UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Silent Witness Enterprises Ltd.
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(Name of Issuer)
Common Shares
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(Title of Class of Securities)
826906307
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(CUSIP Number)
Thomas F. Larkins, Esq.
Honeywell International Inc.
101 Columbia Road
Morristown, NJ 07962
(973) 455-2000
With a Copy to:
David K. Robbins, Esq.
Fried, Frank, Harris, Shriver & Jacobson
350 South Grand Avenue, 32nd Floor
Los Angeles, CA 90071
(213) 473-2000
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications)
October 10, 2003
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or
240.13(g), check the following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See ss.240.13d-7(b)
for other parties to whom copies are to be sent.
SCHEDULE 13D
CUSIP No. 903898401
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HONEYWELL INTERNATIONAL INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
N/A (1)
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 925,690 (2)
9 SOLE DISPOSITIVE POWER
EACH
-0-
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
WITH 925,690 (2)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
925,690 (2)
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (SEE INSTRUCTIONS) |_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.9 %
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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(1) See Item 3 hereof.
(2) See Items 4 and 5 hereof.
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (this "Schedule 13D") relates to the
common shares ("Company Common Shares") of Silent Witness Enterprises Ltd.,
a company incorporated under the laws of British Columbia, Canada (the
"Company"). The principal executive offices of the Company are located at
6554 - 176 Street, Surrey, British Columbia, V3S 4G5.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) This Schedule 13D is filed by Honeywell International Inc., a
Delaware corporation ("Honeywell"). Honeywell is a diversified technology
and manufacturing company, serving customers worldwide with aerospace
products and services, control technologies for buildings, homes and
industry, automotive products, specialty chemicals, fibers and electronic
and advanced materials. The principal business offices of Honeywell are
located at 101 Columbia Road, Morristown, New Jersey 07962.
(d)-(e) During the five years prior to the date hereof, neither
Honeywell nor, to the best of its knowledge, any executive officer or
director of Honeywell (each of whom is listed on Exhibit 1 attached hereto
and incorporated herein by reference), (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii)
has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction, as a result of which such person was or is
subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Not applicable.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On October 10, 2003, Honeywell entered into Deposit Agreements (the
"Deposit Agreements") with the following shareholders of the Company
(collectively, the "Shareholders"): Rob Bakshi, Vinod Bakshi and Opinder
Singh Gill. The Deposit Agreements are attached hereto as Exhibits 2, 3 and
4 and incorporated herein by reference. The Company Common Shares to which
this Schedule 13D relates have not been purchased by Honeywell, and neither
Honeywell nor any of the other persons listed in response to Item 2 hereof
has paid to any Shareholder any funds in connection with the Deposit
Agreement.
ITEM 4. PURPOSE OF TRANSACTION.
On October 10, 2003, Honeywell and the Company entered into a Support
Agreement (the "Support Agreement") whereby, among other things, Honeywell
agreed to cause 678669 B.C. Ltd., a corporation incorporated under the laws
of British Columbia, Canada and an indirect wholly-owned subsidiary of
Honeywell (the "Offeror"), to make an offer (the "Offer") to purchase all
the outstanding Company Common Shares, including Company Common Shares
issuable upon the conversion, exchange or exercise of any (i) options to
acquire Company Common Shares and (ii) other rights, warrants or
entitlements to acquire Company Common Shares, at a price of Cdn. $11.27 in
cash per Company Common Share, subject to the terms and conditions set
forth in the Support Agreement.
Pursuant to the terms of the Support Agreement, Honeywell and the
Offeror agreed that, upon the Company Common Shares being taken up and paid
for under the Offer, the Offeror shall acquire the Company Common Shares
not deposited under the Offer pursuant to the compulsory acquisition
provisions of Section 255 of the Company Act (British Columbia), as the
same may be amended or re-enacted or any successor legislation thereto (the
"Act"), if permitted to do so under the Act. If the Offeror is unable to
use such compulsory acquisition provision, the Offeror will propose an
alternate arrangement, which may include, without limitation, a statutory
arrangement, amalgamation, merger, or other combination ("Second-Step
Transaction") of the Company with the Offeror or an affiliate of the
Offeror within 180 days after the Offeror takes up and pays for Company
Common Shares under the Offer on terms and conditions to be determined by
the Offeror, provided that the Offeror agrees that if any Second-Step
Transaction is effected it will provide that the holders of any Company
Common Shares, other than Honeywell and the Offeror, shall be entitled to
receive consideration per share in cash or the right to receive cash within
35 days following the approval of the Second-Step Transaction at least
equal to the amount paid per share under the Offer.
Simultaneously with the execution and delivery of the Support
Agreement, Honeywell entered into the Deposit Agreements with the
Shareholders pursuant to which each Shareholder has agreed to deposit under
the Offer: (i) all Company Common Shares that are presently owned
beneficially by such Shareholder, (ii) all Company Common Shares, if any,
issued upon the exercise of certain stock options or any other rights
convertible or exercisable for Company Common Shares held by the
Shareholder, and (iii) any Company Common Shares subsequently acquired by
the Shareholder, together with a duly completed and executed letter of
transmittal. The Shareholders have also granted Honeywell an irrevocable
proxy to vote each Shareholder's Company Common Shares in furtherance of
such Shareholder's obligation's under his or her respective Deposit
Agreement and the Company's obligations under the Support Agreement during
the term of the respective Deposit Agreement.
Based on their respective representations in the Deposit Agreements,
as of October 10, 2003, the Shareholders owned the following securities in
the Company: (i) Rob Bakshi - 274,836 Company Common Shares and options to
purchase 312,500 Company Common Shares; (ii) Vinod Bakshi - 256,654 Company
Common Shares; and (iii) Opinder Singh Gill - 81,700 Company Common Shares
and 33,750 share appreciation rights to receive cash payment based on the
price of the Company Common Shares or the right to receive Company Common
Shares of equivalent value (the securities in the foregoing clauses (i)
through (iii), together with any additional securities of the Company
acquired by any Shareholder on or after October 10, 2003 and before the
termination of the Deposit Agreement, collectively referred to herein as
the "Company Securities"). Further, Mr. Gill has covenanted to exercise all
share appreciation rights for cash payment to the extent permitted under
the plan of the Company governing the share appreciation rights and,
accordingly, the Common Shares that would be obtained by Mr. Gill upon the
exercise of the share appreciation rights has, as indicated in Footnote
(3), not been included in the calculation of Company Common Shares in Item
5 of this Schedule 13D.
The Deposit Agreements also provide, among other things that each
Shareholder: (i) will notify the Offeror within 24 hours of becoming aware
of a proposal which, if made in writing, could constitute a Competing
Proposal including the identity of any prospective offeror and the person
making the Competing Proposal; (ii) will not option, sell, transfer,
pledge, encumber, grant a security interest in, hypothecate or otherwise
convey the Shareholder's Company Securities, or any right or interest
therein (legal or equitable), to any person, entity or group or agree to do
any of the foregoing; (iii) will not grant or agree to grant any proxy or
other right to vote the Shareholder's Company Securities, or enter into any
voting trust, vote pooling or other agreement with respect to the right to
vote, call meetings of shareholders or give consents or approvals of any
kind as to the Shareholder's Company Securities; (iv) will exercise the
voting rights attaching to the Shareholder's Company Securities and
otherwise use its best efforts to cause the Company to comply with its
obligations under the Support Agreement; (v) will not purchase or obtain or
enter into any agreement or right to purchase any additional Company Common
Shares; (vi) if applicable, will resign as a director of the Company
effective at the time and in the manner requested by Honeywell, after the
Offeror takes up and pays for the Shareholder's Company Securities; and
(vii) will not take, and shall not authorize or permit any investment
banker, financial advisor, attorney, accountant or other representative of
his to take, any action of any kind, indirectly or directly, to oppose,
frustrate or delay the take up and payment of the Company Common Shares
deposited under the Offer or the completion of the Offer, including but not
limited to any action to solicit, initiate, knowingly assist or knowingly
encourage inquiries, submissions, proposals or offers from any other
person, entity or group, and will cease immediately and not continue in any
discussions or negotiations the Shareholder is carrying on regarding, or
furnish to any other person, entity or group, any confidential, non-public
information with respect to, any Competing Proposal (as such term is
defined in the Support Agreement). Notwithstanding the foregoing, nothing
contained in the Deposit Agreements shall: (A) prevent a Shareholder, in
his capacity as a director or officer of the Company, if applicable, from
engaging in discussions or negotiations with a third party or providing
information in respect of, or otherwise responding to, or negotiating,
approving and recommending to holders of Company Common Shares, an
unsolicited bona fide Competing Proposal if the Board of Directors of the
Company has determined in good faith that such proposal may constitute or
lead to a Superior Proposal (as such term is defined in the Support
Agreement) or that such action is otherwise required by reason of the
fiduciary duties of the directors of the Company under applicable law, or
(B) preclude the Shareholder, in his capacity as a director or officer of
the Company, from responding, within the time and manner required by the
applicable laws, to any take over bid or any business combination or
similar transaction involving the Company or any of its subsidiaries or
assets or tender or exchange offer made for the Company Common Shares.
The Deposit Agreements are each terminable by the Shareholders if: (i)
the Offer has not been made as provided in the Support Agreement; (ii) the
Offer does not substantially conform with the description in the Support
Agreement or the provisions of such Deposit Agreement; (iii) Company Common
Shares deposited under the Offer (including the Shareholder's Company
Securities) have not, for any reason whatsoever, been taken up and paid for
on or before the end of the tenth day following the expiry of the Offer;
(iv) the Offer is abandoned by the Offeror; (v) the Support Agreement is
terminated in accordance with its terms; and (vi) subject to certain
conditions, after January 31, 2004, the Offeror has not purchased any
Company Common Shares pursuant to the Offer, other than as a result of the
material breach by such Shareholder of any material covenant or obligation
under the Deposit Agreement or as a result of any representation or
warranty of a Shareholder in the Deposit Agreement being untrue or
incorrect in any material respect.
The Deposit Agreements are each terminable by Honeywell if: (i) a
Shareholder has not complied in all material respects with his or her
covenants to Honeywell contained therein; (ii) any of the representations
and warranties of a Shareholder contained therein is untrue or inaccurate;
(iii) the Company has not complied in all material respects with its
covenants to Honeywell under the Support Agreement; (iv) the conditions in
Exhibit II of the Support Agreement are not satisfied or waived by the
Offeror on or prior to the expiry of the Offer; or (v) the Support
Agreement is terminated.
The foregoing summary of the Deposit Agreements and the Support
Agreement is qualified in its entirety by reference to the Deposit
Agreements, which are attached hereto as Exhibits 2, 3 and 4, and the
Support Agreement, which is attached hereto as Exhibit 5 and incorporated
herein by reference.
Except as indicated in this Schedule 13D, Honeywell currently has no
specific plans or proposals that relate to or would result in any of the
matters described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY.
(a)-(c) As a result of entering into the Deposit Agreements, Honeywell
may be deemed, for purposes of Rule 13d-3 under the Securities Exchange Act
of 1934 (the "Exchange Act"), to share with the respective Shareholders
party to the Deposit Agreement the direct or indirect power to vote, direct
the voting of, dispose of, or direct the disposal of, an aggregate of
925,690 Company Common Shares (3). Company Common Shares (including the
options) collectively represent approximately 11.9% of the issued and
outstanding Company Common Shares, including those Company Common Shares
issuable upon the exercise of options held by Mr. Bakshi. The foregoing
calculations assume that 7,468,541 Company Common Shares were outstanding
on October 10, 2003 (excluding 549,900 Company Common Shares which are held
by the Company and have not been cancelled), as represented by the Company
in the Support Agreement.
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(3) This number includes the options owned by Mr. Bakshi; however, to date
such options remain unexercised and Honeywell has no right to direct
the exercise of any of them. Honeywell may be deemed for purposes of
Rule 13d-3 under the Exchange Act to share with Mr. Bakshi the direct
or indirect power to vote, direct the voting of, dispose of, or direct
the disposal of any Company Common Shares resulting from the exercise
of any of such options. This number excludes the share appreciation
rights owned by Mr. Gill.
Notwithstanding the foregoing, however, Honeywell (i) is not entitled
to any rights as a shareholder of the Company with respect to the Company
Securities covered by this Schedule 13D and (ii) has no direct or indirect
power to vote, direct the voting of, dispose of, or direct the disposal of,
any of the Company Common Shares covered by this Schedule 13D other than
pursuant to the Deposit Agreements. Honeywell does not directly own any
Company Common Shares. Honeywell hereby disclaims beneficial ownership of
all Company Common Shares (including those covered by this Schedule 13D,
which, for the avoidance of doubt, include any Company Common Shares
resulting from the exercise of any of the options or share appreciation
rights), and nothing contained in this Schedule 13D shall be construed as
an admission that any such person is, for the purposes of Section 13(d) or
13(g) of the Exchange Act or otherwise, the beneficial owner of any
securities covered by this Schedule 13D.
Except as set forth herein, no transactions involving Company Common
Shares have been effected during the past 60 days by Honeywell or any of
its respective directors or executive officers.
(d) None.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE COMPANY.
Except as described in this Schedule 13D, neither Honeywell nor any
executive officer or director of Honeywell has any other contracts,
arrangements, understandings or relationships with any persons with respect
to any securities of the Company. The transactions discussed in Item 4 are
further described in the Deposit Agreements, which are attached hereto as
Exhibits 2, 3 and 4 and the Support Agreement, which is attached hereto as
Exhibit 5.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 List of Executive Officers and Directors of Honeywell.
Exhibit 2 Deposit Agreement, dated as of October 10, 2003,
between Honeywell and Rob Bakshi.
Exhibit 3 Deposit Agreement, dated as of October 10, 2003, between
Honeywell and Vinod Bakshi.
Exhibit 4 Deposit Agreement, dated as of October 10, 2003,
between Honeywell and Opinder Singh Gill.
Exhibit 5 Support Agreement, dated as of October 10, 2003,
between Honeywell and the Company.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
HONEYWELL INTERNATIONAL INC.
By: /s/ Thomas F. Larkins
-------------------------------------
Name: Thomas F. Larkins
Title: Vice President and Corporate
Secretary
Dated: October 20, 2003
EXHIBIT INDEX
Document
Exhibit 1 -- List of Executive Officers and Directors of Honeywell.
Exhibit 2 -- Deposit Agreement, dated as of October 10, 2003, between
Honeywell and Rob Bakshi.
Exhibit 3 -- Deposit Agreement, dated as of October 10, 2003, between
Honeywell and Vinod Bakshi.
Exhibit 4 -- Deposit Agreement, dated as of October 10, 2003, between
Honeywell and Opinder Singh Gill.
Exhibit 5 -- Support Agreement, dated as of October 10, 2003, between
Honeywell and the Company.
Exhibit 1
DIRECTORS:
PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT CITIZENSHIP
- ---- ---------------- -------------------- -----------
Hans W. Becherer c/o 101 Columbia Road Former Chairman and USA
Morristown, NJ 07962 Chief Executive
Officer of Deere &
Company
Gordon M. Bethune 1600 Smith Street, HQS EO Chairman of the Board, USA
Houston, TX 77002 Chief Executive
Officer of
Continental Airlines,
Inc.
Marshall N. Carter 79 JFK Street Senior Fellow at the USA
Cambridge, MA 02138 Center for Business
and Government, John
F. Kennedy School of
Government, Harvard
University
Jaime Chico Pardo Parque Via, # 190 - Piso 10 Vice Chairman and Mexico
Col. Cuauhtemoc, 06599 Mexico, D.F. Chief Executive
Officer of Telefonos
de Mexico, S.A. de
C.V.
David M. Cote 101 Columbia Road Chairman of the USA
Morristown, NJ 07962 Board, President and
Chief Executive
Officer
Clive R. Hollick Ludgate House Chief Executive United Kingdom
245 Blackfriars Road Officer of United
London SE19UY News & Media plc
James J. Howard c/o 101 Columbia Road Chairman Emeritus of USA
Morristown, NJ 07962 Xcel Energy Inc.
Bruce Karatz 10990 Wilshire Blvd. Chairman of the Board USA
Los Angeles, CA 90024 and Chief Executive
Officer of KB Home
Robert P. Luciano c/o 101 Columbia Road Chairman Emeritus of USA
Morristown, NJ 07962 Schering-Plough
Corporation
Russell E. Palmer 3600 Market Street, Suite 530 Chairman and Chief USA
Philadelphia, PA 19104 Executive Officer of
The Palmer Group
Ivan G. Seidenberg 1095 Avenue of the Americas President and Chief USA
New York, NY 10036 Executive Officer of
Verizon
Communications Inc.
John R. Stafford Five Giralda Farm Consultant, Retired USA
Madison, NJ 07940 Chairman of the Board
of Wyeth (formerly
known as American
Home Products
Corporation)
Michael W. Wright 4900 IDS Tower Retired Chairman, USA
Minneapolis, MN 55442 President and Chief
Executive Officer of
Supervalue Inc.
EXECUTIVE OFFICERS:
PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT CITIZENSHIP
- ---- ---------------- -------------------- -----------
David M. Cote 101 Columbia Road Chairman of the USA
Morristown, NJ 07962 Board, President and
Chief Executive
Officer
Dr. Nance K. Dicciani 101 Columbia Road President and Chief USA
Morristown, NJ 07962 Executive Officer -
Specialty Materials
Robert J. Gillette 23365 Hawthorne Blvd. President and Chief USA
Torrance, CA 90505 Executive Officer -
Transportation and
Power Systems
J. Kevin Gilligan MN10-2500 President and Chief USA
1985 Douglas Drive North Executive Officer -
Golden Valley, MN 55422 Automation and
Control Systems
Robert D. Johnson 1944 E. Sky Harbor Circle President and Chief USA
Phoenix, AZ 85038 Executive Officer
-Aerospace
Larry E. Kittelberger 101 Columbia Road Sr. Vice President - USA
Morristown, NJ 07962 Administration and
Chief Information
Officer
Peter M. Kreindler 101 Columbia Road Sr. Vice President USA
Morristown, NJ 07962 and General Counsel
David J. Anderson 101 Columbia Road Sr. Vice President USA
Morristown, NJ 07962 and Chief Financial
Officer
Thomas W. Weidenkopf 101 Columbia Road Sr. Vice President - USA
Morristown, NJ 07962 Human Resources and
Communication
John J. Tus 101 Columbia Road Vice President, USA
Morristown, NJ 07962 Controller and
Treasurer
Exhibit 2
DEPOSIT AGREEMENT
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STRICTLY CONFIDENTIAL
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October 10, 2003
Rob Bakshi
Dear Rob:
This letter agreement (the "Agreement") sets out the terms and conditions
upon which Honeywell International Inc. (the "Offeror's Parent") will cause
678669 B.C. Ltd., a direct or indirect wholly-owned subsidiary of the
Offeror's Parent (the "Offeror") to make an offer (the "Offer") on
substantially the terms and conditions set forth in the support agreement
between Silent Witness Enterprises Ltd. (the "Company") and the Offeror and
the Offeror's Parent dated the date hereof (the "Support Agreement"), to
purchase all of the issued and outstanding common shares (the "Shares") of
the Company.
This Agreement also sets out the terms and conditions of the agreement by
you (the "Shareholder") to deposit, or cause to be deposited, under the
Offer: (i) the 274,836 Shares presently owned beneficially by the
Shareholder; (ii) all Shares, if any, issued upon the exercise of certain
stock options or any other rights convertible or exercisable for shares
held by the Shareholder; and (iii) any Shares subsequently acquired by the
Shareholder (the "Shareholder's Shares"), and sets out the obligations and
commitments of the Shareholder in connection therewith. References in this
Agreement to the Shares held or to be acquired by the Shareholder include
the associated rights issued pursuant to the Company's "Rights Plan" (as
defined in the Support Agreement).
ARTICLE 1
THE OFFER
1.1 TIMING OF THE OFFER.
-------------------
The Offeror's Parent agrees to cause the Offeror to make the Offer for all
of the Shares within the time and upon the terms as provided for in the
Support Agreement, and subject to the conditions therein contained.
1.2 MODIFICATION OF OFFER.
---------------------
The Offeror's Parent agrees that it will not cause or permit the Offeror to
amend, modify or change the Offer without the prior written consent of the
Shareholder, which consent shall not be unreasonably withheld, and to
provide a draft of any proposed amendment, modification or change to the
Offer to the Shareholder and to consult with the Shareholder with respect
to the terms and conditions of such proposed amendment, modification or
change of the Offer. The covenants in the foregoing sentence shall not
apply in respect of any amendments, modifications or changes to the Offer
in accordance with section 1.1(e) of the Support Agreement provided that
the Offeror and the Offeror's Parent shall not, without the consent of the
Shareholder:
(a) increase the number or percentage of Shares required to satisfy
the "Minimum Condition" (as defined in the Support Agreement) or
decrease the number or percentage of Shares required to satisfy
the Minimum Condition below 50% of the outstanding Shares,
decrease the consideration per Share payable under the Offer,
change the form of consideration payable under the Offer (other
than to add additional consideration) or decrease the number of
Shares sought under the Offer;
(b) impose additional material conditions to the Offer;
(c) in the event all of the "Bid Conditions" (as defined in the
Support Agreement) are satisfied or waived, extend the period
during which Shares may be deposited under the Offer without
taking up and paying for Shares validly deposited thereunder and
not withdrawn except as required by applicable law; or
(d) modify or amend the Offer or any terms thereof in a manner
adverse to the Shareholder.
1.3 GENERAL.
-------
Subject to the terms and conditions of the Support Agreement, the Offeror's
Parent hereby covenants to use, and to cause the Offeror to use, its
reasonable best efforts to successfully complete the Offer and the
transactions contemplated by this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
-------------------------------------------------
The Shareholder hereby represents and warrants to the Offeror's Parent
that:
(a) Authorization. This Agreement has been duly executed and
delivered by the Shareholder and constitutes a legal, valid and
binding agreement enforceable by the Offeror's Parent against the
Shareholder in accordance with its terms subject, however, to
limitations with respect to enforcement imposed by law in
connection with bankruptcy or similar proceedings, the equitable
power of the courts to stay proceedings before them and the
execution of judgements and to the extent that equitable remedies
such as specific performance and injunction are in the discretion
of the court from which they are sought.
(b) Ownership of Shares. The Shareholder: (i) is the sole beneficial
owner of 274,836 Shares which are currently held by the
Shareholder; and (ii) is the holder of 312,500 options (the
"Options") to purchase Shares, if exercised, at exercise prices
ranging from Cdn.$4.79 to Cdn.$12.25 per Share and no share
appreciation rights. Except as stated in this paragraph, the
Shareholder does not own or control, directly or indirectly, any
other Shares or options, rights or other entitlements to acquire
Shares. The Shareholder has the exclusive right to dispose of the
Shareholder's Shares as provided in this Agreement and the
Shareholder is not a party to, bound or affected by or subject
to, any charter or by-law provision, statute, regulation,
judgment, order, decree or law of which a breach would occur as a
result of the execution and delivery of this Agreement or the
consummation of any of the transactions provided for in this
Agreement.
(c) Good Title. All the Shareholder's Shares and Options are now, and
at the time the Offeror directly or indirectly takes up and pays
for the Shareholder's Shares under the Offer will be beneficially
owned by the Shareholder with good and marketable title, free and
clear of any and all mortgages, liens, charges, restrictions,
security interests, adverse claims, pledges, encumbrances and
demands or rights of others of any nature or kind whatsoever.
(d) No Agreements. No person, firm or corporation has any agreement
or option, or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option, for
the purchase, acquisition or transfer from the Shareholder, or
any registered holder of the Shareholder's Shares, of any of the
Shareholder's Shares, or any interest therein or right thereto,
except pursuant to this Agreement.
(e) Voting. Neither the Shareholder nor any registered holder of the
Shareholder's Shares has previously granted or agreed to grant
any ongoing proxy in respect of the Shareholder's Shares or
entered into any voting trust, vote pooling or other agreement
with respect to the right to vote, call meetings of shareholders
or give consents or approvals of any kind as to the Shareholder's
Shares.
(f) No Proceeding Pending. There is no claim, action, lawsuit,
arbitration, mediation or other proceeding pending or, to the
best of the knowledge, information and belief of the Shareholder,
threatened against the Shareholder, which relates to this
Agreement or otherwise materially impairs the ability of the
Shareholder to consummate the transactions contemplated hereby.
(g) Arm's Length Negotiation. The price payable by the Offeror's
Parent for the Shares pursuant to the Offer (the "Offer Price")
was arrived at through negotiation between the Company and the
Offeror's Parent. The Shareholder has full knowledge of and
access to information concerning the Company such that the
underlying value of the Company was a material factor considered
by the Shareholder in entering into this Agreement and agreeing
to the Offer Price, and there are no non-financial factors or
other factors peculiar to the Shareholder which have been
considered relevant by the Shareholder in assessing such price or
that had the effect of reducing the price that would otherwise
have been considered acceptable to the Shareholder.
(h) Company Public Disclosure Documents. To the best of the knowledge
of the Shareholder: (i) all forms, reports, statements, schedules
and documents required to be filed by the Company with securities
regulatory authority under applicable securities laws
(collectively, the "Reports") did not, at the time filed, contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; (ii) the Company has
not filed any confidential material change report with any
securities regulatory authority or stock exchange which at the
date of this Agreement remains confidential; and (iii) the
Company has publicly disclosed in the Reports any information
regarding any event, circumstances or action taken or failed to
be taken by the Company or its subsidiaries which could
individually or in the aggregate reasonably be expected to be
Materially Adverse to the Company or its subsidiaries, either
individually or in the aggregate.
(i) Company Representations and Warranties. To the best of the
knowledge of the Shareholder, all of the representations and
warranties of the Company set forth in the Support Agreement are
true and correct.
2.2 REPRESENTATIONS AND WARRANTIES OF THE OFFEROR'S PARENT.
------------------------------------------------------
The Offeror's Parent represents and warrants to the Shareholder as follows:
(a) Organization. Each of the Offeror's Parent and the Offeror is a
corporation duly organized and validly existing under the laws of
its jurisdiction of incorporation.
(b) Authority. The Offeror's Parent has all requisite corporate power
and authority to enter into this Agreement, and the Offeror will
have at the date of the Offer all necessary corporate power and
authority to make the Offer and to carry out the transactions
contemplated hereby and by the Offer. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Offeror's Parent,
and no other corporate proceedings on the part of the Offeror's
Parent are necessary to authorize this Agreement. The Agreement
has been duly executed and delivered by the Offeror's Parent and
constitutes a legal, valid and binding agreement enforceable by
the Shareholder against the Offeror's Parent in accordance with
its terms, subject, however, to the usual limitations with
respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and the availability of
equitable remedies.
(c) Non-Contravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby nor compliance with any of the provisions hereof will
conflict with or result in any breach of any provision of the
constating documents of the Offeror's Parent or the Offeror.
ARTICLE 3
COVENANTS OF THE SHAREHOLDER
3.1 GENERAL.
-------
The Shareholder hereby covenants that until the earlier of (i) the date on
which the Offeror has taken up and paid for Shares under the Offer; (ii)
the date on which the Offeror abandons the Offer; (iii) the Offer expires
and the Offerer has not taken up and paid for Shares in accordance with
applicable law; or (iv) the termination of this Agreement in accordance
with this Agreement, the Shareholder will:
(a) except as permitted by this Agreement, not take and shall not
authorize or permit any investment banker, financial advisor,
attorney, accountant or other representative of his to take, any
action of any kind, indirectly or directly, to oppose, frustrate
or delay the take up and payment of Shares deposited under the
Offer or the completion of the Offer, including but not limited
to any action to solicit, initiate, knowingly assist or knowingly
encourage inquiries, submissions, proposals or offers from any
other person, entity or group, and will cease immediately and not
continue in any discussions or negotiations the Shareholder is
carrying on regarding, or furnish to any other person, entity or
group, any confidential, non-public information with respect to
any "Competing Proposal" (as defined in the Support Agreement)
provided that, nothing contained in this section or other
provisions of this Agreement shall:
(i) prevent the Shareholder, in his capacity as a director or
officer of the Company, from engaging in discussions or
negotiations with a third party or providing information
in respect of, or otherwise responding to, or negotiating,
approving and recommending to holders of Shares, an
unsolicited bona fide Competing Proposal if the Board of
Directors of the Company has determined in good faith,
after consultation with and receiving advice from legal
counsel and the Company's financial advisors, that such
proposal may constitute or lead to a Superior Proposal or
that such action is otherwise required by reason of the
fiduciary duties of the directors of the Company under
applicable law; or
(ii) preclude the Shareholder, in his capacity as a director or
Officer of the Company, from responding, within the time
and manner required by the applicable laws, to any take
over bid or any business combination or similar
transaction involving the Company or any of its
subsidiaries or assets or tender or exchange offer made
for the Shares;
and nothing in this Agreement shall be interpreted to extend to
acts or omissions of the Shareholder acting in his capacity as a
director or officer of the Company or otherwise to fetter the
proper exercise of discretion by the Shareholder acting in that
capacity;
(b) if the Shareholder receives any Competing Proposal the
Shareholder will notify the Offeror within 24 hours of becoming
aware of a proposal which, if made in writing, could constitute a
Competing Proposal (as such term is defined in the Support
Agreement) including the identity of any prospective offeror and
the person making the Competing Proposal;
(c) not option, sell, transfer, pledge, encumber, grant a security
interest in, hypothecate or otherwise convey the Shareholder's
Shares, or any right or interest therein (legal or equitable), to
any person, entity or group or agree to do any of the foregoing;
(d) not grant or agree to grant any proxy or other right to vote the
Shareholder's Shares, or enter into any voting trust, vote
pooling or other agreement with respect to the right to vote,
call meetings of shareholders or give consents or approvals of
any kind as to the Shareholder's Shares;
(e) not do indirectly that which the Shareholder may not do directly
in respect of the restrictions on the Shareholder's rights with
respect to the Shareholder's Shares pursuant to this section 3.1,
including, but not limited to, the granting of a proxy on the
Shares of any direct or indirect holding company of the
Shareholder which would have, indirectly, the effect prohibited
by this section 3.1, and not to take any action which would make
any representation or warranty of the Shareholder contained
herein untrue or incorrect or have the effect of preventing or
disabling the Shareholder from performing the Shareholder's
obligations under this Agreement;
(f) exercise the voting rights attaching to the Shareholder's Shares
and otherwise use his best efforts to cause the Company to comply
with its obligations under the Support Agreement, including its
agreement, subject to the terms and conditions of the Support
Agreement, to use all reasonable commercial efforts to take, or
cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Offer and the
Support Agreement;
(g) agree to use his best efforts to cause the Company to comply with
its notification obligations pursuant to section 3.2(b) of the
Support Agreement;
(h) not purchase or obtain or enter into any agreement or right to
purchase any additional Shares (other than pursuant to the
exercise of Options by the Shareholder);
(i) either exercise all of the Options held by the Shareholder to
acquire Shares and deposit the Shares thereby acquired under the
Offer in accordance with the terms of this Agreement or surrender
to the Company for cancellation all of the Options not so
exercised, provided, that such exercise of Options and surrender
for cancellation of Options may be made subject to the condition
that, and become effective only upon, the Offeror having taken up
and paid for any Shares under the Offer or becoming bound to do
so;
(j) use all reasonable efforts to preserve intact the goodwill of the
Company and its subsidiaries, keep available the services of
their respective present officers and key employees, and preserve
their business relationships with customers and others having
business relationships with them and not engage in any action
directly or indirectly, with the intent to adversely impact the
Company's obligations under the Support Agreement; and
(k) if applicable, resign as a director of the Company effective at
the time and in the manner requested by the Offeror's Parent,
after the Offeror takes up and pays for the Shareholder's Shares.
3.2 OFFER LETTER
------------
The Shareholder hereby covenants that immediately upon the Offeror first
taking up and paying for Shares under the Offer, the Shareholder shall
execute an offer letter substantially in the form initialled by the
Shareholder and Offeror's Parent concurrently with the execution of this
Agreement (except as the terms of such offer letter may be modified to
receive all regulatory approval necessary under applicable Canadian
securities laws (as approved by each of the Shareholder and the Offeror's
Parent, acting reasonably) to approve the terms thereof).
3.3 NON-COMPETITION AND NON-SOLICITATION.
------------------------------------
The Shareholder hereby covenants that such shareholder will fully comply
with the covenants and agreements set forth in Schedule 1 attached hereto.
ARTICLE 4
DEPOSIT AND PAYMENT
4.1 DEPOSIT.
-------
Subject to section 4.2, the Shareholder hereby irrevocably and
unconditionally, subject to the terms of this Agreement, agrees that if the
Offeror makes the Offer on the terms and conditions and conditions set out
in the Support Agreement the Shareholder shall deposit or cause to be
deposited all of the Shareholder's Shares (including for greater certainty
all Shares issued or which may be issued to the Shareholder upon the
exercise of Options or any other rights to acquire Shares), together with a
duly completed and executed letter of transmittal, under the Offer as soon
as practicable following the Offeror making the Offer and in any event
prior to the expiry of the Offer. In the event that the Shareholder
subsequently obtains any additional Shares as contemplated by section
3.1(f) hereof or otherwise, such Shares shall likewise be deposited under
the Offer as soon as practicable thereafter and in any event prior to the
expiry of the Offer.
4.2 NO WITHDRAWAL.
-------------
The Shareholder hereby irrevocably and unconditionally, subject to the
terms of the Agreement, agrees that neither it nor any person on its behalf
will withdraw or take any action to withdraw any of the Shareholder's
Shares deposited under the Offer, notwithstanding any statutory rights or
other rights under the terms of the Offer or otherwise which the
Shareholder might have, unless this Agreement is terminated in accordance
with its terms prior to the taking up of the Shareholder's Shares under the
Offer or unless:
(a) in the event that the Offer is not extended in accordance with
the Support Agreement, the Offeror does not take up and pay for
the Shares on or before January 31, 2003;
(b) in the event that the Offer is extended in accordance with the
Support Agreement, the Offeror does not take up and pay for the
Shares under the Offer on or before the end of the tenth day
following the expiry of the Offer;
(c) a "Superior Proposal" (as defined in the Support Agreement) is
made, the board of directors of the Company has either withdrawn
its recommendation of the Offer or recommended acceptance of the
Superior Proposal, and (i) the Offeror has not amended the Offer
to increase the consideration to be paid to holders of Shares
pursuant to the Offer within the time periods specified by
Section 4.2 of the Support Agreement to an amount having a value
at least equal to the value of the consideration offered under
the Superior Proposal and (ii) the fee specified in Section 4.5
of the Support Agreement has been paid to the Offeror's Parent as
specified therein; or
(d) the Shareholder receives the consent of the Offeror's Parent or
the Offeror to so withdraw the Shareholder's Shares.
4.3 APPOINTMENT OF PROXY
--------------------
The Shareholder hereby grants to, and appoints, the Offerors' Parent and
the Secretary of the Offerer's Parent and the Chief Financial Officer of
the Offeror's Parent, in their respective capacities as officers of the
Offeror's Parent, and any other designee of the Offeror's Parent, each of
them individually, the Shareholder's irrevocable proxy and attorney in fact
(with full power of substitution) to vote the Shareholder's irrevocable
proxy and attorney in fact (with full power of substitution) to vote the
Shareholder's Shares with respect thereto, in order to give effect to the
covenants of the shareholder contained in this Agreement and in furtherance
of the obligations of the Company contained in the Suport Agreement. The
Shareholder agrees that proxy is irrevocable until this Agreement is
terminated in accordance with Article 5 hereof and coupled with an interest
and will take such further action or execute such other instruments as may
be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by him with respect to the Shares.
4.4 STOP TRANSFER ORDER
-------------------
Subject to the termination rights set forth in Article V of this Agreement,
in furtherance of the transactions contemplated by this Agreement and the
Support Agreement, the Shareholder hereby authorizes the Offeror's Parent
to instruct the Company to direct its transfer agent to place a stop
transfer order on the Shareholder's Shares and not to amend, terminate or
waive any of the terms of such stop transfer order (other than to permit
the transfer of the Shareholder's Shares to the Offeror) during the term of
this Agreement.
ARTICLE 5
TERMINATION BY THE SHAREHOLDER AND BY THE PURCHASER
5.1 TERMINATION BY THE SHAREHOLDER.
------------------------------
The Shareholder, when not in material default in performance of his
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Offeror's Parent if:
(a) the Offer has not been made as provided in section 1.1 hereof,
(b) the Offer does not substantially conform with, or subject to
section 1.2 hereof is modified in a manner so as not to conform
with, the description in the Support Agreement or the provisions
of this Agreement;
(c) Shares deposited under the Offer (including the Shareholder's
Shares) have not, for any reason whatsoever, been taken up and
paid for on or before the end of the tenth day following the
expiry of the Offer;
(d) the Offer is abandoned by the Offeror (which shall be
conclusively evidenced by the Offeror issuing a press release or
otherwise publicly disclosing or announcing that the Offer is
withdrawn);
(e) after January 31, 2004 if the Offeror has not purchased any
Shares pursuant to the Offer, otherwise than as a result of the
material breach by the Shareholder of any material covenant or
obligation under this Agreement or as a result of any
representation or warranty of the Shareholder in this Agreement
being untrue or incorrect in any material respect; provided,
however, that if the Offeror's take up and payment for Shares
deposited under the Offer is delayed by (i) an injunction or
order made by a court or regulatory authority of competent
jurisdiction, or (ii) the Offeror not having obtained any
regulatory waiver consent or approval which is necessary to
permit the Offeror to take up and pay for the Shares deposited
under the Offer, then, provided that such injunction or order is
being contested or appealed or such regulatory waiver, consent or
approval is being actively sought, as applicable, this Agreement
shall not be terminated by the Shareholder pursuant to this
section until the earlier of (i) March 31, 2004 and (ii) the
fifth business day following the date on which such injunction or
order ceases to be in effect or such waiver, consent or approval
is obtained, as applicable; and
(f) the Support Agreement is terminated in accordance with its terms.
5.2 TERMINATION BY THE OFFEROR'S PARENT.
-----------------------------------
The Offeror's Parent, when not in material default in performance of its
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Shareholder if:
(a) the Shareholder has not complied in all material respects with
its covenants to the Offeror's Parent contained herein;
(b) any of the representations and warranties of the Shareholder
contained herein is untrue or inaccurate;
(c) the Company has not complied in all material respects with its
covenants to the Offeror's Parent under the Support Agreement;
(d) the conditions in Exhibit II of the Support Agreement are not
satisfied or waived by the Offeror on or prior to the expiry of
the Offer; or
(e) in the event of the termination of the Support Agreement.
5.3 EFFECT OF TERMINATION.
---------------------
In the case of any termination of this Agreement pursuant to this Article
5, this Agreement shall be of no further force and effect. Such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination. Upon termination of this Agreement in accordance
with its terms, the Shareholder shall be entitled to withdraw the
Shareholder's Shares from the Offer.
ARTICLE 6
GENERAL
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The representations and warranties shall not survive the consummation of
the Offer, provided that the representations and warranties of the
Shareholder in section 2.1(a) through (e) of this Agreement shall survive
indefinitely and the other representations and warranties of the
Shareholder in section 2.l of this Agreement shall terminate upon the
expiry of the Offer. No investigations made by or on behalf of the
Offeror's Parent, the Offeror or any of their authorized agents at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty or covenant made by the
Shareholder in or pursuant to this Agreement.
6.2 DISCLOSURE.
----------
Except as may otherwise be required by law or by regulatory authorities
having discretion over such matters, each party hereto agrees that it will
not make any public disclosure with respect to this Agreement or the
negotiations related to this Agreement in each case without the prior
approval of the other party, which approval will not be unreasonably
withheld. If any party deems that it is required by law or such regulatory
authority to make any public announcement or release concerning this
Agreement, such party agrees to provide a written copy thereof to the other
party in advance of any such announcement or release and to reasonably
consider any suggested modifications, which will be provided by the other
party in a timely matter. The parties acknowledge that the terms of this
Agreement will be summarized in the Offer and in the Directors' Circular
relating to the Offer.
6.3 ASSIGNMENT.
----------
This Agreement shall not be assigned by operation of law or otherwise,
except that the Offeror's Parent may assign all or any of its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
the Offeror's Parent, provided that no such assignment shall relieve the
Offeror's Parent of its obligations hereunder if such assignee does not
perform such obligations.
6.4 TIME.
----
Time shall be of the essence of this Agreement.
6.5 CURRENCY.
--------
All sums of money referred to in this Agreement shall mean Canadian funds.
6.6 GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein. The parties hereto submit to the non-exclusive jurisdiction of the
courts of the Province of Ontario and British Columbia in respect of the
interpretation and enforcement of this Agreement.
6.7 ENTIRE AGREEMENT.
----------------
This Agreement and the other agreements referenced herein constitute and
comprise the entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof.
6.8 AMENDMENTS.
----------
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by each of
the parties hereto. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
6.9 DEFINITIONS.
-----------
For the purposes of this Agreement the term:
(a) "affiliates" and "associates" means the persons, companies and
other entities included in the definitions of such terms under
the Securities Act (British Columbia);
(b) "business day" means any day, other than a Saturday or Sunday, on
which chartered banks in the City of Vancouver, British Columbia
and the City of Toronto, Ontario are open for business;
(c) "Effective Date" means any date upon which the Offeror takes up
and pays for Shares under the Offer;
(d) "Materially Adverse" has the meaning ascribed to such term in the
Support Agreement;
(e) "material fact", "material change" and "misrepresentation" are
used as defined under the Securities Act (British Columbia); and
(f) "Shares" shall include any shares into which the Shares may be
reclassified, subdivided, consolidated or converted and any
rights and benefits arising therefrom including any extraordinary
distributions of securities which may be declared in respect of
the Shares.
or the purposes of this Agreement, if the last day of a period of days is
not a business day, the period shall be extended to the next following day
which is a business day.
6.10 SPECIFIC PERFORMANCE AND OTHER EQUITABLE RIGHTS.
-----------------------------------------------
Each of the parties recognizes and acknowledges that this Agreement is an
integral part of the transactions contemplated in the Offer, that the
Offeror's Parent would not contemplate causing the Offer to be made and the
Shareholder would not agree to its covenants to the Offeror's Parent herein
and to irrevocably deposit the Shareholder's Shares to the Offer unless
this Agreement was executed and that a breach by a party of any covenants
or other commitments contained in this Agreement will cause the other party
to sustain injury for which it would not have an adequate remedy at law for
money damages. Therefore, each of the parties agrees that in the event of
any such breach, the aggrieved party shall be entitled to the remedy of
specific performance of such covenants or commitments and preliminary and
permanent injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity, and the parties
further agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any injunctive or other equitable
relief.
6.11 NOTICES.
-------
Any notice required or permitted to be given hereunder shall be written,
and shall be either (i) personally delivered, (ii) sent by a reputable
common carrier guaranteeing next business day delivery, or (iii) sent by
facsimile, to the respective addresses of the parties set forth below, or
to such other place as any party hereto may by notice given as provided
herein designate for receipt of notices hereunder. Any such notice shall be
deemed given and effective upon receipt or refusal of receipt thereof by
the primary party to whom it is to be sent.
(a) If to the Offeror's Parent or the Offeror, addressed as follows:
Honeywell International Inc.
101 Columbia Road
Morristown, NJ 07962
Attention: Senior Vice President and General Counsel
Facsimile: (973) 455-4217
with a copy to:
Honeywell International Inc.
1600 Utica Avenue S
Suite 300
St. Louis Park, MN 55416
Attention: Vice President and General Counsel -
Automation and Control Solutions
Facsimile: (952) 656-1231
with a further copy to:
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place
Toronto, ON M5X 1B8
Attention: Stephen Arnold
Facsimile: (416) 862-6615
(b) to the Shareholder, addressed as follows:
Rob Bakshi
2781 140th St
Surrey, BC V3S 9W8
with a copy to:
Owen Bird
2900 - 595 Burrard Street
Vancouver, BC V7X 1J5
Attention: Kitty Heller
Facsimile: (604) 688-2827
and, solely for information purposes, to:
McCarthy Tetrault LLP
1300 - 777 Dunsmuir Street
Vancouver, BC V7Y 1K2
Attention: Tim McCafferty
Facsimile: (604) 622-5680
6.12 EXPENSES.
--------
Each of the parties shall pay all of its own legal, financial advisory and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed or prepared pursuant hereto and any other costs and expenses
whatsoever and howsoever incurred.
6.13 SEVERABILITY.
------------
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
[The remainder of this page has intentionally been left blank]
6.14 COUNTERPARTS.
------------
This Agreement may be executed by facsimile signature, or otherwise, in two
or more counterparts, all of which taken together will constitute one
binding agreement.
HONEYWELL INTERNATIONAL INC.
By: /s/ Anne T. Madden
--------------------
Anne T. Madden,
Vice President-Corporate Planning
and Development
Agreed and accepted as of this 10th day of October, 2003.
/s/ Rob Bakshi
--------------------
Rob Bakshi
SCHEDULE 1
----------
SHAREHOLDERS NON-COMPETITION AND NON-SOLICITATION COVENANTS
1. ACKNOWLEDGEMENT.
---------------
The Offeror's Parent is a leading global manufacturer of security systems
and products for home, business and specialty applications and the Offeror
has agreed to acquire all of the outstanding common shares of the Company
for an amount that is substantially in excess of the current share price.
By virtue of his position with the Company the Shareholder has maintained
close working relationships with the customers, clients, suppliers,
distributors, consultants, agents and employees of the Company, and is in a
position to irreparably harm the Company and the Offeror's Parent should he
make use of the specialised knowledge, contacts and connections that were
obtained because of his position with the Company or the specialised
knowledge, contacts and connections that will be obtained because of his
future position with the Offeror's Parent.
The Shareholder acknowledges and agrees that because he and others will be
receiving an amount that is substantially in excess of the current share
price the following covenants and restrictions are reasonable and valid in
terms of time, scope of activities and geographical limitations and
understands and agrees that they are vital consideration for the purposes
of the Offeror acquiring the shares of the Company.
2. NON-COMPETITION AND NON-SOLICITATION.
------------------------------------
The Shareholder will not for a period of thirty months from the date on
which such Shareholder's employment with the Offeror's Parent or its
Affiliates is terminated (such date, the "Termination Date") without the
Offeror's express written consent, either as an individual, or in
conjunction with any other person, firm, corporation, or other entity,
whether acting as a principal, agent, employee, consultant, or in any
capacity whatsoever:
(a) engage in or in any way be concerned with any business or enterprise
relating to the manufacture, sales or installation of video or
DVR/digital CCTV security systems and security products for home or
business (the "CCTV Business") in any of the provinces and territories
of Canada, and the states and territories of the United States of
America; provided, however, the foregoing shall not be deemed to
prohibit the Shareholder from being employed by a corporation or other
entity in a position wholly unrelated to the manufacture, sales or
installation of security systems and security products for home or
business merely because such corporation or other entity is engaged in
the CCTV Business.
(b) solicit, attempt to solicit, call upon, or accept the business of any
firm, person or company who is or, during a 30 month period prior to
the Termination Date, was a customer, client, supplier or distributor
of the Company or, with respect to the CCTV Business, the Offeror's
Parent (or any of its Affiliates);
(c) take advantage of, derive a benefit or otherwise profit from any
business opportunities that the Shareholder became aware of in the
course of employment with the Company or the Offeror's Parent or any
of its Affiliates even if the Offeror does not take advantage of or
exploit such opportunities;
(d) take any action as a result of which relations between the Company or
the Offeror's Parent (or any of its Affiliates), on the one hand, and
its consultants, customers, clients, suppliers, distributors,
employees or others, on the other hand, may be impaired or which might
otherwise be detrimental to the business interests or reputation of
the Company or the Offeror's Parent (or any of its Affiliates);
(e) solicit, attempt to solicit, or communicate in any way with any
employees or consultants of the Company or the Offeror's Parent (or
any of its Affiliates) for the purpose of having such employees
employed or in any way engaged by another person, firm, corporation,
or other entity; or
(f) hire, whether as an employee, consultant or otherwise, any person who
as of the date on which the Shareholder's employment with the
Offeror's Parent or its Affiliates is terminated was employed by the
Company or the Offeror's Parent (or any of its Affiliates), or who at
any time was employed or engaged by the Company or the Offeror's
Parent (or any of its Affiliates) in the 12 months preceding the
Termination Date.
Exhibit 3
DEPOSIT AGREEMENT
-----------------
STRICTLY CONFIDENTIAL
- ---------------------
October 10, 2003
Vinod Bakshi
Dear Vinod:
This letter agreement (the "Agreement") sets out the terms and conditions
upon which Honeywell International Inc. (the "Offeror's Parent") will cause
678669 B.C. Ltd., a direct or indirect wholly-owned subsidiary of the
Offeror's Parent (the "Offeror") to make an offer (the "Offer") on
substantially the terms and conditions set forth in the support agreement
between Silent Witness Enterprises Ltd. (the "Company") and the Offeror and
the Offeror's Parent dated the date hereof (the "Support Agreement"), to
purchase all of the issued and outstanding common shares (the "Shares") of
the Company.
This Agreement also sets out the terms and conditions of the agreement by
you (the "Shareholder") to deposit, or cause to be deposited, under the
Offer: (i) the 256,654 Shares presently owned beneficially by the
Shareholder; (ii) all Shares, if any, issued upon the exercise of certain
stock options or any other rights convertible or exercisable for shares
held by the Shareholder; and (iii) any Shares subsequently acquired by the
Shareholder (the "Shareholder's Shares"), and sets out the obligations and
commitments of the Shareholder in connection therewith. References in this
Agreement to the Shares held or to be acquired by the Shareholder include
the associated rights issued pursuant to the Company's "Rights Plan" (as
defined in the Support Agreement).
ARTICLE 1
THE OFFER
1.1 TIMING OF THE OFFER.
-------------------
The Offeror's Parent agrees to cause the Offeror to make the Offer for all
of the Shares within the time and upon the terms as provided for in the
Support Agreement, and subject to the conditions therein contained.
1.2 MODIFICATION OF OFFER.
---------------------
The Offeror's Parent agrees that it will not cause or permit the Offeror to
amend, modify or change the Offer without the prior written consent of the
Shareholder, which consent shall not be unreasonably withheld, and to
provide a draft of any proposed amendment, modification or change to the
Offer to the Shareholder and to consult with the Shareholder with respect
to the terms and conditions of such proposed amendment, modification or
change of the Offer. The covenants in the foregoing sentence shall not
apply in respect of any amendments, modifications or changes to the Offer
in accordance with section 1.1(e) of the Support Agreement provided that
the Offeror and the Offeror's Parent shall not, without the consent of the
Shareholder:
(a) increase the number or percentage of Shares required to satisfy
the "Minimum Condition" (as defined in the Support Agreement) or
decrease the number or percentage of Shares required to satisfy
the Minimum Condition below 50% of the outstanding Shares,
decrease the consideration per Share payable under the Offer,
change the form of consideration payable under the Offer (other
than to add additional consideration) or decrease the number of
Shares sought under the Offer;
(b) impose additional material conditions to the Offer;
(c) in the event all of the "Bid Conditions" (as defined in the
Support Agreement) are satisfied or waived, extend the period
during which Shares may be deposited under the Offer without
taking up and paying for Shares validly deposited thereunder and
not withdrawn except as required by applicable law; or
(d) modify or amend the Offer or any terms thereof in a manner
adverse to the Shareholder.
1.3 GENERAL.
-------
Subject to the terms and conditions of the Support Agreement, the Offeror's
Parent hereby covenants to use, and to cause the Offeror to use, its
reasonable best efforts to successfully complete the Offer and the
transactions contemplated by this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
-------------------------------------------------
The Shareholder hereby represents and warrants to the Offeror's Parent
that:
(a) Authorization. This Agreement has been duly executed and
delivered by the Shareholder and constitutes a legal, valid and
binding agreement enforceable by the Offeror's Parent against the
Shareholder in accordance with its terms subject, however, to
limitations with respect to enforcement imposed by law in
connection with bankruptcy or similar proceedings, the equitable
power of the courts to stay proceedings before them and the
execution of judgements and to the extent that equitable remedies
such as specific performance and injunction are in the discretion
of the court from which they are sought.
(b) Ownership of Shares. The Shareholder: (i) is the sole beneficial
owner of 256,654 Shares which are currently held by the
Shareholder; (ii) holds no options (the "Options"); and (iii)
holds no share appreciation rights. Except as stated in this
paragraph, the Shareholder does not own or control, directly or
indirectly, any other Shares or options, rights or other
entitlements to acquire Shares. The Shareholder has the exclusive
right to dispose of the Shareholder's Shares as provided in this
Agreement and the Shareholder is not a party to, bound or
affected by or subject to, any charter or by-law provision,
statute, regulation, judgment, order, decree or law of which a
breach would occur as a result of the execution and delivery of
this Agreement or the consummation of any of the transactions
provided for in this Agreement.
(c) Good Title. All the Shareholder's Shares are now, and at the time
the Offeror directly or indirectly takes up and pays for the
Shareholder's Shares under the Offer will be beneficially owned
by the Shareholder with good and marketable title, free and clear
of any and all mortgages, liens, charges, restrictions, security
interests, adverse claims, pledges, encumbrances and demands or
rights of others of any nature or kind whatsoever.
(d) No Agreements. No person, firm or corporation has any agreement
or option, or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option, for
the purchase, acquisition or transfer from the Shareholder, or
any registered holder of the Shareholder's Shares, of any of the
Shareholder's Shares, or any interest therein or right thereto,
except pursuant to this Agreement.
(e) Voting. Neither the Shareholder nor any registered holder of the
Shareholder's Shares has previously granted or agreed to grant
any ongoing proxy in respect of the Shareholder's Shares or
entered into any voting trust, vote pooling or other agreement
with respect to the right to vote, call meetings of shareholders
or give consents or approvals of any kind as to the Shareholder's
Shares.
(f) No Proceeding Pending. There is no claim, action, lawsuit,
arbitration, mediation or other proceeding pending or, to the
best of the knowledge, information and belief of the Shareholder,
threatened against the Shareholder, which relates to this
Agreement or otherwise materially impairs the ability of the
Shareholder to consummate the transactions contemplated hereby.
(g) Arm's Length Negotiation. The price payable by the Offeror's
Parent for the Shares pursuant to the Offer (the "Offer Price")
was arrived at through negotiation between the Company and the
Offeror's Parent. The Shareholder has full knowledge of and
access to information concerning the Company such that the
underlying value of the Company was a material factor considered
by the Shareholder in entering into this Agreement and agreeing
to the Offer Price, and there are no non-financial factors or
other factors peculiar to the Shareholder which have been
considered relevant by the Shareholder in assessing such price or
that had the effect of reducing the price that would otherwise
have been considered acceptable to the Shareholder.
2.2 REPRESENTATIONS AND WARRANTIES OF THE OFFEROR'S PARENT.
------------------------------------------------------
The Offeror's Parent represents and warrants to the Shareholder as follows:
(a) Organization. Each of the Offeror's Parent and the Offeror is a
corporation duly organized and validly existing under the laws of
its jurisdiction of incorporation.
(b) Authority. The Offeror's Parent has all requisite corporate power
and authority to enter into this Agreement, and the Offeror will
have at the date of the Offer all necessary corporate power and
authority to make the Offer and to carry out the transactions
contemplated hereby and by the Offer. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Offeror's Parent,
and no other corporate proceedings on the part of the Offeror's
Parent are necessary to authorize this Agreement. The Agreement
has been duly executed and delivered by the Offeror's Parent and
constitutes a legal, valid and binding agreement enforceable by
the Shareholder against the Offeror's Parent in accordance with
its terms, subject, however, to the usual limitations with
respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and the availability of
equitable remedies.
(c) Non-Contravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby nor compliance with any of the provisions hereof will
conflict with or result in any breach of any provision of the
constating documents of the Offeror's Parent or the Offeror.
ARTICLE 3
COVENANTS OF THE SHAREHOLDER
3.1 GENERAL.
-------
The Shareholder hereby covenants that until the earlier of (i) the date on
which the Offeror has taken up and paid for Shares under the Offer; (ii)
the date on which the Offeror abandons the Offer; (iii) the Offer expires
and the Offerer has not taken up and paid for Shares in accordance with
applicable law; or (iv) the termination of this Agreement in accordance
with this Agreement, the Shareholder will:
(a) except as permitted by this Agreement, not take and shall not
authorize or permit any investment banker, financial advisor,
attorney, accountant or other representative of his to take, any
action of any kind, indirectly or directly, to oppose, frustrate
or delay the take up and payment of Shares deposited under the
Offer or the completion of the Offer, including but not limited
to any action to solicit, initiate, knowingly assist or knowingly
encourage inquiries, submissions, proposals or offers from any
other person, entity or group, and will cease immediately and not
continue in any discussions or negotiations the Shareholder is
carrying on regarding, or furnish to any other person, entity or
group, any confidential, non-public information with respect to
any "Competing Proposal" (as defined in the Support Agreement)
provided that, nothing contained in this section or other
provisions of this Agreement shall:
(i) prevent the Shareholder, in his capacity as a director or
officer of the Company, from engaging in discussions or
negotiations with a third party or providing information
in respect of, or otherwise responding to, or negotiating,
approving and recommending to holders of Shares, an
unsolicited bona fide Competing Proposal if the Board of
Directors of the Company has determined in good faith,
after consultation with and receiving advice from legal
counsel and the Company's financial advisors, that such
proposal may constitute or lead to a Superior Proposal or
that such action is otherwise required by reason of the
fiduciary duties of the directors of the Company under
applicable law; or
(ii) preclude the Shareholder, in his capacity as a director or
Officer of the Company, from responding, within the time
and manner required by the applicable laws, to any take
over bid or any business combination or similar
transaction involving the Company or any of its
subsidiaries or assets or tender or exchange offer made
for the Shares;
and nothing in this Agreement shall be interpreted to extend to
acts or omissions of the Shareholder acting in his capacity as a
director or officer of the Company or otherwise to fetter the
proper exercise of discretion by the Shareholder acting in that
capacity;
(b) if the Shareholder receives any Competing Proposal the
Shareholder will notify the Offeror within 24 hours of becoming
aware of a proposal which, if made in writing, could constitute a
Competing Proposal (as such term is defined in the Support
Agreement) including the identity of any prospective offeror and
the person making the Competing Proposal;
(c) not option, sell, transfer, pledge, encumber, grant a security
interest in, hypothecate or otherwise convey the Shareholder's
Shares, or any right or interest therein (legal or equitable), to
any person, entity or group or agree to do any of the foregoing;
(d) not grant or agree to grant any proxy or other right to vote the
Shareholder's Shares, or enter into any voting trust, vote
pooling or other agreement with respect to the right to vote,
call meetings of shareholders or give consents or approvals of
any kind as to the Shareholder's Shares;
(e) not do indirectly that which the Shareholder may not do directly
in respect of the restrictions on the Shareholder's rights with
respect to the Shareholder's Shares pursuant to this section 3.1,
including, but not limited to, the granting of a proxy on the
Shares of any direct or indirect holding company of the
Shareholder which would have, indirectly, the effect prohibited
by this section 3.1, and not to take any action which would make
any representation or warranty of the Shareholder contained
herein untrue or incorrect or have the effect of preventing or
disabling the Shareholder from performing the Shareholder's
obligations under this Agreement;
(f) exercise the voting rights attaching to the Shareholder's Shares
and otherwise use his best efforts to cause the Company to comply
with its obligations under the Support Agreement, including its
agreement, subject to the terms and conditions of the Support
Agreement, to use all reasonable commercial efforts to take, or
cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Offer and the
Support Agreement;
(g) not purchase or obtain or enter into any agreement or right to
purchase any additional Shares;
(h) if applicable, resign as a director of the Company effective at
the time and in the manner requested by the Offeror's Parent,
after the Offeror takes up and pays for the Shareholder's Shares.
ARTICLE 4
DEPOSIT AND PAYMENT
4.1 DEPOSIT.
-------
Subject to section 4.2, the Shareholder hereby irrevocably and
unconditionally, subject to the terms of this Agreement, agrees that if the
Offeror makes the Offer on the terms and conditions and conditions set out
in the Support Agreement the Shareholder shall deposit or cause to be
deposited all of the Shareholder's Shares (including for greater certainty
all Shares issued or which may be issued to the Shareholder upon the
exercise of any other rights to acquire Shares), together with a duly
completed and executed letter of transmittal, under the Offer as soon as
practicable following the Offeror making the Offer and in any event prior
to the expiry of the Offer. In the event that the Shareholder subsequently
obtains any additional Shares as contemplated by section 3.1(f) hereof or
otherwise, such Shares shall likewise be deposited under the Offer as soon
as practicable thereafter and in any event prior to the expiry of the
Offer.
4.2 NO WITHDRAWAL.
-------------
The Shareholder hereby irrevocably and unconditionally, subject to the
terms of the Agreement, agrees that neither it nor any person on its behalf
will withdraw or take any action to withdraw any of the Shareholder's
Shares deposited under the Offer, notwithstanding any statutory rights or
other rights under the terms of the Offer or otherwise which the
Shareholder might have, unless this Agreement is terminated in accordance
with its terms prior to the taking up of the Shareholder's Shares under the
Offer or unless:
(a) in the event that the Offer is not extended in accordance with
the Support Agreement, the Offeror does not take up and pay for
the Shares on or before January 31, 2003;
(b) in the event that the Offer is extended in accordance with the
Support Agreement, the Offeror does not take up and pay for the
Shares under the Offer on or before the end of the tenth day
following the expiry of the Offer;
(c) a "Superior Proposal" (as defined in the Support Agreement) is
made, the board of directors of the Company has either withdrawn
its recommendation of the Offer or recommended acceptance of the
Superior Proposal, and (i) the Offeror has not amended the Offer
to increase the consideration to be paid to holders of Shares
pursuant to the Offer within the time periods specified by
Section 4.2 of the Support Agreement to an amount having a value
at least equal to the value of the consideration offered under
the Superior Proposal and (ii) the fee specified in Section 4.5
of the Support Agreement has been paid to the Offeror's Parent as
specified therein; or
(d) the Shareholder receives the consent of the Offeror's Parent or
the Offeror to so withdraw the Shareholder's Shares.
4.3 APPOINTMENT OF PROXY
--------------------
The Shareholder hereby grants to, and appoints, the Offerors' Parent and
the Secretary of the Offerer's Parent and the Chief Financial Officer of
the Offeror's Parent, in their respective capacities as officers of the
Offeror's Parent, and any other designee of the Offeror's Parent, each of
them individually, the Shareholder's irrevocable proxy and attorney in fact
(with full power of substitution) to vote the Shareholder's irrevocable
proxy and attorney in fact (with full power of substitution) to vote the
Shareholder's Shares with respect thereto, in order to give effect to the
covenants of the shareholder contained in this Agreement and in furtherance
of the obligations of the Company contained in the Suport Agreement. The
Shareholder agrees that proxy is irrevocable until this Agreement is
terminated in accordance with Article 5 hereof and coupled with an interest
and will take such further action or execute such other instruments as may
be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by him with respect to the Shares.
4.4 STOP TRANSFER ORDER
-------------------
Subject to the termination rights set forth in Article V of this Agreement,
in furtherance of the transactions contemplated by this Agreement and the
Support Agreement, the Shareholder hereby authorizes the Offeror's Parent
to instruct the Company to direct its transfer agent to place a stop
transfer order on the Shareholder's Shares and not to amend, terminate or
waive any of the terms of such stop transfer order (other than to permit
the transfer of the Shareholder's Shares to the Offeror) during the term of
this Agreement.
ARTICLE 5
TERMINATION BY THE SHAREHOLDER AND BY THE PURCHASER
5.1 TERMINATION BY THE SHAREHOLDER.
------------------------------
The Shareholder, when not in material default in performance of his
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Offeror's Parent if:
(a) the Offer has not been made as provided in section 1.1 hereof,
(b) the Offer does not substantially conform with, or subject to
section 1.2 hereof is modified in a manner so as not to conform
with, the description in the Support Agreement or the provisions
of this Agreement;
(c) Shares deposited under the Offer (including the Shareholder's
Shares) have not, for any reason whatsoever, been taken up and
paid for on or before the end of the tenth day following the
expiry of the Offer;
(d) the Offer is abandoned by the Offeror (which shall be
conclusively evidenced by the Offeror issuing a press release or
otherwise publicly disclosing or announcing that the Offer is
withdrawn);
(e) after January 31, 2004 if the Offeror has not purchased any
Shares pursuant to the Offer, otherwise than as a result of the
material breach by the Shareholder of any material covenant or
obligation under this Agreement or as a result of any
representation or warranty of the Shareholder in this Agreement
being untrue or incorrect in any material respect; provided,
however, that if the Offeror's take up and payment for Shares
deposited under the Offer is delayed by (i) an injunction or
order made by a court or regulatory authority of competent
jurisdiction, or (ii) the Offeror not having obtained any
regulatory waiver consent or approval which is necessary to
permit the Offeror to take up and pay for the Shares deposited
under the Offer, then, provided that such injunction or order is
being contested or appealed or such regulatory waiver, consent or
approval is being actively sought, as applicable, this Agreement
shall not be terminated by the Shareholder pursuant to this
section until the earlier of (i) March 31, 2004 and (ii) the
fifth business day following the date on which such injunction or
order ceases to be in effect or such waiver, consent or approval
is obtained, as applicable; and
(f) the Support Agreement is terminated in accordance with its terms.
5.2 TERMINATION BY THE OFFEROR'S PARENT.
-----------------------------------
The Offeror's Parent, when not in material default in performance of its
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Shareholder if:
(a) the Shareholder has not complied in all material respects with
its covenants to the Offeror's Parent contained herein;
(b) any of the representations and warranties of the Shareholder
contained herein is untrue or inaccurate;
(c) the Company has not complied in all material respects with its
covenants to the Offeror's Parent under the Support Agreement;
(d) the conditions in Exhibit II of the Support Agreement are not
satisfied or waived by the Offeror on or prior to the expiry of
the Offer; or
(e) in the event of the termination of the Support Agreement.
5.3 EFFECT OF TERMINATION.
---------------------
In the case of any termination of this Agreement pursuant to this Article
5, this Agreement shall be of no further force and effect. Such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination. Upon termination of this Agreement in accordance
with its terms, the Shareholder shall be entitled to withdraw the
Shareholder's Shares from the Offer.
ARTICLE 6
GENERAL
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The representations and warranties shall not survive the consummation of
the Offer, provided that the representations and warranties of the
Shareholder in section 2.1(a) through (e) of this Agreement shall survive
indefinitely and the other representations and warranties of the
Shareholder in section 2.l of this Agreement shall terminate upon the
expiry of the Offer. No investigations made by or on behalf of the
Offeror's Parent, the Offeror or any of their authorized agents at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty or covenant made by the
Shareholder in or pursuant to this Agreement.
6.2 DISCLOSURE.
----------
Except as may otherwise be required by law or by regulatory authorities
having discretion over such matters, each party hereto agrees that it will
not make any public disclosure with respect to this Agreement or the
negotiations related to this Agreement in each case without the prior
approval of the other party, which approval will not be unreasonably
withheld. If any party deems that it is required by law or such regulatory
authority to make any public announcement or release concerning this
Agreement, such party agrees to provide a written copy thereof to the other
party in advance of any such announcement or release and to reasonably
consider any suggested modifications, which will be provided by the other
party in a timely matter. The parties acknowledge that the terms of this
Agreement will be summarized in the Offer and in the Directors' Circular
relating to the Offer.
6.3 ASSIGNMENT.
----------
This Agreement shall not be assigned by operation of law or otherwise,
except that the Offeror's Parent may assign all or any of its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
the Offeror's Parent, provided that no such assignment shall relieve the
Offeror's Parent of its obligations hereunder if such assignee does not
perform such obligations.
6.4 TIME.
----
Time shall be of the essence of this Agreement.
6.5 CURRENCY.
--------
All sums of money referred to in this Agreement shall mean Canadian funds.
6.6 GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein. The parties hereto submit to the non-exclusive jurisdiction of the
courts of the Province of Ontario and British Columbia in respect of the
interpretation and enforcement of this Agreement.
6.7 ENTIRE AGREEMENT.
----------------
This Agreement and the other agreements referenced herein constitute and
comprise the entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof.
6.8 AMENDMENTS.
----------
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by each of
the parties hereto. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
6.9 DEFINITIONS.
-----------
For the purposes of this Agreement the term:
(a) "affiliates" and "associates" means the persons, companies and
other entities included in the definitions of such terms under
the Securities Act (British Columbia);
(b) "business day" means any day, other than a Saturday or Sunday, on
which chartered banks in the City of Vancouver, British Columbia
and the City of Toronto, Ontario are open for business;
(c) "Effective Date" means any date upon which the Offeror takes up
and pays for Shares under the Offer;
(d) "Materially Adverse" has the meaning ascribed to such term in the
Support Agreement;
(e) "material fact", "material change" and "misrepresentation" are
used as defined under the Securities Act (British Columbia); and
(f) "Shares" shall include any shares into which the Shares may be
reclassified, subdivided, consolidated or converted and any
rights and benefits arising therefrom including any extraordinary
distributions of securities which may be declared in respect of
the Shares.
or the purposes of this Agreement, if the last day of a period of days is
not a business day, the period shall be extended to the next following day
which is a business day.
6.10 SPECIFIC PERFORMANCE AND OTHER EQUITABLE RIGHTS.
-----------------------------------------------
Each of the parties recognizes and acknowledges that this Agreement is an
integral part of the transactions contemplated in the Offer, that the
Offeror's Parent would not contemplate causing the Offer to be made and the
Shareholder would not agree to its covenants to the Offeror's Parent herein
and to irrevocably deposit the Shareholder's Shares to the Offer unless
this Agreement was executed and that a breach by a party of any covenants
or other commitments contained in this Agreement will cause the other party
to sustain injury for which it would not have an adequate remedy at law for
money damages. Therefore, each of the parties agrees that in the event of
any such breach, the aggrieved party shall be entitled to the remedy of
specific performance of such covenants or commitments and preliminary and
permanent injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity, and the parties
further agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any injunctive or other equitable
relief.
6.11 NOTICES.
-------
Any notice required or permitted to be given hereunder shall be written,
and shall be either (i) personally delivered, (ii) sent by a reputable
common carrier guaranteeing next business day delivery, or (iii) sent by
facsimile, to the respective addresses of the parties set forth below, or
to such other place as any party hereto may by notice given as provided
herein designate for receipt of notices hereunder. Any such notice shall be
deemed given and effective upon receipt or refusal of receipt thereof by
the primary party to whom it is to be sent.
(a) If to the Offeror's Parent or the Offeror, addressed as follows:
Honeywell International Inc.
101 Columbia Road
Morristown, NJ 07962
Attention: Senior Vice President and General Counsel
Facsimile: (973) 455-4217
with a copy to:
Honeywell International Inc.
1600 Utica Avenue S
Suite 300
St. Louis Park, MN 55416
Attention: Vice President and General Counsel -
Automation and Control Solutions
Facsimile: (952) 656-1231
with a further copy to:
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place
Toronto, ON M5X 1B8
Attention: Stephen Arnold
Facsimile: (416) 862-6615
(b) to the Shareholder, addressed as follows:
Vinod Bakshi
2781 140th St
Surrey, BC V3S 9W8
with a copy to:
Owen Bird
2900 - 595 Burrard Street
Vancouver, BC V7X 1J5
Attention: Kitty Heller
Facsimile: (604) 688-2827
and, solely for information purposes, to:
McCarthy Tetrault LLP
1300 - 777 Dunsmuir Street
Vancouver, BC V7Y 1K2
Attention: Tim McCafferty
Facsimile: (604) 622-5680
6.12 EXPENSES.
--------
Each of the parties shall pay all of its own legal, financial advisory and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed or prepared pursuant hereto and any other costs and expenses
whatsoever and howsoever incurred.
6.13 SEVERABILITY.
------------
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
[The remainder of this page has intentionally been left blank]
6.14 COUNTERPARTS.
------------
This Agreement may be executed by facsimile signature, or otherwise, in two
or more counterparts, all of which taken together will constitute one
binding agreement.
HONEYWELL INTERNATIONAL INC.
By: /s/ Anne T. Madden
--------------------
Anne T. Madden,
Vice President-Corporate Planning
and Development
Agreed and accepted as of this 10th day of October, 2003.
/s/ Vinod Bakshi
-------------------------------
/s/ Vinod Bakshi
Exhibit 4
DEPOSIT AGREEMENT
-----------------
STRICTLY CONFIDENTIAL
- ---------------------
October 10, 2003
Opinder Singh Gill
1043 53 St. E
Vancouver, B.C.
V5X 1J7
Dear Tom:
This letter agreement (the "Agreement") sets out the terms and conditions
upon which Honeywell International Inc. (the "Offeror's Parent") will cause
678669 B.C. Ltd., a direct or indirect wholly-owned subsidiary of the
Offeror's Parent (the "Offeror") to make an offer (the "Offer") on
substantially the terms and conditions set forth in the support agreement
between Silent Witness Enterprises Ltd. (the "Company") and the Offeror and
the Offeror's Parent dated the date hereof (the "Support Agreement"), to
purchase all of the issued and outstanding common shares (the "Shares") of
the Company.
This Agreement also sets out the terms and conditions of the agreement by
you (the "Shareholder") to deposit, or cause to be deposited, under the
Offer: (i) the 81,700 Shares presently owned beneficially by the
Shareholder; (ii) all Shares, if any, issued upon the exercise of certain
stock options or any other rights convertible or exercisable for shares
held by the Shareholder; and (iii) any Shares subsequently acquired by the
Shareholder (the "Shareholder's Shares"), and sets out the obligations and
commitments of the Shareholder in connection therewith. References in this
Agreement to the Shares held or to be acquired by the Shareholder include
the associated rights issued pursuant to the Company's "Rights Plan" (as
defined in the Support Agreement).
ARTICLE 1
THE OFFER
1.1 TIMING OF THE OFFER.
-------------------
The Offeror's Parent agrees to cause the Offeror to make the Offer for all
of the Shares within the time and upon the terms as provided for in the
Support Agreement, and subject to the conditions therein contained.
1.2 MODIFICATION OF OFFER.
---------------------
The Offeror's Parent agrees that it will not cause or permit the Offeror to
amend, modify or change the Offer without the prior written consent of the
Shareholder, which consent shall not be unreasonably withheld, and to
provide a draft of any proposed amendment, modification or change to the
Offer to the Shareholder and to consult with the Shareholder with respect
to the terms and conditions of such proposed amendment, modification or
change of the Offer. The covenants in the foregoing sentence shall not
apply in respect of any amendments, modifications or changes to the Offer
in accordance with section 1.1(e) of the Support Agreement provided that
the Offeror and the Offeror's Parent shall not, without the consent of the
Shareholder:
(a) increase the number or percentage of Shares required to satisfy
the "Minimum Condition" (as defined in the Support Agreement) or
decrease the number or percentage of Shares required to satisfy
the Minimum Condition below 50% of the outstanding Shares,
decrease the consideration per Share payable under the Offer,
change the form of consideration payable under the Offer (other
than to add additional consideration) or decrease the number of
Shares sought under the Offer;
(b) impose additional material conditions to the Offer;
(c) in the event all of the "Bid Conditions" (as defined in the
Support Agreement) are satisfied or waived, extend the period
during which Shares may be deposited under the Offer without
taking up and paying for Shares validly deposited thereunder and
not withdrawn except as required by applicable law; or
(d) modify or amend the Offer or any terms thereof in a manner
adverse to the Shareholder.
1.3 GENERAL.
-------
Subject to the terms and conditions of the Support Agreement, the Offeror's
Parent hereby covenants to use, and to cause the Offeror to use, its
reasonable best efforts to successfully complete the Offer and the
transactions contemplated by this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
-------------------------------------------------
The Shareholder hereby represents and warrants to the Offeror's Parent
that:
(a) Authorization. This Agreement has been duly executed and
delivered by the Shareholder and constitutes a legal, valid and
binding agreement enforceable by the Offeror's Parent against the
Shareholder in accordance with its terms subject, however, to
limitations with respect to enforcement imposed by law in
connection with bankruptcy or similar proceedings, the equitable
power of the courts to stay proceedings before them and the
execution of judgements and to the extent that equitable remedies
such as specific performance and injunction are in the discretion
of the court from which they are sought.
(b) Ownership of Shares. The Shareholder: (i) is the sole beneficial
owner of 81,700 Shares which are currently held by the
Shareholder; (ii) is the holder of no options to purchase Shares;
and (iii) is the holder of 33,750 share appreciation rights
("Share Appreciation Rights") to receive a cash payment based on
the price of the Shares or the right to receive Shares. Except as
stated in this paragraph, the Shareholder does not own or
control, directly or indirectly, any other Shares or options,
rights or other entitlements to acquire Shares. The Shareholder
has the exclusive right to dispose of the Shareholder's Shares as
provided in this Agreement and the Shareholder is not a party to,
bound or affected by or subject to, any charter or by-law
provision, statute, regulation, judgment, order, decree or law of
which a breach would occur as a result of the execution and
delivery of this Agreement or the consummation of any of the
transactions provided for in this Agreement.
(c) Good Title. All the Shareholder's Shares and Share Appreciation
Rights are now, and at the time the Offeror directly or
indirectly takes up and pays for the Shareholder's Shares under
the Offer will be beneficially owned by the Shareholder with good
and marketable title, free and clear of any and all mortgages,
liens, charges, restrictions, security interests, adverse claims,
pledges, encumbrances and demands or rights of others of any
nature or kind whatsoever.
(d) No Agreements. No person, firm or corporation has any agreement
or option, or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option, for
the purchase, acquisition or transfer from the Shareholder, or
any registered holder of the Shareholder's Shares, of any of the
Shareholder's Shares, or any interest therein or right thereto,
except pursuant to this Agreement.
(e) Voting. Neither the Shareholder nor any registered holder of the
Shareholder's Shares has previously granted or agreed to grant
any ongoing proxy in respect of the Shareholder's Shares or
entered into any voting trust, vote pooling or other agreement
with respect to the right to vote, call meetings of shareholders
or give consents or approvals of any kind as to the Shareholder's
Shares.
(f) No Proceeding Pending. There is no claim, action, lawsuit,
arbitration, mediation or other proceeding pending or, to the
best of the knowledge, information and belief of the Shareholder,
threatened against the Shareholder, which relates to this
Agreement or otherwise materially impairs the ability of the
Shareholder to consummate the transactions contemplated hereby.
(g) Arm's Length Negotiation. The price payable by the Offeror's
Parent for the Shares pursuant to the Offer (the "Offer Price")
was arrived at through negotiation between the Company and the
Offeror's Parent. The Shareholder has full knowledge of and
access to information concerning the Company such that the
underlying value of the Company was a material factor considered
by the Shareholder in entering into this Agreement and agreeing
to the Offer Price, and there are no non-financial factors or
other factors peculiar to the Shareholder which have been
considered relevant by the Shareholder in assessing such price or
that had the effect of reducing the price that would otherwise
have been considered acceptable to the Shareholder.
(h) Company Public Disclosure Documents. To the best of the knowledge
of the Shareholder: (i) all forms, reports, statements, schedules
and documents required to be filed by the Company with securities
regulatory authority under applicable securities laws
(collectively, the "Reports") did not, at the time filed, contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; (ii) the Company has
not filed any confidential material change report with any
securities regulatory authority or stock exchange which at the
date of this Agreement remains confidential; and (iii) the
Company has publicly disclosed in the Reports any information
regarding any event, circumstances or action taken or failed to
be taken by the Company or its subsidiaries which could
individually or in the aggregate reasonably be expected to be
Materially Adverse to the Company or its subsidiaries, either
individually or in the aggregate.
(i) Company Representations and Warranties. To the best of the
knowledge of the Shareholder, all of the representations and
warranties of the Company set forth in the Support Agreement are
true and correct.
2.2 REPRESENTATIONS AND WARRANTIES OF THE OFFEROR'S PARENT.
------------------------------------------------------
The Offeror's Parent represents and warrants to the Shareholder as follows:
(a) Organization. Each of the Offeror's Parent and the Offeror is a
corporation duly organized and validly existing under the laws of
its jurisdiction of incorporation.
(b) Authority. The Offeror's Parent has all requisite corporate power
and authority to enter into this Agreement, and the Offeror will
have at the date of the Offer all necessary corporate power and
authority to make the Offer and to carry out the transactions
contemplated hereby and by the Offer. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Offeror's Parent,
and no other corporate proceedings on the part of the Offeror's
Parent are necessary to authorize this Agreement. The Agreement
has been duly executed and delivered by the Offeror's Parent and
constitutes a legal, valid and binding agreement enforceable by
the Shareholder against the Offeror's Parent in accordance with
its terms, subject, however, to the usual limitations with
respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and the availability of
equitable remedies.
(c) Non-Contravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby nor compliance with any of the provisions hereof will
conflict with or result in any breach of any provision of the
constating documents of the Offeror's Parent or the Offeror.
ARTICLE 3
COVENANTS OF THE SHAREHOLDER
3.1 GENERAL.
-------
The Shareholder hereby covenants that until the earlier of (i) the date on
which the Offeror has taken up and paid for Shares under the Offer; (ii)
the date on which the Offeror abandons the Offer; (iii) the Offer expires
and the Offerer has not taken up and paid for Shares in accordance with
applicable law; or (iv) the termination of this Agreement in accordance
with this Agreement, the Shareholder will:
(a) except as permitted by this Agreement, not take and shall not
authorize or permit any investment banker, financial advisor,
attorney, accountant or other representative of his to take, any
action of any kind, indirectly or directly, to oppose, frustrate
or delay the take up and payment of Shares deposited under the
Offer or the completion of the Offer, including but not limited
to any action to solicit, initiate, knowingly assist or knowingly
encourage inquiries, submissions, proposals or offers from any
other person, entity or group, and will cease immediately and not
continue in any discussions or negotiations the Shareholder is
carrying on regarding, or furnish to any other person, entity or
group, any confidential, non-public information with respect to
any "Competing Proposal" (as defined in the Support Agreement)
provided that, nothing contained in this section or other
provisions of this Agreement shall:
(i) prevent the Shareholder, in his capacity as a director or
officer of the Company, from engaging in discussions or
negotiations with a third party or providing information
in respect of, or otherwise responding to, or negotiating,
approving and recommending to holders of Shares, an
unsolicited bona fide Competing Proposal if the Board of
Directors of the Company has determined in good faith,
after consultation with and receiving advice from legal
counsel and the Company's financial advisors, that such
proposal may constitute or lead to a Superior Proposal or
that such action is otherwise required by reason of the
fiduciary duties of the directors of the Company under
applicable law; or
(ii) preclude the Shareholder, in his capacity as a director or
Officer of the Company, from responding, within the time
and manner required by the applicable laws, to any take
over bid or any business combination or similar
transaction involving the Company or any of its
subsidiaries or assets or tender or exchange offer made
for the Shares;
and nothing in this Agreement shall be interpreted to extend to
acts or omissions of the Shareholder acting in his capacity as a
director or officer of the Company or otherwise to fetter the
proper exercise of discretion by the Shareholder acting in that
capacity;
(b) if the Shareholder receives any Competing Proposal the
Shareholder will notify the Offeror within 24 hours of becoming
aware of a proposal which, if made in writing, could constitute a
Competing Proposal (as such term is defined in the Support
Agreement) including the identity of any prospective offeror and
the person making the Competing Proposal;
(c) not option, sell, transfer, pledge, encumber, grant a security
interest in, hypothecate or otherwise convey the Shareholder's
Shares, or any right or interest therein (legal or equitable), to
any person, entity or group or agree to do any of the foregoing;
(d) not grant or agree to grant any proxy or other right to vote the
Shareholder's Shares, or enter into any voting trust, vote
pooling or other agreement with respect to the right to vote,
call meetings of shareholders or give consents or approvals of
any kind as to the Shareholder's Shares;
(e) not do indirectly that which the Shareholder may not do directly
in respect of the restrictions on the Shareholder's rights with
respect to the Shareholder's Shares pursuant to this section 3.1,
including, but not limited to, the granting of a proxy on the
Shares of any direct or indirect holding company of the
Shareholder which would have, indirectly, the effect prohibited
by this section 3.1, and not to take any action which would make
any representation or warranty of the Shareholder contained
herein untrue or incorrect or have the effect of preventing or
disabling the Shareholder from performing the Shareholder's
obligations under this Agreement;
(f) exercise the voting rights attaching to the Shareholder's Shares
and otherwise use his best efforts to cause the Company to comply
with its obligations under the Support Agreement, including its
agreement, subject to the terms and conditions of the Support
Agreement, to use all reasonable commercial efforts to take, or
cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Offer and the
Support Agreement;
(g) agree to use his best efforts to cause the Company to comply with
its notification obligations pursuant to section 3.2(b) of the
Support Agreement;
(h) not purchase or obtain or enter into any agreement or right to
purchase any additional Shares;
(i) exercise all Share Appreciation Rights held by the Shareholder
and elect to receive cash in settlement of such Share
Appreciation Rights, to the extent permitted under the terms of
the Share Appreciation Rights, provided, that such exercise of
Share Appreciation Rights may be made subject to the condition
that, and become effective only upon, the Offeror having taken up
and paid for any Shares under the Offer or becoming bound to do
so;
(j) use all reasonable efforts to preserve intact the goodwill of the
Company and its subsidiaries, keep available the services of
their respective present officers and key employees, and preserve
their business relationships with customers and others having
business relationships with them and not engage in any action
directly or indirectly, with the intent to adversely impact the
Company's obligations under the Support Agreement; and
(k) if applicable, resign as a director of the Company effective at
the time and in the manner requested by the Offeror's Parent,
after the Offeror takes up and pays for the Shareholder's Shares.
3.2 OFFER LETTER
------------
The Shareholder hereby covenants that immediately upon the Offeror first
taking up and paying for Shares under the Offer, the Shareholder shall
execute an offer letter substantially in the form initialled by the
Shareholder and Offeror's Parent concurrently with the execution of this
Agreement (except as the terms of such offer letter may be modified to
receive all regulatory approval necessary under applicable Canadian
securities laws (as approved by each of the Shareholder and the Offeror's
Parent, acting reasonably) to approve the terms thereof).
3.3 NON-COMPETITION AND NON-SOLICITATION.
------------------------------------
The Shareholder hereby covenants that such shareholder will fully comply
with the covenants and agreements set forth in Schedule 1 attached hereto.
ARTICLE 4
DEPOSIT AND PAYMENT
4.1 DEPOSIT.
-------
Subject to section 4.2, the Shareholder hereby irrevocably and
unconditionally, subject to the terms of this Agreement, agrees that if the
Offeror makes the Offer on the terms and conditions and conditions set out
in the Support Agreement the Shareholder shall deposit or cause to be
deposited all of the Shareholder's Shares (including for greater certainty
all Shares issued or which may be issued to the Shareholder upon the
exercise of any other rights to acquire Shares), together with a duly
completed and executed letter of transmittal, under the Offer as soon as
practicable following the Offeror making the Offer and in any event prior
to the expiry of the Offer. In the event that the Shareholder subsequently
obtains any additional Shares as contemplated by section 3.1(f) hereof or
otherwise, such Shares shall likewise be deposited under the Offer as soon
as practicable thereafter and in any event prior to the expiry of the
Offer.
4.2 NO WITHDRAWAL.
-------------
The Shareholder hereby irrevocably and unconditionally, subject to the
terms of the Agreement, agrees that neither it nor any person on its behalf
will withdraw or take any action to withdraw any of the Shareholder's
Shares deposited under the Offer, notwithstanding any statutory rights or
other rights under the terms of the Offer or otherwise which the
Shareholder might have, unless this Agreement is terminated in accordance
with its terms prior to the taking up of the Shareholder's Shares under the
Offer or unless:
(a) in the event that the Offer is not extended in accordance with
the Support Agreement, the Offeror does not take up and pay for
the Shares on or before January 31, 2003;
(b) in the event that the Offer is extended in accordance with the
Support Agreement, the Offeror does not take up and pay for the
Shares under the Offer on or before the end of the tenth day
following the expiry of the Offer;
(c) a "Superior Proposal" (as defined in the Support Agreement) is
made, the board of directors of the Company has either withdrawn
its recommendation of the Offer or recommended acceptance of the
Superior Proposal, and (i) the Offeror has not amended the Offer
to increase the consideration to be paid to holders of Shares
pursuant to the Offer within the time periods specified by
Section 4.2 of the Support Agreement to an amount having a value
at least equal to the value of the consideration offered under
the Superior Proposal and (ii) the fee specified in Section 4.5
of the Support Agreement has been paid to the Offeror's Parent as
specified therein; or
(d) the Shareholder receives the consent of the Offeror's Parent or
the Offeror to so withdraw the Shareholder's Shares.
4.3 APPOINTMENT OF PROXY
--------------------
The Shareholder hereby grants to, and appoints, the Offerors' Parent and
the Secretary of the Offerer's Parent and the Chief Financial Officer of
the Offeror's Parent, in their respective capacities as officers of the
Offeror's Parent, and any other designee of the Offeror's Parent, each of
them individually, the Shareholder's irrevocable proxy and attorney in fact
(with full power of substitution) to vote the Shareholder's irrevocable
proxy and attorney in fact (with full power of substitution) to vote the
Shareholder's Shares with respect thereto, in order to give effect to the
covenants of the shareholder contained in this Agreement and in furtherance
of the obligations of the Company contained in the Suport Agreement. The
Shareholder agrees that proxy is irrevocable until this Agreement is
terminated in accordance with Article 5 hereof and coupled with an interest
and will take such further action or execute such other instruments as may
be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by him with respect to the Shares.
4.4 STOP TRANSFER ORDER
-------------------
Subject to the termination rights set forth in Article V of this Agreement,
in furtherance of the transactions contemplated by this Agreement and the
Support Agreement, the Shareholder hereby authorizes the Offeror's Parent
to instruct the Company to direct its transfer agent to place a stop
transfer order on the Shareholder's Shares and not to amend, terminate or
waive any of the terms of such stop transfer order (other than to permit
the transfer of the Shareholder's Shares to the Offeror) during the term of
this Agreement.
ARTICLE 5
TERMINATION BY THE SHAREHOLDER AND BY THE PURCHASER
5.1 TERMINATION BY THE SHAREHOLDER.
------------------------------
The Shareholder, when not in material default in performance of his
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Offeror's Parent if:
(a) the Offer has not been made as provided in section 1.1 hereof,
(b) the Offer does not substantially conform with, or subject to
section 1.2 hereof is modified in a manner so as not to conform
with, the description in the Support Agreement or the provisions
of this Agreement;
(c) Shares deposited under the Offer (including the Shareholder's
Shares) have not, for any reason whatsoever, been taken up and
paid for on or before the end of the tenth day following the
expiry of the Offer;
(d) the Offer is abandoned by the Offeror (which shall be
conclusively evidenced by the Offeror issuing a press release or
otherwise publicly disclosing or announcing that the Offer is
withdrawn);
(e) after January 31, 2004 if the Offeror has not purchased any
Shares pursuant to the Offer, otherwise than as a result of the
material breach by the Shareholder of any material covenant or
obligation under this Agreement or as a result of any
representation or warranty of the Shareholder in this Agreement
being untrue or incorrect in any material respect; provided,
however, that if the Offeror's take up and payment for Shares
deposited under the Offer is delayed by (i) an injunction or
order made by a court or regulatory authority of competent
jurisdiction, or (ii) the Offeror not having obtained any
regulatory waiver consent or approval which is necessary to
permit the Offeror to take up and pay for the Shares deposited
under the Offer, then, provided that such injunction or order is
being contested or appealed or such regulatory waiver, consent or
approval is being actively sought, as applicable, this Agreement
shall not be terminated by the Shareholder pursuant to this
section until the earlier of (i) March 31, 2004 and (ii) the
fifth business day following the date on which such injunction or
order ceases to be in effect or such waiver, consent or approval
is obtained, as applicable; and
(f) the Support Agreement is terminated in accordance with its terms.
5.2 TERMINATION BY THE OFFEROR'S PARENT.
-----------------------------------
The Offeror's Parent, when not in material default in performance of its
obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Shareholder if:
(a) the Shareholder has not complied in all material respects with
its covenants to the Offeror's Parent contained herein;
(b) any of the representations and warranties of the Shareholder
contained herein is untrue or inaccurate;
(c) the Company has not complied in all material respects with its
covenants to the Offeror's Parent under the Support Agreement;
(d) the conditions in Exhibit II of the Support Agreement are not
satisfied or waived by the Offeror on or prior to the expiry of
the Offer; or
(e) in the event of the termination of the Support Agreement.
5.3 EFFECT OF TERMINATION.
---------------------
In the case of any termination of this Agreement pursuant to this Article
5, this Agreement shall be of no further force and effect. Such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination. Upon termination of this Agreement in accordance
with its terms, the Shareholder shall be entitled to withdraw the
Shareholder's Shares from the Offer.
ARTICLE 6
GENERAL
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The representations and warranties shall not survive the consummation of
the Offer, provided that the representations and warranties of the
Shareholder in section 2.1(a) through (e) of this Agreement shall survive
indefinitely and the other representations and warranties of the
Shareholder in section 2.l of this Agreement shall terminate upon the
expiry of the Offer. No investigations made by or on behalf of the
Offeror's Parent, the Offeror or any of their authorized agents at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty or covenant made by the
Shareholder in or pursuant to this Agreement.
6.2 DISCLOSURE.
----------
Except as may otherwise be required by law or by regulatory authorities
having discretion over such matters, each party hereto agrees that it will
not make any public disclosure with respect to this Agreement or the
negotiations related to this Agreement in each case without the prior
approval of the other party, which approval will not be unreasonably
withheld. If any party deems that it is required by law or such regulatory
authority to make any public announcement or release concerning this
Agreement, such party agrees to provide a written copy thereof to the other
party in advance of any such announcement or release and to reasonably
consider any suggested modifications, which will be provided by the other
party in a timely matter. The parties acknowledge that the terms of this
Agreement will be summarized in the Offer and in the Directors' Circular
relating to the Offer.
6.3 ASSIGNMENT.
----------
This Agreement shall not be assigned by operation of law or otherwise,
except that the Offeror's Parent may assign all or any of its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
the Offeror's Parent, provided that no such assignment shall relieve the
Offeror's Parent of its obligations hereunder if such assignee does not
perform such obligations.
6.4 TIME.
----
Time shall be of the essence of this Agreement.
6.5 CURRENCY.
--------
All sums of money referred to in this Agreement shall mean Canadian funds.
6.6 GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein. The parties hereto submit to the non-exclusive jurisdiction of the
courts of the Province of Ontario and British Columbia in respect of the
interpretation and enforcement of this Agreement.
6.7 ENTIRE AGREEMENT.
----------------
This Agreement and the other agreements referenced herein constitute and
comprise the entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof.
6.8 AMENDMENTS.
----------
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by each of
the parties hereto. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
6.9 DEFINITIONS.
-----------
For the purposes of this Agreement the term:
(a) "affiliates" and "associates" means the persons, companies and
other entities included in the definitions of such terms under
the Securities Act (British Columbia);
(b) "business day" means any day, other than a Saturday or Sunday, on
which chartered banks in the City of Vancouver, British Columbia
and the City of Toronto, Ontario are open for business;
(c) "Effective Date" means any date upon which the Offeror takes up
and pays for Shares under the Offer;
(d) "Materially Adverse" has the meaning ascribed to such term in the
Support Agreement;
(e) "material fact", "material change" and "misrepresentation" are
used as defined under the Securities Act (British Columbia); and
(f) "Shares" shall include any shares into which the Shares may be
reclassified, subdivided, consolidated or converted and any
rights and benefits arising therefrom including any extraordinary
distributions of securities which may be declared in respect of
the Shares.
or the purposes of this Agreement, if the last day of a period of days is
not a business day, the period shall be extended to the next following day
which is a business day.
6.10 SPECIFIC PERFORMANCE AND OTHER EQUITABLE RIGHTS.
-----------------------------------------------
Each of the parties recognizes and acknowledges that this Agreement is an
integral part of the transactions contemplated in the Offer, that the
Offeror's Parent would not contemplate causing the Offer to be made and the
Shareholder would not agree to its covenants to the Offeror's Parent herein
and to irrevocably deposit the Shareholder's Shares to the Offer unless
this Agreement was executed and that a breach by a party of any covenants
or other commitments contained in this Agreement will cause the other party
to sustain injury for which it would not have an adequate remedy at law for
money damages. Therefore, each of the parties agrees that in the event of
any such breach, the aggrieved party shall be entitled to the remedy of
specific performance of such covenants or commitments and preliminary and
permanent injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity, and the parties
further agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any injunctive or other equitable
relief.
6.11 NOTICES.
-------
Any notice required or permitted to be given hereunder shall be written,
and shall be either (i) personally delivered, (ii) sent by a reputable
common carrier guaranteeing next business day delivery, or (iii) sent by
facsimile, to the respective addresses of the parties set forth below, or
to such other place as any party hereto may by notice given as provided
herein designate for receipt of notices hereunder. Any such notice shall be
deemed given and effective upon receipt or refusal of receipt thereof by
the primary party to whom it is to be sent.
(a) If to the Offeror's Parent or the Offeror, addressed as follows:
Honeywell International Inc.
101 Columbia Road
Morristown, NJ 07962
Attention: Senior Vice President and General Counsel
Facsimile: (973) 455-4217
with a copy to:
Honeywell International Inc.
1600 Utica Avenue S
Suite 300
St. Louis Park, MN 55416
Attention: Vice President and General Counsel -
Automation and Control Solutions
Facsimile: (952) 656-1231
with a further copy to:
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place
Toronto, ON M5X 1B8
Attention: Stephen Arnold
Facsimile: (416) 862-6615
(b) to the Shareholder, addressed as follows:
Opinder Singh Gill
1043 53 St. E
Vancouver, B.C.
V5X 1J7
with a copy to:
Harris and Company
14th Floor, Bentall 5
550 Burarrd Street
Vancouver, BC V6C 2B5
Attention: Mr. Naz Mitha
Facsimile: (604) 684-6632
and, solely for information purposes, to:
McCarthy Tetrault LLP
1300 - 777 Dunsmuir Street
Vancouver, BC V7Y 1K2
Attention: Tim McCafferty
Facsimile: (604) 622-5680
6.12 EXPENSES.
--------
Each of the parties shall pay all of its own legal, financial advisory and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed or prepared pursuant hereto and any other costs and expenses
whatsoever and howsoever incurred.
6.13 SEVERABILITY.
------------
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
[The remainder of this page has intentionally been left blank]
6.14 COUNTERPARTS.
------------
This Agreement may be executed by facsimile signature, or otherwise, in two
or more counterparts, all of which taken together will constitute one
binding agreement.
HONEYWELL INTERNATIONAL INC.
By: /s/ Anne T. Madden
--------------------
Anne T. Madden,
Vice President-Corporate Planning
and Development
Agreed and accepted as of this 10th day of October, 2003.
/s/ Opinder Singh Gill
------------------------
/s/ Opinder Singh Gill
SCHEDULE 1
----------
SHAREHOLDERS NON-COMPETITION AND NON-SOLICITATION COVENANTS
1. ACKNOWLEDGEMENT.
---------------
The Offeror's Parent is a leading global manufacturer of security systems
and products for home, business and specialty applications and the Offeror
has agreed to acquire all of the outstanding common shares of the Company
for an amount that is substantially in excess of the current share price.
By virtue of his position with the Company the Shareholder has maintained
close working relationships with the customers, clients, suppliers,
distributors, consultants, agents and employees of the Company, and is in a
position to irreparably harm the Company and the Offeror's Parent should he
make use of the specialised knowledge, contacts and connections that were
obtained because of his position with the Company or the specialised
knowledge, contacts and connections that will be obtained because of his
future position with the Offeror's Parent.
The Shareholder acknowledges and agrees that because he and others will be
receiving an amount that is substantially in excess of the current share
price the following covenants and restrictions are reasonable and valid in
terms of time, scope of activities and geographical limitations and
understands and agrees that they are vital consideration for the purposes
of the Offeror acquiring the shares of the Company.
2. NON-COMPETITION AND NON-SOLICITATION.
------------------------------------
The Shareholder will not for a period of eighteen months from the date on
which such Shareholder's employment with the Offeror's Parent or its
Affiliates is terminated (such date, the "Termination Date") without the
Offeror's express written consent, either as an individual, or in
conjunction with any other person, firm, corporation, or other entity,
whether acting as a principal, agent, employee, consultant, or in any
capacity whatsoever:
(a) engage in or in any way be concerned with any business or enterprise
relating to the manufacture, sales or installation of video or
DVR/digital CCTV security systems and security products for home or
business (the "CCTV Business") in any of the provinces and territories
of Canada, and the states and territories of the United States of
America; provided, however, the foregoing shall not be deemed to
prohibit the Shareholder from being employed by a corporation or other
entity in a position wholly unrelated to the manufacture, sales or
installation of security systems and security products for home or
business merely because such corporation or other entity is engaged in
the CCTV Business.
(b) solicit, attempt to solicit, call upon, or accept the business of any
firm, person or company who is or, during a 18 month period prior to
the Termination Date, was a customer, client, supplier or distributor
of the Company or, with respect to the CCTV Business, the Offeror's
Parent (or any of its Affiliates);
(c) take advantage of, derive a benefit or otherwise profit from any
business opportunities that the Shareholder became aware of in the
course of employment with the Company or the Offeror's Parent or any
of its Affiliates even if the Offeror does not take advantage of or
exploit such opportunities;
(d) take any action as a result of which relations between the Company or
the Offeror's Parent (or any of its Affiliates), on the one hand, and
its consultants, customers, clients, suppliers, distributors,
employees or others, on the other hand, may be impaired or which might
otherwise be detrimental to the business interests or reputation of
the Company or the Offeror's Parent (or any of its Affiliates);
(e) solicit, attempt to solicit, or communicate in any way with any
employees or consultants of the Company or the Offeror's Parent (or
any of its Affiliates) for the purpose of having such employees
employed or in any way engaged by another person, firm, corporation,
or other entity; or
(f) hire, whether as an employee, consultant or otherwise, any person who
as of the date on which the Shareholder's employment with the
Offeror's Parent or its Affiliates is terminated was employed by the
Company or the Offeror's Parent (or any of its Affiliates), or who at
any time was employed or engaged by the Company or the Offeror's
Parent (or any of its Affiliates) in the 12 months preceding the
Termination Date.
Exhibit 5
[EXECUTION COPY]
SUPPORT AGREEMENT
-----------------
THIS AGREEMENT made the 10th day of October, 2003,
BETWEEN
678669 B.C. LTD., a corporation incorporated under the laws
of British Columbia
(the "Offeror")
AND:
HONEYWELL INTERNATIONAL INC., a corporation incorporated
under the laws of Delaware
("Offeror's Parent")
AND:
SILENT WITNESS ENTERPRISES LTD., a company incorporated
under the laws of British Columbia
("Company")
WHEREAS:
A. Offeror's Parent has taken the initiative of organizing and
incorporating the Offeror for the purposes contemplated in this
Agreement;
B. The Offeror and Offeror's Parent wish to make a takeover bid, through
the Offeror, for all of the outstanding Common Shares at a price per
share of $11.27, assuming that there will be no more than 7,952,952
Common Shares outstanding at the expiry of the bid (which number of
Common Shares shall be reduced by any Options which are surrendered to
the Company for cancellation and payment in cash in lieu of exercise
and cancelled pursuant to such surrender or share appreciation rights
that are settled by a cash payment without issuance of Common Shares),
and based upon the representations and warranties of the Company made
in this Agreement;
C. The Board of Directors has unanimously determined to recommend
acceptance of the Offer to the shareholders of the Company and for the
Company to cooperate with the Offeror and take all reasonable action
not inconsistent with the fiduciary obligations of the directors of
the Company to support the Offer, all on the terms and subject to the
conditions contained herein;
D. The Offeror's Parent has, concurrently with the execution of this
Agreement, entered into deposit agreements with Rob Bakshi, Vinod
Bakshi and Tom Gill, setting forth the terms and conditions upon which
such shareholders shall irrevocably deposit, or cause to be deposited,
under the Offer all such holders' current and subsequently acquired
Common Shares; and
E. The Board of Directors has unanimously determined that it would be in
the best interests of the Company to enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party, the parties
agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER
(a) Subject to the terms and conditions of this Agreement, the
Offeror and Offeror's Parent shall promptly publicly announce
and, on a day no later than October 28, 2003, issue and mail the
Offer in accordance with the Applicable Laws. Under the Offer,
the Offeror shall offer to purchase all the outstanding Common
Shares, including Common Shares issuable upon the conversion,
exchange or exercise of any (i) options to acquire Common Shares
(the "Options") and (ii) other rights, warrants or entitlements
to acquire Common Shares, at a price of $11.27 in cash per Common
Share.
(b) The Offer will provide that the obligations of the Offeror to
take-up and pay for Common Shares will be subject only to the
satisfaction or waiver of the Bid Conditions set out on Exhibit
II, including the Minimum Condition.
(c) The Offer will be made in accordance with the Applicable Laws and
applicable securities legislation in other jurisdictions in
Canada and in the United States where registered holders of
Common Shares are located, be in the English and, if necessary
under the laws of the province of Quebec, French language, be
signed by both the Offeror and Offeror's Parent, as offerors, and
the initial expiration date and time will be (i) not earlier than
4:30 p.m. (Vancouver time) on a date 36 days after the date the
Offer is first published or sent or given to holders of Common
Shares and (ii) not later than 4:30 p.m. (Vancouver time) on a
date 40 days after the date the Offer is first published or sent
or given to holders of Common Shares, subject to the right of the
Offeror to extend the period during which Common Shares may be
deposited under the Offer if any of the Bid Conditions are not
satisfied on the initial expiry date of the Offer. The Offeror
and Offeror's Parent shall use their reasonable best efforts to
consummate the Offer and take up and pay for the Common Shares
validly deposited thereunder and not withdrawn, subject only to
the terms and conditions thereof and hereof. In the event that
the condition set forth in paragraphs (a) or (b) of the Bid
Conditions is not satisfied by the initial expiration date, the
Offeror and Offeror's Parent shall extend the Offer, and continue
to extend the Offer, until at least January 31, 2004 (provided
that at least 75% of the outstanding Common Shares on a
fully-diluted basis other than Common Shares already held at the
date of the Offer by, or by a nominee for, the Offeror or its
affiliates have been validly deposited and not withdrawn) or such
earlier date on which such conditions may be satisfied or on
which it is determined by the Offeror that such conditions cannot
be satisfied.
(d) Subject to the terms of the Offer and this Agreement and the
satisfaction or waiver of all the Bid Conditions as of any
expiration date, the Offeror shall within the time periods
required by Applicable Laws take-up, accept for payment and pay
for all Common Shares validly tendered and not properly withdrawn
pursuant to the Offer as soon as practicable after such
expiration date of the Offer.
(e) It is understood and agreed that the Offeror and Offeror's Parent
may, in their sole discretion, modify or waive any term or
condition of the Offer, provided that the Offeror and Offeror's
Parent shall not, without the consent of the Company:
(i) increase the number or percentage of Common Shares
required to satisfy the Minimum Condition or decrease the
number or percentage of Common Shares required to satisfy
the Minimum Condition below 50% of the outstanding Common
Shares, decrease the consideration per Common Share
payable under the Offer, change the form of consideration
payable under the Offer (other than to add additional
consideration) or decrease the number of Common Shares
sought under the Offer;
(ii) impose additional material conditions to the Offer;
(iii) in the event all of the Bid Conditions are satisfied or
waived, extend the period during which Common Shares may
be deposited under the Offer without taking up and paying
for Common Shares validly deposited thereunder and not
withdrawn except as required by Applicable Law; or
(iv) modify or amend the Offer or any terms thereof in any
manner adverse to the holders of Common Shares.
(f) The Offer Documents will comply in all material respects with
Applicable Laws and, on the date filed with applicable securities
regulatory authorities, and on the date first published, sent or
given to the holders of Common Shares, shall not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under
which they were made, not misleading, except that no warranty or
representation is made by the Offeror or Offeror's Parent with
respect to information supplied by the Company for inclusion in
the Offer Documents. The Offeror and Offeror's Parent will give
the Company a reasonable opportunity to review and comment upon a
draft copy of any Offer Document to be filed prior to any such
filing and will provide the Company in writing any comments or
response the Offeror or Offeror's Parent (or their
representatives) may receive from or send to the applicable
securities regulatory authorities with respect to the Offer
Documents promptly after the receipt or before the sending of
such comments or response. Each of the Offeror and Offeror's
Parent, on the one hand, and the Company, on the other hand,
agree promptly to correct any information provided by them for
use in the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect, and the
Offeror and Offeror's Parent further agree to take all steps
necessary to cause the Offer Documents as so corrected to be
filed with the applicable securities regulatory authorities and
to be disseminated to the holders of Common Shares, in each case
as and to the extent required by Applicable Laws.
1.2 CONDITIONS TO THE OFFEROR'S AND OFFEROR'S PARENT'S OBLIGATION TO
MAKE THE OFFER
(a) The obligation of the Offeror and Offeror's Parent to make the
Offer is conditional on the prior satisfaction of the following
conditions:
(i) the obligations of the Offeror hereunder shall not have
been terminated pursuant to section 4.3;
(ii) no circumstance, fact, change, event or occurrence caused
by a person other than the Offeror or Offeror's Parent
shall have occurred that would render it impossible for
one or more of the Bid Conditions to be satisfied;
(iii) the Board of Directors shall have received the advice of
its financial advisors and unanimously:
A. determined that the Offer is fair to the holders of
Common Shares; and
B. resolved to recommend that holders of Common Shares
accept the Offer and not withdraw or change such
recommendation in a manner that has substantially the
same effect as a withdrawal of it;
(iv) the Board of Directors shall have made the determinations
set forth in section 1.3(a) (and such determinations shall
still be in effect) and have resolved to waive the
provisions of the Company's Rights Plan in respect of the
Offer in a manner reasonably satisfactory to Offeror's
Parent;
(v) the Company shall terminate or waive, irrevocably, the
standstill provisions contained in the Confidentiality
Agreement; and
(vi) no cease trade order, injunction or other prohibition at
law shall exist against the Offeror making the Offer or
taking up or paying for Common Shares deposited under the
Offer.
(b) The foregoing conditions are for the sole benefit of the Offeror
and Offeror's Parent and any or all of them may be waived by them
in whole or in part in their sole discretion without prejudice to
any other right they may have under this Agreement, which
conditions shall be deemed to have been satisfied upon the Offer
being made.
1.3 COMPANY ACTIONS
(a) The Company hereby represents that the Board of Directors, upon
consultation with its advisors, has unanimously:
(i) determined that the Offer is fair to the holders of Common
Shares and is in the best interests of the Company and the
holders of Common Shares;
(ii) approved this Agreement and resolved to recommend that
holders of Common Shares accept the Offer and has not
withdrawn or changed such recommendation in a manner that
has substantially the same effect as a withdrawal of it;
and
(iii) resolved to waive the application of the Company's Rights
Plan in respect of the Offer;
provided that the Offer does not differ in any material respect
from the terms and conditions of the Offer as contemplated
herein.
(b) The Company shall prepare and make available for mailing as soon
as practicable after the date the Offer is made a Directors'
Circular, and in any event within the time period required by
Applicable Laws, prepared in accordance with all Applicable Laws,
containing a recommendation to accept the Offer and the Company
shall use its best efforts to mail the Directors' Circular on the
same date that the Offer is mailed.
(c) The Directors' Circular will comply in all material respects with
Applicable Laws and, on the date filed with the applicable
securities regulatory authorities, and on the date first
published, sent or given to the holders of Common Shares, will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading,
except that no representation is made by the Company with respect
to information supplied by the Offeror or Offeror's Parent for
inclusion in the Directors' Circular. The Company will give the
Offeror or Offeror's Parent a reasonable opportunity to review
and comment upon a draft copy of the Directors' Circular prior to
its filing (recognizing that the contents of the Directors'
Circular are the sole responsibility of the Board of Directors)
and will provide the Offeror or Offeror's Parent in writing any
comments or response the Company (or their representatives) may
receive from or send to the applicable securities regulatory
authorities with respect to the Directors' Circular promptly
after the receipt or before the sending of such comments or
response. Each of the Company, on the one hand, and the Offeror
and Offeror's Parent, on the other hand, agree promptly to
correct any information provided by them for use in the
Directors' Circular if and to the extent that it shall have
become false or misleading in any material respect, and the
Company further agrees to take all steps necessary to cause the
Directors' Circular as so corrected to be filed with applicable
securities regulatory authorities and to be disseminated to the
holders of Common Shares, in each case as and to the extent
required by Applicable Laws.
1.4 COMPANY TO COOPERATE IN MAKING OF THE OFFER
(a) The Company shall cause its registrar and transfer agent to
provide the Offeror with a list of the holders of Common Shares
and a list of participants in book-based nominee registrants such
as CDS & Co. together with their addresses and respective
holdings of Common Shares, and such other information as the
Offeror may reasonably request in connection with communicating
the Offer to record and beneficial owners of Common Shares.
(b) The Company shall provide the Offeror with the names, addresses
and holdings of all persons having rights to acquire Common
Shares and the details of such rights.
(c) Subject to Applicable Laws, the Company shall from time to time
furnish the Offeror with such additional information in the
possession of or within the control of the Company as the Offeror
may reasonably request in order for the Offeror to be able to
communicate the Offer to the holders of the Common Shares and to
such other persons as are entitled to receive the Offer under the
Applicable Laws, including updated or additional lists of holders
of Common Shares and lists of securities positions.
1.5 COMPANY DIRECTORS
Promptly upon the purchase by the Offeror pursuant to the Offer
of such number of Common Shares which, together with the Common Shares held
by or on behalf of the Offeror and Offeror's Parent, represents at least a
majority of the outstanding Common Shares, and from time to time
thereafter, the Offeror shall be entitled to designate such number of
directors of the Board of Directors and any committees thereof (rounded up
to the next whole number of directors) as is proportionate (determined
after giving effect to the directors to be appointed or elected under this
section) to the percentage of outstanding Common Shares beneficially owned
by or on behalf of the Offeror and Offeror's Parent, and the Company shall
not frustrate the Offeror's attempts to do so and shall cooperate with the
Offeror to enable the Offeror's designees to be elected or appointed to the
Board of Directors, including, without limitation, at the request of the
Offeror, by using its best efforts to increase the number of directors
comprising the Board of Directors and/or securing the resignations of such
number of directors as is necessary to cause the Offeror's designees to be
so elected or appointed.
1.6 SECOND-STEP TRANSACTION
The Offeror and Offeror's Parent covenant and agree that upon
Common Shares being taken up and paid for under the Offer, the Offeror
shall utilize the Compulsory Acquisition provision in respect of Common
Shares not tendered under the Offer if permitted to do so under the Act. If
the Offeror is unable to use such Compulsory Acquisition provision, the
Offeror will propose an alternate arrangement, which may include, without
limitation, a statutory arrangement, amalgamation, merger, or other
combination ("Second-Step Transaction") of the Company with the Offeror or
an affiliate of the Offeror within 180 days after the Offeror takes up and
pays for Common Shares under the Offer on terms and conditions to be
determined by the Offeror, provided that the Offeror agrees that if any
Second-Step Transaction is effected it will provide that the holders of any
Common Shares, other than the Offeror and Offeror's Parent, shall be
entitled to receive consideration per share in cash or the right to receive
cash within 35 days following the approval of the Second-Step Transaction
at least equal to the amount paid per share under the Offer. Nothing herein
shall be construed to prevent the Offeror or Offeror's Parent from
acquiring, directly or indirectly, additional Common Shares in the open
market, in privately negotiated transactions, in another takeover bid or
exchange offer, or otherwise in accordance with Applicable Laws, following
taking up and paying for Common Shares under the Offer. In the case of a
Second-Step Transaction, under the direction of the Offeror, the Company
shall cooperate in the calling of the necessary shareholder meeting and in
making any necessary regulatory and court applications. The Offeror shall
prepare the drafts of the documentation required for any such transaction,
with the Company and its advisors being entitled to participate in their
preparation.
1.7 EMPLOYMENT AND SEVERANCE AGREEMENTS
After the Offeror takes up and pays for Common Shares under the
Offer, the Offeror and Offeror's Parent shall cause the Company and any
successor of the Company to agree to honour and comply with the terms of
all existing employment and severance agreements and policies to which the
Company is subject or by which it is bound, as the same may be amended or
modified as permitted hereunder. The Company Disclosure Schedule contains a
true and complete list of all existing severance agreements and written
employment agreements and policies to which the Company is subject or by
which it is bound, true and complete copies of which severance agreements
and written employment agreements have been provided to Offeror's Parent.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE OFFEROR AND OFFEROR'S PARENT
The Offeror and Offeror's Parent hereby jointly and severally
represent and warrant to the Company as to those matters set forth in
Exhibit III and acknowledge that the Company is relying upon those
representations and warranties in entering into this Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Offeror and
Offeror's Parent as to those matters set forth in Exhibit IV and
acknowledges that the Offeror and Offeror's Parent are relying upon those
representations and warranties in entering into this Agreement.
2.3 INVESTIGATION
No investigation by or on behalf of any party prior to the date
of this Agreement shall mitigate, diminish or affect the representations
and warranties made by any other party.
2.4 KNOWLEDGE
Any reference in this Agreement to the "knowledge" of the Company
shall mean to the best of the actual knowledge, information and belief of
any of the Senior Management of the Company after due inquiry.
ARTICLE 3
CONDUCT OF BUSINESS
3.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING COMPLETION OF THE OFFER
The Company covenants and agrees that from the date hereof and until the
earlier of (i) the time that the Offeror takes up and pays for Common
Shares under the Offer and (ii) the expiry, termination or withdrawal of
the Offer, except as consented to or approved by Offeror's Parent or as
otherwise expressly contemplated or permitted by this Agreement, the
Company shall not, and shall not permit any of its Subsidiaries to:
(a) alter any of the provisions of the constating documents of the
Company or any of the Subsidiaries of the Company;
(b) resolve to consolidate, subdivide, reclassify, alter or reduce
its share capital in any way or repurchase, redeem or otherwise
acquire any of its shares;
(c) except as provided in section 3.3, make an allotment of, or
issue, reissue or sell, any Common Shares or Preference Shares,
or grant (including a grant under any plan existing as of the
date hereof), or amend (other than the amendment of any Options
outstanding at the date of this Agreement to accelerate the
vesting of such Options, to the extent such Options are not
otherwise fully vested or exercisable in full, or to permit the
payment to the holder thereof, in cash representing, for each
share the holder has the right to acquire under the Option, the
excess of the price to be paid for the Common Shares under the
Offer (as the same may be increased or varied from time to time)
over the exercise price thereof, the terms of, any Option, right
or warrant to subscribe for or acquire, any of its shares or
issue securities convertible or exchangeable into or for its
shares;
(d) other than in the ordinary course of business consistent with
past practice, purchase or otherwise acquire or sell, transfer,
lease, exchange or otherwise dispose of any material assets or
material properties;
(e) except pursuant to existing Indebtedness or renewal or
replacement Indebtedness for a principal amount approximately the
same (or less) as the principal amount of the Indebtedness
renewed or replaced, incur or become liable upon any
Indebtedness;
(f) except as disclosed in the Company Disclosure Schedule, pledge,
lien, restrict, mortgage, charge, enter into any title retention
agreement, or otherwise encumber any property or assets of the
Company or any Subsidiary of the Company;
(g) except as disclosed in the Company Disclosure Schedule, enter
into any agreement, whatsoever, to sell, transfer, exchange,
encumber or otherwise dispose of the lands which are the subject
of the Land Exchange Agreement;
(h) except as disclosed in the Company Disclosure Schedule, license
or otherwise alienate or encumber in any manner, any of the Owned
Intellectual Property or other proprietary technology;
(i) declare or pay any dividends, including for the purpose of
effecting a share subdivision, or make any payment or
distribution with respect to its shares;
(j) except as disclosed in the Company Disclosure Schedule or
pursuant to existing employment, pension, termination or
compensation agreements, arrangements, plans or policies, grant
or agree to pay any bonuses, salary increases, severance or
termination pay or enter into or modify any employment,
retention, change of control, collective bargaining, bonus,
incentive compensation or other compensation or benefit plan,
policy, agreement, trust, fund, entitlement or arrangement with,
for or in respect of, any director or officer of the Company or
any of its Subsidiaries other than reasonable compensation
arrangements for members of the special committee formed to
consider the Offer as may be approved by the Board of Directors;
(k) except as disclosed in the Company Disclosure Schedule or
pursuant to existing employment, pension, termination or
compensation agreements, arrangements, plans or policies (in each
case, true and complete copies of which written agreements have
been provided to Offeror's Parent) in the case of employees who
are not officers or directors of the Company or any of its
Subsidiaries, grant or agree to pay any bonuses, salary
increases, severance or termination pay or increase any benefits
or any consideration payable under any benefit plan, policy,
agreement, trust, fund, arrangement or welfare plan for the
benefit of any employee or employees of the Company or any of its
Subsidiaries in effect on the date hereof;
(l) except as disclosed in the Company Disclosure Schedule or as
required by applicable law, enter into or modify in any material
respect any material contract or agreement of which the Company
or any Subsidiary of the Company has the benefit;
(m) except in the ordinary course of business consistent with past
practice or as disclosed in the Company Disclosure Schedule,
enter into, or amend (such that such amendment has the effect set
forth in clause (i) or (ii) below) any instrument or transaction
(i) pursuant to which the aggregate financial obligation of the
Company or a Subsidiary or the value of the services to be
provided could exceed $100,000, or (ii) which is not terminable
upon no more than 90 days' notice by the Company or the
Subsidiary involved without penalty in excess of $100,000,
except, in each case, as required pursuant to the terms of
agreements as in effect on the date hereof (in which case the
Company shall promptly notify Offeror's Parent) (it being
understood that the exceptions set forth in this paragraph (m)
shall not expand the scope of any exception or permit any actions
in any way that is otherwise specifically restricted by this
Section 3.1);
(n) enter into, amend, modify, terminate or waive any material rights
under any material contract or any material agreement or other
material obligation that restricts, in any material respect, the
activities of the Company or a Subsidiary of the Company or
amend, modify, terminate or waive any such right, agreement or
obligation that restricts in any material respect any other
person; or
(o) except as disclosed in the Company Disclosure Schedule,
amalgamate or merge with any other person or resolve that it be
wound up or permit the making of any court order for the winding
up or dissolution of the Company or any of its Subsidiaries,
adopt any plan of liquidation, dissolution, merger,
consolidation, share exchange, restructuring, recapitalization or
other fundamental reorganization, appoint or permit the
appointment of a liquidator, receiver or trustee in bankruptcy
for the Company or any Subsidiary of the Company or in respect of
the assets of the Company or any Subsidiary of the Company;
(p) acquire by amalgamation, merger or consolidation with, purchasing
substantially all of the assets (provided that such assets are in
excess of $100,000) of or otherwise, any business of any
corporation, partnership, association or other business
organization, or division thereof;
(q) except as disclosed in the Company Disclosure Schedule, enter
into any transaction or arrangement with or incur any
indebtedness, liability or obligation to any director or officer,
former director or officer or employee of the Company or any
Subsidiary, or any other person not dealing at arm's length
(within the meaning of the Income Tax Act (Canada)) with, the
Company or any Subsidiary or any affiliate of the foregoing; or
(r) except as disclosed in the Company Disclosure Schedule, commence
or settle any litigation, claims, investigations, grievances or
proceedings, including appeals and applications for review,
involving the Company or any Subsidiary of the Company.
3.2 POSITIVE COVENANTS
The Company agrees with the Offeror and Offeror's Parent that (except as
expressly contemplated by this Agreement or as otherwise consented to or
approved by the Offeror and Offeror's Parent in writing) prior to the
earlier of (i) the time that the Offeror takes up and pays for Common
Shares under the Offer and (ii) the expiry, termination or withdrawal of
the Offer, the Company shall:
(a) carry on its business and cause each of its Subsidiaries to carry
on its business in the ordinary course consistent with past
practice;
(b) promptly and in any case within 24 hours advise Offeror's Parent
of (i) any change in the financial condition, operations,
business or capital of the Company or any of its Subsidiaries
that is Materially Adverse to the Company (ii) any withdrawal or
change that has substantially the same effect as a withdrawal of
the recommendation or approval of any member or members of the
Board of Directors with respect to the determinations set forth
in section 1.3(a);
(c) use its best efforts to maintain the current insurance policies
of it and its Subsidiaries and not allow such policies to be
cancelled or terminated or any other coverage thereunder to
lapse, unless at the same time as such termination, cancellation
or lapse, replacement policies underwritten by one or more
insurance companies of nationally recognized standing providing
coverage comparable to or greater than the coverage under the
cancelled, terminated or lapsed policies, if available, for
reasonably similar premiums are in full force and effect;
(d) use, and cause each of its Subsidiaries to use, its commercially
reasonable efforts to preserve intact their respective business
organizations and goodwill, to keep available the services of
their respective officers and employees as a group and to
maintain satisfactory relationships with suppliers, distributors,
customers and others with whom they have business relationships
and inform Offeror's Parent orally and in writing promptly and in
any case within 24 hours if any member of the Senior Management
of the Company or any other officer submits a resignation;
(e) pay all material accounts payable and other material obligations
(including, for greater certainty, all insurance premiums and
Taxes, including instalments on account of taxes, when they
become due and payable and also including withholding, collecting
and remitting Taxes on a timely basis) in the ordinary course of
business consistent with past practice, except if the same are
contested in good faith, and, in the case of the failure to pay
any material accounts payable or other material obligations which
are contested in good faith, only after consultation with
Offeror's Parent;
(f) duly and timely make or prepare all Tax Returns required to be
made or prepared by it, duly and timely file all Tax Returns
required to be filed by it with the appropriate governmental
authority and duly, completely and correctly report all income
and all other amounts and information required to be reported
thereon;
(g) duly and timely comply with all requirements of applicable
securities laws (including, without limitation, the timely and
complete filing pursuant to applicable Canadian securities laws
of the Company's Annual Information Form for the fiscal year
ended July 31, 2003);
(h) following the making of the Offer (other than during the pendency
of a Competing Proposal being considered by the board of
directors of the Company), permit Offeror's Parent and its
representatives, provided they do not interfere with the ordinary
conduct of the Company's business, upon reasonable notice to and
prior consultation with, Rob Bakshi, Tom Gill or any designee
thereof, to have reasonable access during normal business hours
to (i) the Real Property, (ii) all other locations where books
and records or other material relevant to the business of the
Company and its Subsidiaries are stored, (iii) all the books and
records, and (iv) the properties and assets used by the Company,
and provided that (A) Offeror's Parent and its representatives
will not contact employees of the Company or its Subsidiaries
except after prior consultation with Rob Bakshi, Tom Gill or any
designee thereof; (B) except as disclosed in the Company
Disclosure Schedule, Offeror's Parent and its representatives
will not be entitled to contact suppliers, distributors,
customers and others with whom the Company and its Subsidiaries
have business relationships without the express approval of Rob
Bakshi, Tom Gill or any designee thereof; and (C) notwithstanding
the foregoing, the Company shall not be required to disclose (x)
any information, records, files or other data to Offeror's Parent
where prohibited by any applicable laws (it being understood that
if any consent of any person or governmental authority is
required to permit the Company or any of the Subsidiaries to
release any information to Offeror's Parent, the Company shall
make all reasonable efforts to obtain such consent as soon as
possible); and (y) any of the Company's management or Board of
Directors' materials relating to the assessment or evaluation of
the transactions contemplated hereby or any Competing Proposal
proposed by any other person) nor any information supplied by any
of its officers, directors, employees, financial advisors, legal
advisors, auditors, representatives or agents or other advisors
in connection therewith or any confidentiality agreement made
between the Company and any other person in respect of any
Competing Proposal;
(i) provide the Offeror, Offeror's Parent, and their respective
employees, agents, contractors, and subcontractors with access to
the property owned by Company located at 14962-56th Avenue,
Surrey, British Columbia, for the purpose of performing an
environmental investigation of such property, at the sole cost
and expense of the Offeror and Offeror's Parent, including
without limitation, such soil, surface water, and groundwater
studies as may be necessary to assess the environmental condition
of such property;
(j) duly and timely furnish Offeror's Parent on a monthly basis with
copies of unaudited monthly financial and operating statements of
the Company and the Subsidiaries as prepared under the direction
of senior management of the Company;
(k) duly and timely, upon request by Offeror's Parent or Offeror's
Parent counsel, execute and deliver to Offeror's Parent all
necessary consents and authorizations to permit Offeror's Parent
to have inspections made or have existing records released to
Offeror's Parent by the municipal building and zoning department,
fire department, public works, environmental agencies, the
elevator inspections branch of the provincial or territorial
department of labour and other appropriate authorities as
Offeror's Parent may consider advisable; and
(l) use its best efforts to perform or comply with, in all respects,
all its obligations and covenants under this Agreement
(including, without limitation, the obligations of the Company
set forth in section 3.6).
3.3 PERMITTED TRANSACTIONS
Nothing in this Agreement will restrict the ability of the
Company or its Subsidiaries to:
(a) subject to the restriction in section 3.1(c) against granting, or
amending the terms of, any Options, issue or transfer Common
Shares upon the exercise of any Option granted prior to the date
of this Agreement;
(b) incur and pay the Transaction Expenses.
3.4 OFFEROR NOT TO MANAGE OR CONTROL THE COMPANY'S BUSINESS
The Offeror and Offeror's Parent acknowledge and agree that
nothing contained in this Agreement shall give or be deemed to give the
Offeror or Offeror's Parent, directly or indirectly, the right to control
or direct the management of the Company's operations prior to the time the
Offeror takes up and pays for the Common Shares and the Company shall
continue to exercise, subject to the terms and conditions of this
Agreement, complete control, direction and supervision over its business
and operations.
3.5 OFFICERS' AND DIRECTORS' INSURANCE AND INDEMNIFICATION
(a) The parties agree that, notwithstanding any other provision of
this Agreement, the Offeror or Offeror's Parent may secure
non-cancellable prepaid officers' and directors' liability
insurance covering the officers and directors of the Company and
its Subsidiaries on a six year "trailing" or "run-off" basis on
terms no less favourable (as determined by the parties acting
reasonably), to the extent available on reasonable commercial
terms and permitted by law, to such persons than such insurance
maintained in effect by the Company on the date hereof in terms
of similar coverage and amounts (such insurance, the "Run-Off
Coverage").
(b) If a policy described in section 3.5(a) is not obtained (or
evidence reasonably satisfactory to the Company that the Offeror
or Offeror's Parent has made arrangements to secure such policy
is not provided to the Company) by Offeror and Offeror's Parent
at a time no later than 48 hours (not counting Saturdays, Sundays
and holidays) prior to the expiry time of the Offer, the Company
may secure Run-Off Coverage prior to the time that the Offeror
first takes up and pays for Common Shares under the Offer.
(c) If neither the policy described in section 3.5(a) nor section
3.5(b) is obtained, then for six years after the Offeror takes up
and pays for Common Shares under the Offer, the Offeror and
Offeror's Parent shall cause the Company and any successor to the
Company (or in the event the Company's existence is terminated,
Offeror's Parent) to maintain the Company's current officers' and
directors' liability insurance, or equivalent insurance covering
the current officers and directors of the Company and its
Subsidiaries with respect to actions and omissions occurring
prior to the date of their resignations in such amounts, and with
such deductibles, retained amounts, coverages and exclusions and
otherwise on terms and conditions no less advantageous or
favourable to such persons than such insurance in effect by the
Company on the date that the Offeror takes up and pays for Common
Shares under the Offer.
(d) The Offeror and Offeror's Parent shall cause the Company and its
Subsidiaries to continue to indemnify to the maximum extent
contemplated law or by the Articles of the Company and constating
documents of the Subsidiaries of the Company or indemnification
agreements to which the Company or its Subsidiaries are a party
such persons who are now or will be entitled on the date the
Offeror takes up and pays for Common Shares under the Offer to
indemnification thereunder and the Articles of the Company and
constating documents of the Subsidiaries of the Company shall not
be amended or restated in any manner to reduce or limit the
rights of indemnity afforded to the directors and officers of the
Company or its Subsidiaries.
(e) Should any threatened or actual claim, action, suit, or
investigation be made against any present or former director,
officer, employee, fiduciary or agent of the Company or
Subsidiary of the Company who is entitled to be indemnified under
the Articles of the Company or constating documents of the
Subsidiaries of the Company or any indemnification agreement to
which the Company or any Subsidiary of the Company is a party,
within six years from the date the Offeror takes up and pays for
Common Shares under the Offer, the provisions of this section 3.5
shall continue in effect until the final disposition of all such
claims, suits, proceedings or investigations.
(f) The Offeror's Parent shall cause the Offeror and the Company (and
any successor to the Company) and the Subsidiaries of the Company
(and any successor to such Subsidiaries) to honour, in accordance
with their terms, any indemnification agreements or arrangements
provided for under the constating documents of the Company or any
of its Subsidiaries, resolutions of their respective boards or
shareholders, or any indemnification agreements in existence on
the date hereof and as disclosed in the Company Disclosure
Schedule between the Company or any Subsidiary of the Company and
any present or former director, officer, employee, fiduciary or
agent of the Company or any of its Subsidiaries and their
respective rights to claim under such agreements or arrangements
shall survive and continue in full force and effect and without
modification, with respect to actions or omissions of such
Indemnified Parties occurring prior to the date the Offeror takes
up and pays for Common Shares under the Offer, for a period of
time of not less than the limitation period applicable under the
statutes of limitation applicable to such matters.
3.6 MUTUAL COVENANTS
(a) Subject to the terms and conditions herein, each party hereto
agrees to use all reasonable commercial efforts to take, or cause
to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective as promptly as is practicable the transactions
contemplated by the Offer and this Agreement, including the
execution and delivery of such documents as the other party
hereto may reasonably require, and using commercially reasonable
efforts to obtain all necessary waivers, consents and approvals,
and to effect all necessary registrations and filings, including,
but not limited to, filings under the Applicable Laws and
submissions of information requested by any Agency.
(b) Each of the parties will use its commercially reasonable efforts
to obtain as soon as practicable all waivers and consents of any
Agency or any other person required in connection with the
consummation of the transactions contemplated by the Offer.
(c) In furtherance and not in limitation of the foregoing, Offeror's
Parent shall use its commercially reasonable efforts to resolve
such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement or the Offer under
Antitrust Laws.
(d) Each party hereto shall promptly inform the others of any
material communication from the Competition Bureau or any other
Agency regarding any of the transactions contemplated by this
Agreement or the Offer. If any party or any affiliate thereof
receives a request for additional information or documentary
material from any such Agency with respect to the transactions
contemplated by this Agreement or the Offer, then such party will
endeavour in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other
parties, an appropriate response in compliance with such request.
Offeror's Parent will advise the Company promptly in respect of
any understandings, undertakings or agreements (oral or written)
which Offeror's Parent proposes to make or enter into with such
Agency in connection with the transactions contemplated by this
Agreement.
ARTICLE 4
NO SOLICITATION, TERMINATION AND BREAK FEE
4.1 NO SOLICITATION
(a) The Company shall, and shall cause its officers, directors,
employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties that may be ongoing
with respect to any Competing Proposal. Except as expressly
contemplated by this Agreement, the Company will not, and will
not permit any of the Company's Subsidiaries to, directly or
indirectly, through the officers, directors, employees, financial
advisors, attorneys, accountants, consultants or other agents or
advisors of the Company and the Company's Subsidiaries, directly
or indirectly solicit, initiate or knowingly encourage the
submission of any Competing Proposal; provided that, subject to
section 4.1(b), nothing contained in this Article 4 or other
provisions of this Agreement shall prevent the Company from
engaging in discussions or negotiations with a third party or
providing information in respect of, or otherwise responding to,
or negotiating, approving and recommending to holders of Common
Shares, an unsolicited bona fide Competing Proposal if the Board
of Directors has determined in good faith, after consultation
with and receiving advice from legal counsel and the Company's
financial advisors, that such proposal may constitute or lead to
a Superior Proposal or that such action is otherwise required by
reason of the fiduciary duties of the directors of the Company
under applicable law.
(b) The Company will notify Offeror's Parent promptly (but in no
event later than 24 hours) after receipt by the Company (or any
of its advisors) of any Competing Proposal on or after the date
hereof, or of any request (other than in the ordinary course of
business and whether or not related to a Competing Proposal) for
confidential, non-public information relating to the Company or
any of the Company's Subsidiaries or for access to the
properties, books or records of the Company or any of the
Company's Subsidiaries. The Company shall provide such notice
orally and in writing and shall identify the person making, and
the terms and conditions of, any such Competing Proposal,
indication or request. Information provided under this section
4.1(b) shall constitute information which is subject to the
Confidentiality Agreement.
(c) Nothing in this section 4.1 will preclude the Company or its
officers and Board of Directors from responding, within the time
and manner required by the Applicable Laws, to any take over bid
or tender or exchange offer made for the Common Shares and
nothing in this Agreement shall be interpreted to extend to acts
or omissions of any person acting in his capacity as a director
or officer of the Company or otherwise to fetter the proper
exercise of discretion by such person.
4.2 MODIFICATION OF RECOMMENDATION
Notwithstanding the provisions of section 1.3 of this Agreement,
in the event that, prior to the Offeror taking up and paying for Common
Shares deposited under the Offer,
(a) a Competing Proposal is proposed, offered or made to the holders
of Common Shares or to the Company which is a Superior Proposal,
if the Company complies with its obligations under section 4.1
and the Offeror does not, within 48 hours (excluding Saturdays,
Sundays, holidays, November 27, 2003 and November 28, 2003) of
receipt of notice from the Company that the Board of Directors
has determined that the Competing Proposal is a Superior
Proposal, agree to amend this Agreement and the Offer to increase
the consideration offered under the Offer to an amount having a
value at least equal to the value of the consideration offered
under the Superior Proposal; or
(b) the Offeror or Offeror's Parent is in material breach or default
of any of its agreements, covenants, representations or
warranties contained herein,
the Board of Directors may withdraw, modify or change any recommendation
regarding the Offer.
4.3 TERMINATION
This Agreement may be terminated by written notice by the party
(in case of (a), the parties) desiring and have the right to terminate this
Agreement at any time prior to the Offeror taking up and paying for Common
Shares under the Offer as follows:
(a) by mutual agreement in writing executed by the Offeror, Offeror's
Parent and the Company;
(b) by either of the Offeror or the Company:
(i) after January 31, 2004 if the Offeror has commenced the
Offer in accordance with this Agreement but the Offeror
has not purchased any Common Shares pursuant to the Offer
(provided that, in the event of termination by a party,
such party is not in violation of the terms of this
Agreement or the Offer); or
(ii) if any permanent order, decree, ruling or other action of
a court or other competent authority restraining,
enjoining or otherwise preventing the consummation of the
Offer shall have become final and non-appealable;
(c) by the Offeror:
(i) if the Minimum Condition or any other condition of the
Offer is not satisfied or waived at the expiry time of the
Offer (as the same may be extended) and the Offeror in its
sole discretion shall not elect to waive such condition or
extend the Offer and the Offeror and the Offeror's Parent
are not in material breach of their obligations hereunder
or under the Offer;
(ii) at any time if the Company is in default of any material
obligation under this Agreement or any representation or
warranty of the Company under this Agreement is untrue in
any material respect and which is not curable or, if
curable, is not cured within the later of (x) 2 business
days after notice of such default has been given by the
Offeror to the Company and (y) the satisfaction of all
conditions of the Offer not related to such default; or
(iii) if the Board of Directors (x) withdraws or changes its
recommendation of the Offer as set forth in section
1.2(a)(iii)B in a manner that has substantially the same
effect as a withdrawal or (y) recommends that holders of
Common Shares accept, or vote in favour of, a transaction
that constitutes a Superior Proposal.
(d) by the Company if:
(i) the Offeror does not commence the Offer within the time
contemplated by section 1.1 except if such failure is due
to (A) a breach of this Agreement by the Company or (B) a
material delay in performance of the Company's obligations
under this Agreement;
(ii) prior to the purchase, taking-up or payment of Common
Shares pursuant to the Offer, in accordance with the terms
of this Agreement and the Offer, if the Offeror or
Offeror's Parent is in default of any material obligation
under this Agreement or any representation or warranty of
the Offeror or Offeror's Parent under this Agreement is
untrue in any material respect and which is not curable
or, if curable, is not cured within the later of (x) 2
business days after notice of such breach has been given
by the Company to Offeror's Parent and (y) the
satisfaction of all conditions to the Offer not related to
such breach; or
(iii) the Board of Directors authorizes the Company, subject to
complying with the terms of this Agreement, to enter into
a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company so
notifies Offeror's Parent in writing, and the Company,
concurrently with such termination pursuant to this clause
(iii) pays the fees required to be paid to Offeror's
Parent pursuant to section 4.5(b).
4.4 EFFECT OF TERMINATION
In the event this Agreement is terminated as provided in section
4.3, this Agreement shall, except for the payment obligations of the
Company pursuant to section 4.5, become void and of no further force and
effect and no party shall have any liability or obligation (howsoever and
whensoever arising) under or in relation to this Agreement to any other
party hereunder or to their respective shareholders, directors, officers or
employees, except as set forth in section 4.5, provided that nothing herein
will relieve or have the effect of resulting in relieving the Offeror and
Offeror's Parent in any way from liability for damages incurred or suffered
by the Company as a result of a breach by the Offeror or Offeror's Parent
of their obligations in this Agreement or prejudice the rights of the
Company as a result of such breach.
4.5 EXPENSES AND NON-COMPLETION FEE
(a) Subject to section 4.5(b) below, whether or not the Offeror takes
up and pays for Common Shares under the Offer, all costs,
expenses and liabilities incurred in connection with the Offer,
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs, expenses or liabilities.
(b) Provided that the Offeror and the Offeror's Parent are not in
material default of their obligations under this Agreement to be
performed at or prior to the occurrence of any event referred to
in (i) through (ix) of this section 4.5(b), if at any time after
the execution of this Agreement,
(i) the Board of Directors has withdrawn, redefined or changed
any of its recommendations or determinations as set forth
in section 1.2(a)(iii)B in a manner adverse to the Offeror
or shall have resolved to do so prior to the expiry of the
period during which Common Shares may be deposited under
the Offer;
(ii) the Board of Directors shall have failed to reaffirm its
recommendation of the Offer by press statement within five
full business days after the public announcement or
commencement of any Competing Proposal (or, in the event
that the Offer shall be scheduled to expire within such
five business days, prior to the scheduled expiry of the
Offer);
(iii) the Board of Directors shall have recommended that holders
of Common Shares accept, or vote in favour of, a Competing
Proposal;
(iv) a Competing Proposal has been made and publicly announced
by a Competing Proposal Offeror, prior to the expiry time
of the Offer and not withdrawn at least five days prior to
the expiry time of the Offer, and the Offer is not
completed as a result of the Minimum Condition not being
satisfied and more than 20% of the outstanding Common
Shares (on a non-diluted basis) are acquired under such
Competing Proposal;
(v) the Company consummates a Competing Proposal with the
Competing Proposal Offeror, or a person acting jointly or
in concert with the competing Proposal Offeror (within the
meaning of that expression as used in the Applicable Laws)
prior to the expiration of 270 days following termination
of this Agreement;
(vi) the Competing Proposal Offeror together with persons
acting jointly or in consent with the Competing Proposal
Offeror, acquires sufficient Common Shares of the Company
that, together with their currently held Common Shares,
would constitute control of the Company, prior to the
expiration of 270 days following termination of this
Agreement; or
(vii) the Company enters into a definitive agreement with
respect to a Competing Proposal with any third party
(which, for greater certainty, will not include a
confidentiality and standstill agreement), prior to the
expiration of 180 days following the termination of this
Agreement, and thereafter consummates such Competing
Proposal, provided that the fee specified in this section
4.5(b)(vii) shall not be payable in the event of a
termination of this Agreement following the
non-satisfaction of any of paragraphs (a), (b), (c), (d),
(i) or (k) in the Bid Conditions unless such condition was
not satisfied as a result of any action (or failure to
take any action) by the Company or its Subsidiaries;
(viii) this Agreement is terminated pursuant to section
4.3(d)(iii), or
(ix) the Company fails to comply with or breaches any covenant
made in this Agreement or any representation or warranty
of the Company in this Agreement is untrue, which failure,
breach or misrepresentation, if not cured, would be
reasonably likely to be Materially Adverse to the Company
or reasonably likely to prevent the Offeror from
proceeding with the Offer or impose material limitations
or conditions on the purchase by or sale to the Offeror of
the Common Shares under the Offer or the right of the
Offeror to own or exercise full rights of ownership of the
Common Shares or the Offeror's ability to effect a
Compulsory Acquisition or Second-Step Transaction, and
which is not curable or, if curable, is not cured within
the later of (x) 2 business days after notice of such
failure, breach or misrepresentation has been given by the
Offeror to the Company and (y) the satisfaction of all
conditions of the Offer not related to such failure,
breach or misrepresentation,
then the Company shall pay to Offeror's Parent the sum of $3.52
million by way of wire transfer in immediately available funds as
Offeror's Parent may direct, as liquidated damages. Such payment
will be due (i) in the case of an event specified in section
4.5(b)(i), (ii), (iii), or (ix) within five business days after
such event, (ii) in the case of an event specified in section
4.5(b)(viii), at the time of the termination of this Agreement by
the Company; or (iii) in the case of an event specified in
section 4.5(b)(iv), (v), (vi) or (vii) on the day of consummation
of the transaction referred to therein. The Company shall not be
obligated to make more than one payment pursuant to this section
4.5.
4.6 LIQUIDATED DAMAGES
The parties acknowledge that the payments described in section
4.5 are a payment of liquidated damages which are paid in lieu of actual
damages and represent a genuine pre-estimate of the damages which Offeror's
Parent or the Company, as the case may be, will suffer or incur as a result
of the event giving rise to such damages and resultant termination of this
Agreement and are not penalties. The parties irrevocably waive any right
they may have to raise as a defence that any of such liquidated damages are
excessive or punitive. For greater certainty, the parties agree that the
payment of the payments described in section 4.5 are the sole monetary
remedy of the party receiving such payment. Nothing herein shall preclude a
party from seeking injunctive relief to restrain any breach or threatened
breach of the covenants and agreements set forth in the agreement or
otherwise to obtain specific performance of any such covenant or agreement,
without the necessity of posting bond or security in connection therewith.
ARTICLE 5
GENERAL PROVISIONS
5.1 BROKERS
The parties represent and warrant to each other that, except for Credit
Suisse First Boston, in the case of the Company, no broker, finder or
investment banker is entitled to any brokerage, finder's fee or other fee
or commission, or to the reimbursement of any of its expenses, in
connection with the Offer or any similar transaction based upon
arrangements made by or on behalf of the parties hereto.
5.2 DISCLOSURE
Disclosure of this Agreement, its terms and conditions and the
transactions that it contemplates, or any confidential information provided
by any party in connection therewith shall be made only:
(a) to any legal counsel to or financial advisor engaged by, any of
the parties hereto;
(b) with the approval of each of the parties, which approval shall
not be withheld unreasonably, may be oral, and may be given on
behalf of a party by its counsel;
(c) as required by the Applicable Laws or any Agency; or
(d) as may be necessary to implement and complete the Offer and the
other transactions contemplated herein.
Each party shall agree with the others as to the timing and wording of
press releases and other disclosure of or relating to the Offer and the
other transactions contemplated herein. Notwithstanding the foregoing, the
parties shall be entitled to describe or append this Agreement in the
Company's Directors' Circular, and provide copies thereof to their
respective boards of directors and to those employees, lenders and
professional advisors that need to know details about this Agreement in
order for the parties to perform their covenants or satisfy the conditions
set out in this Agreement.
5.3 NOTICES
Any notice or other communications required or permitted to be
given hereunder shall be in writing and be sufficiently given if delivered
in person or if sent by facsimile transmission (provided such transmission
is confirmed):
(a) in the case of the Offeror or Offeror's Parent, to the following
address:
Honeywell International Inc.
101 Columbia Road
Morristown, New Jersey 07962
Attention: Senior Vice President and General Counsel
Facsimile: (973) 455-4217
with a copy to:
Honeywell International Inc.
1600 Utica Avenue S
Suite 300
St. Louis Park, MN 55416
Attention: Vice President and General Counsel -
Automation and Control Solutions
Facsimile: (952) 656-1231
With a copy to:
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place
Toronto, ON M5X 1B8
Attention: Stephen Arnold
Facsimile: (416) 862-6666
(b) in the case of the Company, to the following address:
Silent Witness Enterprises Ltd.
6554 176 St
Surrey, B.C.
V3S 4G5
Attention: Rob Bakshi
Facsimile No.:604 574-1527
With a copy to:
McCarthy Tetrault LLP
1300 - 777 Dunsmuir Street
Vancouver, British Columbia V7Y 1K2
Attention: Tim McCafferty
Facsimile: (604) 622-5680
or at such other address as the party to which such notice or other
communication is to be given has last notified the party giving the same in
the manner provided in this section, and if so given the same shall be
deemed to have been received on the date of such delivery or sending.
5.4 DEFINITIONS
For the purposes of this Agreement, those terms defined in
Exhibit I shall have the meanings attributed to them in that Exhibit.
5.5 HEADINGS AND REFERENCES
The division of this Agreement into articles, sections and the
insertion of headings are for convenience of reference only and do not
affect the construction or interpretation of this Agreement. Unless
otherwise specified, references to articles or sections are to articles and
sections of this Agreement.
5.6 NUMBER, GENDER AND PERSONS
In this Agreement, unless the contrary intention appears, words
importing the singular include the plural and vice versa; words importing
gender shall include all genders; and words importing persons shall include
a natural person, firm, trust, partnership, association, corporation, joint
venture or Agency.
5.7 DATE FOR ACTION
If the date on which any action is required to be taken hereunder
is not a business day in the place where the action is required to be
taken, such action shall be required to be taken on the next succeeding day
which is a business day in such place.
5.8 SEVERABILITY
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated and the parties shall
negotiate in good faith to modify the agreement to preserve each party's
anticipated benefits under the Agreement.
5.9 ENTIRE AGREEMENT
This Agreement, together with the Confidentiality Agreement,
supersedes all prior agreements, commitments or understandings between the
parties hereto with respect to the subject matter hereof and constitutes
the entire agreement between the parties with respect to the subject matter
hereof.
5.10 AMENDMENT
This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
5.11 WAIVER
At any time prior to the Offeror taking up and paying for Common
Shares under the Offer, either the Company on the one hand, and the Offeror
and Offeror's Parent, on the other hand may:
(a) extend the time for the performance of any of the obligations or
other acts of the other; or
(b) waive compliance with any of the agreements of the other or with
any conditions to its own obligations,
in each case only to the extent such obligations, agreements and conditions
are intended for its benefit.
5.12 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein (excluding any conflict of laws rule or principle which might refer
such construction to the laws of another jurisdiction). Each party hereto
irrevocably submits to the non-exclusive jurisdiction of the courts of
British Columbia and Ontario with respect to any matter arising hereunder
or related hereto.
5.13 CURRENCY
Except as expressly indicated otherwise, all sums of money
referred to in this Agreement are expressed and shall be payable in
Canadian dollars.
5.14 COUNTERPARTS
This Agreement may be executed in any number of original or
facsimile counterparts, each of which shall be deemed to be an original and
all of which taken together shall be deemed to constitute one and the same
instrument, and it shall not be necessary in making proof of this Agreement
to produce more than one counterpart.
5.15 SEPARATE AGREEMENTS, COVENANTS AND OBLIGATIONS
The agreements and covenants of any party to this Agreement are
the separate agreements and covenants of such party and such party shall
have no liability or obligation in respect of the agreements and covenants
of any other party to this Agreement, except that Offeror's Parent shall be
responsible for causing the Offeror to carry out and perform the
obligations of the Offeror hereunder and be liable in the event of any
breach or default by the Offeror,
5.16 THIRD PARTIES
Nothing in this Agreement shall create any rights in, or be
deemed to have been executed for the benefit of, any person that is not a
party hereto, or a successor or permitted assign of such a party; provided
however, that the parties hereto specifically acknowledge that, the
provisions of section 1.7 and section 3.5 are intended to be for the
benefit of, and shall be enforceable by, the employees, officers and
directors of the Company and its Subsidiaries affected thereby and their
heirs and representatives.
5.17 NO PERSONAL LIABILITY
(a) No director, officer or employee of the Company shall have any
personal liability to the Offeror or Offeror's Parent or persons
named in section 5.16 under this Agreement.
(b) No director, officer or employee of the Offeror or Offeror's
Parent shall have any personal liability to the Company or
persons named in section 5.16 under this Agreement.
5.18 ASSIGNMENT AND APPLICATION
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto prior to the consummation of the Offer without the prior
written consent of the other party hereto, except that Offeror may assign
to the Offeror's Parent or any other subsidiary of Offeror's Parent any and
all rights, interests and obligations of Offeror under this Agreement
(provided that such entity remains a subsidiary of the Offeror's Parent
until the consummation of the Offer). Offeror's Parent covenants and agrees
to cause the Offeror to carry out its obligations under this Agreement and
agrees that the representations and warranties relating to the Offeror
shall be construed as extending to it.
5.19 EXHIBITS
The following are the Exhibits to this Agreement, which form an
integral part hereof:
Exhibit I - Definitions
Exhibit II - Conditions of the Offer
Exhibit III - Representations and Warranties of the Offeror
and Offeror's Parent
Exhibit IV - Representations and Warranties of the Company
IN WITNESS WHEREOF, the parties have executed this Agreement.
678669 B.C. LTD.
/s/ Anne T. Madden
--------------------
Anne T. Madden
Authorized Signatory
HONEYWELL INTERNATIONAL INC.
/s/ Anne T. Madden
--------------------
Anne T. Madden,
Vice President-Corporate Planning
and Development
SILENT WITNESS ENTERPRISES LTD.
/s/ Rob Bakshi
--------------------
Rob Bakshi,
CEO and Chairman of the Board
EXHIBIT I
TO SUPPORT AGREEMENT
DEFINITIONS
"ACT" means the Company Act (British Columbia), as the same may be amended
or re-enacted or any successor legislation thereto.
"AFFILIATE" shall have the meaning attributed to it under the Act.
"AGENCY" means any:
(a) multinational, federal, provincial, state, regional, municipal,
local or other government, governmental or public department,
central bank, court, tribunal, arbitral body, commission, board,
official, minister, bureau or agency, domestic or foreign;
(b) subdivision, agent, commission, board or authority of any of the
foregoing; or
(c) quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any
of the foregoing.
"AGREEMENT" means this Agreement including the Exhibits hereto.
"ANTITRUST LAWS" means any antitrust, competition or trade regulatory laws,
rules or regulations of any domestic or foreign government or governmental
authority or any multinational authority.
"APPLICABLE LAWS" means the Act, United States federal securities laws, the
securities legislation of each province and territory of Canada where
holders who are resident in such province or territory hold not less than
2% of the Company's Common Shares, the rules, regulations and forms made or
promulgated under that legislation, and the published policies, bulletins
and notices of the regulatory authorities administering that legislation
and the published rules, regulations, bylaws and policies of The Toronto
Stock Exchange and the National Association of Securities Dealers, Inc., as
any of the foregoing may be amended from time to time.
"APPURTENANCES" means all privileges, rights, easements and appurtenances
both at law and equity belonging to or for the benefit of Real Property,
including any means of access between such Real Property and a public way,
rights in respect of or for any other uses upon which the present use is
dependent (such as pipelines, cables, railway sidings) and all rights
existing in and to any streets, alleys, passages and other rights-of-way.
"BID CONDITIONS" means the conditions set out in Exhibit II.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"BUSINESS DAY" means any day on which commercial banks are generally open
for business in Vancouver, British Columbia, other than a Saturday, a
Sunday or a day observed as a holiday in Vancouver, British Columbia.
"COMMON SHARES" means Common shares without par value in the capital of the
Company as constituted on the date hereof.
"COMPANY" means Silent Witness Enterprises Ltd., a company incorporated
under the Act.
"COMPANY'S DISCLOSURE DOCUMENTS" means the Company's audited financial
statements for the fiscal year-ended July 31, 2003 including the notes
thereto and Management's Discussion and Analysis contained therein, the
Company's Form 20-F/Annual Information Form for each of the fiscal years
ended July 31, 2002 and July 31, 2003 and all other interim financial
statements, reports to shareholders and material change reports filed
pursuant to the Applicable Laws since December 31, 2002.
"COMPANY DISCLOSURE SCHEDULE" means a written disclosure schedule delivered
by the Company to the Offeror's Parent prior to or concurrently with the
execution of this Agreement.
"COMPETING PROPOSAL" does not include the Offer but means:
(a) the possible acquisition of, or business combination with, the
Company or any of its Subsidiaries (whether by way of merger,
amalgamation, arrangement, consolidation, takeover bid, tender
offer, purchase of shares, purchase of assets or otherwise);
(b) the possible acquisition of any material portion of the shares or
assets of the Company or any of its Subsidiaries;
(c) any takeover bid, tender offer, stock exchange takeover bid or
other purchase or acquisition of equity securities of the Company
that, if consummated, would result in any person beneficially
owning 50% or more of any class of equity securities of the
Company; or
(d) any other transaction, the consummation of which would reasonably
be expected to prevent or materially impeded, interfere with or
delay the consummation of the Offer.
"COMPETING PROPOSAL OFFEROR" means any person, other than the Offeror,
Offeror's Parent, or any affiliate of Offeror's Parent that, prior to the
expiry time of the Offer, has made and publicly announced a Competing
Proposal that is not withdrawn at least five days prior to the expiry time
of the Offer.
"COMPULSORY ACQUISITION" means the acquisition of the Common Shares not
deposited under the Offer pursuant to the provisions of Section 255 of the
Act.
"CONFIDENTIALITY AGREEMENT" means the agreement dated May 28, 2003 between
Offeror's Parent and the Company.
"CONTRACT" means any contract, commitment or understanding (including any
lease, license, loan agreement, guarantee, security, indemnity, indenture
or other instrument), whether written or oral.
"ENCUMBRANCE" means any lien, charge, title retention right, security
interest, pledge, hypothecation or encumbrance of any nature or kind
whatsoever.
"EXCESS TREASURY SHARES" has the meaning defined in paragraph (b) of the
Representations and Warranties of the Company set forth in Exhibit IV.
"IMPROVEMENTS" means all plants, buildings, structures, fixtures, erections
and improvements located on, over, under or upon the Real Property
including those under construction and any mechanical, electrical,
plumbing, heating and air-conditioning systems relating to the Real
Property.
"INDEBTEDNESS" of any person, means, without duplication, (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments; (c)
all obligations of such person under conditional sale or other title
retention agreements relating to property or assets other than purchase
orders incurred in the ordinary course of business; (d) all obligations of
such person in respect of the deferred purchase price of property, assets
or services (excluding current accounts receivable payable incurred in the
ordinary course of business); (e) all Indebtedness of third parties secured
by (or for which the holder of such Indebtedness has an existing right,
contingent right or otherwise, to be secured by) any lien on property or
assets owned by or acquired by such person, whether or not the Indebtedness
secured thereby has been assumed; (f) all guarantees by such person of
Indebtedness of others; (g) all capital leases of such person; (h) all
obligations, contingent or otherwise, of such person as an account party to
letters of credit and letters of guarantee (other than in connection with
inventory purchased in the ordinary course of business); and (i) all
obligations of such person, contingent or otherwise, of such person in
respect of bankers' acceptances.
"LAND EXCHANGE AGREEMENT" has the meaning defined in subparagraph (k)(ii)
of the Representations and Warranties of the Company set forth in Exhibit
IV.
"LEASED REAL PROPERTY" means lands and/or premises which are used by the
Company or any of the Subsidiaries and which are leased, subleased,
licensed to or otherwise occupied by the Company or any of the Subsidiaries
and the interest of the Company and the Subsidiaries in all Improvements
and Appurtenances.
"LOSSES" means, in respect of any matter, all claims, demands, proceedings,
losses, damages, liabilities, liabilities for Taxes, deficiencies,
reasonable costs and expenses (including, without limitation, all legal and
other professional fees and disbursements, interest, penalties and amounts
paid in settlement) arising directly or indirectly as a consequence of such
matter.
"MATERIALLY ADVERSE" means, with respect to a person, circumstance, term,
asset, agreement, obligation, liability, covenant, sale, disposition,
expenditure, event, change, compliance, breach, violation, default or other
action, occurrence or effect (collectively, a "fact") that is or would
reasonably be expected to be material and adverse to the condition of that
person and its Subsidiaries, taken as a whole, provided that, for all
purposes of this Agreement, a fact shall be deemed not to be Materially
Adverse to a person unless the effect of such fact is or would reasonably
be expected to be, or, in the case of any fact described in Exhibit III or
Exhibit IV, is, or would reasonably be expected to be, when combined with
any other fact described in such Exhibit III or Exhibit IV (without
duplication), material and adverse to the condition of such person and its
Subsidiaries, taken as a whole, and provided for greater certainty that a
fact shall not be deemed to be Materially Adverse if it consists of, or
results from, any change, effect, event, circumstance, action or occurrence
(i) in or relating to the Canadian or United States economy or financial,
credit or securities markets in general including, without limitation, any
reduction in major markets indices, (ii) in or relating to currency
exchange rates, (iii) in or relating to the industries in which the Company
or Offeror's Parent operates or the markets for any of the Company's or
Offeror's Parent products or services in general, (iv) reasonably
attributable to the announcement of the Offer and anticipated closing
thereof, (v) in or relating to the trading price of the Shares, or (vi) in
or relating to Canadian or United States generally accepted accounting
principles or regulatory accounting requirements;
"MINIMUM CONDITION" has the meaning defined in paragraph (a) of the Bid
Conditions;
"OFFER" means the takeover bid to be made by the Offeror offering to
acquire all of the outstanding Common Shares at a price per share of $11.27
payable in cash, including any amendments to, or extensions of, such offer,
including without limitation, increasing the consideration offered,
removing, waiving or altering any condition or extending the date by which
Common Shares may be deposited under such offer.
"OFFER DOCUMENTS" means the take over bid circular setting out the Offer,
together with the Letter of Transmittal, Notice of Guaranteed Delivery and
other related documents, together with any amendments or supplements to
such documents.
"OPTIONS" has the meaning defined in section 1.1(a).
"OWNED REAL PROPERTY" means real property, owned or purported to be owned
in fee simple, by the Company or any of the Subsidiaries, or real property,
other than Leased Real Property, in which the Company or any of the
Subsidiaries has an interest, including all Improvements and Appurtenances.
"PERSON" includes an individual, corporation, incorporated or
unincorporated association, syndicate or organization, partnership, limited
liability company, joint venture, association, joint stock company, trust,
trustee, executor, administrator or other legal representative or other
entity.
"REAL PROPERTY" means the Owned Real Property and the Leased Real Property.
"RIGHTS PLAN" means the Share Rights Plan pursuant to the Share Rights Plan
Agreement dated November 12, 1999 between the Company and Computershare
Trust Company, as trustee.
"SECOND-STEP TRANSACTION" has the meaning defined in section 1.6.
"SENIOR MANAGEMENT OF THE COMPANY" means Messrs. Rob Bakshi, Tom Gill,
Darren Jarvis, Curtis Smith and Coleen Hunter.
"SUBSIDIARY" means, with respect to a specified body corporate, any body
corporate of which more than 50% of the outstanding shares ordinarily
entitled to elect a majority of the board of directors thereof (whether or
not shares of any other class or classes shall or might be entitled to vote
upon the happening of any event or contingency) are at the time owned
directly or indirectly by such specified body corporate or indirectly by
such specified body corporate and shall include any body corporate,
partnership, joint venture or other entity over which it exercises
direction or control or which is in a like relation to a Subsidiary.
"SUPERIOR PROPOSAL" means a bona fide Competing Proposal which is
determined by the board of directors in good faith by majority vote of its
members, after consultation with the Company's financial advisors, to be
one which would, if consummated in accordance with its terms, result in a
transaction more favourable to the holders of the Common Shares than the
Offer with a value of not less than $0.50 per share in excess of the value
of the Offer or, if applicable, any amended Offer by the Offeror. For the
purpose of this Agreement, the value of any non-cash consideration proposed
to be paid, delivered or issued under any Superior Proposal or by the
Offeror (unless the consideration proposed to be paid, delivered or issued
by the Offeror includes an all-cash option in which case the Offer shall be
valued on a per share basis as such cash consideration) shall be determined
by the Board of Directors (having consulted any financial advisor of the
Company or obtained other independent financial advice), acting reasonably.
"TAXES" means all taxes, however denominated, including any interest,
penalties or other additions that may become payable in respect thereof,
imposed by any government or governmental body, which taxes shall include,
without limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal income taxes, provincial and
state income taxes), capital taxes, payroll and employee withholding taxes,
unemployment insurance, social insurance taxes (including Canada Pension
Plan payments), goods and services tax, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipt taxes, business licence
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers compensation, pension
assessment and other governmental charges and other obligations of the same
or of a similar nature to any of the foregoing which the Company or any of
its Subsidiaries is required to pay, withhold or collect.
"TAX RETURNS" includes all returns, reports, declarations, elections,
notices, filings, forms, statements and other documents (whether in
tangible, electronic or other form) and including any amendments,
schedules, attachments, supplements, appendices and exhibits thereto, made,
prepared, filed or required to be made, prepared or filed by law in respect
of Taxes;
"TRANSACTION EXPENSES" means all reasonable costs and expenses incurred in
connection with the transactions contemplated by this Agreement including
all legal, accounting, financial advisory, printing, translation, registrar
and transfer agent, and other administrative or professional fees, costs
and expenses of third parties incurred by the Company in connection with
the solicitation of bids or expressions of interest in relation to the
Company prior to the execution of this Agreement, the preparation,
negotiation and settlement of this Agreement, the preparation and mailing
of a Directors Circular and structuring and the completion of the
transactions contemplated by the Offer and this Agreement and any incentive
fees payable by the Company to its senior officers in connection with
completion of the Offer.
EXHIBIT II
TO SUPPORT AGREEMENT
CONDITIONS OF THE OFFER
The Offeror shall have the right to withdraw the Offer and not
take up and pay for, or extend the period of time during which the Offer is
open and postpone taking up and paying for, any Common Shares deposited
thereunder unless all of the following conditions are satisfied or waived
by the Offeror at or prior to the expiry time of the Offer (the "Expiry
Time"):
(a) there shall have been validly deposited under the Offer and not
withdrawn at the Expiry Time that number of Common Shares that
constitute at least 90% of the outstanding Common Shares on a
fully diluted basis other than Common Shares already held at the
date of the Offer by, or by a nominee for, the Offeror or its
affiliates (the "Minimum Condition");
(b) all necessary consents, authorizations, governmental and
regulatory approvals, orders, rulings and exemptions (including,
without limitation, those of any stock exchange or securities or
other regulatory authorities) shall have been obtained on terms
and conditions satisfactory to the Offeror, including, without
limiting the generality of the foregoing, (i) an advance ruling
certificate ("ARC") pursuant to section 102 of the Competition
Act (Canada) shall have been issued by the Commissioner of
Competition (the "Commissioner") appointed under that Act; or
(ii) the relevant waiting period in section 123 of the
Competition Act (Canada) shall have expired and a "no action"
letter indicating that the Commissioner has determined not to
make an application for an order under section 92 of the
Competition Act (Canada) shall have been received from the
Commissioner, and any terms and conditions attached to any such
letter would not have a Materially Adverse effect on either
Offeror's Parent or Offeror's Parent's global video controls
business or the Company; or (iii) pursuant to section 113(c) of
the Competition Act (Canada) the Commission shall have waived the
obligation to comply with Part IX of the Competition Act (Canada)
and there shall be no threatened or actual application by the
Commissioner for an order under section 92 or 100 of the
Competition Act (Canada) in respect of the transactions
contemplated hereby which would have a Materially Adverse effect
on either Offeror's Parent or Offeror's Parent's global video
controls business or the Company;
(c) no act, action, suit or proceeding shall have been threatened or
taken before or by any domestic or foreign court or tribunal or
governmental agency or other regulatory authority, stock exchange
or administrative agency or commission or by any elected or
appointed public official in Canada or elsewhere, whether or not
having the force of law and no law, regulation or policy shall
have been proposed, enacted, promulgated or applied:
(i) which has the effect or may have the effect to cease
trade, enjoin, prohibit or impose material limitations or
conditions on the purchase by or the sale to the Offeror
of the Common Shares or the right of the Offeror to own or
exercise full rights of ownership of the Common Shares,
(ii) which, if the Offer were consummated, would materially
adversely affect the Company or Offeror's Parent or its
global video controls business; or
(iii) which, if the Offer were consummated, would adversely
affect the Company or the Offeror's ability to effect a
Compulsory Acquisition or a Second-Step Transaction;
(d) there shall not exist any prohibition at law against the Offeror
making the Offer, taking up and paying for any Common Shares
deposited under the Offer or completing a Compulsory Acquisition
or a Second-Step Transaction;
(e) since the announcement of the Offer, the Company and its
Subsidiaries shall not have taken or proposed to take any action
that has not been disclosed in writing to the Offeror prior to
announcement of the Offer, or publicly disclosed that they intend
to take any action that has not been disclosed in writing to the
Offeror prior to the announcement of the Offer, and the Offeror
shall not have otherwise learned of any previous action taken by
the Company or its Subsidiaries which had not been publicly
disclosed prior to the announcement of the Offer, that would have
a material adverse effect on the Company or that would prevent
the Offeror from proceeding with the Offer or that would impose
material limitations or conditions on the purchase by or the sale
to the Offeror of the Common Shares under the Offer or the right
of the Offeror to own or exercise full rights of ownership of the
Common Shares or the Offeror's ability to effect a Compulsory
Acquisition or a Second-Step Transaction, other than actions that
have been consented to by the Offeror;
(f) there shall be no more than 7,952,952 Common Shares outstanding
(which number of Common Shares shall be reduced by any Options
which are surrendered to the Company for cancellation and payment
in cash in lieu of exercise and cancelled pursuant to such
surrender or share appreciation rights that are settled by a cash
payment without issuance of Common Shares) and all of the Options
and any other rights, warrants or entitlements to acquire Common
Shares shall have been either exercised or otherwise cancelled,
terminated, released surrendered or waived by the holders thereof
(and including for this purpose, the cancellation of any Common
Shares held by the Company which are not reserved for transfer on
account of any Options or share appreciation rights);
(g) there shall not have been any breach of a covenant, nor shall any
representation or warranty be untrue at the date it was given or
deemed to have been given, or the date of take-up under the
Offer, by the Company pursuant to the provisions of this
Agreement, except for any breaches or untrue representations
which, individually or in the aggregate, would not be Materially
Adverse to the Company or would not prevent the Offeror from or
significantly impair the Offeror in proceeding with the Offer or
taking up and paying for Common Shares under the Offer or
completing a Compulsory Acquisition or all possible Second-Step
Transactions;
(h) the Company shall have waived the provisions of the Company's
Rights Plan in respect of the Offer;
(i) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or financial
occurrence of national or international consequence or any law,
regulation, action, government regulation, inquiry or other
occurrence of any nature whatsoever which materially adversely
affects or involves, or may materially adversely affect or
involve, the general economic, financial, currency exchange or
securities in Canada or elsewhere, or the financial condition,
business, operations, assets, affairs or prospects of Company and
its Subsidiaries, taken as a whole (other than those reasonably
attributable to the announcement of the Offer), or which impairs
the Offeror in proceeding with the Offer or taking up and paying
for Common Shares deposited under the Offer or that would impose
material limitations or conditions on the purchase by or sale to
the Offeror of the Common Shares under the Offer or the right of
the Offeror to own or exercise full rights of ownership of the
Common Shares or the Offeror's ability to effect a Compulsory
Acquisition or Second-Step Transaction;
(j) there does not exist and there shall not have occurred (or, if
there does exist or shall have previously occurred, there shall
not have been disclosed, generally or to the Offeror in writing
prior to the commencement of the Offer) any change (or any
condition, event, circumstance or development involving a
prospective change) in the business, assets, operations,
capitalization, condition (financial or otherwise), prospects,
share or debt ownership, results of operations, cash flows,
properties, articles, by-laws, licenses, permits, rights, or
privileges, whether contractual or otherwise, or liabilities
(including without limitation any contingent liabilities that may
arise through outstanding, pending or threatened litigation or
otherwise), whether contractual or otherwise, of the Company and
its Subsidiaries taken as a whole which is or may be Materially
Adverse to Company or the value of the Common Shares to the
Offeror;
(k) there shall not have occurred an actual or announced change in
tax legislation applicable to the Company (including a press
release issued by the Minister of Finance of Canada to amend the
Tax Act or a final rule to further amend the United States
Internal Revenue Code of 1986, or an announcement condition,
event or development involving a change or a prospective change)
that directly or indirectly has or may have a Materially Adverse
effect with respect to the business or operations of Company and
its Subsidiaries taken as a whole with respect to the regulatory
regime applicable to their respective businesses and operations
or with respect to completing a Compulsory Acquisition or
Subsequent Acquisition Transaction or that increases or would
increase the effective tax cost of the Offer to the Offeror; and
(l) the Offeror shall not have become aware of any untrue statement
of material fact, or an omission to state a material fact that is
required to be stated or that is necessary to make a statement
not misleading in the light of the circumstances in which it was
made and at the date it was made (after giving effect to all
subsequent filings prior to the date of the Offer in relation to
all matters covered in earlier filings), in any document filed by
or on behalf of Company or any of its Subsidiaries with any
securities commission or similar securities regulatory authority
in any of the provinces of Canada, including without limitation
any annual information form, financial statement, material change
report or management proxy circular or in any document so filed
or released by Company or its Subsidiaries to the public which is
materially adverse to the Company or significantly impairs the
Offeror in proceeding with the Offer or taking up and paying for
Common Shares deposited under the Offer or that would impose
material limitations or conditions on the purchase by or sale to
the Offeror of the Common Shares under the Offer or the right of
the Offeror to own or exercise full rights of ownership of the
Common Shares or the Offeror's ability to effect a Compulsory
Acquisition or Second-Step Transaction; and
EXHIBIT III
TO SUPPORT AGREEMENT
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR AND
OFFEROR'S PARENT
(a) Organization and Qualification. Each of the Offeror and Offeror's
Parent has been duly incorporated and is validly existing as a
corporation under the jurisdiction of its incorporation, amalgamation
or continuance and has full corporate power and authority to own its
assets and conduct its business as now owned and conducted.
(b) Authority Relative to this Agreement. Each of the Offeror and
Offeror's Parent has the requisite corporate power and authority to
execute and deliver into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by each of the
Offeror and Offeror's Parent and the consummation by each of the
Offeror and Offeror's Parent of the transactions contemplated by this
Agreement, including without limitation, the making of the Offer and
the taking up of and payment for Common Shares thereunder have been
duly authorized by all requisite corporate action on the part of each
of the Offeror and Offeror's Parent and no other corporate proceedings
on the part of either the Offeror or Offeror's Parent are necessary to
authorize this Agreement and the transactions contemplated hereby,
including without limitation, the making of the Offer and the taking
up of and payment for Common Shares thereunder. This Agreement has
been duly executed and delivered by each of the Offeror and Offeror's
Parent and constitutes a legal, valid and binding obligation of each
of the Offeror and Offeror's Parent, enforceable against each of the
Offeror and Offeror's Parent in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other laws relating to or affecting the availability of
equitable remedies and the enforcement of creditors' rights generally
and to general principles of equity and public policy and the fact
that the Currency Act (Canada) precludes a court in Canada from giving
judgment in any currency other than Canadian currency. The execution
and delivery by either the Offeror or Offeror's Parent of this
Agreement and the performance by it of its obligations hereunder,
including without limitation, the making of the Offer and the taking
up of and payment for Common Shares thereunder, will not result in a
material violation or breach of:
(i) any provision of its constating documents;
(ii) any applicable law, or, to its knowledge, any regulation,
order, judgment or decree (subject to obtaining the
authorizations, consents and approvals referred to in paragraph
(e)), or
(iii) any material contract, agreement, arrangement or understanding
to which it is a party or by which its properties are bound or
subject which will have a Material Adverse effect on Offeror's
Parent or significantly impede the completion of the
transactions contemplated by this Agreement.
(c) Approvals. Other than in connection with or in compliance with the
provisions of the Competition Act (Canada), the Hart-Scott-Rodino Act,
foreign antitrust laws and the Applicable Laws, no authorization,
consent or approval of, or filing with, any Agency is necessary for
the consummation by either the Offeror or Offeror's Parent of its
obligations under this Agreement, including without limitation, the
making of the Offer and the taking up of and payment for Common Shares
thereunder, except for such authorizations, consents, approvals and
filings the failure to obtain or make which would not, individually or
in the aggregate, prevent, significantly impede or materially delay
the consummation or completion of the transactions contemplated by
this Agreement.
(d) Availability of Financing. The Offeror has available to it financing
sufficient to permit it to fulfil its obligations under this Agreement
and make full payment for securities which the Offeror has agreed to
acquire under the Offer and pay all related fees and expenses. If the
Offeror is borrowing funds, the Offeror has provided to the Company
evidence of the availability of such credit facilities or funding
sources (and any modifications, variations and amendments thereto)
setting out the terms and conditions of such credit facilities or
funding sources.
(e) Actions. There are (i) no claims, actions, proceedings, suits,
investigations or reviews pending or, to the best of the knowledge of
either the Offeror or Offeror's Parent threatened against the Offeror
or Offeror's Parent or any of their properties or assets by or before
any Agency or (ii) existing facts or conditions which may reasonably
be expected, individually or in the aggregate, to be a proper basis
for claims, actions, proceedings, suits, investigations or reviews;
that, in either case, either individually or in the aggregate, could,
or prevent, hinder or materially delay the consummation of the
transactions contemplated hereby, including, without limitation, the
making of the Offer and the taking up of, and payment for Common
Shares thereunder.
EXHIBIT IV
TO SUPPORT AGREEMENT
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(a) Organization and Qualification. The Company has been duly incorporated
and is validly existing as a corporation under the Act and has all
requisite corporate power and authority to own, lease and operate
properties and conduct its businesses as currently conducted. The
Company is duly qualified to carry on business, and is in
good-standing, in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary and where the failure to be so
qualified or in good standing has, or would have, a Materially Adverse
effect on the Company.
(b) Capitalization. The authorized capital of the Company consists of
100,000,000 Common Shares and 10,000,000 Preference Shares. As at the
date of this Agreement there are (i) 7,468,541 Common Shares issued
and outstanding (excluding 549,900 Common Shares which are held by the
Company and which have not been cancelled) as fully paid and
non-assessable shares, (ii) 57,411 Common Shares reserved for issue or
transfer pursuant to all oustanding share appreciation rights granted
prior to the date of this Agreement (assuming that the "Market Price"
applicable under the share appreciation rights shall be determined to
be the price per Common Share referred to in Section 1.1(a)), (iii)
427,000 Common Shares reserved for issue or transfer pursuant to all
oustanding Options granted prior to the date of this Agreement and
(iv) no Preference Shares outstanding. Except as set forth on the
Company Disclosure Schedule and the rights of the parties and the
securityholders of the Company under this Agreement and the
transactions contemplated herein, there are no Options, warrants,
conversion privileges, calls or other rights, agreements,
arrangements, commitments or obligations obligating the Company to
issue, transfer or sell any shares of the Company or securities or
obligations of any kind convertible into or exchangeable for any
shares of the Company, nor are there outstanding any share
appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the share price, book value,
income or any other attribute of the Company.
(c) Subsidiaries. Other than the Subsidiaries set forth on the Company
Disclosure Schedule, there are no Subsidiaries of the Company the
total assets of which constituted more than ten percent of the
consolidated assets of the Company or the total revenues of which
constituted more than ten percent of the consolidated revenues of the
Company, in each case as set out in the consolidated financial
statements of the Company for the year ended July 31, 2003 and
including each Subsidiary of the Company that directly or indirectly
holds an equity interest in each such Subsidiary. Each of the
Subsidiaries of the Company is validly existing and has all requisite
corporate authority to own, lease and operate its properties and
conduct its businesses as currently conducted. Neither the nature of
its business nor the location or character of the assets owned or
leased by any of the Subsidiaries of the Company requires it to be
registered, licensed or otherwise qualified as an extra-provincial or
foreign corporation in any jurisdiction other than jurisdictions where
the relevant Subsidiary is duly registered, licensed or otherwise
qualified for such purpose as previously disclosed to the Offeror's
Parent. All of the outstanding shares in the capital of or outstanding
shares of capital stock or other ownership interests of such
Subsidiaries are validly issued, fully paid and non assessable and
except:
(i) as previously disclosed to the Offeror's Parent;
(ii) pursuant to the constating documents of any Subsidiary or any
shareholder, partnership or joint venture or other similar
agreements for Subsidiaries that are not wholly-owned; or
(iii) pursuant to existing financing arrangements;
all such shares and other ownership interests owned directly or
indirectly by the Company are owned free and clear of all Encumbrances
other than as previously disclosed to Offeror's Parent. There are no
outstanding Options, rights, entitlements, understandings or
commitments (contingent or otherwise) regarding the right to acquire
any such share or other ownership interests in any such Subsidiaries.
There are no Options, warrants, entitlements, conversion privileges or
other rights, agreements, arrangements or commitments obligating any
such Subsidiaries to issue or sell any shares of such Subsidiary or
securities or obligations of any kind convertible into or exchangeable
for any shares of such Subsidiary.
(d) Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Company and the performance by the Company of
its obligations hereunder have been duly authorized by the Board of
Directors and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement and the transactions
contemplated hereunder, subject to approval of the Directors Circular
by the Board of Directors provided that additional corporate
proceedings on the part of the Company, including approvals by the
Board of Directors and in some cases holders of Common Shares may be
required to authorize (i) a Compulsory Acquisition; (ii) a Second-Step
Transaction; (iii) the transactions described in section 1.5 and (iv)
cancellation of the Excess Treasury Shares. This Agreement has been
duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company enforceable by the Offeror
and Offeror's Parent against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other laws relating to or affecting the
availability of equitable remedies and the enforcement of creditors'
rights generally and to general principles of equity and public policy
and the fact that the Currency Act (Canada) precludes a court in
Canada from giving judgment in any currency other than Canadian
currency. The execution and delivery by the Company of this Agreement
and performance by it of its obligations hereunder and the
transactions contemplated hereby will not result in:
(i) a material violation or breach of any provision of or
constitute a default (or an event that with notice or lapse of
time or both would become a default) under,
(A) its constating documents or those of any of its
Subsidiaries,
(B) any applicable law or, to its knowledge, any regulation,
order, judgment or decree (subject to obtaining the
authorizations, consents and approvals referred to in
paragraph (e)), or
(C) any material contract, agreement, arrangement,
understanding, license, franchise or permit to which it or
any of its Subsidiaries is a party or by which any of them
or their properties is bound or is subject, or
(ii) the imposition of any Encumbrance upon any of its assets or the
assets of any of its Subsidiaries.
(e) Approvals. Other than in connection with or in compliance with the
provisions of the Competition Act (Canada), the Hart-Scott-Rodino Act,
foreign antitrust laws and the Applicable Laws, no authorization,
consent or approval of, or filing with, any Agency is necessary for
the consummation by the Company of its obligations under this
Agreement, except for such authorizations, consents, approvals and
filings the failure to obtain or make would not prevent, significantly
impede or materially delay the consummation or completion of the
transactions contemplated by this Agreement.
(f) Financial Statements and Disclosure Documents. The audited financial
statements of the Company prepared on a consolidated basis, for and as
at the years ended July 31, 2002 and July 31, 2003 have been prepared
in accordance with generally accepted accounting principles in Canada
("GAAP") consistently applied (except as noted in such statements) and
fairly present in all material respects the financial position of the
Company and its Subsidiaries as at the respective dates thereof and
the results of operations and cash flows of the Company and its
Subsidiaries on a consolidated basis for the respective periods
covered thereby. The Company has filed with the appropriate Agency
true and complete copies of all forms, reports, schedules, statements
and other documents required to be filed by it under the Applicable
Laws since July 31, 2001. The Company's Disclosure Documents were, as
of their respective dates, in compliance in all material respects with
the Applicable Laws and did not, when filed, contain any
"misrepresentation" within the meaning of the Applicable Laws and
complied in all material respects with the requirements of Applicable
Laws and make full disclosure of and provision for all material actual
and contingent liabilities.
(g) Absence of Certain Changes or Events. Since July 31, 2003, except as
has been publicly disclosed in one or more documents filed under the
Applicable Laws prior to the date of this Agreement or as contemplated
by this Agreement or disclosed to the Offeror or Offeror's Parent in
writing:
(i) the Company has conducted its business only in the ordinary
course of business;
(ii) no liability or obligation of any nature (whether absolute,
accrued, contingent or otherwise) material to the Company and
its Subsidiaries, taken as a whole, has been incurred other
than in the ordinary course of business;
(iii) none of the Company or any of the Subsidiaries, directly or
indirectly, has declared or paid any dividends or declared or
made any other payments or distributions on or in respect of
any of its shares and has not, directly or indirectly,
purchased or otherwise acquired any of its shares;
(iv) there has not been any change that, individually or in the
aggregate, is or has been Materially Adverse to the Company;
and
(v) as of the date of this Agreement, there are no material change
reports filed on a confidential basis with any Agency or any
other documents with any securities regulatory agency which
remain confidential.
(h) Disclosure. The Company has not failed to disclose in the Company's
Disclosure Documents or to the Offeror or Offeror's Parent in writing,
on or prior to the date of this Agreement, any information regarding
any event, circumstance or action taken or failed to be taken since
July 31, 2003 within the knowledge of the Company and not within the
knowledge of the Offeror or Offeror's Parent as at the date of this
Agreement which could reasonably be expected to be Materially Adverse
to the Company. Without limitation, since July 31, 2003, except as set
forth in the Company's Disclosure Documents that have been filed prior
to the date of this Agreement pursuant to the Applicable Laws or,
prior to the date of this Agreement, disclosed in writing to the
Offeror or Offeror's Parent:
(i) except as disclosed in the Company Disclosure Schedule or as
contemplated in this Agreement, none of the Company nor any of
its Subsidiaries has (A) become a party to any written or oral
agreement providing for severance, retention or termination
payments to, or any employment agreement with, any officer or
director, (B) granted any bonuses, salary increases, severance
or termination payments to any officer or director or (C)
entered into or modified any change of control, collective
bargaining, bonus, incentive compensation or other compensation
or benefit plan, policy, agreement, trust, fund or arrangement
with, for, in respect of, or for the benefit or welfare of any
employees of the Company or any of its Subsidiaries;
(ii) except as contemplated in this Agreement, none of the Company
nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature (whether absolute, accrued,
contingent or otherwise) that, either individually or in the
aggregate, are material to the Company except those incurred in
the ordinary course of business;
(iii) except as specifically contemplated by this Agreement, neither
the Company nor any Subsidiary of the Company is or has become
bound by any voting trust or other agreement or understanding
with respect to the voting of any equity interests of the
Company or any such Subsidiary;
(iv) except as specifically contemplated by this Agreement, neither
the Company nor any Subsidiary of the Company is or has become
bound by any material restrictions on the business or
activities of the Company or any of its Subsidiaries;
(v) there have been no material claims, actions, proceedings,
suits, investigations or reviews and, to the best of the
Company's knowledge, no facts or conditions have arisen which
may reasonably be expected, individually or in the aggregate,
to be a proper basis for material claims, actions, proceedings,
suits, investigations or reviews, commenced or, to the best of
the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or any of their properties by or before
any Agency, nor is the Company aware of any basis for any such
claim, action, proceeding, suit, investigation or review; and
(vi) none of the Company nor any of its Subsidiaries nor any of
their properties has been the subject of a judgement, order,
writ, injunction or decree.
(i) Compliance. None of the Company nor any of its Subsidiaries is in
conflict with, or in default (including cross defaults) under or in
violation of:
(i) its constating documents;
(ii) any law or, to its knowledge, any rule, regulation, order,
judgement or decree applicable to it or by which any of its
properties is bound or affected, or
(iii) any material contract, agreement, license, franchise or permit
to which it is a party or by which any of its properties is
bound or is subject.
(j) Sarbanes-Oxley Compliance, etc.
(i) The Company has complied with and maintains the disclosure
controls and procedures required by the U.S. Securities
Exchange Act of 1934 Rule 13a-14 and Rule 15d-14. Such controls
and procedures are effective to ensure that all material
information concerning the Company and its Subsidiaries is made
known on a timely basis to the individuals responsible for the
preparation of Company's filings with the SEC and other public
disclosure documents and the conclusions regarding the
effectiveness of the disclosure controls and procedures set
forth in the SEC Reports are true and correct in all material
respects.
(ii) The chief executive officer and the chief financial officer of
the Company have signed, and the Company has filed with the
SEC, all certifications required by Sections 302 and Section
906 of the Sarbanes-Oxley Act with respect to the SEC Reports
filed since such certifications have been required and such
certifications were true and correct when filed, contained no
qualifications or exceptions to the matters certified therein
and have not been modified or withdrawn.
(iii) Neither the Company nor any of its officers has received any
notice from the SEC or any other governmental entity that any
of its accounting policies or practices are the subject of any
review, inquiry, investigation or challenge other than comments
from the SEC on Company filings, which comments have either
been satisfied or withdrawn by the SEC.
(iv) At the time of the signing of the audit report for any audit
period commencing on or after January 1, 2000, as required by
applicable law at the time the financial statements were signed
by the auditor of the Company, the auditor of the Company's
financial statements for each such period was (A) qualified as
an "independent accountant" as required by the U.S. Securities
and Exchange Act of 1934, as amended (and the rules and
regulations promulgated thereunder) and (B) complied with the
auditor independence requirements of applicable Canadian
securities laws.
(v) For purposes of this paragraph (j), (A) "SEC" shall mean the
U.S. Securities and Exchange Commission; (B) "Sarbanes-Oxley
Act" shall mean the U.S. Sarbanes-Oxley Act of 2002 and the
rule and regulations promulgated thereunder; (C) "principal
executive officer" and "principal financial officer" shall have
the meanings given to such terms in the Sarbanes-Oxley Act; and
(D) "SEC Reports" shall mean all forms, reports and documents
required to be filed by the Company with the SEC which were
subject to the requirements of the Sarbanes-Oxley Act.
(k) Property.
(i) Except as has been disclosed to Offeror's Parent prior to the
execution of this Agreement, each of the Company and its
Subsidiaries has good and marketable title to, is the legal and
beneficial owner of the Owned Real Property or is entitled to
the benefits of all of its properties and assets (real and
personal, tangible and intangible, including Leased Real
Property) necessary to permit the operation of its businesses
as presently conducted. A full and complete description of all
such property, including a list of all Owned Real Property (by
reference to the owner, municipal address and legal
description) and all Leased Real Property (by reference to the
terms thereof and all relevant documents, including amendments,
extension notices, registered notices, non-disturbance
agreements) has been previously disclosed in writing to
Offeror's Parent. Such properties and assets are not subject to
any Encumbrance of any kind except those Encumbrances which do
not adversely affect the value of such properties and assets,
individually or in the aggregate, or as is reflected in the
balance sheets forming part of the financial statements of the
Company and except where the failure to have such title, or the
existence of such Encumbrance, individually or in the
aggregate, would not be Materially Adverse to the Company.
(ii) The Company is in the process of negotiating a land exchange
agreement with LNF Holdings Inc. with respect to Company lands
legally described as Parcel Identifier: 025-639-781 Lot 1
Section 3 Township 2 New Westminster District Plan BCP5151 and
LNF Holdings Inc. lands legally described as a portion of
Parcel Identifier: 013-219-081 Parcel "A" (Reference Plan 2726)
North East Quarter Section 3, Township 2 and at District Lot
167 Group 2, New Westminster District (the "Land Exchange
Agreement"). Except as disclosed in the Company Disclosure
Schedule, the Company has not entered into the Land Exchange
Agreement or any other agreement respecting the sale, transfer
or exchange of the lands which are the subject of the Land
Exchange Agreement.
(iii) Except as previously disclosed to Offeror's Parent, there are
no (A) agreements, undertakings or other documents which affect
or relate to the title to, or ownership, operation or
management of, the Owned Real Property or (B) agreements or
understandings between the landlord and tenant, or sublandlord
and subtenant, or other relevant parties, other than as
contained in the Real Property Leases, relating to the rights
and obligations of the parties thereto or relating to the use
and occupation of the Leased Real Property.
(l) Tax Matters.
(i) Each of the Company and its Subsidiaries has filed all Tax
Returns required to be filed by it (and such returns are true,
complete and correct in all material respects), has paid in
full on a timely basis all Taxes that are imposed under any
laws or by any relevant taxing authority that are due and
payable and has made adequate provision in the financial
statements referred to above for the payment of all Taxes not
then due and payable including all Taxes shown to be payable on
the returns or on subsequent assessments with respect thereto
and no other Taxes are payable by the Company or any of its
Subsidiaries with respect to the items or time periods covered
by the returns. Each of the Company and its Subsidiaries has
made and will have made adequate and timely payment of
instalments on account of Taxes for each of the taxation
periods ending on or before the date on which the Offeror takes
up and pays for the Common Shares under the Offer. With respect
to any taxation period up to and including the date on which
the Offeror takes up and pays for Common Shares under the Offer
for which Tax Returns have not yet been filed or for which
Taxes are not yet due and payable, each of the Company and its
Subsidiaries has only incurred liabilities for Taxes in the
ordinary course of its business consistent with past practice.
Except as disclosed in writing to the Offeror or Offeror's
Parent prior to the date of this Agreement, there are no
outstanding waivers of any limitation periods or agreements
providing for an extension of time for the filing of any tax
return or the payment of any Taxes. No deficiencies exist or
have been asserted with respect to Taxes of the Company or any
of its Subsidiaries, neither the Company nor any Subsidiary of
the Company is a party to any action or proceeding or
assessment or collection of Taxes, nor has any such event been
asserted or threatened against the Company or any of its
Subsidiaries or any of their respective assets and to the best
of the Company's knowledge, as of the date of this Agreement
none of the Company nor any of its Subsidiaries is subject to
any assessments, penalties or levies with respect to Taxes that
will result in any liability on its part in respect of any
period ending on or before the date of this Agreement in excess
of the amount provided for in the financial statements referred
to above. Except as disclosed in writing to the Offeror or
Offeror's Parent prior to the date of this Agreement, to the
knowledge of the Company and its Subsidiaries, no audit,
investigation, assessment or reassessment of Taxes is
reasonably anticipated or imminent.
(ii) Each of the Company and the Subsidiaries has duly and timely
withheld all Taxes and other amounts required by law to be
withheld by it (including Taxes and other amounts required to
be withheld by it in respect of any amount paid or credited or
deemed to be paid or credited by it to or for the account or
benefit of any person, including any employees, officers or
directors and any non-resident person), and has duly and timely
remitted to the appropriate governmental authority such Taxes
and other amounts required by law to be remitted by it.
(iii) Each of the Company and the Subsidiaries has duly and timely
collected all amounts on account of any sales or transfer
taxes, including goods and services, harmonized sales and
local, state, provincial or territorial sales taxes, required
by law to be collected by it and has duly and timely remitted
to the appropriate governmental authority any such amounts
required by law to be remitted by it.
(m) Environmental Laws. Except as disclosed in writing to the Offeror or
Offeror's Parent prior to the date of this Agreement:
(i) the operations of the Company and its Subsidiaries are in
compliance with all applicable environmental laws and
environmental permits in Canada and in other applicable foreign
jurisdictions with environmental regulatory jurisdiction over
the Company or any of its Subsidiaries except where the failure
to be in compliance would not have a Material Adverse effect on
the Company; and
(ii) none of the Company nor any of its Subsidiaries is, with
respect to its businesses and operations, aware of or subject
to any written notice, written notice of default, order,
summons, or notice of judgment or commencement of proceedings
of any nature related to any material breach, liability or
remedial action (or alleged material breach, liability or
remedial action) arising under environmental laws and
environmental permits that could reasonably be expected to be,
individually nor in the aggregate, Materially Adverse to the
Company, and none of the Company or its Subsidiaries have (with
respect to such businesses and operations) at any time given
any written undertakings with respect to remedying any breach
of, or liability under, environmental laws that have not been
duly performed, which breach or liability could reasonably be
expected to be, individually or in the aggregate, Materially
Adverse to the Company.
(n) Books and Records. The corporate records and minute books of the
Company and its Subsidiaries have been maintained substantially in
accordance with all applicable laws and are complete and accurate in
all material respects.
(o) Insurance. Policies of insurance in force as of the date hereof,
naming the Company and its Subsidiaries as insureds adequately cover
all risk reasonably and prudently foreseeable in the operation and
conduct of the businesses of the Company and its Subsidiaries in such
amounts and against such risks as are customarily carried and insured
against by owners of comparable businesses, properties and assets. All
such policies of insurance are in full force and effect and none of
the Company or any of the Subsidiaries is in default, as to the
payment of premiums or otherwise, under the terms of any such policy.
The Company has previously disclosed to Offeror's Parent in writing a
complete list of all policies of insurance which the Company or any of
the Subsidiaries maintain and the particulars of such policies,
including the name of the insurer, the risk insured against, the
amount of coverage and the amount of any deductible and a summary of
all claims under each such policy for the past three years.
(p) Employment Agreements. Except as set forth in the Company Disclosure
Schedule, the Company is not a party to any written or oral
employment, service or consulting agreement specifically providing for
severance or termination payments to any officer of the Company.
(q) Non-Arm's Length Transactions. Except as set forth in the Company
Disclosure Schedule, no director or officer, former director or
officer, shareholder or employee of, or any other person not dealing
at arm's length (within the meaning of the Income Tax Act (Canada))
with, the Company or any Subsidiary or any affiliate of the foregoing
is engaged in any transaction or arrangement with or is a party to a
contract with, or has any indebtedness, liability or obligation to,
the Company or any of the Subsidiaries except for employment
arrangements with employees, the terms of which have been disclosed to
Offeror's Parent.
(r) Pension and Employee Benefits. Except as disclosed to the Offeror or
Offeror's Parent in writing prior to the date of this Agreement,
neither the Company nor any Subsidiary of the Company has, or is
subject to, any present or future obligation or liability under, any
pension plan, deferred compensation plan, retirement income plan,
Option or stock purchase plan, profit sharing plan, bonus plan or
policy, employee group insurance plan, program policy or practice,
formal or informal, with respect to its employees.
(s) Material Agreements. Other than:
(i) as referred to in the Company's Disclosure Documents;
(ii) agreements, copies of which were in the data or information
rooms maintained by the Company made available to Offeror's
Parent; or
(iii) as set forth in a list provided to Offeror's Parent;
there are no agreements material to the conduct of the Company's
business. Except as disclosed in writing to Offeror's Parent or the
Offeror, such agreements are all in full force and effect unamended
and there are no outstanding material defaults or violations under any
such agreements on the part of the Company or any of the Subsidiaries
or, to the Company's knowledge, on the part of any other party to such
agreements and no approval or consent of any person is needed in order
that such agreements continue in full force and effect following
consummation of the transactions contemplated hereby.
(t) Indebtedness. The Company, together with its Subsidiaries on a
consolidated basis, does not have any Indebtedness (excluding
liabilities incurred in the ordinary course of business).
(u) Liens, etc. Except as disclosed in writing to Offeror's Parent prior
to the date hereof, there are no pledges, liens, charges, security
interests, leases, title retention agreements, mortgages, restrictions
or encumbrances of any kind or character whatsoever on any material
asset of the Company or its Subsidiaries.
(v) Intellectual Property.
(i) The Company has previously disclosed to Offeror's Parent a
true, correct and complete list (including, to the extent
applicable, registration, application or file numbers) of all
patents, registered copyrights, registered trademarks, trade
names, and registered service marks owned by the Company or any
Subsidiary of the Company, including all domain names that are
registered in the name of the Company or any Subsidiary of the
Company and that are currently used in connection with the
Company's business as it is now conducted, and all
registrations of or applications for registration of any of the
foregoing, including any additions thereto or extensions,
continuations, renewals or divisions thereof (setting forth the
registration, issue or serial number and a description of the
same) (collectively, together with all trade dress, trade
secrets, processes, formulae, designs, know-how and other
intellectual property rights that are so owned, the "Owned
Intellectual Property"). The Company has previously disclosed
to Offeror's Parent true, correct and complete copies of each
registration or application for registration covering any of
the Owned Intellectual Property which is registered with, or in
respect of which any application for registration has been
filed with, any governmental entity.
(ii) All patents, copyrights, trademarks, trade names, service
marks, domain names, trade dress, trade secrets, processes,
formulae, designs, know-how and other intellectual property
rights held by the Company or any Subsidiary of the Company
under a license or similar arrangement (collectively, the
"Licensed Intellectual Property" and, together with the Owned
Intellectual Property, the "Intellectual Property"), together
with the Owned Intellectual Property, includes all of the
intellectual property rights owned or licensed by the Company
and its Subsidiaries that are reasonably necessary to conduct
the Company's business as it is now conducted. The Company,
directly or through its Subsidiaries, has good, marketable and
exclusive title to, and the valid and enforceable power and
unqualified right to use, the Owned Intellectual Property free
and clear of all liens and encumbrances and no person or entity
other than the Company and its Subsidiaries has any material
right or interest of any kind or nature in or with respect to
the Owned Intellectual Property or any portion thereof or any
material rights to use, market or exploit the Owned
Intellectual Property or any portion thereof, except for rights
that have been granted by the Company or any of its
Subsidiaries to its customers as part of sales in the ordinary
course of business or as disclosed in the Company Disclosure
Schedule.
(iii) Except as set forth the Company Disclosure Schedule, neither
the existence nor the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation
by the Company or any Subsidiary of the Company of any
Intellectual Property, as is reasonably necessary to conduct
the Company's business as it is currently conducted does or did
(i) infringe on any patent, trademark, copyright or other right
of any other person or (ii) constitute a misuse or
misappropriation of any trade secret, know-how process,
proprietary information or other right of any other person
(each an "Infringement"). Since January 1, 2000, except (i) as
set forth on the Company Disclosure Schedule, (ii) for
agreements previously delivered to Purchaser with a claiming
party pursuant to which such party has released or otherwise
agreed to settle such claim of Infringement or (iii)
settlements of claims of Infringements which were not
individually or in the aggregate material, neither the Company
nor any of its Subsidiaries has received in writing any
complaint, assertion, threat or allegation or otherwise has
notice of any lawsuit, claim, demand, proceeding or
investigation involving matters of Infringement or is aware of
any facts or circumstances that could reasonably be expected to
give rise to any such lawsuit, claim, demand, proceeding or
investigation. Except as required under any license agreements
or similar agreements to which the Company or any Subsidiary of
the Company is bound which (i) were placed in the Data Room on
or prior to Thursday, August 21, 2003 or (ii) have previously
been delivered by the Company to the Offeror's Parent, there
are no restrictions on the ability of the Company or any
Subsidiary of the Company to commercially exploit any Owned
Intellectual Property or any Licensed Intellectual Property.
(iv) Except for agreements which (i) were placed in the Data Room on
or prior to Thursday, August 21, 2003 or (ii) previously
delivered to Offeror's Parent, neither the Company nor any
Subsidiary of the Company has any obligation to indemnify any
third party for any claims of any infringement,
misappropriation or violation relating to any Intellectual
Property.
(v) Except for agreements which (i) were placed in the Data Room on
or prior to Thursday, August 21, 2003 or (ii) have previously
been delivered by the Company to the Offeror's Parent, there
are no settlement agreements, consents, judgments, orders,
forbearance to sue or similar obligations limiting or
restricting any rights of the Company or any Subsidiary of the
Company in and to any Intellectual Property.
(vi) Each of the Company and the Subsidiaries of the Company is
using or holding Intellectual Property to which it is not the
sole beneficial and registered owner with the consent of or a
licence from the owner of such Intellectual Property, all of
which such consents or licences are in full force and effect
and no material default exists on the part of the Company or
any of the Subsidiaries of the Company or, to the knowledge of
the Company or any of the Subsidiaries of the Company, on the
part of any of the parties thereto.
(v) Inventory. All inventories of the Company and its Subsidiaries are
valued on the books of the Company and its Subsidiaries at the lower
of cost, using the first in, first out method, or net realizable value
in accordance with GAAP consistently applied. Inventories of finished
goods are saleable and all other inventories are merchantable or
usable and all inventories are in quantities usable or saleable in the
ordinary course of business. The inventory levels have been maintained
at the amounts required for the operations of the Company and its
Subsidiaries as previously conducted and such inventory levels are
adequate for such operations.
(w) Major Suppliers and Customers. Other than as a result of the
announcement of the Offer or the anticipated completion of the Offer,
to the Company's knowledge, no material supplier or customer has any
intention to change its relationship or the terms upon which it
conducts business with the Company or any of its Subsidiaries.