or if such selection cannot
be made, by a nationally recognized independent investment banking
firm selected by the American Arbitration Association in accordance
with its rules).
"CDA Warrant" means the Stock Subscription Warrant issued
August 12, 1994, as amended, by ERS to the Connecticut Development
Authority.
"Canadian Dollar Equivalent" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount") at
any date the product obtained by multiplying (a) the Foreign
Currency Amount by (b) the official noon spot exchange rate on such
date for such foreign currency as reported by the Bank of Canada
or, in the event such spot exchange rate is not available, such
exchange rate on such date for such foreign currency as may be
deemed by the Board of Directors to be appropriate for such
purpose.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Combination Agreement" means the agreement between ERS and
the Corporation, dated as of October 29, 1997, as the same may be
amended, providing for, among other things, the Arrangement.
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"Common Shares" means the common shares, without par value, of
the Corporation.
"Corporation" means Telepanel Systems Inc., a corporation
existing under the laws of Canada.
"Current Market Price" means, in respect of a share of ERS
Common Stock on any date, the Canadian Dollar Equivalent of the
greatest of: (x) the CDA Average Market Price for the 15-day period
then ending calculated, (y) the 1997 Warrant Current Market Value
per share on such date, or (x) the average during a period of 20
consecutive trading days ending not more than five trading days
before such date of the last sale price regular way or, in case no
sale takes place on any such day, of the average of the closing bid
and asked prices regular way, in either case on the principal
national securities exchange on which the ERS Common Stock is
listed or admitted to trading, or if the ERS Common Stock is not
listed or admitted to trading on any such national securities
exchange, of the last sale price of the ERS Common Stock as
reported on The Nasdaq National Market, or, if the ERS Common Stock
is not so reported, of the average of the closing high bid and low
asked prices of the ERS Common Stock in the over-the-counter market
as reported on The Nasdaq Stock Market, Inc.; provided, however,
that if the shares of ERS Common are not then reported on The
Nasdaq Stock Market, Inc., or if, in the opinion of the ERS Board
of Directors, the public distribution or trading activity of ERS
Common Stock during such period is inadequate to create a market
that reflects the fair market value of a share of ERS Common Stock,
then the Current Market Price of a share of ERS Common Stock shall
be determined by the Board of Directors based upon the advice of
such qualified independent financial advisors as the ERS Board of
Directors may deem to be appropriate and provided further that any
such selection, opinion or determination by the ERS Board of
Directors shall be conclusive and binding.
"Dividend Amount" means an amount equal to the full amount of
all dividends and distributions declared and unpaid on each
Exchangeable Share and all dividends and distributions declared on
a share of ERS Common Stock that have not been declared on each
Exchangeable Share in accordance with Section 3.1, in each case
with a record date prior to the effective date of the exchange of
such Exchangeable Share for a share of ERS Common Stock hereunder.
"Effective Date" shall have the meaning set forth in the Plan
or Arrangement.
"ERS" means Electronic Retailing Systems International, Inc.,
a corporation existing under the laws of the State of Delaware, and
any successor corporation.
"ERS Board of Directors" means the Board of Directors of ERS.
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"ERS Call Notice" has the meaning set out in Section 7.2(2).
"ERS Common Stock" means the shares of common stock, par value
US$O.O1 per share, having voting rights of one vote per share and
not limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends and
in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding-up of ERS, as constituted on
the date hereof (including any stock into which it may be changed,
reclassified or converted pursuant to a recapitalization,
reconstruction, reorganization or reclassification of, or
amalgamation, merger, liquidation or similar transaction affecting
such shares).
"ERS Dividend Declaration Date" means the date on which the
ERS Board of Directors declares any dividend on the shares of ERS
Common Stock.
"ERS Indenture" means the Indenture dated January 24, 1997
between ERS and United States Trust Company of New York, as may be
supplemented or amended.
"ERS Liquidation Event" has the meaning set out in Section
5.3(1).
"ERS Liquidation Event Effective Date " has the meaning set
out in Section 5.3(3).
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions set out in paragraph 3.1 of Schedule A
of the articles of amendment of the articles of Telepanel creating
the Exchangeable Shares.
"Exchangeable Shares" mean the Exchangeable Shares of the
Corporation to which are attached the Exchangeable Share
Provisions.
"Liquidation Amount" has the meaning set out in Section
5.1(1).
"Liquidation Call Purchase Price" has the meaning set out in
Section 5.2(1).
"Liquidation Call Right" has the meaning set out in Section
5.2(1).
"Liquidation Date" has the meaning set out in Section 5.1(1).
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"1997 Warrant Current Market Value" means, in respect of a
share of ERS Common Stock on any date, (i) if the ERS Common Stock
is not registered under the United States Securities Exchange Act
of 1934, (a) the value of the security determined in good faith by
the ERS Board of Directors and certified in a board resolution,
based on the most recently computed arms-length transaction between
ERS and a person or entity (other than a person or entity
controlling, controlled by or under common control with ERS, or any
director or officer of ERS or any ERS subsidiary, or any beneficial
owner of 5% or more of the voting common equity, on a fully-diluted
basis, of ERS) and the closing of which occurs on such date or
shall have occurred on the six-month period preceding such date, or
(b) if no such transaction shall have occurred on such date or
within such six-month period, the value of the security as
determined by an independent financial expert or (ii) if the
security is registered under such Act, the average of the daily
closing bid prices (or the equivalent in the over-the-counter
market) for each business day in New York during the period
commencing 15 such business days before such date and ending on the
date one day prior to such date.
"Plan of Arrangement" means the plan of arrangement relating
to the arrangement of the Corporation under section 192 of the CBCA
contemplated by the Combination Agreement.
"1997 Warrant Agreement" means the Warrant Agreement dated
January 24, 1997, as amended, between ERS and American Stock
Transfer and Trust Company.
"Redemption Call Purchase Price" has the meaning set out in
Section 7.2(1).
"Redemption Call Right" has the meaning set out in Section
7.2(1).
"Redemption Price" has the meaning set out in Section 7.1(1).
"Retracted Shares" has the meaning set out in Section 6.1(1).
"Retraction Call Purchase Price" has the meaning set out in
Section 6.2(1).
"Retraction Call Right" has the meaning set out in Section
6.2(1).
"Retraction Date" has the meaning set out in Section 6.1(1).
"Retraction Price" has the meaning set out in Section 6.1(1).
"Retraction Request" has the meaning set out in Section
6.1(1).
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"Subsidiary" means, when used with reference to ERS, any
corporation more than 50% of the outstanding stock of which, by
vote, is owned, directly or indirectly, by ERS, by one or more
other Subsidiaries of ERS, or by ERS and one or more other
Subsidiaries of ERS.
"Transfer Agent" means The Montreal Trust Company of Canada,
a corporation existing under the laws of Canada, or such other
person as may from time to time be the registrar and transfer agent
for the Exchangeable Shares.
"Trustee" means The Montreal Trust Company of Canada, a
corporation existing under the laws of Canada, and any successor
trustee appointed under the Voting, Support and Exchange Trust
Agreement.
"Trust Estate" has the meaning set out in Section 1.1 of the
Voting, Support and Exchange Trust Agreement.
"Voting, Support and Exchange Trust Agreement" means the
Voting, Support and Exchange Trust Agreement among the Corporation,
ERS and the Trustee, made as of the date that the Plan of
Arrangement becomes effective.
1.2. Sections and Headings.
The division of these Exchangeable Share Provisions into
articles and sections and the insertion of headings are for
reference purposes only and shall not affect the interpretation of
these Exchangeable Share Provisions. Unless otherwise indicated,
any reference in these Exchangeable Share Provisions to an article
or section refers to the specified article or section of these
Exchangeable Share Provisions.
1.3. Number, Gender and Persons.
In these Exchangeable Share Provisions, 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, companies, associations, trusts,
unincorporated organizations, governmental bodies and other legal
or business entities of any kind.
1.4. Payments.
All payments to be made hereunder shall be made without
interest and less any tax required by law to be deducted and
withheld.
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ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1. Ranking.
The Exchangeable Shares shall be entitled to a preference over
the Common Shares and any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends as and
to the extent provided in Article 3 and with respect to the
distribution of assets in the event of the liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding up its affairs as and
to the extent provided in Article 5.
ARTICLE 3
DIVIDENDS
3.1. Dividends.
A holder of an Exchangeable Share shall be entitled to receive
and the Board of Directors shall, subject to applicable law, on
each ERS Dividend Declaration Date, declare a dividend on each
Exchangeable Share (a) in the case of a cash dividend or
distribution declared on the shares of ERS Common Stock, in an
amount in cash for each Exchangeable Share as is equal to the
Canadian Dollar Equivalent on the ERS Dividend Declaration Date of
the cash dividend or distribution declared on each share of ERS
Common Stock, (b) in the case of a stock dividend or distribution
declared on the shares of ERS Common Stock to be paid in shares of
ERS Common Stock, in such number of Exchangeable Shares for each
Exchangeable Share as is equal to the number of shares of ERS
Common Stock to be paid on each share of ERS Common Stock or (c) in
the case of a dividend or distribution declared on the shares of
ERS Common Stock to be paid in property other than cash or shares
of ERS Common Stock, in such type and amount of property for each
Exchangeable Share as is the same as or economically equivalent to
(to be determined by the Board of Directors as contemplated by
section 6.7 of the Voting, Support and Exchange Trust Agreement)
the type and amount of property declared as a dividend or
distribution on each share of ERS Common Stock. Such dividends
shall be paid out of the assets of the Corporation properly
applicable to the payment of dividends, or out of authorized but
unissued shares or other securities of the Corporation.
3.2. Payment of Dividends.
Cheques of the Corporation payable at par at any branch of the
bankers of the Corporation shall be issued in respect of any cash
dividends or distributions contemplated by Section 3.1(a) hereof<PAGE>
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and the sending of such a cheque to each holder of an Exchangeable
Share shall satisfy the cash dividend represented thereby unless
the cheque is not paid on presentation. Certificates registered in
the name of the registered holder of Exchangeable Shares shall be
issued or transferred in respect of any stock dividends or other
distribution of Exchangeable Shares contemplated by Section 3.1(b)
hereof and the sending of such a certificate to each holder of an
Exchangeable Share shall satisfy the stock dividend or other
distribution of Exchangeable Shares represented thereby. Such other
type and amount of property in respect of any dividends or
distributions contemplated by Section 3.1(c) hereof shall be
issued, distributed or transferred by the Corporation in such
manner as it shall determine and the issuance, distribution or
transfer thereof by the Corporation to each holder of an
Exchangeable Share shall satisfy the dividend or distribution
represented thereby. No holder of an Exchangeable Share shall be
entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has
not been duly presented to the Corporation's bankers for payment or
that otherwise remains unclaimed for a period of six years from the
date on which such dividend or distribution was payable.
3.3. Record and Payment Dates.
The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the payment
date for, any dividend or distribution declared on the Exchangeable
Shares under Section 3.1 hereof shall be the same as the record
date and payment date respectively, for the corresponding dividend
or distribution declared on the shares of ERS Common Stock.
3.4 Partial Payment.
If on any payment date for any dividends or distributions
declared on the Exchangeable Shares under Section 3.1 hereof the
dividends or distributions are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends or
distributions that remain unpaid shall be paid on a subsequent date
or dates determined by the Board of Directors on which the
Corporation shall have sufficient money or other assets properly
applicable to the payment of such dividends or distributions.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1. Certain Restrictions
(1) Except as provided in Section 4.1(2) and except pursuant
to obligations existing on the date hereof, so long as any of the
Exchangeable Shares are outstanding, the Corporation shall not at
any time without, but may at any time with, the approval of the<PAGE>
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holders of the Exchangeable Shares given as specified in Section
9.2 hereof:
(a) pay any dividends on the Common Shares or any other
shares ranking junior to the Exchangeable Shares, other than
stock dividends payable in Common Shares or any such other
shares ranking junior to the Exchangeable Shares, as the case
may be;
(b) redeem or purchase or make any capital distribution
in respect of Common Shares or any other shares ranking junior
to the Exchangeable Shares;
(c) redeem or purchase any other shares of the
Corporation ranking equally with the Exchangeable Shares with
respect to the payment of dividends or on any liquidation
distribution; or
(d) issue any shares other than (i) Exchangeable Shares,
(ii) Common Shares, and (iii) any other shares not ranking
superior to the Exchangeable Shares.
(2) The restrictions in Sections 4.1(1)(a), 4.1(1)(b) and
4.1(1)(c) shall not apply if all dividends and distributions on the
outstanding Exchangeable Shares corresponding to dividends and
distributions declared to date on the ERS Common Stock shall have
been declared on the Exchangeable Shares and paid in full.
ARTICLE 5
LIQUIDATION
5.1. Participation Upon Liquidation,
Dissolution or Winding Up of the Corporation.
(1) Subject to applicable law and the due exercise by ERS of
a Liquidation Call Right, in the event of the liquidation,
dissolution or winding up of the Corporation or any other
distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, a holder of
Exchangeable Shares shall be entitled to receive from the assets of
the Corporation in respect of each Exchangeable Share held by such
holder on the effective date of such liquidation, dissolution or
winding up (the "Liquidation Date"), before any distribution of any
part of the assets of the Corporation among the holders of the
Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount per share equal to (a) the Current
Market Price of a share of ERS Common Stock on the last Business
Day prior to the Liquidation Date, which shall be satisfied in full
by the Corporation causing to be delivered to such holder one share
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(collectively, the "Liquidation Amount"). In connection with
payment of the Liquidation Amount, the Corporation shall be
entitled to sell some of the ERS Common Stock which would otherwise
be deliverable to the particular holder of Exchangeable Shares in
order to fund any statutory withholding tax obligation.
(2) In the case of a distribution on Exchangeable Shares
under this Section 5.1, on or promptly after the Liquidation Date,
and subject to the exercise by ERS of the Liquidation Call Right,
the Corporation shall cause to be delivered to the holders of the
Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the CBCA and such
additional documents and instruments as the Transfer Agent and the
Corporation may reasonably require, at the registered office of the
Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of the
Exchangeable Shares. Payment of the aggregate Liquidation Amount
for such Exchangeable Shares shall be made by delivery to each
holder, at the address of the holder recorded in the securities
register of the Corporation for the Exchangeable Shares or by
holding for pick-up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of
Exchangeable Shares, certificates representing the aggregate number
of shares of ERS Common Stock deliverable by the Corporation to
such holder (which shares shall be duly issued as fully paid and
nonassessable and shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim created by ERS or
arising from acts or omissions of ERS) and a cheque of the
Corporation payable at par at any branch of the bankers of the
Corporation in payment of the remaining portion, if any, of the
aggregate Liquidation Amount payable to such holder. On and after
the Liquidation Date, the holders of the Exchangeable Shares shall
cease to be holders of such Exchangeable Shares and shall not be
entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part
of the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Exchangeable Shares shall not be made
upon presentation and surrender of share certificates in accordance
with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation
shall have the right at any time on or after the Liquidation Date
to deposit or cause to be deposited the Liquidation Amount in
respect of the Exchangeable Shares represented by certificates that
have not at the Liquidation Date been surrendered by the holders
thereof in a custodial account or for safe keeping, in the case of
non-cash items, with any chartered bank or trust company in Canada.
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Upon such deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be limited to
receiving their proportionate part of the total Liquidation Amount
for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in
accordance with the foregoing provisions. Upon such payment or
deposit of such Liquidation Amount, the holders of the Exchangeable
Shares shall thereafter be considered and deemed for all purposes
to be the holders of the ERS Common Stock delivered to them.
Notwithstanding the foregoing, until such payment or deposit of
such Liquidation Amount, the holder shall be deemed to still be a
holder of Exchangeable Shares for purposes of all voting rights
with respect thereto under the Voting, Support and Exchange Trust
Agreement.
(3) After the Corporation has satisfied its obligations to
pay the holders of the Exchangeable Shares the total Liquidation
Amount pursuant to this Section 5.1, such holders shall not be
entitled to share in any further distribution of the assets of the
Corporation.
5.2. Liquidation Call Rights.
(1) Subject to the limitations set forth in Section 5.2(2),
ERS shall have the overriding right (a "Liquidation Call Right"),
in the event of and notwithstanding the proposed liquidation,
dissolution or winding up of the Corporation referred to in Section
5.1 hereof, to purchase from all but not less than all of the
holders (other than ERS) of Exchangeable Shares on the Liquidation
Date all but not less than all of the Exchangeable Shares held by
each such holder on payment by ERS of an amount per share equal to
(a) the Current Market Price of a share of ERS Common Stock on the
last Business Day prior to the Liquidation Date, which shall be
satisfied in full by causing to be delivered to such holder one
share of ERS Common Stock, plus (b) the Dividend Amount, if any
(collectively, the "Liquidation Call Purchase Price"). In the event
of the exercise of a Liquidation Call Right, each holder of
Exchangeable Shares (other than ERS) shall be obligated to sell all
the Exchangeable Shares held by such holder to ERS on the
Liquidation Date on payment by ERS to the holder of the Liquidation
Call Purchase Price for each such share.
(2) In order to exercise its Liquidation Call Right, ERS must
notify in writing the Transfer Agent, as agent for the holders of
Exchangeable Shares, and the Corporation of its intention to
exercise such right at least 55 days before the Liquidation Date in
the case of a voluntary liquidation, dissolution or winding up of
the Corporation and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or winding up of the Corporation. The Transfer Agent
will notify the holders of Exchangeable Shares as to whether or not
a Liquidation Call Right has been exercised forthwith after the<PAGE>
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expiry of the date by which the same may be exercised, such form of
notice to be provided by ERS to the Transfer Agent. If ERS duly
exercises its Liquidation Call Right in accordance with this
Section 5.2, all obligations of the Corporation under Section 5.1
shall terminate and on the Liquidation Date ERS will purchase and
the holders of Exchangeable Shares will sell all of their
Exchangeable Shares then outstanding for a price per share equal to
the Liquidation Call Purchase Price.
(3) For the purposes of completing a purchase of the
Exchangeable Shares pursuant to the exercise of a Liquidation Call
Right, ERS shall deposit with the Transfer Agent, on or before the
Liquidation Date, certificates representing the total number of
shares of ERS Common Stock deliverable by ERS (which shares shall
be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim, encumbrance, security interest or
adverse claim created by ERS or arising from acts or omissions of
ERS) in payment of the total Liquidation Call Purchase Price and a
cheque in the amount of the remaining portion of the total
Liquidation Call Purchase Price and any interest allowed on such
deposit shall belong to ERS. Provided that the total Liquidation
Call Purchase Price has been so deposited with the Transfer Agent,
on and after the Liquidation Date the rights of each holder of
Exchangeable Shares (other than ERS) will be limited to receiving
such holder's proportionate part of the total Liquidation Call
Purchase Price payable by ERS, upon presentation and surrender by
the holder of Exchangeable Shares of certificates representing the
Exchangeable Shares held by such holder in accordance with the
following provisions and such holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be
the holder of the shares of ERS Common Stock delivered to such
holder. Upon surrender to the Transfer Agent of a certificate
representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer
of Exchangeable Shares, under the CBCA and such additional
documents and instruments as the Transfer Agent and the Corporation
may reasonably require, the holder of such surrendered certificate
shall be entitled to receive in exchange therefor, and the Transfer
Agent on behalf of ERS shall deliver to such holder, a certificate
representing the shares of ERS Common Stock to which such holder is
entitled and a cheque in payment of the remaining portion, if any,
of the holder's proportionate part of the total Liquidation Call
Purchase Price. If ERS does not exercise its Liquidation Call Right
in the manner described above, on the Liquidation Date the holders
of Exchangeable Shares shall be entitled to receive in exchange
therefor the Liquidation Amount otherwise payable by the
Corporation in connection with the liquidation, dissolution or
winding up of the Corporation pursuant to Section 5.1 hereof.
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5.3. Automatic Exchange on Liquidation of ERS.
(1) ERS shall give the Transfer Agent written notice of each
of the following events (each a "ERS Liquidation Event") at the
time set forth below:
(a) In the event of any determination by the ERS Board
of Directors to institute voluntary liquidation, dissolution
or winding-up proceedings with respect to ERS or to effect any
other distribution of assets of ERS among its stockholders for
the purpose of winding up its affairs, at least 60 days prior
to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(b) immediately, upon the earlier of (i) receipt by ERS
of notice of and (ii) ERS otherwise becoming aware of any
threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of ERS or to effect any other
distribution of assets of ERS among its stockholders for the
purpose of winding up its affairs.
(2) Immediately following receipt by the Transfer Agent from
ERS of notice of any ERS Liquidation Event contemplated by Section
5.3(1)(a) or 5.3(1)(b), the Transfer Agent will give notice thereof
to the holders of Exchangeable Shares. Such notice shall be
provided by ERS to the Transfer Agent and shall include a brief
description of the automatic exchange of Exchangeable Shares for
shares of ERS Common Stock provided for in Section 5.3(3) below
(the "Automatic Exchange Right").
(3) In order that the holders of Exchangeable Shares (other
than ERS) will be able to participate on a pro rata basis with the
holders of ERS Common Stock in the distribution of assets of ERS in
connection with a ERS Liquidation Event, on the fifth Business Day
prior to the effective date (the "ERS Liquidation Event Effective
Date") of a ERS Liquidation Event all of the then outstanding
Exchangeable Shares (other than Exchangeable Shares held by ERS)
shall be automatically exchanged for shares of ERS Common Stock. To
effect such automatic exchange, ERS shall be deemed to have
purchased on the fifth Business Day prior to the ERS Liquidation
Event Effective Date each Exchangeable Share then outstanding and
held by a holder of Exchangeable Shares (other than ERS), and each
such holder shall be deemed to have sold the Exchangeable Shares
held by it at such time, for a purchase price per share equal to
(a) the Current Market Price of a share of ERS Common Stock on the
Business Day prior to the fifth Business Day prior to the ERS
Liquidation Event Effective Date, which shall be satisfied in full
by ERS delivering to such holder one share of ERS Common Stock,
plus (b) the Dividend Amount, if any.
<PAGE>
<PAGE>
(4) On the fifth Business Day prior to the ERS Liquidation
Event Effective Date, the closing of the transaction of purchase
and sale contemplated by the automatic exchange of Exchangeable
Shares for ERS Common Stock shall be deemed to have occurred, and
each holder of Exchangeable Shares (other than ERS) shall be deemed
to have transferred to ERS all of such holder's right, title and
interest in and to such Exchangeable Shares and shall cease to be
a holder of such Exchangeable Shares and ERS shall deliver or cause
to be delivered to the Transfer Agent, for delivery to such
holders, the certificates for the number of shares of ERS Common
Stock deliverable upon the automatic exchange of Exchangeable
Shares for ERS Common Stock (which shares shall be duly issued as
fully paid and non-assessable shall be free and clear of any lien,
claim or encumbrance, security interest or adverse claim created by
ERS or arising from acts or omissions of ERS) and a cheque for the
balance, if any, of the total purchase price for such Exchangeable
Shares and any interest on such deposit shall belong to ERS.
Concurrently with each such holder ceasing to be a holder of
Exchangeable Shares, such holder shall be considered and deemed for
all purposes to be the holder of the shares of ERS Common Stock
delivered to it, or to the Transfer Agent on its behalf, pursuant
to the automatic exchange of Exchangeable Shares for ERS Common
Stock and the certificates held by such holder previously
representing the Exchangeable Shares exchanged by such holder with
ERS pursuant to such automatic exchange shall thereafter be deemed
to represent the shares of ERS Common Stock delivered to such
holder by ERS pursuant to such automatic exchange. Upon the request
of any such former holder of Exchangeable Shares and the surrender
by such holder of Exchangeable Share certificates deemed to
represent shares of ERS Common Stock duly endorsed in blank and
accompanied by such instruments of transfer as ERS may reasonably
require, the Transfer Agent shall deliver or cause to be delivered
to such holder certificates representing the shares of ERS Common
Stock of which such holder is the holder and a cheque in payment of
the remaining portion, if any, of the purchase price.
ARTICLE 6
RETRACTION AT OPTION OF HOLDER
6.1. Retraction at Option of Holder.
(1) Subject to applicable law and the due exercise by ERS of
a Retraction Call Right, a holder of Exchangeable Shares shall be
entitled at any time to require the Corporation to redeem, on the
fifth Business Day after the date on which the Retraction Request
is received by the Corporation (the "Retraction Date"), any or all
of the Exchangeable Shares registered in the name of such holder
for an amount per share equal to (a) the Current Market Price of a
share of ERS Common Stock on the last Business Day prior to the
Retraction Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder one share of ERS<PAGE>
<PAGE>
Common Stock for each Exchangeable Share presented and surrendered
by the holder, plus (b) the Dividend Amount, if any (collectively,
the "Retraction Price"). In connection with the payment of the
Retraction Price, the Corporation shall be entitled to sell some of
the ERS Common Stock that would otherwise be deliverable to the
particular holder of Exchangeable Shares in order to fund any
statutory withholding tax obligation. To effect a redemption under
this Section 6.1, the holder must present and surrender at the
registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to
the holders of Exchangeable Shares the certificate representing the
Exchangeable Shares that the holder desires to have the Corporation
redeem, together with such other documents and instruments as may
be required to effect a transfer of Exchangeable Shares under the
CBCA and such additional documents and instruments as the Transfer
Agent and the Corporation may reasonably require, together with a
duly executed statement (the "Retraction Request") in the form of
Schedule A hereto or in such other form as may be acceptable to the
Corporation specifying that the holder desires to have all or any
number specified therein of the Exchangeable Shares represented by
such certificate (the "Retracted Shares") redeemed by the
Corporation.
(2) In the case of a redemption of Exchangeable Shares under
this Section 6.1, and subject to the exercise by ERS of the
Retraction Call Right, upon receipt by the Corporation or the
Transfer Agent in the manner specified in Section 6.1(1) hereof of
a certificate representing the number of Exchangeable Shares which
the holder desires to have the Corporation redeem, together with a
Retraction Request, and provided that the Retraction Request is not
revoked by the holder in the manner specified in Section 6.1(5),
the Corporation shall redeem the Retracted Shares effective at the
close of business on the Retraction Date. On the Retraction Date,
the Corporation shall deliver or cause the Transfer Agent to
deliver to the relevant holder at the address of the holder
recorded in the securities register of the Corporation for the
Exchangeable Shares or at the address specified in the holder's
Retraction Request or by holding for pick-up by the holder at the
registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to
the holders of Exchangeable Shares, a certificate representing the
number of shares of ERS Common Stock to which such holder is
entitled (which shares shall be duly issued as fully paid and
non-assessable shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim created by ERS or
arising from acts or omissions of ERS) registered in the name of
the holder or in such other name as the holder may request in
payment of the Retraction Price and a cheque of the Corporation
payable at par at any branch of the bankers of the Corporation in
payment of the remaining portion, if any, of the aggregate
Retraction Price to which such holder is entitled and such delivery
of such certificate and cheque on behalf of the Corporation by the<PAGE>
<PAGE>
Transfer Agent shall be deemed to be payment of and shall satisfy
and discharge all liability for the Retraction Price to the extent
that the same is represented by such share certificates and cheque,
unless such cheque is not paid on due presentation. If only a part
of the Exchangeable Shares represented by any certificate is
redeemed, a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of the
Corporation.
(3) On and after the close of business on the Retraction
Date, the holder of the Retracted Shares shall cease to be a holder
of such Retracted Shares and shall not be entitled to exercise any
of the rights of a holder in respect thereof, other than the right
to receive its proportionate part of the aggregate Retraction Price
for such Retracted Shares, unless upon presentation and surrender
of certificates in accordance with the foregoing provisions,
payment of the aggregate Retraction Price payable to such holder
shall not be made, in which case the rights of such holder shall
remain unaffected under such aggregate Retraction Price has been
paid in the manner hereinbefore provided. On and after the close of
business on the Retraction Date, provided that presentation and
surrender of certificates and payment of such aggregate Retraction
Price has been made in accordance with the foregoing provisions,
the holder of the Retracted Shares so redeemed by the Corporation
shall thereafter be considered and deemed for all purposes to be a
holder of the shares of ERS Common Stock delivered to such holder.
(4) Notwithstanding any other provision of this Section 6.1,
the Corporation shall not be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent that
such redemption of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law. If the
Corporation believes that on any Retraction Date it would not be
permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and ERS shall not have
exercised its Retraction Call Right with respect to the Retracted
Shares, the Corporation shall only be obligated to redeem Retracted
Shares specified by a holder in a Retraction Request to the extent
of the maximum number that may be so redeemed (rounded down to a
whole number of shares) as would not be contrary to such provisions
and shall notify the holder at least two Business Days prior to the
Retraction Date as to the number of Retracted Shares which will not
be redeemed by the Corporation. In any case in which the redemption
by the Corporation of Retracted Shares would be contrary to
solvency requirements or other provisions of applicable law and
more than one holder has delivered a Retraction Request, the
Corporation shall redeem Retracted Shares in accordance with
Section 6.1(2) on a pro rata basis and shall issue to each such
holder of Retracted Shares a new certificate, at the expense of the
Corporation, representing the Retracted Shares not redeemed by the
Corporation pursuant to Section 6.1(2) hereof if the Retraction
Request is not revoked by the holder in the manner specified in<PAGE>
<PAGE>
Section 6.1(5) and ERS shall not have exercised its Retraction Call
Right in respect of any such Retracted Shares, an Insolvency Event
(as defined in the Voting, Support and Exchange Trust Agreement)
shall, to the extent it has not theretofore occurred, be deemed
thereupon to have occurred and the holder of any such Retracted
Shares not redeemed by the Corporation pursuant to Section 6.1(2)
as a result of solvency requirements or other provisions of
applicable law shall be deemed by giving the Retraction Request to
have exercised its Exchange Right (as defined in the Voting,
Support and Exchange Trust Agreement) so as to require ERS to
purchase the unredeemed Retracted Shares from such holder on the
Retraction Date or as soon as practicable thereafter on payment by
ERS to such holder of the Purchase Price for each such Retracted
Share, all as more specifically provided in the Voting, Support and
Exchange Trust Agreement.
(5) A holder of Retracted Shares may, by notice in writing
given by the holder to the Corporation before the close of business
on the Business Day immediately preceding the Retraction Date,
withdraw its Retraction Request in which event such Retraction
Request shall be null and void.
6.2. Retraction Call Rights.
(1) In the event that a holder of Exchangeable Shares
delivers a Retraction Request pursuant to Section 6.1 and subject
to the limitations set forth in Section 6.2(2), ERS shall have the
overriding right (a "Retraction Call Right"), notwithstanding the
proposed redemption of the Exchangeable Shares by the Corporation
pursuant to Section 6.1 hereof, to purchase from such holder on the
Retraction Date all but not less than all of the Retracted Shares
held by such holder on payment by ERS of a purchase price (the
"Retraction Call Purchase Price") per share equal to the Retraction
Price. In the event of the exercise of a Retraction Call Right, a
holder of Exchangeable Shares who has delivered a Retraction
Request shall be obligated to sell all the Retracted Shares to ERS
on the Retraction Date on payment by ERS of the Retraction Call
Purchase Price.
(2) Upon receipt by the Corporation of a Retraction Request,
the Corporation shall immediately notify ERS thereof. In order to
exercise its Retraction Call Right, ERS must notify the Corporation
in writing of its determination to do so (a "ERS Call Notice")
within two Business Days of notification to ERS by the Corporation
of the receipt by the Corporation of the Retraction Request. If ERS
so notifies the Corporation within such two Business Day period,
the Corporation shall notify the holder as soon as possible
thereafter as to the exercise of a Retraction Call Right. If ERS
delivers an ERS Call Notice within such two Business Day period and
duly exercises its Retraction Call Right in accordance with this
Section 6.2, the obligation of the Corporation to redeem the
Retracted Shares shall terminate and, provided that the Retraction<PAGE>
<PAGE>
Request is not revoked by the holder in the manner specified in
Section 6.1(5), ERS shall purchase from such holder and such holder
shall sell to ERS on the Retraction Date the Retracted Shares for
the Retraction Call Purchase Price. For the purposes of completing
a purchase pursuant to a Retraction Call Right, ERS shall deposit
with the Transfer Agent, on or before the Retraction Date,
certificates representing the number of shares of ERS Common Stock
to which such holder is entitled and a cheque in the amount of the
remaining portion, if any, of the aggregate Retraction Call
Purchase Price to which such holder is entitled. Provided that the
aggregate Retraction Call Purchase Price has been so deposited to
the Transfer Agent, the closing of the purchase and sale of the
Retracted Shares pursuant to the Retraction Call Right shall be
deemed to have occurred as at the close of business on the
Retraction Date and for greater certainty, no redemption by the
Corporation of such Retracted Shares shall take place on the
Retraction Date. In the event that ERS does not deliver a ERS Call
Notice within such two Business Day period, and provided that the
Retraction Request is not revoked by the holder in the manner
specified in Section 6.1(5), the Corporation shall redeem the
Retracted Shares on the Retraction Date and in the manner otherwise
contemplated in Section 6.1.
(3) For the purpose of completing a purchase of Exchangeable
Shares pursuant to the exercise of a Retraction Call Right, ERS
shall deliver or cause the Transfer Agent to deliver to the
relevant holder, at the address of the holder recorded in the
securities register of the Corporation for the Exchangeable Shares
or at the address specified in the holder's Retraction Request or
by holding for pick-up by the holder at the registered office of
the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of
Exchangeable Shares, a certificate representing the number of
shares of ERS Common Stock to which such holder is entitled (which
shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim, encumbrance, security
interest or adverse claim created by ERS or arising from acts or
omissions of ERS) registered in the name of the holder or in such
other name as the holder may request in payment of the Retraction
Call Purchase Price and a cheque of ERS payable at par and in
Canadian dollars at any branch of the bankers of ERS or of the
Corporation in Canada in payment of the remaining portion, if any,
of such aggregate Retraction Call Purchase Price and such delivery
of such certificate and cheque on behalf of ERS by the Transfer
Agent shall be deemed to be payment of and shall satisfy and
discharge all liability for the Retraction Call Purchase Price to
the extent that the same is represented by such share certificates
and cheque, unless such change is not paid on due presentation.
<PAGE>
<PAGE>
(4) On and after the close of business on the Retraction
Date, the holder of the Retracted Shares shall not be entitled to
exercise any of the rights of a holder in respect thereof, other
than the right to receive its proportionate part of the total
Retraction Call Purchase Price unless upon presentation and
surrender of certificates in accordance with the foregoing
provisions, payment of the aggregate Retraction Call Purchase Price
payable to such holder shall not be made, in which case the rights
of such holder shall remain unaffected until such aggregate
Retraction Call Purchase Price has been paid in the manner
hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of
certificates and payment of such aggregate Retraction Call Purchase
Price has been made in accordance with the foregoing provisions,
the holder of the Retracted Shares so purchased by ERS shall
thereafter be considered and deemed for all purposes to be a holder
of the shares of ERS Common Stock delivered to such holder.
ARTICLE 7
REDEMPTION BY THE CORPORATION
7.1. Redemption by the Corporation.
(1) Subject to applicable law and the due exercise by ERS of
a Redemption Call Right, the Corporation shall on the Automatic
Redemption Date redeem all of the then outstanding Exchangeable
Shares for an amount per share equal to (a) the Current Market
Price of a share of ERS Common Stock on the last Business Day prior
to the Automatic Redemption Date, which shall be satisfied in full
by the Corporation causing to be delivered to each holder of
Exchangeable Shares one share of ERS Common Stock for each
Exchangeable Share held by such holder, plus (b) the Dividend
Amount, if any (collectively, the "Redemption Price"). In
connection with the payment of the Redemption Price, the
Corporation shall be entitled to sell some of the ERS Common Stock
which would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax
obligation.
(2) In case of a redemption of Exchangeable Shares under this
Section 7.1, the Corporation shall, at least 30 days before the
Automatic Redemption Date or before a possible Automatic Redemption
Date which may result from a failure of the holders of Exchangeable
Shares to take necessary action as described in clause (d) of the
definition of Automatic Redemption Date, send or cause to be sent
to each holder of Exchangeable Shares a notice in writing of the
redemption by the Corporation or the purchase by ERS under its
Redemption Call Right, as the case may be, of the Exchangeable
Shares held by such holder. Such notice shall set out the formula
for determining the Redemption Price or the Redemption Call
Purchase Price, as the case may be, the Automatic Redemption Date<PAGE>
<PAGE>
and, if applicable, particulars of the Redemption Call Right. In
the case of any notice given in connection with a possible
Automatic Redemption Date, such notice will be given contingently
and will be withdrawn if the contingency does not occur.
(3) On or after the Automatic Redemption Date and subject to
the exercise by ERS of a Redemption Call Right, the Corporation
shall cause to be delivered to the holders of the Exchangeable
Shares to be redeemed the Redemption Price for each such
Exchangeable Share upon presentation and surrender at the
registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such
notice of the certificates representing such Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
CBCA, and such additional documents and instruments as the Transfer
Agent and the Corporation may reasonably require. Payment of the
aggregate Redemption Price for Exchangeable Shares held by a holder
shall be made by delivery to such holder, at the address of such
holder recorded in the securities register of the Corporation or by
holding for pick-up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be
specified by the Corporation in such notice, of a certificate
representing the aggregate number of shares of ERS Common Stock
deliverable by the Corporation to such holder (which shares shall
be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim, encumbrance, security interest or
adverse claim created by ERS or arising form acts or omissions of
ERS) and a cheque of the Corporation payable at par at any branch
of the bankers of the Corporation in respect of the remaining
portion, if any, of such aggregate Redemption Price. On and after
the Automatic Redemption Date, the holders of the Exchangeable
Shares called for redemption shall not be entitled to exercise any
of the rights of holders in respect thereof, other than the right
to receive their proportionate part of the total Redemption Price,
unless payment of the aggregate Redemption Price deliverable to a
holder for Exchangeable Shares shall not be made upon presentation
and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holder shall
remain unaffected until the aggregate Redemption Price deliverable
to such holder has been paid in the manner hereinbefore provided.
The Corporation shall have the right at any time after the sending
of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the total Redemption
Price of the Exchangeable Shares so called for redemption, or of
such of the said Exchangeable Shares represented by certificates
that have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, in a custodial
account with any chartered bank or trust company in Canada named in
such notice and any interest allowed on such deposit shall belong
to the Corporation. Provided that such total Redemption Price has
been so deposited prior to the Automatic Redemption Date, on and<PAGE>
<PAGE>
after the Automatic Redemption Date, the Exchangeable Shares shall
be redeemed and the rights of the holders thereof after the
Automatic Redemption Date shall be limited to receiving their
proportionate part of the total Redemption Price for such
Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in
accordance with the foregoing provisions. Upon such payment or
deposit of the total Redemption Price, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for
all purposes to be holders of the shares of ERS Common Stock
delivered to them.
7.2. Redemption Call Rights.
(1) Subject to the limitations set forth in Section 7.2(2),
ERS shall have the overriding right (a "Redemption Call Right"),
notwithstanding the proposed redemption of the Exchangeable Shares
by the Corporation pursuant to Section 7.1 hereof, to purchase from
all but not less than all of the holders of Exchangeable Shares
(other than ERS) on the last Business Day prior to the Automatic
Redemption Date all but not less than all of the Exchangeable
Shares held by each such holder on payment by ERS of an amount per
share equal to (a) the Current Market Price of a share of ERS
Common Stock on the last Business Day prior to the Automatic
Redemption Date, which shall be satisfied in full by causing to be
delivered to such holder one share of ERS Common Stock plus (b) the
Dividend Amount, if any (collectively, the "Redemption Call
Purchase Price"). In the event of the exercise of a Redemption Call
Right, each holder of Exchangeable Shares (other than ERS) shall be
obligated to sell all the Exchangeable Shares held by such holder
to ERS on the last Business Day prior to the Automatic Redemption
Date on payment by ERS to such holder of the Redemption Call
Purchase Price for each such share.
(2) In order to exercise its Redemption Call Right, ERS must
notify in writing the Transfer Agent, as agent for the holders of
Exchangeable Shares, and the Corporation of its intention to
exercise such right not later than the date by which the
Corporation is required to give notice of the Automatic Redemption
Date. The Transfer Agent will notify the holders of Exchangeable
Shares as to whether or not a Redemption Call Right has been
exercised forthwith after the expiry of the date by which the same
may be exercised, such form of notice to be provided by ERS to the
Transfer Agent. If ERS duly exercises its Redemption Call Right in
accordance with this Section 7.2, the right of the Corporation to
redeem any Exchangeable Shares pursuant to Section 7.1 on the
Automatic Redemption Date shall terminate at such time and on the
last Business Day prior to the Automatic Redemption Date ERS will
purchase and the holders of Exchangeable Shares (other than ERS)
will sell all of their Exchangeable Shares then outstanding for a
price per share equal to the Redemption Call Purchase Price.
<PAGE>
<PAGE>
(3) For the purposes of completing a purchase of the
Exchangeable Shares pursuant to the exercise of a Redemption Call
Right, ERS shall deposit with the Transfer Agent, on or before the
last Business Day prior to the Automatic Redemption Date,
certificates representing the total number of shares of ERS Common
Stock deliverable by ERS (which shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any
lien, claim, encumbrance, security interest or adverse claim
created by ERS or arising from acts or omissions of ERS) in payment
of the total Redemption Call Purchase Price and a cheque in the
amount of the remaining portion, if any, of the total Redemption
Call Purchase Price and any interest allowed on such deposit shall
belong to ERS. Provided that the total Redemption Call Purchase
Price has been so deposited with the Transfer Agent, on and after
the last Business Day prior to such Automatic Redemption Date the
rights of each holder of Exchangeable Shares (other than ERS) will
be limited to receiving such holder's proportionate part of the
total Redemption Call Purchase Price payable by ERS upon
presentation and surrender by such holder of certificates
representing the Exchangeable Shares held by such holder in
accordance with the following provisions and such holder shall on
and after the last Business Day prior to the Automatic Redemption
Date be considered and deemed for all purposes to be the holder of
the shares of ERS Common Stock delivered to such holder. Upon
surrender to the Transfer Agent of a certificate representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable
Shares under the CBCA and such additional documents and instruments
as the Transfer Agent and the Corporation may reasonably require,
the holder of such surrendered certificate shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf of
ERS shall deliver to such holder, a certificate representing the
shares of ERS Common Stock to which such holder is entitled and a
cheque in payment of the remaining portion, if any, of the holder's
proportionate part of the total Redemption Call Purchase Price. If
ERS does not exercise the Redemption Call Right in the manner
described above, on the Automatic Redemption Date a holder of
Exchangeable Shares shall be entitled to receive in exchange
therefor the redemption price otherwise payable by the Corporation
in connection with the redemption of the Exchangeable Shares
pursuant to Section 7.1 hereof.
ARTICLE 8
VOTING RIGHTS
8.1. Voting Rights. Except as required by applicable law and
the provisions of Sections 9.1, 10.1 and 11.2, the holders of the
Exchangeable Shares shall not be entitled as such to receive notice
of or to attend any meeting of the shareholders of the Corporation
or to vote at any such meeting. The holders of the Exchangeable
Shares shall, however, be entitled to notice of meetings of the<PAGE>
<PAGE>
shareholders called for the purpose of authorizing the dissolution
of the Corporation or the sale, lease or exchange of all or
substantially all the property of the Corporation other than in the
ordinary course of business of the Corporation.
ARTICLE 9
AMENDMENT AND APPROVAL
9.1. Amendment. The rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares may be added to,
changed or removed only with the approval of the holders of the
Exchangeable Shares given as hereinafter specified.
9.2. Approval. Any approval given by the holders of the
Exchangeable Shares to add to, change or remove any right,
privilege, restriction or condition attaching to the Exchangeable
Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been
sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such approval
be evidenced by resolution passed by not less than two-thirds of
the votes cast on such resolution at a meeting of holders of
Exchangeable Shares duly called and held at which the holders of at
least 50% of the outstanding Exchangeable Shares at that time are
present or represented by proxy; provided that such approval must
be given also by the affirmative vote of holders of more than
two-thirds of the Exchangeable Shares represented in person or by
proxy at the meeting excluding Exchangeable Shares beneficially
owned by ERS or any of its Subsidiaries. If at any such meeting the
holders of at least 50% of the outstanding Exchangeable Shares at
that time are not present or represented by proxy within one-half
hour after the time appointed for such meeting then the meeting
shall be adjourned to such date not less than 10 days thereafter
and to such time and place as may be designated by the chairman of
such meeting. At such adjourned meeting the holders of Exchangeable
Shares present or represented by proxy thereat may transact the
business for which the meeting was originally called and a
resolution passed thereat by the affirmative vote of not less than
two-thirds of the votes cast on such resolution at such meeting
shall constitute the approval or consent of the holders of the
Exchangeable Shares.
ARTICLE 10
RECIPROCAL CHANGES, ETC.
IN RESPECT OF ERS COMMON STOCK
10.1. Economic Equivalence.
(1) Each holder of an Exchangeable Share acknowledges that
the Voting, Support and Exchange Trust Agreement provides, in part,<PAGE>
<PAGE>
that ERS will not, except as provided in the Voting, Support and
Exchange Trust Agreement, without the prior approval of the
Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2 hereof:
(a) issue or distribute shares of ERS Common Stock (or
securities exchangeable for or convertible into or carrying
rights to acquire ERS Common Stock) to the holders of all or
substantially all of the then outstanding shares of ERS Common
Stock by way of stock dividend or other distribution, other
than an issue of shares of ERS Common Stock (or securities
exchangeable for or convertible into or carrying rights to
acquire ERS Common Stock) to holders of shares of ERS Common
Stock who exercise an option to receive dividends in shares of
ERS Common Stock (or securities exchangeable for or
convertible into or carrying rights to acquire shares of ERS
Common Stock) in lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of ERS Common Stock (or securities
exchangeable for or convertible into or carrying rights to
acquire ERS Common Stock); or
(c) issue or distribute to the holders of all or
substantially all of the then outstanding shares of ERS Common
Stock (i)shares or securities of ERS of any class other than
ERS Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares of ERS
Common Stock), (ii) rights, options or warrants other than
those referred to in Section 10.1 (1) (b) above, (iii)
evidences of indebtedness of ERS or (iv) assets of ERS;
unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other
assets is issued or distributed simultaneously to holders of the
Exchangeable Shares.
(2) Each holder of an Exchangeable Share acknowledges that
the Voting, Support and Exchange Trust Agreement further provides,
in part, that ERS will not, except as provided in the Voting,
Support and Exchange Trust Agreement, without the prior approval of
the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2 of these
share provision:
(a) subdivide, redivide or change the then outstanding
shares of ERS Common Stock into a greater number of shares of
ERS Common Stock; or
<PAGE>
<PAGE>
(b) reduce, combine or consolidate or change the then
outstanding shares of ERS Common Stock into a lesser number of
shares of ERS Common Stock; or
(c) reclassify or otherwise change the shares of ERS
Common Stock or effect an amalgamation, merger, reorganization
or other transaction affecting the ERS Common Stock;
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the
Exchangeable Shares.
(3) The Voting, Support and Exchange Trust Agreement further
provides, in part, that the aforesaid provisions of the Voting,
Support and Exchange Trust Agreement shall not be changed without
the approval of the holders of the Exchangeable Shares given in
accordance with Section 9.2 hereof.
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER THE VOTING,
SUPPORT AND EXCHANGE TRUST AGREEMENT
11.1. Compliance. The Corporation shall take all such
actions and do all such things as shall be necessary or advisable
to perform and comply with and to ensure performance and compliance
by ERS with all provisions of the Voting, Support and Exchange
Trust Agreement applicable to the Corporation and ERS,
respectively, in accordance with the terms thereof including,
without limitation, taking all such actions and doing all such
things as shall be necessary or advisable to enforce to the fullest
extent possible for the direct benefit of the Corporation all
rights and benefits in favour of the Corporation under or pursuant
to such agreement.
11.2. Amendments. The Corporation shall not agree to or
otherwise give effect to any amendment to, or waiver or forgiveness
of its rights or obligations under, the Voting, Support and
Exchange Trust Agreement without the approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 hereof
other than as permitted by the Voting, Support and Exchange Trust
Agreement and other than such amendments, waivers and/or
forgiveness as may be necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or
parties to such agreement for the protection of the
Corporation or the holders of Exchangeable Shares;
(b) making such provisions or modifications not
inconsistent with such agreement as may be necessary or
desirable with respect to matters or questions arising
thereunder which, in the opinion of the Board of Directors, it<PAGE>
<PAGE>
may be expedient to make, provided that the Board of Directors
shall be of the opinion, after consultation with counsel, that
such provisions and modifications will not be prejudicial to
the interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such
agreement which, on the advice of counsel to the Corporation,
are required for the purpose of curing or correcting any
ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error contained therein,
provided that the Board of Directors shall be of the opinion,
after consultation with counsel, that such changes or
corrections will not be prejudicial to the interests of the
holders of the Exchangeable Shares.
ARTICLE 12
LEGEND
12.1. Legend. The certificates evidencing the Exchangeable
Shares shall contain or have affixed thereto a legend, in form and
on terms approved by the Board of Directors, with respect to the
provisions of the Plan of Arrangement and the Voting, Support and
Exchange Trust Agreement (including the provisions with respect to
the call rights, voting rights and exchange rights thereunder).
ARTICLE 13
NOTICES
13.1. Notices. Subject to applicable law, any notice,
request or other communication to be given to the Corporation by a
holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by
telecopy or by delivery to the registered office of the Corporation
and addressed to the attention of the President. Any such notice,
request or other communication, if given by mail, telecopy or
delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
13.2. Delivery of Certificates. Any presentation and
surrender by a holder of Exchangeable Shares to the Corporation or
the Transfer Agent of certificates representing Exchangeable Shares
in connection with the liquidation, dissolution or winding up of
the Corporation or the retraction or redemption of Exchangeable
Shares shall be made by registered mail (postage prepaid) or by
delivery to the registered office of the Corporation or to such
office of the Transfer Agent as may be specified by the
Corporation, in each case addressed to the attention of the
President of the Corporation. Any such presentation and surrender
of certificates shall only be deemed to have been made and to be
effective upon actual receipt thereof by the Corporation or the<PAGE>
<PAGE>
Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the
sole risk of the holder mailing the same.
13.3. Notices to Holders. Subject to applicable law, any
notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in
writing and shall be valid and effective if given by mail (postage
prepaid) or by delivery to the address of the holder recorded in
the securities register of the Corporation or, in the event of the
address of any such holder not being so recorded, then at the last
known address of such holder. Any such notice, request order
communication, if given by mail, shall be deemed to have been given
and received on the fifth Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been
given and received on the date of delivery. Accidental failure or
omission to give any notice, request or other communication to one
or more holders of Exchangeable Shares, or any defect in such
notice, shall not invalidate or otherwise alter or affect any
action or proceeding to be taken by the Corporation pursuant
thereto.
<PAGE>
<PAGE>
SCHEDULE A
NOTICE OF RETRACTION
To the Corporation and ERS
c/o The Montreal Trust Company of Canada
This notice is given pursuant to Article 6 of the provisions
(the "Share Provisions") attaching to the share(s) represented by
this certificate and all capitalized words and expressions used in
this notice that are defined in the Share Provisions have the
meanings ascribed to such words and expressions in such Share
Provisions.
The undersigned hereby notifies the Corporation that, subject
to the Retraction Call Right referred to below, the undersigned
desires to have the Corporation redeem on the Retraction Date
(being the fifth Business Day after the date upon which this notice
is received by the Corporation) in accordance with Article 6 of the
Share Provisions;
all share(s) represented by this certificate; or
share(s) only.
The undersigned acknowledges the Retraction Call Right of ERS
to purchase all but not less than all the Retracted Shares from the
undersigned and that this notice shall be deemed to be a revocable
offer by the undersigned to sell the Retracted Shares to ERS in
accordance with the Retraction Call Right on the Retraction Date
for the Retraction Price and on the other terms and conditions set
out in Section 6.3 of the Share Provisions. If ERS determines not
to exercise its Retraction Call Right, the Corporation will notify
the undersigned of such fact as soon as possible. This notice of
retraction, and offer to sell the Retracted Shares to ERS, may be
revoked and withdrawn by the undersigned by notice in writing given
to the Corporation at any time before the close of business on the
Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency
requirements or other provisions of applicable law, the Corporation
is unable to redeem all Retracted Shares an Insolvency Event (as
defined in the Voting, Support and Exchange Trust Agreement) shall,
to the extent it shall not theretofore have occurred, be deemed
thereupon to have occurred, and the undersigned will be deemed to
have exercised the Exchange Right (as defined in the Voting,
Support and Exchange Trust Agreement) so as to require ERS to
purchase the unredeemed Retracted Shares.
<PAGE>
<PAGE>
The undersigned hereby represents and warrants to the
Corporation and ERS that the undersigned has good title to, and
owns, the share(s) represented by this certificate to be acquired
by the Corporation or ERS, as the case may be, free and clear of
all liens, claims and encumbrances.
(Date) (Signature of Shareholder) (Guarantee of Signature)
Please check box if the securities and any check(s) resulting from
the retraction or purchase of the Retracted Shares are to be held
for pick-up by the shareholder at the principal transfer office of
Transfer Agent in Toronto, Ontario, failing which the securities
and any cheque will be mailed to the last address of the
shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate,
together with such additional documents as the Transfer
Agent and the Corporation may require, must be deposited
with the Transfer Agent at its principal transfer office
in Toronto. The securities and any cheque resulting from
the retraction or purchase of the Retracted Shares will
be issued and registered in, and made payable to,
respectively, the name of the shareholder as it appears
on the register of the Corporation and the securities and
cheque resulting from such retraction or purchase will be
delivered to such shareholder as indicated above, unless
the form appearing immediately below is duly completed,
all exigible transfer taxes are paid and the signature of
the registered holder is guaranteed by a Canadian
chartered bank or trust company, member of a recognized
stock exchange in Canada or a member of the Securities
Transfer Association Medallion (STAMP) Program.
Date
- ------------------------------------ ------------
Name of Person in Whose Name Securities
and Cheques Are To Be Registered, Issued
or Delivered (please print)
- ------------------------------------ ---------------------
Street Address or P.O. Box Signature of
Registered Holder
- ------------------------------------ ---------------------
City - Province Signature Guaranteed
by<PAGE>
<PAGE>
NOTE: If the notice of retraction is for less than all of the
share(s) represented by this certificate, a certificate
representing the remaining shares of the Corporation will
be issued and registered in the name of the shareholder
as it appears on the register of the Corporation, unless
the Share Transfer Power on the share certificate is duly
completed in respect of such shares.
U.S. Residents/Citizens must provide their Taxpayer Identification
Number here:
<PAGE>
<PAGE>
APPENDIX B
TELEPANEL SYSTEMS INC.
BY-LAW NO. 5
BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of the
Corporation, as follows:
(i) Section 2.03 of By-law No. 1 shall be deleted in its
entirety and the following substituted in lieu thereof:
2.03 Financial Year - Until changed by the
Board, the Financial Year of the Corporation
shall end on the 31st day of December in each
year.
(ii) Section 2.04 of By-law No. 1 shall be deleted in its
entirety and the following substituted in lieu thereof:
2.04 Execution of Instruments - Deeds,
transfers, assignments, contracts,
obligations, certificates and other
instruments may be signed on behalf of the
Corporation by one person who holds the office
of chairman of the board, president, managing
director or vice-president. In addition, the
board may from time to time direct the manner
in which and the person or persons by whom any
particular instrument or class of instruments
may or shall be signed. Any signing officer
may affix the corporate seal to any instrument
requiring the same.
(iii) Section 4.01 of By-law No. 1 shall be deleted in its
entirety and the following substituted in lieu thereof.
4.01 Number of Directors and Quorum - Until
changed in accordance with the Act, the board
shall consist of five directors. Subject to
Section 4.08, the quorum for the transaction
of business at any meeting of the board shall
consist of four directors or such other number
of directors as the board may from time to
time determine.
ENACTED this th day of , 199 .
WITNESS the seal of the Corporation.
------------------------------
President
------------------------------
Secretary
<PAGE>
Exhibit 1.1(b)(i)
VOTING, SUPPORT AND EXCHANGE TRUST AGREEMENT
AMONG
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
TELEPANEL SYSTEMS, INC.
AND
THE MONTREAL TRUST COMPANY OF CANADA
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INTERPRETATION. . . . . . . . . 2
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . 2
1.2. Interpretation Not Affected by Headings, etc.. . . . 7
1.3. Number, Gender and Persons . . . . . . . . . . . . . 7
1.4. Date for Any Action. . . . . . . . . . . . . . . . . 7
1.5. Payments . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2 TRUST . . . . . . . . . . . . . . . . . . . . . 8
2.1. Establishment of Trust . . . . . . . . . . . . . . . 8
ARTICLE 3 VOTING SHARE. . . . . . . . . . . . . . . . . . 8
3.1. Issue and Ownership of the Voting Share. . . . . . . 8
3.2. Legended Share Certificates. . . . . . . . . . . . . 8
3.3. Safekeeping of Certificate . . . . . . . . . . . . . 9
3.4. Retirement of Voting Share . . . . . . . . . . . . . 9
ARTICLE 4 EXERCISE OF VOTING RIGHTS . . . . . . . . . . . 9
4.1. Voting Rights . . . . . . . . . . . . . . . . . . . 9
4.2. Number of Votes . . . . . . . . . . . . . . . . . . 9
4.3. Mailings to Shareholders. . . . . . . . . . . . . . 9
4.4. Copies of Stockholder Information . . . . . . . . . 11
4.5. Other Materials . . . . . . . . . . . . . . . . . . 11
4.6. List of Persons Entitled to Vote. . . . . . . . . . 11
4.7. Entitlement to Direct Votes . . . . . . . . . . . . 12
4.8. Voting by Trustee, and Attendance of Trustee
Representative, at Meeting. . . . . . . . . . . . . 12
4.9. Distribution of Written Materials . . . . . . . . . 13
4.10. Termination of Voting Rights. . . . . . . . . . . . 13
ARTICLE 5 EXCHANGE RIGHT AND PARENT SUPPORT . . . . . . . 14
5.1. Grant and Ownership of the Exchange Right . . . . . 14
5.2. Legended Share Certificates . . . . . . . . . . . . 15
5.3. General Exercise of Exchange Right. . . . . . . . . 15
5.4. Purchase Price. . . . . . . . . . . . . . . . . . . 15
5.5. Exercise Instructions . . . . . . . . . . . . . . . 15
5.6. Delivery of Parent Common Stock;
Effect of Exercise. . . . . . . . . . . . . . . . 16
5.7. Exercise of Exchange Right
Subsequent to Retraction. . . . . . . . . . . . . 17
5.8. Stamp or Other Transfer Taxes . . . . . . . . . . . 17
5.9. Notice of Insolvency Event. . . . . . . . . . . . . 18
5.10. Call Rights . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
<PAGE>
ARTICLE 6 COVENANTS, REPRESENTATIONS AND WARRANTIES . . . 18
6.1. Covenants of Parent Regarding Exchangeable
Shares . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Segregation of Funds. . . . . . . . . . . . . . . . 19
6.3. Certain Representations . . . . . . . . . . . . . . 20
6.4. Notification of Certain Events. . . . . . . . . . . 20
6.5. Delivery of Shares of Parent Common Stock . . . . . 21
6.6. Qualification of Shares of Parent Common Stock. . . 21
6.7 Economic Equivalence. . . . . . . . . . . . . . . . 22
6.8. Tender Offers; etc. . . . . . . . . . . . . . . . . 24
6.9. Parent Not to Vote Exchangeable Shares. . . . . . . 25
6.10. Due Performance . . . . . . . . . . . . . . . . . . 25
6.11. Issuance of Additional Shares . . . . . . . . . . . 25
ARTICLE 7 CONCERNING THE TRUSTEE. . . . . . . . . . . . . 25
7.1. Powers and Duties of the Trustee. . . . . . . . . . 25
7.2. No Conflict of Interest . . . . . . . . . . . . . . 27
7.3. Dealings with Transfer Agents, Registrars, etc. . . 27
7.4. Book and Records. . . . . . . . . . . . . . . . . . 27
7.5. Income Tax Returns and Reports. . . . . . . . . . . 28
7.6. Indemnification Prior to Certain Actions
by Trustee. . . . . . . . . . . . . . . . . . . . 28
7.7. Actions by Non-Affiliated Holders . . . . . . . . . 28
7.8. Reliance upon Declarations. . . . . . . . . . . . . 29
7.9. Evidence and Authority to Trustee . . . . . . . . . 29
7.10. Experts, Advisors and Agents. . . . . . . . . . . . 30
7.11. Investment of Money Held by Trustee . . . . . . . . 30
7.12. Trustee Not Required to Give Security . . . . . . . 31
7.13. Trustee Not Bound to Act on Corporation's
Request. . . . . . . . . . . . . . . . . . . . . . 31
7.14. Authority to Carry on Business. . . . . . . . . . . 31
7.15. Conflicting Claims. . . . . . . . . . . . . . . . . 31
7.16. Acceptance of Trust . . . . . . . . . . . . . . . . 32
ARTICLE 8 COMPENSATION. . . . . . . . . . . . . . . . . . 32
8.1. Fees and Expenses of the Trustee . . . . . . . . . . 32
ARTICLE 9 INDEMNIFICATION AND LIMITATION OF LIABILITY . . 33
9.1. Indemnification of the Trustee . . . . . . . . . . . 33
9.2. Limitation of Liability. . . . . . . . . . . . . . . 33
ARTICLE 10 CHANGE OF TRUSTEE . . . . . . . . . . . . . . . 34
10.1. Resignation . . . . . . . . . . . . . . . . . . . . 34
10.2. Removal . . . . . . . . . . . . . . . . . . . . . . 34
10.3. Successor Trustee . . . . . . . . . . . . . . . . . 34
10.4. Notice of Successor Trustee . . . . . . . . . . . . 34
<PAGE>
<PAGE>
ARTICLE 11 PARENT SUCCESSORS . . . . . . . . . . . . . . . 35
11.1. Certain Requirements in Respect of
Combination, etc.. . . . . . . . . . . . . . . . . 35
11.2. Vesting of Powers in Successor. . . . . . . . . . . 35
11.3. Wholly-Owned Subsidiaries . . . . . . . . . . . . . 35
ARTICLE 12 AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS. . 36
12.1. Amendments, Modifications, etc. . . . . . . . . . . 36
12.2. Ministerial Amendments. . . . . . . . . . . . . . . 36
12.3. Meeting to Consider Amendments. . . . . . . . . . . 36
12.4. Changes in Exchangeable Shares. . . . . . . . . . . 37
12.5. Execution of Supplemental Trust Agreements. . . . . 37
ARTICLE 13 TERMINATION . . . . . . . . . . . . . . . . . . 37
13.1. Term. . . . . . . . . . . . . . . . . . . . . . . . 37
13.2. Survival of Agreement . . . . . . . . . . . . . . . 38
ARTICLE 14 GENERAL . . . . . . . . . . . . . . . . . . . . 38
14.1. Severability. . . . . . . . . . . . . . . . . . . . 38
14.2. Enurement . . . . . . . . . . . . . . . . . . . . . 38
14.3. Notices to Parties. . . . . . . . . . . . . . . . . 38
14.4. Notice of Non-Affiliated Holders. . . . . . . . . . 39
14.5. Risk of Payments by Post. . . . . . . . . . . . . . 39
14.6. Counterparts. . . . . . . . . . . . . . . . . . . . 39
14.7. Jurisdiction. . . . . . . . . . . . . . . . . . . . 40
14.8. Attornment. . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
<PAGE>
VOTING, SUPPORT AND EXCHANGE TRUST AGREEMENT
AGREEMENT made as of the day of , 199 .
AMONG:
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC., a
corporation existing under the laws of the State of Delaware
(the "Parent")
- and -
TELEPANEL SYSTEMS INC., a corporation existing under the laws
of Canada (the "Corporation")
- and -
THE MONTREAL TRUST COMPANY OF CANADA, a trust company existing
under the laws of Canada (the "Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to a combination agreement dated as of
October 29, 1997 between the Parent and the Corporation (such
agreement as it may be amended or restated is hereinafter referred
to as the "Combination Agreement"), the parties agreed that
effective on the Effective Date (as defined in the Combination
Agreement), the Parent, the Corporation and a Canadian trust
company selected by the Parent and satisfactory to the Corporation,
acting reasonably, would execute and deliver a Voting, Support and
Exchange Trust Agreement substantially in the form set forth in
Exhibit 1.1(b)(i) to the Combination Agreement; and
WHEREAS, pursuant to an arrangement (the "Arrangement")
effected by articles of arrangement dated , 199
filed pursuant to the (Canada) Business Corporations Act, each
issued and outstanding common share, without par value (a
"Corporation Common Share"), of the Corporation, other than
Corporation Common Shares held by the Parent or by holders who duly
exercised their rights of dissent, was exchanged for the number of
issued and outstanding Exchangeable Shares of the Corporation (the
"Exchangeable Shares") required thereunder; and
WHEREAS, the Parent is to grant to and in favor of Non-
Affiliated Holders (as hereinafter defined) from time to time of
Exchangeable Shares the right, in the circumstances set forth
herein, to require the Parent to purchase from each Non-Affiliated
Holder all or any part of the Exchangeable Shares held by the
Non-Affiliated Holder; and
WHEREAS, the parties desire to make appropriate provision and
to establish a procedure whereby voting rights in the Parent shall
be exercisable by Non-Affiliated Holders from time to time of
Exchangeable Shares by and through the Trustee, which will hold
legal title to the Voting Share (as hereinafter defined) to which
voting rights attach for the benefit of Non-Affiliated Holders and<PAGE>
<PAGE>
whereby the rights to require the Parent to purchase Exchangeable
Shares from the Non-Affiliated Holders shall be exercisable by
Non-Affiliated Holders from time to time of Exchangeable Shares by
and through the Trustee, which will hold legal title to such rights
for the benefit of Non-Affiliated Holders; and
WHEREAS, the parties desire to make appropriate provision and
to establish a procedure whereby the Parent will take certain
actions and make certain payments and deliveries necessary to
ensure that the Corporation will be able to make certain payments
and to deliver or cause to be delivered shares of Parent Common
Stock (as hereinafter defined) in satisfaction of the obligations
of the Corporation under the Exchangeable Share Provisions (as
hereinafter defined) and this trust agreement; and
WHEREAS, these recitals and any statements of fact in this
trust agreement are made by the Parent and the Corporation and not
by the Trustee;
NOW THEREFORE, in consideration of the respective covenants
and agreements provided in this trust agreement and for other good
and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged), the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1. Definitions. In this trust agreement, unless something in
the subject matter or content is inconsistent therewith:
"Applicable Laws" has the meaning set out in section 6.6
hereof.
"Arrangement" has the meaning set out in the recitals hereto.
"Automatic Exchange Rights" means the automatic exchange of
shares of Parent Common Stock for Exchangeable Shares pursuant to
Section 5.3 of the Exchangeable Share Provisions.
"best efforts" means an obligation of such party to use every
reasonable commercial effort and shall not be interpreted to
require such party to enter into an agreement or undertaking to pay
or otherwise confer anything of value to or for the benefit of a
third party (except for fees of Governmental Entities [as defined
in the Combination Agreement] and securities exchanges and except
as otherwise expressly provided herein), to guaranty any
obligation, to make whole or keep well a third party or the like or
to take such other action which would have an unreasonably adverse
effect on the business of such party.
"Board of Directors" means the board of directors of the
Corporation.<PAGE>
<PAGE>
"Business Day" means a day other than a Saturday, a Sunday or
a day when banks are not open for business in either or both of New
York, New York and Toronto, Ontario.
"CDA Average Market Price" means, in respect of a share of
Parent Common Stock for any specified period, the average of the
daily closing prices for the business days during such period (as
proportionally adjusted for any stock dividend, split, combination
of reclassification that took effect during such period). The
closing price for each day shall be the last reported sales price
regular way or, in case no such reported sales price took place on
such day, the average of the last reported bid and asked prices
regular way, in either case on the principal national securities
exchange on which the Parent Common Stock is listed or admitted to
trading (or if the Parent Common Stock is not at the time admitted
or listed to trading or any such exchange, then such price as shall
be equal to the average of the last reported sale price, as
reported on the Nasdaq National Market System on such day, or if
the Parent Common Stock is not so reported by Nasdaq on such day or
if on any day in question the security shall not be quoted on
Nasdaq, then such price shall be equal to the last reported bid and
asked prices on such day as reported by The National Quotation
Bureau Incorporated [or any similar reputable quotation and
reporting service, if such quotation is not reported by The
National Quotation Bureau Incorporated]); provided, however, that
if the Parent Common Stock is not traded in such manner that the
quotations referred to in this definition are available for the
period required hereunder, the CDA Average Market Price shall be
determined by the Parent Board of Directors or, if such
determination cannot be made, by a nationally recognized investment
banking firm selected by the Parent Board of Directors (or if such
selection cannot be made, by a nationally recognized independent
investment banking firm selected by the American Arbitration
Association in accordance with its rules).
"Canadian Dollar Equivalent" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount") at
any date the product obtained by multiplying (a) the Foreign
Currency Amount by (b) the official noon spot exchange rate on such
date for such foreign currency as reported by the Bank of Canada
or, in the event such spot exchange rate is not available, such
exchange rate on such date for such foreign currency as may be
deemed by the Board of Directors to be appropriate for such
purpose.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Combination Agreement" has the meaning set out in the
recitals hereto.
"Corporation Common Shares" has the meaning set out in the
recitals hereto.<PAGE>
<PAGE>
"Current Market Price" means, in respect of a share of Parent
Common Stock on any date, the Canadian Dollar Equivalent of the
greatest of: (x) the CDA Average Market Price for the 15-day period
then ending, (y) the 1997 Warrant Current Market Value per share on
such date, or (z) the average during a period of 20 consecutive
trading days ending not more than five trading days before such
date of the last sale price regular way or, in case no sale takes
place on any such day, of the average of the closing bid and asked
prices regular way, in either case on the principal United States
national securities exchange on which the Parent Common Stock is
listed or admitted to trading, or, if the Parent Common Stock is
not listed or admitted to trading on any such national securities
exchange, of the last sale price of the Parent Common Stock as
reported on The Nasdaq National Market, or, if the Parent Common
Stock is not so reported, of the average of the closing high bid
and low asked prices of the Parent Common Stock in the over-the-
counter market, as reported on The Nasdaq Stock Market, Inc.;
provided, however, that if the shares of Parent Common Stock are
not then reported on the Nasdaq Stock Market, Inc., or if, in the
opinion of the Parent Board of Directors, the public distribution
or trading activity of Parent Common Stock during such period is
inadequate to create a market that reflects the fair market value
of the Parent Common Stock, then the Current Market Price of a
share of the Parent Common Stock shall be determined by the Parent
Board of Directors based upon the advice of such qualified
independent financial advisors as the Parent Board of Directors may
deem to be appropriate, and provided further that any such
selection, opinion or determination by the Parent Board of
Directors shall be conclusive and binding.
"Dividend Amount" has the meaning set out in Section 1.1 of
the Exchangeable Shares Provisions.
"Effective Date" has the meaning set out in section 1.1 of the
Plan of Arrangement.
"ERS Indenture" means the Indenture dated January 24, 1997
between the Parent and United States Trust Company of New York, as
may be supplemented or amended.
"Exchange Right" has the meaning set out in section 5.1
hereof.
"Exchange Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares.
"Exchangeable Shares" has the meaning set out in the recitals
hereto.
"Insolvency Event" means the institution by the Corporation of
any proceeding to be adjudicated a bankrupt or insolvent or to be
dissolved or wound up, or the consent of the Corporation to the
institution of bankruptcy, insolvency, dissolution or winding-up<PAGE>
<PAGE>
proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding up under any bankruptcy,
insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy
and Insolvency Act (Canada), and the failure by the Corporation to
contest in good faith any such proceedings commenced in respect to
the Corporation within 15 days of becoming aware thereof, or the
consent by the Corporation to the filing of any such petition or to
the appointment of a receiver, or the making by the Corporation of
a general assignment for the benefit of creditors, or the admission
in writing by the Corporation of its inability to pay its debts
generally as they become due, or the Corporation not being
permitted, pursuant to solvency requirements of other provisions of
applicable law, to redeem any Retracted Shares pursuant to Section
5.1 of the Exchangeable Share Provisions.
"Liquidation Amount" has the meaning set out in Section 6.1(1)
of the Exchangeable Share Provisions.
"Liquidation Call Right" has the meaning set out in Section
5.2(1) of the Exchangeable Share Provisions.
"List" has the meaning set out in section 4.6 hereof.
"1997 Warrant Agreement" means the Warrant Agreement dated
January 24, 1997, as amended, between the Parent and American Stock
Transfer and Trust Company.
"1997 Warrant Current Market Value" means, in respect of a
share of Parent Common Stock on any date, (i) if the Parent Common
Stock is not registered under the United States Securities Exchange
Act of 1934, (a) the value of the security determined in good faith
by the Parent Board of Directors and certified in a board
resolution, based on the most recently computed arms-length
transaction between Parent and a person or entity (other than a
person or entity controlling, controlled by or under common control
with Parent, or any director or officer of Parent or any Parent
subsidiary, or any beneficial owner of 5% or more of the voting
common equity, on a fully-diluted basis, of Parent) and the closing
of which occurs on such date or shall have occurred on the six-
month period preceding such date, or (b) if no such transaction
shall have occurred on such date or within such six-month period,
the value of the security as determined by an independent financial
expert or (ii) if the security is registered under such Act, the
average of the daily closing bid prices (or the equivalent in the
over-the-counter market) for each business day in New York during
the period commencing 15 such business days before such date and
ending on the date one day prior to such date.
"Non-Affiliated Holder Votes" has the meaning set out in
section 4.2 hereof.
<PAGE>
<PAGE>
"Non-Affiliated Holders", means the registered holders of
Exchangeable Shares other than the Parent and its Subsidiaries.
"Offer" has the meaning set out in section 6.8 hereof.
"Officer's Certificate" means, with respect to the Parent or
the Corporation, as the case may be, a certificate signed by any
one of the Chairman of the Board, the Vice-Chairman of the Board,
the President, any Vice-President or any other senior officer of
the Parent or the Corporation, as the case may be.
"Parent Board of Directors" means the board of directors of
the Parent.
"Parent Common Stock" means the shares of common stock of the
Parent, par value US$0.01 per share, having voting rights of one
vote per share and not limited to a fixed sum or percentage of par
value in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the
voluntary or the involuntary liquidation, dissolution or winding-up
of the Parent, as constituted on the date hereof (but including any
stock into which it subsequently may be changed, reclassified or
converted pursuant to a recapitalization, reconstruction,
reorganization or reclassification of, or amalgamation, merger,
liquidation or similar transaction affecting such shares).
"Parent Consent" has the meaning set out in section 4.2
hereof.
"Parent Meeting" has the meaning set out in section 4.2
hereof.
"Parent Special Voting Stock" means the Special Voting Stock
of the Parent, par value U.S.$0.01 per share.
"Parent Successor" has the meaning set out in section 11.1
hereof.
"Plan of Arrangement" means the plan of arrangement of the
Corporation providing for the Arrangement.
"Redemption Call Right" has the meaning set out in Section
7.2(1) of the Exchangeable Share Provisions.
"Redemption Price" has the meaning set out in Section 7.1(1)
of the Exchangeable Share Provisions.
"Retracted Shares" has the meaning set out in Section 5.7
hereof.
"Retraction Call Right" has the meaning set out in Section
6.2(1) of the Exchangeable Share Provisions.
<PAGE>
<PAGE>
"Retraction Price" has the meaning set out in Section 6.1(1)
of the Exchangeable Share Provisions.
"Subsidiary" of the Parent means any corporation more than 50%
of the outstanding stock of which, by vote, is owned, directly or
indirectly, by the Parent, by one or more other Subsidiaries of the
Parent or by the Parent and one or more other Subsidiaries of the
Parent.
"Transfer Agent" has the meaning set out in Section 1.1 of the
Exchangeable Share Provisions.
"Trust" means the trust created by this trust agreement.
"Trust Estate" means the Voting Shares, any other securities,
the Exchange Right and any money or other rights or assets that may
be held by the Trustee from time to time pursuant to this trust
agreement.
"Trustee" means The Montreal Trust Company of Canada and,
subject to the provisions of Article 10 hereof, includes any
successor trustee or permitted assigns.
"Voting Rights" means the voting rights attached to the Voting
Share.
"Voting Share" means the one share of Parent Special Voting
Stock issued by the Parent to and deposited with the Trustee, which
entitles the holder of record to a number of votes at meetings of
holders of Parent Common Stock equal to the number of Exchangeable
Shares outstanding from time to time that are held by
Non-Affiliated Holders.
1.2. Interpretation Not Affected by Headings, etc. The
division of this trust agreement into articles and sections and the
insertion of headings are for reference purposes only and shall not
affect the interpretation of this trust agreement. Unless otherwise
indicated, any reference in this trust agreement to an article or
section refers to the specified article or section of this trust
agreement.
1.3. Number, Gender and Persons. In this trust agreement,
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, companies, associations,
trusts, unincorporated organizations, governmental bodies and other
legal or business entities of any kind.
1.4. Date for Any Action. If any date on which any action is
required to be taken under this trust agreement is not a Business
Day, such action shall be required to be taken on the next
succeeding Business Day.<PAGE>
<PAGE>
1.5. Payments. All payments to be made hereunder will be made
without interest and less any tax required by law to be deducted
and withheld.
ARTICLE 2
TRUST
2.1. Establishment of Trust. The purpose of this trust
agreement is to create the Trust for the benefit of the
Non-Affiliated Holders, as herein provided. The Trustee will hold
the Voting Share in order to enable the Trustee to exercise the
Voting Rights and will hold the Exchange Right in order to enable
the Trustee to exercise such right and will hold the other rights
granted in or resulting from the Trustee being a party to this
trust agreement in order to enable the Trustee to exercise or
enforce such rights, in each case as trustee for and on behalf of
the Non-Affiliated Holders as provided in this trust agreement.
ARTICLE 3
VOTING SHARE
3.1. Issue and Ownership of the Voting Share. Simultaneously
with the execution and delivery of this trust agreement, the Parent
will issue to and deposit with the Trustee the Voting Share to be
hereafter held of record by the Trustee as trustee for and on
behalf of, and for the use and benefit of, the Non-Affiliated
Holders, in accordance with the provisions of this trust agreement.
The Parent hereby acknowledges receipt from the Trustee as trustee
for and on behalf of the Non-Affiliated Holders of the amount of
U.S.$.01 and other good and valuable consideration (and the
adequacy thereof) for the issuance of the Voting Share by the
Parent to the Trustee. During the term of the Trust and subject to
the terms and conditions of this trust agreement, the Trustee shall
possess and be vested with full legal ownership of the Voting Share
and shall be entitled to exercise all of the rights and powers of
an owner with respect to the Voting Share, provided that the
Trustee shall:
(a) hold the Voting Share and the legal title thereto as
trustee solely for the use and benefit of the Non-Affiliated
Holders in accordance with the provisions of this trust
agreement; and
(b) except as specifically authorized by this trust
agreement, have no power or authority to sell, transfer, vote
or otherwise deal in or with the Voting Share, and the Voting
Share shall not be used or disposed of by the Trustee for any
purpose other than the purposes for which the Trust is created
pursuant to this trust agreement.
<PAGE>
<PAGE>
3.2. Legended Share Certificates. The Corporation will cause
each certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Non-Affiliated Holders of their
right to instruct the Trustee with respect to the exercise of the
Voting Rights with respect to the Exchangeable Shares held by a
Non-Affiliated Holder.
3.3. Safekeeping of Certificate. The certificate representing
the Voting Share shall at all times be held in safe keeping by the
Trustee or its agent.
3.4. Retirement of Voting Share. Upon termination of the term
of the Trust, the Trustee shall assign to the Parent all rights to
the Voting Share, which shall be retired by the Parent in
accordance with Section 243 of the Delaware General Corporation
Law.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1. Voting Rights. The Trustee, as the holder of record of
the Voting Share, shall be entitled to all of the Voting Rights,
including the right to consent to or to vote in person or by proxy
the Voting Share, on any matter, question or proposition whatsoever
that may come before the stockholders of the Parent at a Parent
Meeting or in connection with a Parent Consent. The Voting Rights
shall be and remain vested in and exercised by the Trustee. Subject
to section 7.14 hereof, the Trustee shall exercise the Voting
Rights only on the basis of instructions received pursuant to this
Article 4 from Non-Affiliated Holders entitled to instruct the
Trustee as to the voting thereof at the time at which the Parent
Consent is sought or the Parent Meeting is held. To the extent that
no instructions are received from a Non-Affiliated Holder with
respect to the Voting Rights to which such Non-Affiliated Holder is
entitled, the Trustee shall not exercise or permit the exercise of
the Voting Rights relating to such Non-Affiliated Holder's
Exchangeable Shares.
4.2. Number of Votes. With respect to all meetings of
stockholders of the Parent at which holders of shares of Parent
Common Stock are entitled to vote (a "Parent Meeting") and with
respect to all written consents sought from the holders of shares
of Parent Common Stock (a "Parent Consent"), each Non-Affiliated
Holder shall be entitled to instruct the Trustee to cast and
exercise, in the manner instructed, one of the votes comprised in
the Voting Rights for each Exchangeable Share owned of record by
such Non-Affiliated Holder on the record date established by the
Parent or by applicable law for such Parent Meeting or Parent
Consent, as the case may be (the "Non-Affiliated Holder Votes") in
respect of each matter, question or proposition to be voted on at
such Parent Meeting or to be consented to in connection with such
Parent Consent.<PAGE>
<PAGE>
4.3. Mailings to Shareholders. With respect to each Parent
Meeting and Parent Consent, the Trustee will mail or cause to be
mailed (or otherwise communicate in the same manner that the Parent
utilizes in communications to holders of Parent Common Stock,
subject to the Trustee being advised in writing of such method and
its ability to provide this method of communication) to each of the
Non-Affiliated Holders named in the List on a day reasonably
proximate to the same day as the initial mailing or notice (or
other communication) with respect thereto is given by the Parent to
its stockholders:
(a) a copy of such notice, together with any proxy or
information statement and related materials to be provided to
stockholders of the Parent;
(b) a statement that such Non-Affiliated Holder is
entitled, subject to the provisions of section 4.7 hereof, to
instruct the Trustee as to the exercise of the Non-Affiliated
Holder Votes with respect to such Parent Meeting or Parent
Consent, as the case may be, or, pursuant and subject to
section 4.7 hereof, to attend such Parent Meeting and to
exercise personally the Non-Affiliated Holder Votes thereat;
(c) a statement as to the manner in which such
instructions may be given to the Trustee, including an express
indication that instructions may be given to the Trustee to
give (in the form so mailed with such statement):
(i) a proxy to such Non-Affiliated Holder or its
designee to exercise personally such holder's
Non-Affiliated Holder Votes; or
(ii) a proxy to a designated agent or other
representative of the management of the Parent to
exercise such Non-Affiliated Holder Votes;
(d) a statement that if no such instructions are
received from the Non-Affiliated Holder, the Non-Affiliated
Holder Votes to which such Non-Affiliated Holder is entitled
will not be exercised;
(e) a form of direction whereby the Non-Affiliated
Holder may so direct and instruct the Trustee as contemplated
herein; and
(f) a statement of (i) the time and date by which such
instructions must be received by the Trustee in order to be
binding upon it, which in the case of a Parent Meeting shall
not be earlier than the close of business on the second
Business Day prior to such meeting, and (ii) the method for
revoking or amending such instructions.
<PAGE>
<PAGE>
The materials referred to above are to be provided by the Parent to
the Trustee, but (in the case of the materials referred to under
clauses (b) through (f), inclusive, above) shall be subject to
review and comment by the Trustee, acting reasonably. For the
purpose of determining Non-Affiliated Holder Votes to which a
Non-Affiliated Holder is entitled in respect of any such Parent
Meeting or Parent Consent, the number of Exchangeable Shares owned
of record by the Non-Affiliated Holder shall be determined at the
close of business on the record date established by the Parent or
by applicable law for purposes of determining stockholders entitled
to vote at such Parent Meeting or to give written consent in
connection with such Parent Consent. The Parent will notify the
Trustee in writing of any decision of the Parent Board of Directors
of the Parent with respect to the calling of any such Parent
Meeting or the seeking of any such Parent Consent and shall provide
all necessary information and materials to the Trustee in each case
promptly and in any event in sufficient time to enable the Trustee
to perform its obligations contemplated by this section 4.3.
4.4. Copies of Stockholder Information. The Parent will
deliver to the Trustee copies of all proxy materials (including
notices of Parent Meetings), information statements, reports
(including without limitation all interim and annual financial
statements) and other written communications that are to be
distributed from time to time to the holders of Parent Common
Stock, in sufficient quantities and in sufficient time so as to
enable the Trustee to send those materials to each Non-Affiliated
Holder at a time reasonably proximate to the same time as such
materials are first sent to holders of Parent Common Stock. The
Trustee will mail or otherwise send to each Non-Affiliated Holder,
at the expense of Parent, copies of all such materials (and all
materials specifically directed to the Non-Affiliated Holders or to
the Trustee for the benefit of the Non-Affiliated Holders by the
Parent) received by the Trustee from the Parent at a time (other
than in the case of materials specifically directed as aforesaid)
reasonably proximate to the same time as such materials are first
sent to holders of Parent Common Stock. The Trustee will make
copies of all such materials available for inspection by any
Non-Affiliated Holder at the Trustee's principal office in the
cities of Montreal, Toronto and Vancouver.
4.5. Other Materials. Promptly after receipt by the Parent of
any materials sent or given generally to the holders of Parent
Common Stock by or on behalf of a third party, including without
limitation dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars
(and related information and material), the Parent shall use
reasonable efforts to obtain and deliver to the Trustee copies
thereof in sufficient quantities so as to enable the Trustee to
forward such material (unless the same has been provided directly
to Non-Affiliated Holders by such third party) to each Non-
Affiliated Holder as soon as practicable thereafter. As soon as
practicable after receipt thereof, the Trustee will mail or<PAGE>
<PAGE>
otherwise send to each Non-Affiliated Holder, at the expense of the
Parent, copies of all such materials received by the Trustee from
the Parent. The Trustee will also make copies of all such materials
available for inspection by any Non-Affiliated Holder at the
Trustee's principal office in the cities of Montreal, Toronto and
Vancouver.
4.6. List of Persons Entitled to Vote. The Corporation shall:
(a) prior to each annual, general and special Parent Meeting or the
seeking of any Parent Consent and (b) forthwith upon each
reasonable request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and
addresses of the Non-Affiliated Holders arranged in alphabetical
order and showing the number of Exchangeable Shares held of record
by each such Non-Affiliated Holder, in each case at the close of
business on the date specified by the Trustee in such request or,
in the case of a List prepared in connection with a Parent Meeting
or a Parent Consent, at the close of business on the record date
established by the Parent or pursuant to applicable law for
determining the holders of Parent Common Stock entitled to receive
notice of and/or to vote at such Parent Meeting or to give consent
in connection with such Parent Consent. Each such List shall be
delivered to the Trustee within a reasonable time after receipt by
the Corporation of such request or the record date for such meeting
or seeking of consent, as the case may be, and, in any event,
within sufficient time as to enable the Trustee to perform its
obligations under this trust agreement. The Parent agrees to give
the Corporation written notice (with a copy to the Trustee) of the
calling of any Parent Meeting or the seeking of any Parent Consent,
together with the record dates therefor sufficiently prior to the
date of the calling of such meeting or seeking of such consent so
as to enable the Corporation to perform its obligations under this
section 4.6.
4.7. Entitlement to Direct Votes. Any Non-Affiliated Holder
named in a List prepared in connection with any Parent Meeting or
any Parent Consent will be entitled (a) to instruct the Trustee in
the manner described in section 4.3 hereof with respect to the
exercise of the Non-Affiliated Holder Votes to which such
Non-Affiliated Holder is entitled or (b) subject to the provisions
of section 4.3 hereof, to attend such meeting and personally to
exercise thereat (or to exercise with respect to any written
consent), as the proxy of the Trustee, the Non-Affiliated Holder
Votes to which such Non-Affiliated Holder is entitled except, in
each case, to the extent that such Non-Affiliated Holder has
transferred the ownership of any Exchangeable Shares in respect of
which such Non-Affiliated Holder is entitled to Non-Affiliated
Holder Votes after the close of business on the record date for
such meeting or seeking of consent.
<PAGE>
<PAGE>
4.8. Voting by Trustee, and Attendance of Trustee
Representative, at Meeting.
(1) In connection with each Parent Meeting and Parent
Consent, the Trustee shall exercise, in accordance with the
instructions received from a Non-Affiliated Holder pursuant to
section 4.3 hereof, the Non-Affiliated Holder Votes as to which
such Non-Affiliated Holder is entitled to direct the vote (or any
lesser number thereof as may be set forth in the instructions);
provided, however, that such written instructions are received by
the Trustee from the Non-Affiliated Holder prior to the time and
date fixed by it for receipt of such instructions in the notice
given by the Trustee to the Non-Affiliated Holder pursuant to
section 4.3 hereof.
(2) Subject to the provisions of section 4.3 hereof, the
Trustee shall cause such representatives as are empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting
Rights enabling a Non-Affiliated Holder to attend each Parent
Meeting. Upon submission by a Non-Affiliated Holder (or its
designee) of identification satisfactory to the Trustee's
representatives, and at the Non-Affiliated Holder's request made in
the manner described in section 4.3 hereof, such representatives
shall sign and deliver to such Non-Affiliated Holder (or its
designee) a proxy to exercise personally the Non-Affiliated Holder
Votes as to which such Non-Affiliated Holder is otherwise entitled
hereunder to direct the vote, if such Non-Affiliated Holder either
(i) has not previously given the Trustee instructions pursuant to
section 4.3 hereof in respect of such meeting, or (ii) submits to
the Trustee's representatives written revocation of any such
previous instructions in the manner described in section 4.3
hereof. At such meeting, the Non-Affiliated Holder exercising such
Non-Affiliated Holder Votes shall have the same rights as the
Trustee would have but for such proxy (and without reference to the
immediately succeeding proviso) to speak at the meeting in respect
of any matter, question or proposition, to vote by way of ballot at
the meeting in respect of any matter, question or proposition and
to vote at such meeting by way of a show of hands in respect of any
matter, question or proposition; provided, however, that, in
connection with each Parent Meeting, to the extent that the Trustee
has not, in accordance with the provisions hereof, signed and
delivered to Non-Affiliated Holders (or their designees) proxies as
aforesaid, the Trustee shall exercise the Non-Affiliate Holder
Votes (or any lesser number thereof as may be set forth in the
instructions delivered hereunder), in accordance with the
provisions hereof, by proxy and not in person (such proxy to be
given with respect to the number of Non-Affiliate Holder Votes set
forth in the instructions delivered hereunder).
4.9. Distribution of Written Materials. Any written materials
to be distributed by the Trustee to the Non-Affiliated Holders
pursuant to this trust agreement shall be delivered or sent by mail
(or otherwise communicated in the same manner as the Parent<PAGE>
<PAGE>
utilizes in communications to holders of Parent Common Stock,
subject to the Trustee being advised in writing of such method of
communication and its ability to provide same) to each
Non-Affiliated Holder at its address as shown on the books of the
Corporation. The Corporation shall provide or cause to be provided
to the Trustee for this purpose, on a timely basis and without
charge or other expense:
(a) current lists of the Non-Affiliated Holders; and
(b) upon the request of the Trustee, mailing labels to
enable the Trustee to carry out its duties under this trust
agreement.
4.10. Termination of Voting Rights. All the rights of a
Non-Affiliated Holder with respect to the Non-Affiliated Holder
Votes exercisable in respect of the Exchangeable Shares held by
such Non-Affiliated Holder, including the right to instruct the
Trustee as to the voting of or to vote personally such
Non-Affiliated Holder Votes, shall be deemed to be surrendered by
the Non-Affiliated Holder and such Non-Affiliated Holder Votes and
the Voting Rights represented thereby shall cease immediately upon
the exercise by the Non-Affiliated Holder of the Exchange Right or
the occurrence of the automatic exchange of Exchangeable Shares for
shares of Parent Common Stock, or upon the redemption of
Exchangeable Shares pursuant to Article 6 or Article 7 of the
Exchangeable Share Provisions, or upon the effective date of the
liquidation, dissolution or winding-up of the Corporation pursuant
to Article 5 of the Exchangeable Share Provisions, or upon the
purchase of Exchangeable Shares from the holder thereof by the
Parent pursuant to the exercise by the Parent of the Retraction
Call Right, the Redemption Call Right or the Liquidation Call Right
(unless in any case the Corporation or the Parent shall not have
delivered the requisite shares of Parent Common Stock and cheque,
if any, deliverable in exchange therefor to the Transfer Agent or
the Trustee for delivery to a Non-Affiliated Holder).
ARTICLE 5
EXCHANGE RIGHT AND PARENT SUPPORT
5.1. Grant and Ownership of the Exchange Right. The Parent
hereby grants to the Trustee as trustee for and on behalf of, and
for the use and benefit of, the Non-Affiliated Holders the right
(the "Exchange Right"), upon the occurrence and during the
continuance of an Insolvency Event, to require the Parent to
purchase from each or any Non-Affiliated Holder all or any part of
the Exchangeable Shares held by the Non-Affiliated Holder, all in
accordance with the provisions of this trust agreement. The Parent
hereby acknowledges receipt from the Trustee, as trustee for and on
behalf of the Non-Affiliated Holders, of good and valuable
consideration (and the adequacy thereof) for the grant of the
Exchange Right by the Parent to the Trustee. During the term of the<PAGE>
<PAGE>
Trust and subject to the terms and conditions of this trust
agreement, the Trustee shall possess and be vested with full legal
ownership of the Exchange Right and shall be entitled to exercise
all of the rights and powers of an owner with respect to the
Exchange Right, provided that the Trustee shall:
(a) hold the Exchange Right and the legal title thereto
as trustee solely for the use and benefit of the
Non-Affiliated Holders in accordance with the provisions of
this trust agreement; and
(b) except as specifically authorized by this trust
agreement, have no power or authority to exercise or otherwise
deal in or with the Exchange Right, and the Trustee shall not
exercise such right for any purpose other than the purposes
for which this Trust is created pursuant to this trust
agreement.
5.2. Legended Share Certificates. The Corporation will cause
each certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Non-Affiliated Holders of their
right to instruct the Trustee with respect to the exercise of the
Exchange Right, in respect of the Exchangeable Shares held by a
Non-Affiliated Holder.
5.3. General Exercise of Exchange Right. The Exchange Right
shall be and remain vested in and exercisable by the Trustee.
Subject to section 7.15 hereof, the Trustee shall exercise the
Exchange Right only on the basis of instructions received pursuant
to this Article 5 from Non-Affiliated Holders entitled to instruct
the Trustee as to the exercise thereof. To the extent that no
instructions are received from a Non-Affiliated Holder with respect
to the Exchange Right, the Trustee shall not exercise or permit the
exercise of the Exchange Right.
5.4. Purchase Price. The purchase price payable by the Parent
for each Exchangeable Share to be purchased by the Parent under the
Exchange Right shall be an amount per share equal to (a) the
Current Market Price of a share of Parent Common Stock on the last
Business Day prior to the date of closing of the purchase and sale
of such Exchangeable Share under the Exchange Right, which shall be
satisfied in full by causing to be delivered to such holder one
share of Parent Common Stock, plus (b) the Dividend Amount, if any.
The purchase price for each such Exchangeable Share so purchased
may be satisfied only by the Parent delivering or causing to be
delivered to the Trustee, on behalf of the relevant Non-Affiliated
Holder, one share of Parent Common Stock and a cheque for the
balance, if any, of the purchase price without interest.
5.5. Exercise Instructions. Subject to the terms and
conditions herein set forth, a Non-Affiliated Holder shall be
entitled, upon the occurrence and during the continuance of an
Insolvency Event, to instruct the Trustee to exercise the Exchange<PAGE>
<PAGE>
Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Non-Affiliated Holder on the books
of the Corporation. To cause the exercise of the Exchange Right by
the Trustee, the Non-Affiliated Holder shall deliver to the
Trustee, in person or by certified or registered mail, at its
principal office in Toronto, Ontario or at such other places in
Canada as the Trustee may from time to time designate by written
notice to the Non-Affiliated Holders, the certificates representing
the Exchangeable Shares which such Non-Affiliated Holder desires
the Parent to purchase, duly endorsed in blank, and accompanied by
such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Business Corporations
Act (Ontario) and the by-laws of the Corporation and such
additional documents and instruments as the Trustee or the
Corporation may reasonably require together with (a) a duly
completed form of notice of exercise of the Exchange Right,
contained on the reverse of or attached to the Exchangeable Share
certificates, stating (i) that the Non-Affiliated Holder thereby
instructs the Trustee to exercise the Exchange Right so as to
require the Parent to purchase from the Non-Affiliated Holder the
number of Exchangeable Shares specified therein, (ii) that such
Non-Affiliated Holder has good title to and owns all such
Exchangeable Shares to be acquired by the Parent free and clear of
all liens, claims and encumbrances, (iii) the names in which the
certificates representing Parent Common Stock issuable in
connection with the exercise of the Exchange Right are to be issued
and (iv) the names and addresses of the persons to whom such new
certificates should be delivered and (b) payment (or evidence
satisfactory to the Trustee, the Corporation and the Parent of
payment) of the taxes (if any) payable as contemplated by section
5.8 hereof. If only a portion of the Exchangeable Shares
represented by any certificate delivered to the Trustee are to be
purchased by the Parent under the Exchange Right, a new certificate
for the balance of such Exchangeable Shares shall be issued to the
holder at the expense of the Corporation.
5.6. Delivery of Parent Common Stock; Effect of Exercise.
Promptly after receipt of the certificates representing the
Exchangeable Shares that a Non-Affiliated Holder desires the Parent
to purchase under the Exchange Right (together with such documents
and instruments of transfer and a duly completed form of notice of
exercise of the Exchange Right and payment of taxes payable as
contemplated by section 5.8 hereof, if any, or evidence thereof),
duly endorsed for transfer to the Parent, the Trustee shall notify
the Parent and the Corporation of its receipt of the same, which
notice to the Parent and the Corporation shall constitute exercise
of the Exchange Right by the Trustee on behalf of the holder of
such Exchangeable Shares, and the Parent shall promptly thereafter
deliver or cause to be delivered to the Trustee, for delivery to
the Non-Affiliated Holder of such Exchangeable Shares (or to such
other persons, if any, properly designated by such Non-Affiliated
Holder), a certificate for the number of shares of Parent Common
Stock deliverable in connection with such exercise of the Exchange<PAGE>
<PAGE>
Right (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or
encumbrance, security interest or adverse claim created by the
Parent or arising from acts or omissions of the Parent) and a
cheque for the balance, if any, of the purchase price therefor;
provided, however that no such delivery shall be made unless and
until the Non-Affiliated Holder requesting the same shall have paid
(or provided evidence satisfactory to the Trustee, the Corporation
and the Parent of the payment of) the taxes (if any) payable as
contemplated by section 5.8 hereof. Immediately upon the giving of
notice by the Trustee to the Parent and the Corporation of the
exercise of the Exchange Right, as provided in this section 5.6,
the closing of the transaction of purchase and sale contemplated by
the Exchange Right shall be deemed to have occurred, and the
Non-Affiliated Holder of such Exchangeable Shares shall be deemed
to have transferred to the Parent all of its right, title and
interest in and to such Exchangeable Shares and the related
interest in the Trust Estate and shall not be entitled to exercise
any of the rights of a holder in respect thereof, other than the
right to receive its proportionate part of the total purchase price
therefor, unless the requisite number of shares of Parent Common
Stock (together with a cheque for the balance, if any, of the total
purchase price therefor) is not delivered by the Parent to the
Trustee, for delivery to such Non-Affiliated Holder (or to such
other persons, if any, properly designated by such Non-Affiliated
Holder), within five Business Days of the date of the giving of
such notice by the Trustee, in which case the rights to such
Non-Affiliated Holder shall remain unaffected until such shares of
Parent Common Stock are so delivered by the Parent and any such
cheque is so delivered and paid. Concurrently with the closing of
the transaction of purchase and sale contemplated by the Exchange
Right, such Non-Affiliated Holder shall be considered and deemed
for all purposes to be the holder of the shares of Parent Common
Stock delivered to it pursuant to the Exchange Right.
5.7. Exercise of Exchange Right Subsequent to Retraction. In
the event that a Non-Affiliated Holder has exercised its right
under Article 6 of the Exchangeable Share Provisions to require the
Corporation to redeem any or all of the Exchangeable Shares held by
such Non-Affiliated Holder (the "Retracted Shares") and is notified
by the Corporation pursuant to Section 6.1(4) of the Exchangeable
Share Provisions that the Corporation will not be permitted as a
result of solvency requirements of applicable law to redeem all
such Retracted Shares, subject to receipt by the Trustee of written
notice to that effect from the Corporation and provided that the
Parent shall not have exercised its Retraction Call Right with
respect to the Retracted Shares and that the Non-Affiliated Holder
shall not have revoked the retraction request delivered by the Non-
Affiliated Holder to the Corporation pursuant to Section 6.1 of the
Exchangeable Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the
Non-Affiliated Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares<PAGE>
<PAGE>
that the Corporation is unable to redeem. In any such event, the
Corporation hereby agrees with the Trustee and in favor of the
Non-Affiliated Holder immediately to notify the Trustee of such
prohibition against the Corporation redeeming all of the Retracted
Shares and immediately to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Non-Affiliated
Holder to the Corporation or to the Transfer Agent (including
without limitation a copy of the retraction request delivered
pursuant to Section 6.1(1) of the Exchangeable Share Provisions) in
connection with such proposed redemption of the Retracted Shares
and the Trustee will thereupon exercise the Exchange Right with
respect to the Retracted Shares that the Corporation is not
permitted to redeem and will require the Parent to purchase such
shares in accordance with the provisions of this Article 5.
5.8. Stamp or Other Transfer Taxes. Upon any sale of
Exchangeable Shares to the Parent pursuant to the Exchange Right,
the share certificate or certificates representing the Parent
Common Stock to be delivered in connection with the payment of the
total purchase price therefor shall be issued in the name of the
Non-Affiliated Holder of the Exchangeable Shares so sold without
charge to the holder of the Exchangeable Shares so sold, provided,
however, that such Non-Affiliated Holder (a) shall pay (and neither
the Parent, the Corporation nor the Trustee shall be required to
pay) any documentary, stamp, transfer or other similar taxes that
may be payable in respect of any transfer involved in the issuance
or delivery of such shares to a person other than such
Non-Affiliated Holder or (b) shall have established to the
satisfaction of the Trustee, the Parent and the Corporation that
such taxes, if any, have been paid.
5.9. Notice of Insolvency Event. Promptly upon the occurrence
of an Insolvency Event or any event that with the giving of notice
or the passage of time or both would be an Insolvency Event, the
Corporation and the Parent shall give written notice thereof to the
Trustee. As soon as practicable after receiving notice from the
Corporation or the Parent or from any other person of the
occurrence of an Insolvency Event, the Trustee will mail to each
Non-Affiliated Holder, at the expense of the Parent, a notice of
such Insolvency Event in the form provided by the Parent, which
notice shall contain a brief statement of the right of the
Non-Affiliated Holders with respect to the Exchange Right.
5.10. Call Rights. The Liquidation Call Right, the Redemption
Call Right, the Retraction Call Right and the Automatic Exchange
Right are hereby agreed, acknowledged and confirmed, and it is
agreed and acknowledged that such rights are granted in part in
consideration of the obligations of the Parent under this trust
agreement.
<PAGE>
<PAGE>
ARTICLE 6
COVENANTS, REPRESENTATIONS AND WARRANTIES
6.1. Covenants of Parent Regarding Exchangeable Shares. So
long as any Exchangeable Shares are outstanding, the Parent will:
(a) not declare or pay any dividend on the Parent Common
Stock unless (i) the Corporation will have sufficient money or
other assets or authorized but unissued securities available to
enable the due declaration and the due and punctual payment in
accordance with applicable law, of an equivalent dividend on the
Exchangeable Shares and (ii) the Corporation shall simultaneously
declare or pay, as the case may be, an equivalent dividend on the
Exchangeable Shares;
(b) advise the Corporation sufficiently in advance of the
declaration by the Parent of any dividend on the Parent Common
Stock and take all such other actions as are necessary, in
cooperation with the Corporation, to ensure that the respective
declaration date, record date and payment date for a dividend on
the Exchangeable Shares shall be the same as the declaration date,
record date and payment date for the corresponding dividend on the
Parent Common Stock and that such dividend on the Exchangeable
Shares shall correspond with any requirements of the stock exchange
on which the Exchangeable Shares are listed;
(c) ensure that the record date for determining shareholders
entitled to receive any dividend declared on the Parent Common
Stock is not less than 10 Business Days after the declaration date
for such dividend or such shorter period within which applicable
law may be complied with;
(d) take all such actions and do all such things as are
necessary or desirable to enable and permit the Corporation, in
accordance with applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of the Liquidation
Amount in respect of each issued and outstanding Exchangeable Share
upon the liquidation, dissolution or winding up of the Corporation,
including without limitation all such actions and all such things
as are necessary or desirable to enable and permit the Corporation
to cause to be delivered shares of Parent Common Stock to the
holders of Exchangeable Shares in accordance with the provisions of
Article 5 of the Exchangeable Share Provisions;
(e) take all such actions and do all such things as are
necessary or desirable to enable and permit the Corporation, in
accordance with applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of the Retraction
Price and the Redemption Price, including without limitation all
such actions and all such things as are necessary or desirable to
enable and permit the Corporation to cause to be delivered shares
of Parent Common Stock to the holders of Exchangeable Shares, upon<PAGE>
<PAGE>
the retraction or redemption of the Exchangeable Shares in
accordance with the provisions of Article 6 or Article 7 of the
Exchangeable Share Provisions, as the case may be;
(f) use its best efforts to enable the Corporation to
maintain the listing of the Exchangeable Shares on The Toronto
Stock Exchange or another stock exchange in Canada prescribed under
the Income Tax Act (Canada); and
(g) not exercise its vote as a shareholder to initiate the
voluntary liquidation, dissolution or winding-up of the Corporation
nor take any action or omit to take any action that is designed to
result in the liquidation, dissolution or winding-up of the
Corporation, in each case under this Section 6.1(g) unless there
shall have occurred any breach of or default under the ERS
Indenture or the notes secured thereby without waiver thereof by
such noteholders.
6.2 Segregation of Funds. The Parent will cause the
Corporation to deposit a sufficient amount of funds in a separate
account and segregate a sufficient amount of such other assets as
is necessary to enable the Corporation to pay or otherwise satisfy
the applicable dividends, Liquidation Amount, Retraction Price or
Redemption Price, in each case for the benefit of the Non-
Affiliated Holders from time to time of the Exchangeable Shares,
and to use such funds and other assets so segregated exclusively
for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount, the Retraction Price or the Redemption
Price, as applicable.
6.3. Certain Representations. The Parent hereby represents,
warrants and covenants that:
(a) it has reserved for issuance and will at all times keep
available, free from pre-emptive and other rights, out of its
authorized and unissued capital stock such number of shares of
Parent Common Stock (or other shares or securities into which the
Parent Common Stock may be reclassified or changed as contemplated
by section 6.7 hereof) (i) as is equal to the sum of (x) the number
of Exchangeable Shares issued and outstanding from time to time and
(y) the number of Exchangeable Shares issuable upon the exercise of
all rights to acquire Exchangeable Shares outstanding from time to
time and (ii) as are now and may hereafter be required to enable
and permit each of the Corporation and the Parent to meet its
obligations hereunder, under the Exchangeable Share Provisions and
under any other security or commitment pursuant to which the
Corporation or the Parent may now or hereafter be required to issue
and/or deliver shares of Parent Common Stock; and
(b) it is not as of the Effective Date, and has not been at
any time within the past five (5) years prior to the Effective
Date, a "United States real property holding corporation" within<PAGE>
<PAGE>
the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended.
6.4. Notification of Certain Events. In order to assist the
Parent to comply with its obligations hereunder, the Corporation
will give the Parent notice of each of the following events at the
time set forth below:
(a) in the event of any determination by the Board of
Directors to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to the Corporation or to
effect any other distribution of the assets of the Corporation
among its shareholders for the purpose of winding up its
affairs, at least 60 days prior to the proposed effective date
of such liquidation, dissolution, winding up or to their
distribution;
(b) immediately, upon the earlier of (i) receipt by the
Corporation of notice of, and (ii) the Corporation otherwise
becoming aware of, any threatened or instituted claim, suit,
petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding up of the Corporation or
to effect any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding
up its affairs;
(c) immediately, upon receipt by the Corporation of a
Retraction Request (as defined in the Exchangeable Share
Provisions);
(d) at least 130 days prior to any Automatic Redemption
Date determined by the Board of Directors in accordance with
clause (b) of the definition of Automatic Redemption Date in
the Exchangeable Share Provisions;
(e) as soon as practicable upon the issuance by the
Corporation of any Exchangeable Shares or rights to acquire
Exchangeable Shares; and
(f) immediately in the event of any determination by the
Board of Directors of the Corporation to take any action which
would require a vote of the holders of Exchangeable Shares.
6.5. Delivery of Shares of Parent Common Stock. Upon notice of
any event that requires the Corporation to cause to be delivered
shares of Parent Common Stock to any holder of Exchangeable Shares,
the Parent shall, in any manner deemed appropriate by it, provide
such shares or cause such shares to be provided to the Corporation,
which shall forthwith deliver the requisite shares of Parent Common
Stock to or to the order of the former holder of the surrendered
Exchangeable Shares, as the Corporation shall direct. All such
shares of Parent Common Stock shall be duly issued as fully paid,
non-assessable, free of pre-emptive rights and shall be free and<PAGE>
<PAGE>
clear of any lien, claim, encumbrance, security interest or adverse
claim created by the Parent or arising from acts or omissions of
the Parent.
6.6. Qualification of Shares of Parent Common Stock. The
Parent covenants that if any shares of Parent Common Stock (or
other shares or securities into which the Parent Common Stock may
be reclassified or changed as contemplated by section 6.7 hereof)
to be issued and delivered hereunder, including for greater
certainty, pursuant to the Plan of Arrangement, the Exchangeable
Share Provisions or the Exchange Right, require registration or
qualification with or approval of or the filing of any document
including any prospectus or similar document or the taking of any
proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian or
United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority
or the fulfillment of any other legal requirement (collectively,
the "Applicable Laws") before such shares (or other shares or
securities into which the Parent Common Stock may be reclassified
or changed as contemplated by section 6.7 hereof) may be issued and
delivered by the Parent to the initial holder thereof, the Parent
will in good faith use its best efforts expeditiously to take all
such actions and do all such things as are necessary to cause such
shares of Parent Common Stock (or other shares or securities into
which the Parent Common Stock may be reclassified or changed as
contemplated by section 6.7 hereof) to be and remain duly
registered, qualified or approved. The Parent will in good faith
use its best efforts expeditiously to take all such actions and do
all such things as are necessary to cause all shares of Parent
Common Stock (or other shares or securities into which the Parent
Common Stock may be reclassified or changed as contemplated by
section 6.7 hereof) to be delivered hereunder, including for
greater certainty, pursuant to the Plan of Arrangement, the
Exchangeable Share Provisions or the Exchange Right, to be listed,
quoted or posted for trading on all stock exchanges and quotation
systems on which such shares are listed, quoted or posted for
trading at such time.
6.7 Economic Equivalence.
(1) The Parent will not without the prior approval of the
Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of the
Exchangeable Share Provisions:
(a) issue or distribute shares of Parent Common Stock
(or securities exchangeable for or convertible into or
carrying rights to acquire shares of Parent Common Stock) to
the holders of all or substantially all of the then
outstanding Parent Common Stock by way of stock dividend or
other distribution, other than an issue of shares of Parent
Common Stock (or securities exchangeable for or convertible<PAGE>
<PAGE>
into or carrying rights to acquire shares of Parent Common
Stock) to holders of shares of Parent Common Stock who
exercise an option to receive dividends in Parent Common Stock
(or securities exchangeable for or convertible into or
carrying rights to acquire shares of Parent Common Stock) in
lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of Parent Common Stock entitling them to
subscribe for or to purchase shares of Parent Common Stock (or
securities exchangeable for or convertible into or carrying
rights to acquire shares of Parent Common Stock); or
(c) issue or distribute to the holders of all or
substantially all of the then outstanding shares of Parent
Common Stock (i) shares or securities of the Parent of any
class other than Parent Common Stock (other than shares
convertible into or exchangeable for or carrying rights to
acquire shares of Parent Common Stock), (ii) rights, options
or warrants other than those referred to in section 6.7(1)(b)
above, (iii) evidences of indebtedness of the Parent or (iv)
assets of the Parent;
unless (x) one or both of the Parent or the Corporation is
permitted under applicable law to issue or distribute the economic
equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets to
holders of the Exchangeable Shares and (y) one or both of the
Parent or the Corporation shall issue or distribute such rights,
options, securities, shares, evidences of indebtedness or other
assets at a reasonably proximate time to holders of the
Exchangeable Shares.
(2) The Parent will not without the prior approval of the
Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of the
Exchangeable Share Provisions:
(a) subdivide, redivide or change the then outstanding
shares of Parent Common Stock into a greater number of shares
of Parent Common Stock; or
(b) reduce, continue or consolidate or change the then
outstanding shares of Parent Common Stock into a lesser number
of shares of Parent Common Stock; or
(c) reclassify or otherwise change the shares of Parent
Common Stock or effect an amalgamation, merger, reorganization
or other transaction affecting the holders of the shares of
Parent Common Stock;
<PAGE>
<PAGE>
unless (x) the Corporation is permitted under applicable law to at
a reasonably proximate time make the same or an economically
equivalent change to, or in the rights of holders of, the
Exchangeable Shares and (y) the same or an economically equivalent
change is made to, or in the rights of the holders of, the
Exchangeable Shares.
(3) The Parent will ensure that the record date for any event
referred to in section 6.7(1) or 6.7(2) above, or (if no record
date is applicable for such event) the effective date for any such
event, is not less than 20 Business Days after the date on which
such event is declared or announced by the Parent (with
simultaneous notice thereof to be given by the Parent to the
Corporation).
(4) The Board of Directors shall determine, in good faith and
in its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts as
the board may require), economic equivalence for the purposes of
any event referred to in section 6.7(1) or 6.7(2) hereof and each
such determination shall be conclusive and binding on the Parent.
In making each such determination, the following factors shall,
without excluding other factors determined by the board to be
relevant, be considered by the Board of Directors:
(a) in the case of any stock dividend or other
distribution payable in shares of Parent Common Stock, the
number of such shares issued in proportion to the number of
shares of Parent Common Stock previously outstanding;
(b) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or purchase
shares of Parent Common Stock (or securities exchangeable for
or convertible into or carrying rights to acquire shares of
Parent Common Stock), the relationship between the exercise
price of each such right, option or warrant and the current
market value (as determined by the Board of Directors in the
manner above contemplated) of a share of Parent Common Stock;
(c) in the case of the issuance or distribution of any
other form of property (including without limitation any
shares or securities of the Parent of any class other than
Parent Common Stock, any rights, options or warrants other
than those referred to in section 6.7(4)(b) hereof, any
evidences of indebtedness of the Parent or any assets of the
Parent), the relationship between the fair market value (as
determined by the Board of Directors in the manner above
contemplated) of such property to be issued or distributed
with respect to each outstanding share of Parent Common Stock
and the current market value (as determined by the Board of
Directors in the manner above contemplated) of a share of
Parent Common Stock; and
<PAGE>
<PAGE>
(d) in the case of any subdivision, redivision or change
of the then outstanding shares of Parent Common Stock into a
greater number of shares of Parent Common Stock or the
reduction, combination or consolidation or change of the then
outstanding shares of Parent Common Stock into a lesser number
of shares of Parent Common Stock or any amalgamation, merger,
reorganization or other transaction affecting the Parent
Common Stock, the effect thereof upon the then outstanding
shares of Parent Common Stock.
For purposes of the foregoing determinations, the current market
value of any security shall be calculated in substantially the same
manner as Current Market Price in the case of the Parent Common
Stock. The Parent shall not enter into any transaction referred to
in Section 6.7(1) or 6.7(2) hereof if the primary purpose thereof
is to effect distributions on a per share basis to the holders of
the Parent Common Stock that are not the economic equivalent of
distributions on a per share basis to holders of the Exchangeable
Shares, which shall be determined by the Board of Directors in good
faith and in its sole discretion as aforesaid.
6.8. Tender Offers; etc. In the event that a tender offer,
share exchange offer, issuer bid, takeover bid or similar
transaction with respect to Parent Common Stock (each, an "Offer")
is proposed by the Parent or is proposed to the Parent or its
shareholders and recommended by the Parent Board of Directors, or
is otherwise effected or to be effected with the consent or
approval of the Parent Board of Directors, the Parent will
expeditiously and in good faith use its best efforts to take all
such actions and do all such things as are necessary or desirable
to enable and permit holders of Exchangeable Shares to participate
in such Offer to the same extent and on an economically equivalent
basis as the holders of shares of Parent Common Stock, without
discrimination. Without limiting the generality of the foregoing,
the Parent will use its best efforts to ensure that holders of
Exchangeable Shares may participate in all such Offers without
being required to retract Exchangeable Shares as against the
Corporation (or, if so required, to ensure that any such retraction
shall be effective only upon, and shall be conditional upon, the
closing of the Offer and only to the extent necessary to tender or
deposit to the Offer).
6.9. Parent Not to Vote Exchangeable Shares. The Parent
covenants and agrees that it will appoint and cause to be appointed
proxyholders with respect to all Exchangeable Shares held by the
Parent and its Subsidiaries for the sole purpose of attending each
meeting of holders of Exchangeable Shares in order to be counted as
part of the quorum for each such meeting. The Parent further
covenants and agrees that it will not, and will cause its
Subsidiaries not to, exercise any voting rights that may be
exercisable by holders of Exchangeable Shares from time to time
pursuant to the Exchangeable Share Provisions or pursuant to the
provisions of the Canada Business Corporations Act (or any<PAGE>
<PAGE>
successor or other corporate statute by which the Corporation may
in the future be governed) with respect to any Exchangeable Shares
held by it or by its direct or indirect Subsidiaries in respect of
any matter considered at any meeting of holders of Exchangeable
Shares.
6.10. Due Performance. On and after the effective date of the
Plan of Arrangement, the Parent shall duly and timely perform all
of its obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of any
rights by any holder of Exchangeable Shares or Parent under the
Exchangeable Share Provisions.
6.11. Issuance of Additional Shares. During the term of this
trust agreement, the Parent will not issue any shares of Parent
Special Voting Stock in addition to the Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1. Powers and Duties of the Trustee. The rights, powers,
duties and authorities of the Trustee under this trust agreement,
in its capacity as trustee of the trust, shall include:
(a) receipt and deposit of the Voting Share from the
Parent as trustee for and on behalf of the Non-Affiliated
Holders in accordance with the provisions of this trust
agreement;
(b) granting proxies and distributing materials to
Non-Affiliated Holders as provided in this trust agreement;
(c) voting the Non-Affiliated Holder Votes in accordance
with the provisions of this trust agreement;
(d) receiving the grant of the Exchange Right and the
Automatic Exchange Rights from the Parent as trustee for and
on behalf of the Non-Affiliated Holders in accordance with the
provisions of this trust agreement;
(e) exercising the Exchange Right in accordance with the
provisions of this trust agreement, and in connection
therewith receiving from Non-Affiliated Holders Exchangeable
Shares and other requisite documents and distributing to such
Non-Affiliated Holders the shares of Parent Common Stock and
cheques, if any, to which such Non-Affiliated Holders are
entitled upon the exercise of the Exchange Right;
(f) holding title to the Trust Estate;
<PAGE>
<PAGE>
(g) investing any money forming, from time to time, a
part of the Trust Estate as provided in this trust agreement;
and
(h) taking action at the direction of a Non-Affiliated
Holder to enforce the obligations of the Corporation and/or
the Parent under this trust agreement and/or under the Plan of
Arrangement, including the Exchangeable Share Provisions; and
(i) taking such other actions and doing such other
things as are specifically provided in this trust agreement.
In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of
this trust agreement as the Trustee, acting in good faith and in
the reasonable exercise of its discretion, may deem necessary,
appropriate or desirable to effect the purpose for the Trust. Any
exercise of such discretionary rights, powers and authorities by
the Trustee shall be final, conclusive and binding upon all
persons. For greater certainty, the Trustee shall have only those
duties as are set out specifically in this trust agreement. The
Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the
best interests of the Non-Affiliated Holders and shall exercise the
care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances. The Trustee shall not be
bound to give any notice or do or take any act, action or
proceeding by virtue of the powers conferred on it hereby unless
and until it shall be specifically required to do so under the
terms hereof; nor shall the Trustee be required to take any notice
of, or to do of to take any act, action or proceeding as a result
of any default or breach of any provision hereunder, unless and
until notified in writing of such default or breach, which notice
shall distinctly specify the default or breach desired to be
brought to the attention of the Trustee and in the absence of such
notice the Trustee may for all purposes of this trust agreement
conclusively assume that no default or breach has been made in the
observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
7.2. No Conflict of Interest. The Trustee represents to the
Corporation and the Parent that at the date of execution and
delivery of this trust agreement there exists no material conflict
of interest in the role of the Trustee as a fiduciary hereunder and
the role of the Trustee in any other capacity. The Trustee shall,
within 90 days after it becomes aware that such a material conflict
of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in
Article 10 hereof. If, notwithstanding the foregoing provisions of
this section 7.2, the Trustee has such a material conflict of
interest, the validity and enforceability of this trust agreement
shall not be affected in any manner whatsoever by reason only of<PAGE>
<PAGE>
the existence of such material conflict of interest. If the Trustee
contravenes the foregoing provisions of this section 7.2, any
interested party may apply to the Ontario Court of Justice (General
Division) for an order that the Trustee be replaced as trustee
hereunder.
7.3. Dealings with Transfer Agents, Registrars, etc. The
Corporation and the Parent irrevocably authorize the Trustee, from
time to time, to:
(a) consult, communicate and otherwise deal with the
respective registrars and transfer agents, and with any such
subsequent registrar or transfer agent, of the Exchangeable
Shares and the Parent Common Stock; and
(b) requisition, from time to time, from any such
registrar or transfer agent any information readily available
from the records maintained by it which the Trustee may
reasonably require for the discharge of its duties and
responsibilities under this trust agreement. The Parent
covenants that it will supply the Trustee, or the Transfer
Agent, as the case may be, in a timely manner with duly
executed share certificates for the purpose of completing the
exercise from time to time of all rights to acquire Parent
Common Stock hereunder, under the Plan of Arrangement, under
the Exchangeable Share Provisions and under any other security
or commitment given to the Non-Affiliated Holders pursuant
thereto, in each case pursuant to the provisions hereof, of
the Plan of Arrangement or of the Exchangeable Share
provisions or otherwise.
7.4. Book and Records. The Trustee shall keep available for
inspection by the Parent and the Corporation, at the Trustee's
principal office in Toronto, Ontario, correct and complete books
and records of account relating to the Trustee's actions under this
trust agreement, including without limitation all information
relating to mailings and instructions to and from Non-Affiliated
Holders and all transactions pursuant to the Voting Rights and the
Exchange Right for the term of this Agreement. On or before March
31 in every year after the date hereof, so long as the Voting Share
is on deposit with the Trustee, the Trustee shall transmit to the
Parent and the Corporation a brief report, dated as of the
preceding December 31, with respect to: (a) the property and funds
comprising the Trust Estate as of that date; (b) the number of
exercises of the Exchange Right, if any, and the aggregate number
of Exchangeable Shares received by the Trustee on behalf of
Non-Affiliated Holders in consideration of the issue and delivery
by the Parent of shares of Parent Common Stock in connection with
the Exchange Right, during the calendar year ended on such date;
and (c) all other actions taken by the Trustee in the performance
of its duties under this trust agreement which it had not
previously reported.
<PAGE>
<PAGE>
7.5. Income Tax Returns and Reports. The Trustee shall, to the
extent necessary, prepare and file on behalf of the Trust
appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or
pursuant to the rules and regulations of any securities exchange or
other trading system through which the Exchangeable Shares are
traded and, in connection therewith, may obtain the advice and
assistance of such experts as the Trustee may consider necessary or
advisable. If requested by the Trustee, the Parent shall retain
such experts as may be required for the purposes of providing such
advice and assistance.
7.6. Indemnification Prior to Certain Actions by Trustee. The
Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this trust agreement at the request,
order or direction of any Non-Affiliated Holder upon such
Non-Affiliated Holder furnishing to the Trustee reasonable funding,
security and indemnity against the costs, expenses and liabilities
that may be incurred by the Trustee therein or thereby, provided
that no Non-Affiliated Holder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with
the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Voting Share pursuant to
Article 4 hereof and with respect to the Exchange Right pursuant to
Article 5 hereof, subject to the provisions of section 7.16 hereof.
None of the provisions contained in this trust agreement shall
require the Trustee to expend or risk its own funds or otherwise
incur financial liability in the exercise of any of its rights,
powers, duties or authorities unless funded, given funds, security
and indemnified as aforesaid.
7.7. Actions by Non-Affiliated Holders. No Non-Affiliated
Holder shall have the right to institute any action, suits or
proceeding or to exercise any other remedy authorized by this trust
agreement for the purpose of enforcing any of its rights or for the
execution of any trust or power hereunder unless the Non-Affiliated
Holder has requested the Trustee to take or institute such action,
suits or proceeding and furnished the Trustee with the funding,
security and indemnity referred to in section 7.6 hereof and the
Trustee shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Non-Affiliated
Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it
being understood and intended that no one or more Non-Affiliated
Holders shall have any right in any manner whatsoever to affect,
disturb or prejudice the rights hereby created by any such action,
or to enforce any right hereunder or under the Voting Rights or the
Exchange Right except subject to the conditions and in the manner
herein provided, and that all powers and trusts hereunder shall be
exercised and all proceedings at law shall be instituted, had and
maintained by the Trustee, except only as herein provided, and in
any event for the equal benefit of all Non-Affiliated Holders.
<PAGE>
<PAGE>
7.8. Reliance upon Declarations. The Trustee shall not be
considered to be in contravention of any of its rights, powers,
duties and authorities hereunder if, when required, it acts and
relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or
documents furnished pursuant to the provisions hereof or required
by the Trustee to be furnished to it in the exercise of its rights,
powers, duties and authorities hereunder and such lists, mailing
labels, notices, statutory declarations, certificates, opinions,
reports or other papers or documents comply with any applicable
provisions of this trust agreement.
7.9. Evidence and Authority to Trustee. The Corporation
and/or the Parent shall furnish to the Trustee evidence of
compliance with the conditions provided for in this trust agreement
relating to any action or step required or permitted to be taken by
the Corporation and/or the Parent under this trust agreement or as
a result of any obligation imposed on the Corporation or the Parent
under this trust agreement, including, without limitation, in
respect of the Voting Rights or the Exchange Right and the taking
of any other action to be taken by the Trustee at the request of or
on the application of the Corporation and/or the Parent forthwith
if and when:
(a) such evidence is required by any other section of this
trust agreement to be furnished to the Trustee in accordance with
the terms of this Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers,
duties and authorities under this trust agreement gives the
Corporation and/or the Parent written notice requiring it to
furnish such evidence in relation to any particular action or
obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of the
Corporation and/or the Parent or a statutory declaration or a
certificate made by persons entitled to sign an Officer's
Certificate stating that any such condition has been complied with
in accordance with the terms of this trust agreement. Whenever such
evidence relates to a matter other than the Voting Rights or the
Exchange Right and except as otherwise specified provided herein,
such evidence may consist of a report or opinion of any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert or
any other person whose qualifications give authority to a statement
made by such person, provided that if such report or opinion is
furnished by a director, officer or employee of the Corporation
and/or the Parent it shall be in the form of an Officer's
Certificate or a statutory declaration. Each statutory declaration,
certificate, opinion or report furnished to the Trustee as evidence
of compliance with a condition provided for in this trust agreement
shall include a statement by the person giving the evidence:
<PAGE>
<PAGE>
(a) declaring that such person has read and understands the
provisions of this trust agreement relating to the condition in
question;
(b) describing the nature and scope of the examination or
investigation upon which such person based the statutory
declaration, certificate, statement or opinion; and
(c) declaring that such person has made such examination or
investigation as such person believes is necessary to enable such
person to make the statements or give the opinions contained or
expressed therein.
7.10. Experts, Advisors and Agents. The Trustee may:
(a) in relation to these presents act and rely on the opinion
or advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Trustee or by the Corporation
and/or the Parent or otherwise, and may employ such assistants as
may be necessary to the proper determination and discharge of its
powers and duties and determination of its rights hereunder and may
pay proper and reasonable compensation for all such legal and other
advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may
reasonably require for the proper determination and discharge of
its powers and duties hereunder, and may pay reasonable
remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the determination and discharge of its duties
hereunder and in the management of the Trust.
7.11. Investment of Money Held by Trustee. Unless otherwise
provided in this trust agreement, any money held by or on behalf of
the Trustee which under the terms of this trust agreement may or
ought to be invested or which may be on deposit with the Trustee or
which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of Ontario,
trustees are authorized to invest trust money, provided that such
securities are stated to mature within two years after their
purchase by the Trustee, and the Trustee shall so invest such money
on the written direction of the Corporation. Pending the investment
of any money as hereinbefore provided, such money may be deposited
in the name of the Trustee in any chartered bank in Canada or, with
the consent of the Corporation, in the deposit department of the
Trustee or any other loan or trust company authorized to accept
deposits under the laws of Canada or any province thereof at the
rate of interest then current on similar deposits.
<PAGE>
<PAGE>
7.12. Trustee Not Required to Give Security. The Trustee shall
not be required to give any bond or security in respect of the
execution of the trusts, rights, duties, powers and authorities of
this trust agreement or otherwise in respect of the premises.
7.13. Trustee Not Bound to Act on Corporation's Request.
Except as in this trust agreement otherwise specifically provided,
the Trustee shall not be bound to act in accordance with any
direction or request of the Corporation and/or the Parent or of the
directors thereof until a duly executed copy of the instrument or
resolution containing such direction or request shall have been
delivered to the Trustee, and the Trustee shall be empowered to act
and rely upon any such copy purporting to be executed and believed
by the Trustee to be genuine.
7.14. Authority to Carry on Business. The Trustee represents
to the Corporation and the Parent that at the date of execution and
delivery by it of this trust agreement it is authorized to carry on
the business of a trust company in the Province of Ontario but if,
notwithstanding the provisions of this section 7.14, it ceases to
be so authorized to carry on business, the validity and
enforceability of this trust agreement and the Voting Rights, the
Exchange Right and the other rights granted in or resulting from
the Trustee being a party to this trust agreement shall not be
affected in any manner whatsoever by reason only of such event but
the Trustee shall, within 90 days after ceasing to be authorized to
carry on the business of a trust company in the Province of
Ontario, either become so authorized or resign in the manner and
with the effect specified in Article 10 hereof.
7.15. Conflicting Claims. If conflicting claims or demands are
made or asserted with respect to any interest of any Non-Affiliated
Holder in any Exchangeable Shares, including any disagreement
between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Non-Affiliated
Holder in any Exchangeable Shares resulting in conflicting claims
or demands being made in connection with such interest, then the
Trustee shall be entitled, at its sole discretion, to refuse to
recognize or to comply with any such claim or demand. In so
refusing, the Trustee may elect not to exercise any Voting Rights,
the Exchange Right or other rights subject to such conflicting
claims or demands and, in so doing, the Trustee shall not be or
become liable to any person on account of such election or its
failure or refusal to comply with any such conflicting claims or
demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to
the Voting Rights, Exchange Right or other rights subject to
such conflicting claims or demands have been adjudicated by a
final judgment of a court of competent jurisdiction; or
<PAGE>
<PAGE>
(b) all differences with respect to the Voting Rights,
Exchange Right or other rights subject to such conflicting
claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and
the Trustee shall have been furnished with an executed copy of
such agreement.
If the Trustee elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its discretion
require such claimant to furnish such surety bond or other security
satisfactory to the Trustee as it shall deem appropriate fully to
indemnify it as between all conflicting claims or demands.
7.16. Acceptance of Trust. The Trustee hereby accepts the
Trust created and provided for by and in this trust agreement and
agrees to perform the same upon the terms and conditions herein set
forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from
time to time be Non-Affiliated Holders, subject to all the terms
and conditions herein set forth.
ARTICLE 8
COMPENSATION
8.1. Fees and Expenses of the Trustee. The Parent and the
Corporation jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it
under this trust agreement and will reimburse the Trustee for all
reasonable expenses (including but not limited to taxes,
compensation paid to experts, agents and advisors and travel
expenses) and disbursements, including the cost and expense of any
suit or litigation of any character and any proceedings before any
governmental agency reasonably incurred by the Trustee in
connection with its rights and duties under this trust agreement;
provided that the Parent and the Corporation shall have no
obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit
or litigation in which the Trustee is determined to have acted in
bad faith or with negligence or wilful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1. Indemnification of the Trustee. The Parent and the
Corporation jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers, employees
and agents appointed and acting in accordance with this trust
agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal
counsel) which, without fraud, negligence, wilful misconduct or bad<PAGE>
<PAGE>
faith on the part of such Indemnified Party, may be paid, incurred
or suffered by the Indemnified Party by reason of or as a result of
the Trustee's acceptance or administration of the Trust, its
compliance with its duties set forth in this trust agreement, or
any written or oral instructions delivered to the Trustee by the
Parent or the Corporation pursuant hereto. In no case shall the
Parent or the Corporation be liable under this indemnity for any
claim against any of the Indemnified Parties if such claim is
incurred or suffered by reason of or as a result of the fraud,
negligence, wilful misconduct or bad faith of an Indemnified Party
and unless the Parent and the Corporation shall be notified by the
Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of
the Indemnified Parties shall have received any such written
assertion of a claim or shall have been served with a summons or
other first legal process giving information as to the nature and
basis of the claim. Subject to (ii), below, the Parent and the
Corporation shall be entitled to participate at their own expense
in the defense and, if the Parent and the Corporation so elect at
any time after receipt of such notice, any of them may assume the
defense of any suit brought to enforce any such claim. The Trustee
shall have the right to employ separate counsel in any such suit
and participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of the Trustee unless: (i) the
employment of such counsel has been authorized by the Parent or the
Corporation, such authorization not to be unreasonably withheld; or
(ii) the named parties to any such suit include both the Trustee
and the Parent or the Corporation the Trustee shall have been
advised by counsel acceptable to the Parent or the Corporation that
there may be one or more legal defenses available to the Trustee
that are different from or in addition to those available to the
Parent and the Corporation and that an actual or potential conflict
of interest exists (in which case the Parent and the Corporation
shall not have the right to assume the defense of such suit on
behalf of the Trustee but shall be liable to pay the reasonable
fees and expenses of counsel for the Trustee). Such indemnification
shall survive the resignation or removal of the Trustee and the
termination of this trust agreement.
9.2. Limitation of Liability. The Trustee shall not be held
liable for any loss which may occur by reason of depreciation of
the value of any part of the Trust Estate or any loss incurred on
any investment of funds pursuant to this trust agreement, except to
the extent that such loss is attributable to the fraud, negligence,
wilful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1. Resignation. The Trustee, or any trustee hereafter
appointed, may at any time resign by giving written notice of such
resignation to the Parent and the Corporation specifying the date<PAGE>
<PAGE>
on which it desires to resign, provided that such notice shall
never be given less than 60 days before such desired resignation
date unless the Parent and the Corporation otherwise agree and
provided further that such resignation shall not take effect until
the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon
receiving such notice of resignation, the Parent and the
Corporation shall promptly appoint a successor trustee by written
instrument in duplicate, one copy of which shall be delivered to
the resigning trustee and one copy to the successor trustee.
Failing acceptance by a successor trustee, a successor trustee may
be appointed by an order of the Ontario Court of Justice (General
Division) upon application of one or more of the parties hereto.
10.2. Removal. The Trustee, or any trustee hereafter
appointed, may be removed with or without cause, at any time on 60
days' prior notice by written instrument executed by the Parent and
the Corporation, in duplicate, one copy of which shall be delivered
to the trustee so removed and one copy to the successor trustee.
10.3. Successor Trustee. Any successor trustee appointed as
provided under this trust agreement shall execute, acknowledge and
deliver to the Parent and the Corporation and to its predecessor
trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor or trustee shall become
effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers,
duties and obligations of its predecessor under this trust
agreement, with like effect as if originally named as trustee in
this trust agreement. However, on the written request of the Parent
and the Corporation or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of this trust agreement, execute and
deliver an instrument transferring to such successor trustee, all
the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trusted, the Parent and the
Corporation and such predecessor trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers.
10.4. Notice of Successor Trustee. Upon acceptance of
appointment by a successor trustee as provided herein, the Parent
and the Corporation shall cause to be mailed notice of the
succession of such trustee hereunder to each Non-Affiliated Holder
specified in a List. If the Parent or the Corporation shall fail to
cause such notice to be mailed within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Parent and the
Corporation.
<PAGE>
<PAGE>
ARTICLE 11
PARENT SUCCESSORS
11.1. Certain Requirements in Respect of Combination, etc.
The Parent shall not consolidate or amalgamate with, or merge into,
any other person, but may do so if:
(a) such other person or (in the case of any consolidation or
amalgamation) the continuing corporation (the "Parent Successor"),
by operation of law, becomes, without more, bound by the terms and
provisions of this trust agreement or, if not so bound, executes,
prior to or contemporaneously with the consummation of such
transaction a trust agreement supplemental hereto and such other
instruments (if any) as are satisfactory to the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee,
acting reasonably, are necessary or advisable to evidence the
assumption by the Parent Successor of liability for all money
payable and property deliverable hereunder and the covenant of such
Parent Successor to pay and deliver or cause to be delivered the
same and its agreement to observe and perform all the covenants and
obligations of the Parent under this trust agreement; and
(b) such transaction shall, to the satisfaction of the
Trustee and in the opinion of legal counsel to the Trustee, in each
case acting reasonably, be upon such terms as substantially to
preserve and not to impair in any material respect any of the
rights, duties, powers and authorities of the Trustee or of the
Non-Affiliated Holders hereunder.
11.2. Vesting of Powers in Successor. Whenever the conditions
of section 11.1 hereof have been duly observed and performed, if
required by section 11.1 hereof, the Trustee, the Parent Successor
and the Corporation shall execute and deliver the supplemental
trust agreement provided for in Article 12 hereof and thereupon the
Parent Successor shall possess and from time to time may exercise
each and every right and power of the Parent under this trust
agreement in the name of the Parent or otherwise and any act or
proceeding by any provision of this trust agreement required to be
done or performed by the Parent Board of Directors or any officers
of the Parent may be done and performed with like force and effect
by the directors or officers of such Parent Successor.
11.3. Wholly-Owned Subsidiaries. Except as provided in Section
5.10, nothing herein shall be construed as preventing the
amalgamation or consolidation of any Subsidiary of the Parent with
the Parent or the winding-up, liquidation or dissolution of any
Subsidiary of the Parent, provided that all of the assets of such
Subsidiary are transferred to the Parent or a wholly-owned
Subsidiary of the Parent.
<PAGE>
<PAGE>
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1. Amendments, Modifications, etc. This trust agreement may
not be amended or modified except by an agreement in writing
executed by the Corporation, the Parent and the Trustee and
approved by the Non-Affiliated Holders in accordance with Section
9.2 of the Exchangeable Share Provisions.
12.2. Ministerial Amendments. Notwithstanding the provisions
of Section 12.1 hereof, the parties to this trust agreement may in
writing, at any time and from time to time, without the approval of
the Non-Affiliated Holders, amend or modify this trust agreement
for the purposes of:
(a) adding to the covenants of any or all of the parties
hereto for the protection of the Non-Affiliated Holders
hereunder;
(b) making such amendments or modifications not
inconsistent with this trust agreement as may be necessary or
desirable with respect to matters or questions which, in the
opinion of the Board of Directors and the Parent Board of
Directors and in the opinion of the Trustee and its counsel,
having in mind the best interests of the Non-Affiliated
Holders as a whole, it may be expedient to make, provided that
such boards of directors and the Trustee and its counsel shall
be of the opinion that such amendments and modifications will
not be prejudicial to the interests of the Non-Affiliated
Holders as a whole; or
(c) making such changes or corrections which, on the
advice of counsel to the Corporation, the Parent and the
Trustee, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error, provided that the
Trustee and its counsel and the Board of Directors and the
Parent Board of Directors shall be of the opinion that such
changes or corrections will not be prejudicial to the
interests of the NonAffiliated Holders as a whole.
12.3. Meeting to Consider Amendments. The Corporation, at the
request of the Parent, shall call a meeting or meetings of the
Non-Affiliated Holders for the purpose of considering any proposed
amendment or modification requiring approval pursuant hereto. Any
such meeting or meetings shall be called and held in accordance
with the by-laws of the Corporation, the Exchangeable Share
Provisions and all applicable laws.
12.4. Changes in Exchangeable Shares. At all times after the
occurrence of any event effected pursuant to Section 6.7 or Section
6.8 of this trust agreement, as a result of which the Exchangeable<PAGE>
<PAGE>
Shares are in any way changed, this trust agreement shall forthwith
be amended and modified as necessary in order that it shall apply
with full force and effect, mutatis mutandis, to all new securities
into which the Exchangeable Shares are so changed and the parties
hereto shall execute and deliver a supplemental trust agreement
giving effect to and evidencing such necessary amendments and
modifications.
12.5. Execution of Supplemental Trust Agreements. No amendment
to or modification or waiver of any of the provisions of this trust
agreement otherwise permitted hereunder shall be effective unless
made in writing and signed by all of the parties hereto. From time
to time the Corporation (when authorized by a resolution of its
Board of Directors), the Parent (when authorized by a resolution of
the Parent Board of Directors) and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by
these presents, execute and deliver by their proper officers, trust
agreements or other instruments supplemental hereto, which
thereafter shall form part hereof, for any one or more of the
following purposes:
(a) evidencing the succession of Parent Successors to
the Parent and the covenants of and obligations assumed by
each such Parent Successor in accordance with the provisions
of Article 11 and the successor of any successor trustee in
accordance with the provisions of Article 10;
(b) for any other purposes not inconsistent with the
provisions of this trust agreement, including without
limitation to make or evidence any amendment or modification
to this trust agreement as contemplated hereby, provided that,
in the opinion of the Trustee and its counsel, acting
reasonably, the rights of the Trustee and the Non-Affiliated
Holders as a whole will not be prejudiced thereby.
ARTICLE 13
TERMINATION
13.1. Term. The Trust created by this trust agreement shall
continue until the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by any
Non-Affiliated Holders;
(b) each of the Corporation and the Parent elects in
writing to terminate the Trust and such termination is
approved by the Non-Affiliated Holders of the Exchangeable
Shares in accordance with Section 9.2 of the Exchangeable
Share Provisions; and
<PAGE>
<PAGE>
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King George VI of the United
Kingdom of Great Britain and Northern Ireland living on the
date of the creation of the Trust.
13.2. Survival of Agreement. This trust agreement shall
survive any termination of the Trust and shall continue until there
are no Exchangeable Shares outstanding held by any Non-Affiliated
Holder; provided, however, that the provisions of Article 8 and 9
hereof and the representation contained in Section 6.3(b) hereof
shall survive any such termination of this trust agreement.
ARTICLE 14
GENERAL
14.1. Severability. If any provision of this trust agreement
is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remainder of this trust agreement
shall not in any way be affected or impaired thereby and this trust
agreement shall be carried out as nearly as possible in accordance
with its original terms and conditions.
14.2. Enurement. This trust agreement shall be binding upon
and enure to the benefit of the parties hereto and their respective
successors and permitted assigns and to the benefit of the Non-
Affiliated Holders, and with respect to the representations
contained in Section 6.3(b), all shareholders of the Corporation
who receive Parent Common Stock through holding Exchangeable
Shares.
14.3. Notices to Parties. All notices and other communications
between the parties hereunder shall be in writing and shall be
deemed to have been given if delivered personally or by confirmed
telecopy to the parties at the following addresses (or at such
other address for such party as shall be specified in like notice):
(a) if to the Parent at:
Electronic Retailing Systems International, Inc.
488 Main Avenue
Norwalk, Connecticut 06851
Attention: Chairman of the Board
Telecopy: (203) 849-2501
<PAGE>
<PAGE>
(b) if to the Corporation at:
Telepanel Systems, Inc.
245 Riviera Drive
Markham, Ontario
Canada L3R SJ9
Attention: President
Telecopy: (905) 477-9528
(c) if to the Trustee at:
The Montreal Trust Company of Canada
151 Front Street West
Suite 800
Toronto, Ontario M5J 2N1
Telecopy: (416) 981-9800
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and if
given by telecopy shall be deemed to have been given and received
on the date of receipt thereof unless such day is not a Business
Day in which case it shall be deemed to have been given and
received upon the immediately following Business Day.
14.4. Notice of Non-Affiliated Holders. Any and all notices to
be given and any documents to be sent to any Non-Affiliated Holders
may be given or sent to the address of such holder shown on the
register of holders of Exchangeable Shares in any manner permitted
by the Canada Business Corporations Act from time to time in force
in respect of notices to shareholders and shall be deemed to be
received (if given or sent in such manner) at the time specified in
such Act, the provisions of which Act shall apply mutatis mutandis
to notices or documents as aforesaid sent to such holders.
14.5. Risk of Payments by Post. Whenever payments are to be
made or documents are to be sent to any Non-Affiliated Holder by
the Trustee or by the Corporation, the Parent or by such
Non-Affiliated Holder to the Trustee or to the Parent or the
Corporation, the making of such payment or sending of such document
sent through the post shall be at the risk of the Corporation, in
the case of payments made or documents sent by the Trustee or the
Corporation or the Parent, and the Non-Affiliated Holder, in the
case of payments or documents sent by the Non-Affiliated Holder.
14.6. Counterparts. This trust agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
<PAGE>
<PAGE>
14.7. Jurisdiction. This trust agreement shall be construed
and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.
14.8. Attornment. The Parent agrees that any action or
proceeding arising out of or relating to this trust agreement may
be instituted in the courts of Ontario, waives any objection which
it may have now or hereafter to the venue of any such action or
proceeding, and irrevocably submits to the jurisdiction of the said
courts in any such action or proceeding, agrees to be bound by any
final judgment (after all appeals have been exhausted or waived) of
the said courts and agrees not to seek, and hereby waives any
review of the merits of any such judgment by the courts of any
other jurisdiction and hereby appoints the Corporation at its
registered office in the Province of Ontario as its attorney for
service of process.
IN WITNESS WHEREOF, the parties hereto have caused this trust
agreement to be duly executed as of the date first above written.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
TELEPANEL SYSTEMS, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
<PAGE>
<PAGE>
THE MONTREAL TRUST COMPANY OF CANADA
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT 1.1(b)(ii)
AMENDMENTS TO ERS
CERTIFICATE OF INCORPORATION
Article FOURTH of the Certificate of Incorporation of ERS
shall be amended as follows:
(a) The first paragraph of Article FOURTH shall be deleted
and the following new paragraphs substituted therefor:
"FOURTH: the total number of shares of capital stock
which the Corporation shall have the authority to issue is
2,000,000 shares of preferred stock, $1.00 par value per share
("Preferred Stock"), 50,000,000 shares of common stock, $.01
par value per share ("Common Stock"), and one share of special
voting stock, $.01 par value per share ("Special Voting
Stock"). The following is a description of the different
classes and a statement of the relative rights of the holders
of the Preferred Stock, the Common Stock and the Special
Voting Stock.
A. Preferred Stock. The powers, designations,
preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions of
the Preferred Stock shall be as follows:"
(b) The following shall be added at the end of Article
FOURTH:
"B. Common Stock and Special Voting Stock. The rights,
privileges and restrictions of the Common Stock and the
Special Voting Stock shall be as set forth in this Article
FOURTH as follows:
1. (a) Except as otherwise required by law or this
Certificate of Incorporation: (a) each holder of record of
Common Stock shall have one vote in respect of each share of
stock held by the holder on the books of the Corporation, and
(b) the holder of record of the share of Special Voting Stock
shall have a number of votes equal to the number of
Exchangeable Shares ("Exchangeable Shares") of Telepanel
Systems Inc., a company incorporated under the Canada Business
Corporations Act ("Telepanel"), from time to time which are
not owned by the Corporation or any of its Subsidiaries (as
defined in the Trust Agreement hereinafter identified), in
each case for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation.
(b) In respect of all matters concerning the voting of
shares, the Common Stock and the Special Voting Stock shall
vote as a single class and such voting rights shall be
identical in all respects except as required by applicable
law. As permitted by Section 242(b)(ii) of the Delaware<PAGE>
<PAGE>
General Corporation Law, any increase or decrease in the
authorized number of shares of Common Stock shall not require
the approval of the holders of the Common Stock voting
separately as a class.
2. Subject to any prior rights of holders of Preferred
Stock, and the prior payment to the holder of the Special
Voting Stock of an amount equal to the par value thereof, in
the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Common Stock shall share ratably
in all of the remaining assets of the Corporation available
for distribution to its stockholders and the holders of
Special Voting Stock shall not be entitled to receive any such
assets.
3. Subject to any prior rights of holders of Preferred
Stock of the Corporation, the holders of shares of Common
Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of the assets of the
Corporation which are by law available therefor, dividends
payable either in cash, in property or in shares of capital
stock and the holders of Special Voting Stock shall not be
entitled to receive any such dividends.
4. (a) Pursuant to the terms of that certain
Combination Agreement, dated as of October 29, 1997, between
the Corporation and Telepanel, one share of Special Voting
Stock is being issued to the trustee (the "Trustee") under the
Voting, Support and Exchange Trust Agreement, dated as of
, 199 (the "Trust Agreement") by and among the
Corporation, Telepanel and the Trustee.
(b) At such time as the Special Voting Stock has no
votes attached to it because there are no Exchangeable Shares
of Telepanel outstanding which are not owned by the
Corporation or, any of its Subsidiaries, and there are no
shares of stock, debt, options or other agreements of
Telepanel which could give rise to the issuance of any
Exchangeable Shares of Telepanel to any person (other than the
Corporation or any of its Subsidiaries), the Special Voting
Stock shall, without further action, cease to have any rights
whatsoever. From and after assignment to the Corporation of
the Special Voting Stock in accordance with the Trust
Agreement and retirement in accordance with Section 243 of The
Delaware General Corporation Law, the Special Voting Stock
shall not be reissued."
<PAGE>
<PAGE>
EXHIBIT 1.9(a)
, 1997
------------
Electronic Retailing Systems
International, Inc.
488 Main Avenue
Norwalk, Connecticut 06851-2500
Telepanel Systems Inc.
245 Riviera Drive
Markham, Ontario
Canada L3R SJ9
Ladies and Gentlemen:
In connection with and in furtherance of the transactions
contemplated by the Combination Agreement dated as of October 29,
1997 (the "Agreement") between Electronic Retailing Systems
International, Inc., a company incorporated under the laws of the
State of Delaware ("ERS"), and Telepanel Systems Inc., a company
incorporated under the Canada Business Corporations Act
("Telepanel"), the undersigned hereby agrees that:
(a) The undersigned will not sell, transfer, pledge,
hypothecate or otherwise convey or dispose of or enter into any
contract or arrangement for the sale, transfer, pledge,
hypothecation, conveyance or other disposition of any shares of the
common stock, $.01 par value ("ERS Common Stock"), of ERS or any
common shares, without par value ("Telepanel Common Shares"), of
Telepanel or any Exchangeable Shares ("Exchangeable Shares") of
Telepanel, owned by the undersigned: (x) from the date of the
notice (the "Notice") delivered by ERS of its stockholder meeting
contemplated under the Agreement (said Notice not to be less than
30 days prior to such meeting) until the earlier of (i) the
termination of the Agreement or (ii) the date of the first
publication of combined operating results of ERS and Telepanel
covering at least a 30-day period after the Effective Date (as
specified in the Agreement); or (y) from the date hereof through
the date of the Notice if such transactions, individually or in the
aggregate, during any 90-day period would relate to securities
representing in excess of one percent of the outstanding securities
of the same class.
<PAGE>
<PAGE>
(b) In order to enable you to enforce the aforesaid covenant
against disposition of shares, the undersigned hereby consents to
placing stop-transfer orders with the transfer agents,
respectively, of the ERS Common Stock, with respect to any shares
of ERS Common Stock registered in the name of the undersigned or
beneficially owned by the undersigned, and with the transfer
agents, respectively, of the Telepanel Common Shares, with respect
to any Telepanel Common Shares registered in the name of the
undersigned or beneficially owned by the undersigned, and with the
transfer agents, respectively, of the Exchangeable Shares, with
respect to any Exchangeable Shares registered in the name of the
undersigned or beneficially owned by the undersigned.
_______________________________
<PAGE>
<PAGE>
EXHIBIT 1.9(b)
, 1997
-----------
Electronic Retailing Systems
International, Inc.
488 Main Avenue
Norwalk, Connecticut 06851
Telepanel Systems Inc.
245 Riviera Drive
Markham, Ontario
Canada L3R SJ9
Ladies and Gentlemen:
In connection with and in furtherance of the transactions
contemplated by the Combination Agreement dated as of October 29,
1997 (the "Agreement") between Electronic Retailing Systems
International, Inc., a company incorporated under the laws of the
State of Delaware ("ERS"), and Telepanel Systems Inc., a company
incorporated under the Canada Business Corporations Act
("Telepanel"), the undersigned hereby agrees that:
(a) The undersigned will not sell, transfer, pledge,
hypothecate or otherwise convey or dispose of or enter into any
contract or arrangement for the sale, transfer, pledge,
hypothecation, conveyance or other disposition of any shares of the
common stock, $.01 par value (the "ERS Common Stock"), of ERS, any
common shares, without par value ("Telepanel Common Shares"), of
Telepanel or any Exchangeable Shares ("Exchangeable Shares") of
Telepanel owned by the undersigned: (x) from the date of the notice
(the "Notice") delivered by Telepanel of its shareholder meeting
contemplated under the Agreement (said Notice not to be less than
30 days prior to such meeting) until the earlier of (i) the
termination of the Agreement or (ii) the date of the first
publication of combined operating results of ERS and Telepanel
covering at least a 30-day period after the Effective Date (as
specified in the Agreement); or (y) from the date hereof through
the date of the Notice if such transactions, individually or in the
aggregate, during any 90-day period would relate to securities
representing in excess of one percent of the outstanding securities
of the same class.
<PAGE>
<PAGE>
(b) The undersigned shall make no disposition of any
Exchangeable Shares that it receives pursuant to the Arrangement
(as defined in the Agreement), or any shares of ERS Common Stock
that it receives in exchange for any Exchangeable Shares, except in
accordance with the applicable provisions of the United States
Securities Act of 1933, as amended, and the rules and regulations
thereunder; and agrees that the certificates evidencing such shares
shall bear a customary legend setting forth such restrictions.
(c) In order to enable you to enforce the aforesaid covenants
against disposition of shares, the undersigned hereby consents to
placing stop-transfer orders with the transfer agents,
respectively, of the ERS Common Stock, with respect to any shares
of ERS Common Stock registered in the name of the undersigned or
beneficially owned by the undersigned, and with the transfer
agents, respectively, of the Telepanel Common Shares, with respect
to any Telepanel Common Shares registered in the name of the
undersigned or beneficially owned by the undersigned, and with the
transfer agents, respectively, of the Exchangeable Shares, with
respect to any Exchangeable Shares registered in the name of the
undersigned or beneficially owned by the undersigned.
The undersigned represents that it has no present plan,
intention, or arrangement to sell, transfer or otherwise dispose of
any of the Exchangeable Shares that it receives pursuant to the
Arrangement or any shares of ERS Common Stock that it receives in
exchange for Exchangeable Shares, and shall not change such
intention or enter into any such arrangement, prior to the
Effective Date (as defined in the Agreement).
_______________________________
<PAGE>
<PAGE>
EXHIBIT 4.4(b)
The letter to be delivered to ERS from Telepanel's independent
auditors referred to in Section 4.4(b) of the Agreement shall be in
form and substance reasonably satisfactory to ERS and contain
statements by such auditors to the effect that:
(1) They are independent certified public accountants with
respect to Telepanel within the meaning of the Securities Act and
the applicable published rules and regulations thereunder.
(2) In their opinion, the consolidated financial statements
and financial statement schedules audited by them and included or
incorporated by reference in the Joint Proxy Statement comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the
related published rules and regulations.
(3) They have not audited any financial statements of
Telepanel as of any date or for any period subsequent to the date
of the most recent consolidated financial statements audited by
them and included or incorporated by reference into the Joint Proxy
Statement; although they have conducted an audit for the year ended
on the date of the most recent consolidated financial statements
audited by them and included or incorporated by reference in the
Joint Proxy Statement, the purpose (and therefor the scope) of such
audit was to enable them to express their opinion on the
consolidated financial statements as of the date of the most recent
consolidated financial statements audited by them and included or
incorporated by reference into the Joint Proxy Statement and for
the year then ended, but not on the financial statements for any
interim period within such year. Therefore, they are unable to and
do not express any opinion on the unaudited condensed consolidated
balance sheet included or incorporated by reference in the Joint
Proxy Statement, or the unaudited condensed consolidated statements
of operations and deficit and changes in financial position
included or incorporated by reference in the Joint Proxy Statement,
or on the financial position, results of operations or cash flows
as of any date or for any period subsequent to January 31, 1997 the
date of the most recent consolidated financial statements audited
by them and included or incorporated by reference into the Joint
Proxy Statement.
(4) For purposes of such letter, they have read the minutes
of the meetings of the stockholders, the Board of Directors (and
other appropriate committees, if any) of Telepanel and its
subsidiaries as set forth in the minute books from the date of
their report on the most recent consolidated financial statements
audited by them and included or incorporated by reference in the
Joint Proxy Statement to such date not more than five business days
prior to the date of the Joint Proxy Statement, officials of
Telepanel having advised them that the minutes of all such meetings
through that date were set forth therein (except for the minutes of
any Board of Directors meeting which were not approved in final<PAGE>
<PAGE>
form, for which drafts were provided to them; officials of
Telepanel having represented that such drafts include all
substantive actions taken at such meeting), and have carried out
other procedures to such date not more than five business days
prior to the date of the Joint Proxy Statement (their work not
having extended to the period from such date not more than five
business days prior to the date of the Joint Proxy Statement to the
date of the Joint Proxy Statement, inclusive) as follows:
(a) With respect to the periods covered by the unaudited
financial statements of Telepanel and its consolidated
subsidiaries included or incorporated by reference in the
Joint Proxy Statement, they have:
(1) performed the procedures specified by the
Canadian Institute of Chartered Accountants for the
review of unaudited interim financial information
included in prospectuses or other offering documents as
set out in the CICA Handbook section 7100, on the most
recent unaudited condensed consolidated balance sheet,
the most recent unaudited condensed consolidated
statements of operations and deficit and changes in
financial position included or incorporated by reference
in the Joint Proxy Statement; and
(2) inquired of certain officials of Telepanel who
have responsibility for financial and accounting matters
whether the unaudited consolidated condensed financial
statements referred to under (a)(1) above comply as to
form in all material respects with the applicable
accounting requirements of the Securities Act and the
Exchange Act and the published rules and regulations
thereunder.
(b) With respect to the period from the date of the most
recent financial statements of Telepanel and its consolidated
subsidiaries included or incorporated by reference in the
Joint Proxy Statement to the end of the next to last month
prior to the calendar month of the date of the joint Proxy
Statement, they have:
(1) read the unaudited consolidated financial data
of Telepanel and subsidiaries for each month of both the
current year and the corresponding month of the prior
year furnished them by Telepanel, officials of Telepanel
having advised them that no such financial data as of any
date or for any period subsequent to the end of the next
to last month prior to the calendar month of the date of
the Joint Proxy Statement were available; and
<PAGE>
<PAGE>
(2) inquired of certain officials of Telepanel who
have responsibility for financial and accounting matters
as to whether the unaudited financial data referred to
under (b)(1) above are stated on a basis substantially
consistent with that of the audited financial statements
included or incorporated by reference in the Joint Proxy
Statement.
The foregoing procedures do not constitute an audit made in
accordance with Canadian GAAP. Also, such procedures would not
necessarily reveal matters of significance with respect to the
comments in the following paragraph. Accordingly, they make no
representations as to the sufficiency of the foregoing procedures
for purposes of ERS.
(5) Nothing came to their attention as a result of the
foregoing procedures, however, that caused them to believe that:
(a)(i) the unaudited condensed consolidated financial
statements described in 4(a)(1) above, included in the Joint
Proxy Statement, do not comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the published rules
and regulations thereunder and (ii) any material modifications
should be made to the unaudited condensed consolidated
financial statements described in 4(a)(1) for them to be in
conformity with Canadian GAAP; or
(b)(i) as of the end of the next to last month prior to
the calendar month of the date of the Joint Proxy Statement,
there was, except as set forth in such letter, any change in
the capital stock, increase in long-term debt or any decreases
in consolidated net current assets (working capital) or
stockholders' equity of Telepanel and subsidiaries
consolidated as compared with amounts shown in the most recent
unaudited condensed consolidated balance sheet of Telepanel
included in the Joint Proxy Statement or (ii) for the period
from the date of the most recent balance sheet of Telepanel
included or incorporated by reference in the Joint Proxy
Statement to the end of the month immediately preceding the
date of the Joint Proxy Statement, unless the date of the
Joint Proxy Statement is within the first 15 calendar days of
a month, in which case the end of the next to last month prior
to the calendar month of the date of the Joint Proxy
Statement, there were, except as set forth in such letter, any
decreases, as compared with the corresponding period in the
preceding year, in consolidated revenues or increases in the
total or per-share amounts of loss before extraordinary items
or of net loss, except in all instances for changes, increases
or decreases which the Joint Proxy Statement discloses have
occurred or may occur.
<PAGE>
<PAGE>
(6) As mentioned under (4)(b), Telepanel officials have
advised them that no consolidated financial data as of any date or
for any period subsequent to the end of the next to last month
prior to the calendar month of the date of the Joint Proxy
Statement are available; accordingly, the procedures carried out by
them with respect to changes in financial statement items after the
date of the most recent financial statements of Telepanel and its
consolidated subsidiaries included or incorporated by reference in
the Joint Proxy Statement have, of necessity, been even more
limited than those with respect to the periods referred to in (4).
They have made inquiries of certain officials of Telepanel who have
responsibility for financial and accounting matters as to whether
(i) there was any change at a date not more than five business days
prior to the date of the Joint Proxy Statement in the capital
stock, increase in long-term debt or any decreases in consolidated
net current assets (working capital) or stockholders' equity of
Telepanel and subsidiaries consolidated as compared with amounts
shown on the most recent condensed consolidated balance sheet of
Telepanel included or incorporated by reference in the Joint Proxy
Statement, or (ii) for the period from the date of the most recent
condensed consolidated balance sheet of Telepanel included or
incorporated by reference in the Joint Proxy Statement to a date
not more than five business days before the date of the Joint Proxy
Statement, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated net
revenues or increases in the total or per-share amounts of loss
before extraordinary items or of net loss. On the basis of these
inquiries and their reading of the minutes as described in (4),
nothing came to their attention that caused them to believe that
there was, except as set forth in such letter, any such change,
increase or decrease, except in all instances for changes,
increases or decreases which the Joint Proxy Statement discloses
have occurred or may occur.
<PAGE>
<PAGE>
EXHIBIT 4.4(c)
The letter to be delivered to Telepanel from ERS' independent
auditors referred to in Section 4.4(c) of the Agreement shall be in
form and substance reasonably satisfactory to Telepanel and contain
statements by such auditors to the effect that:
(1) They are independent certified public accountants with
respect to ERS within the meaning of the Securities Act and the
applicable published rules and regulations thereunder.
(2) In their opinion, the consolidated financial statements
and financial statement schedules audited by them and included or
incorporated by reference in the Joint Proxy Statement comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the
related published rules and regulations.
(3) They have not audited any financial statements of ERS as
of any date or for any period subsequent to the date of the most
recent consolidated financial statements audited by them and
included or incorporated by reference into the Joint Proxy
Statement; although they have conducted an audit for the year ended
on the date of the most recent consolidated financial statements
audited by them and included or incorporated by reference in the
Joint Proxy Statement, the purpose (and therefor the scope) of such
audit was to enable them to express their opinion on the
consolidated financial statements as of the date of the most recent
consolidated financial statements audited by them and included or
incorporated by reference into the Joint Proxy Statement and for
the year then ended, but not on the financial statements for any
interim period within such year. Therefore, they are unable to and
do not express any opinion on the unaudited condensed consolidated
balance sheet included or incorporated by reference in the Joint
Proxy Statement, or the unaudited condensed consolidated statements
of income, and of cash flows, and of changes in stockholder equity
included or incorporated by reference in the Joint Proxy Statement,
or on the financial position, results of operations or cash flows
as of any date or for any period subsequent to the date of the most
recent consolidated financial statements audited by them and
included or incorporated by reference into the Joint Proxy
Statement.
(4) For purposes of such letter, they have read the minutes
of the meetings of the stockholders, the Board of Directors (and
other appropriate committees, if any) of ERS and its subsidiaries
as set forth in the minute books from the date of their report on
the most recent consolidated financial statements audited by them
and included or incorporated by reference in the Joint Proxy
Statement to such date not more than five business days prior to
the date of the Joint Proxy Statement, officials of ERS having
advised them that the minutes of all such meetings through that
date were set forth therein (except for the minutes of any Board of
Directors meeting which were not approved in final form, for which<PAGE>
<PAGE>
drafts were provided to them; officials of ERS having represented
that such drafts include all substantive actions taken at such
meeting), and have carried out other procedures to such date not
more than five business days prior to the date of the Joint Proxy
Statement (their work not having extended to the period from such
date not more than five business days prior to the date of the
Joint Proxy Statement to the date of the Joint Proxy Statement,
inclusive) as follows:
(a) With respect to the periods covered by the unaudited
financial statements of ERS and its consolidated subsidiaries
included or incorporated by reference in the Joint Proxy
Statement, they have:
(1) performed the procedures specified by the
American Institute of Certified Public Accountants for
the review of unaudited interim financial information as
described in SAS No. 71, Interim Financial Information,
on the most recent unaudited condensed consolidated
balance sheet, the most recent unaudited condensed
consolidated statements of income, of cash flows and of
changes in stockholders' equity included or incorporated
by reference in the Joint Proxy Statement; and
(2) inquired of certain officials of ERS who have
responsibility for financial and accounting matters
whether the unaudited consolidated condensed financial
statements referred to under (a)(1) above comply as to
form in all material respects with the applicable
accounting requirements of the Securities Act and the
Exchange Act and the published rules and regulations
thereunder.
(b) With respect to the period from the date of the most
recent financial statements of ERS and its consolidated
subsidiaries included or incorporated by reference in the
Joint Proxy Statement to the end of the next to last month
prior to the calendar month of the date of the joint Proxy
Statement, they have:
(1) read the unaudited consolidated financial data
of ERS and its consolidated subsidiaries for each month
of both the current year and the corresponding month of
the prior year furnished them by ERS, officials of ERS
having advised them that no such financial data as of any
date or for any period subsequent to the end of the next
to last month prior to the calendar month of the date of
the Joint Proxy Statement were available; and
<PAGE>
<PAGE>
(2) inquired of certain officials of ERS who have
responsibility for financial and accounting matters as to
whether the unaudited financial data referred to under
(b)(1) above are stated on a basis substantially
consistent with that of the audited financial statements
included or incorporated by reference in the Joint Proxy
Statement.
The foregoing procedures do not constitute an audit made in
accordance with U.S. GAAP. Also, such procedures would not
necessarily reveal matters of significance with respect to the
comments in the following paragraph. Accordingly, they make no
representations as to the sufficiency of the foregoing procedures
for purposes of Telepanel.
(5) Nothing came to their attention as a result of the
foregoing procedures, however, that caused them to believe that:
(a)(i) the unaudited condensed consolidated financial
statements described in 4(a)(1) above, included in the Joint
Proxy Statement, do not comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the published rules
and regulations thereunder and (ii) any material modifications
should be made to the unaudited condensed consolidated
financial statements described in 4(a)(1) for them to be in
conformity with U.S. GAAP; or
(b)(i) as of the end of the next to last month prior to
the calendar month of the date of the Joint Proxy Statement,
there was, except as set forth in such letter, any change in
the capital stock, increase in long-term debt or any decreases
in consolidated net current assets (working capital) or
stockholders' equity of ERS and subsidiaries consolidated as
compared with amounts shown in the most recent unaudited
condensed consolidated balance sheet of ERS included in the
Joint Proxy Statement or (ii) for the period from the date of
the most recent balance sheet of ERS included or incorporated
by reference in the Joint Proxy Statement to the end of the
month immediately preceding the date of the Joint Proxy
Statement, unless the date of the Joint Proxy Statement is
within the first 15 calendar days of a month, in which case
the end of the next to last month prior to the calendar month
of the date of the Joint Proxy Statement, there were, except
as set forth in such letter, any decreases, as compared with
the corresponding period in the preceding year, in
consolidated revenues or increases in the total or per-share
amounts of loss before extraordinary items or of net loss,
except in all instances for changes, increases or decreases
which the Joint Proxy Statement discloses have occurred or may
occur.
<PAGE>
<PAGE>
(6) As mentioned under (4)(b), ERS officials have advised
them that no consolidated financial data as of any date or for any
period subsequent to the end of the next to last month prior to the
calendar month of the date of the Joint Proxy Statement are
available; accordingly, the procedures carried out by them with
respect to changes in financial statement items after the date of
the most recent financial statements of ERS and its consolidated
subsidiaries included or incorporated by reference in the Joint
Proxy Statement have, of necessity, been even more limited than
those with respect to the periods referred to in (4). They have
made inquiries of certain officials of ERS who have responsibility
for financial and accounting matters as to whether (i) there was
any change at a date not more than five business days prior to the
date of the Joint Proxy Statement in the capital stock, increase in
long-term debt or any decreases in consolidated net current assets
(working capital) or stockholders' equity of ERS and subsidiaries
consolidated as compared with amounts shown on the most recent
condensed consolidated balance sheet of ERS included or
incorporated by reference in the Joint Proxy Statement, or (ii) for
the period from the date of the most recent condensed consolidated
balance sheet of ERS included or incorporated by reference in the
Joint Proxy Statement to a date not more than five business days
before the date of the Joint Proxy Statement, there were any
decreases, as compared with the corresponding period in the
preceding year, in consolidated net revenues or increases in the
total or per-share amounts of loss before extraordinary items or of
net loss. On the basis of these inquiries and their reading of the
minutes as described in (4), nothing came to their attention that
caused them to believe that there was, except as set forth in such
letter, any such change, increase or decrease, except in all
instances for changes, increases or decreases which the Joint Proxy
Statement discloses have occurred or may occur.
(7) At your request, they have:
(a) read the unaudited pro forma condensed consolidated
balance sheet and the unaudited pro form condensed
consolidated statements of income, included in the Joint Proxy
Statement.
(b) inquired of certain officials of ERS and of
Telepanel who have responsibility for financial and accounting
matters about:
(i) the basis for their determination of the pro forma
adjustments, and
(ii) whether the unaudited pro forma condensed
consolidated financial statements referred to in
(7)(a) comply as to form in all material respects
with the applicable accounting requirements of Rule
11-02 of the SEC's Regulation S-X.<PAGE>
<PAGE>
(c) proved the arithmetic accuracy of the application of
the pro forma adjustments to the historical amounts in the
unaudited pro forma condensed consolidated financial
statements.
The foregoing procedures are substantially less in scope than an
examination, the objective of which is the expression of an opinion
on management's assumption, the pro form adjustments, and the
application of those adjustments to historical financial
information. Accordingly, they do not express such an opinion.
The foregoing procedures would not necessarily reveal matters of
significance with respect to the comments in the following
paragraph. Accordingly, they make no representation about the
sufficiency of such procedures for your purposes.
(8) Nothing, except as set forth in such letter, came to
their attention as a result of the procedures specified in
paragraph (7), however, that caused them to believe that the
unaudited pro forma condensed consolidated financial statements
referred to in (7)(a) included in the Joint Proxy Statement do not
comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of the SEC's Regulation S-X
and that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of those statements.
Had they performed additional procedures or had we made an
examination of the condensed consolidated pro forma financial
statements, other matters might have come to their attention that
would have been reported to you.
<PAGE>
<PAGE>
Exhibit 5.10
AMENDMENTS TO ERS BY-LAWS
(i) The second sentence of Section 1 of Article IV shall be
deleted and the following substituted in lieu thereof:
"The number of Directors which shall constitute the whole
Board shall be nine; provided, however, that the size of
the Board shall increase automatically, without any
further amendment to this Section 1, to ten (10)
Directors upon the election or appointment of the
Additional Nominee (as hereinafter defined). The
"Additional Nominee" shall be defined as any nominee for
election or appointment to the Board of Directors
pursuant to contractual obligations entered into by the
Corporation prior to the Closing Date, other than
pursuant to Section 4.15 of the Combination Agreement (as
such terms are hereinafter defined), as such obligations
may subsequently be amended, and any replacements or
substitutions for such obligations."
(ii) Sections 1 through 4, inclusive, of Article V shall be
deleted and the following added after Section 12 of Article IV:
"Section 13. Approval of Certain Actions. Notwithstanding the
provisions contained in Section 8 of this Article IV (and without
limiting any provision contained in Section 9 of this Article IV),
until the second anniversary of the Closing Date the affirmative
vote of at least two-thirds of the Directors then serving, at a
meeting at which a quorum is present, shall be required to
authorize the following acts of the Board of Directors:
(a) appointment of a principal executive officer of the
Corporation under Section 1 of Article V; and
(b) any fundamental change in the business of the
Corporation and its subsidiaries, taken as a whole, from the
business conducted thereby on the Closing Date and any
business related, ancillary or complementary thereto and any
business utilizing any technology, know-how, patents,
processes, copyrights or other intellectual property now or
hereafter developed thereby.
<PAGE>
<PAGE>
ARTICLE IVA
CORPORATE EXECUTIVE COMMITTEE
There shall be a Corporate Executive Committee, which shall
consist of the Chairman of the Board and each Vice Chairman of the
Board, and such other officers of the Corporation as may from time
to time be determined by the Board of Directors. The Corporate
Executive Committee, under the direction of the Board of Directors,
shall have general and active management of the business of the
Corporation, shall see that all orders and resolutions of the Board
of Directors are carried into effect and, as a body, shall exercise
the principal executive authority of the Corporation. All
decisions of the Corporate Executive Committee shall require the
concurrence of a majority of its members.
ARTICLE V
OFFICERS
Section 1. Number, Election and Term of Office. The officers
of the Corporation shall be a Chairman of the Board, two Vice
Chairmen of the Board, a President, an Executive Vice President,
one or more Vice Presidents, a Secretary and a Treasurer, and may,
at the discretion of the Board of Directors, include any other
officers and agents as the interest of the Corporation may
require. The Corporate Executive Committee may, subject to approval
by the Board of Directors as set forth under Section 13 of Article
IV, authorize the Chairman of the Board, either Vice Chairman of
the Board, the President, or any other officer of the Corporation,
or any combination of them, to exercise the duties of the principal
executive officer of the Corporation, under the direction of the
Corporate Executive Committee. The officers of the Corporation
shall be elected annually by the Board of Directors at its meeting
held immediately after the annual meeting of the stockholders, and
shall hold their respective offices until their successors are duly
elected and have qualified. Any number of offices may be held by
the same person.
Section 2. Chairman of the Board. The Chairman of the Board
shall preside, when present, at all meetings of the Board of
Directors and all meetings of the stockholders and will perform
such other duties as may from time to time be assigned to him by
the Board of Directors, the Corporate Executive Committee, or these
By-laws.
Section 2A. Vice Chairmen of the Board. In the absence of the
Chairman of the Board or in the event of his death, inability or
refusal to act, either Vice Chairman of the Board shall perform the
duties of the Chairman of the Board and, when so acting, shall have
all the powers of and be subject to all the restrictions on the
Chairman of the Board. The Vice Chairmen of the Board shall perform
such other duties as may be prescribed from time to time by the
Board, the Corporate Executive Committee, or these by-laws.
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Section 3. President. The President shall have such powers and
duties as from time to time may be assigned to him by the Board of
Directors, the Corporate Executive Committee, or these By-laws, and
shall see that all orders and resolutions of the Board of Directors
and the stockholders are carried into effect. He shall have the
general authority to execute bonds, deeds, and contracts in the
name of the Corporation and affix the corporate seal thereto, and
to sign stock certificates. Subject to authorization and approval
by the Board of Directors, the Corporate Executive Committee, or
pursuant to these By-laws, he shall have the authority: to cause
the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to
fix their compensation; and to remove or suspend any employee or
agent who shall have been employed or appointed under his authority
or under authority of an officer subordinate to him.
Section 3A. Executive Vice President. The Executive Vice
President shall be the chief operating officer of the Corporation
and manage the day-to-day operations of the Corporation. The
Executive Vice President shall report to the Corporate Executive
Committee and shall have such other powers and duties as from time
to time may be assigned to him by the Corporate Executive Committee
or by the Board of Directors and, generally, shall exercise all the
powers and authority usually appertaining to the chief operating
officer of a corporation. The Executive Vice President shall,
during the absence or incapacity of the President, assume and
perform his duties.
Section 4. Vice Presidents. The Vice Presidents shall perform
such duties as the President, the Executive Vice President, the
Corporate Executive Committee or the Board of Directors shall
require. Any Vice President shall, during the absence or incapacity
of the Executive Vice President, assume and perform his duties."
(iii) Article XIV shall be amended to read as follows:
"ARTICLE XIV
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation,
these By-Laws may be altered, amended or repealed or new By-Laws
may be adopted by the stockholders or by the Board of Directors at
any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the
Board of Directors; provided, however, that, until the second
anniversary of the Closing Date (as defined in the Combination
Agreement dated October 29, 1997 [the "Combination Agreement"]
between the Corporation and Telepanel Systems, Inc.), the size of
the Board of Directors, as set forth in Section 1 of Article IV,
and the provisions of Section 13 of Article IV, may only be amended
by a vote of at least two-thirds of the Board of Directors or by
the affirmative vote of the Corporation's stockholders holding and<PAGE>
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voting in favor thereof a majority of the voting power of the
shares of the Corporation entitled to vote thereon, at any annual
stockholders' meeting or at any special stockholders' meeting."
