Exhibit 2.1
Execution Copy
SUPPORT AGREEMENT
April 7, 2004
SUPPORT AGREEMENT
STRICTLY
CONFIDENTIAL
April 7, 2004
The Hockey Company Holdings Inc.
Suite 800
3500 de Maisonneuve Boulevard West
Montreal, Québec
Canada H3Z 3C1
Attention: Matthew H.
O’Toole
Dear Sirs:
Reebok International Ltd. (“
Reebok ”) has, concurrently with the execution of this
letter agreement (the “ Agreement ”), entered
into a letter agreement (the “ Lock-up Agreement
”) with WS Acquisition LLC, The Equitable Life Assurance
Company of the United States, Phoenix Life Insurance Company and
certain other holders of Exchangeable Shares (as defined below) or
of options or other rights to acquire Exchangeable Shares
(hereinafter collectively referred to as the “ Selling
Shareholders ”) which sets out the terms and conditions
upon which Reebok will make, or will cause a direct or indirect
wholly-owned subsidiary of Reebok to make, an offer (the “
Offer ”), on substantially the terms summarized in
Schedule B to the Lock-up Agreement, to purchase all of the
issued and outstanding common shares of The Hockey Company Holdings
Inc. (the “ Corporation ”), including common
shares issuable upon (i) the conversion or exchange, in accordance
with their terms, of all non-voting exchangeable common stock, par
value US$0.01 per share (the “ Exchangeable Shares
”), of The Hockey Company, a subsidiary of the Corporation
(“ THC ”), including Exchangeable Shares
outstanding as of the date hereof or issuable pursuant to the
exercise of options, warrants or other rights to acquire
Exchangeable Shares, and (ii) the exercise of stock options or
other rights granted by the Corporation to acquire common shares of
the Corporation (collectively, the “ Common Shares
”).
The Lock-up Agreement also provides,
among other things, for the agreement of the Selling Shareholders
not to solicit expressions of interest for or assist or encourage
competing offers for the Common Shares, and to irrevocably deposit
under the Offer (i) all Common Shares issuable upon the conversion
or exchange of all Exchangeable Shares beneficially owned, directly
or indirectly, by each of them, including all Exchangeable Shares
issuable pursuant to the exercise of options, warrants or other
rights to acquire Exchangeable Shares and (ii) all Common Shares
beneficially owned, directly or indirectly, by each of them
(collectively, the “ Selling Shareholders’
Shares ”), subject only to the exceptions provided for
in sections 6.2 and 6.3 of the Lock-up Agreement, and sets out the
obligations and commitments of the Selling
Shareholders in connection
therewith. In this Agreement, the “ Offeror ”
means Reebok and if a subsidiary of Reebok makes the Offer, shall
include that subsidiary.
This Agreement sets out the terms
and conditions of the agreement by the Corporation, among other
things, to recommend that the holders of Common Shares accept the
Offer and not to solicit expressions of interest for or assist or
encourage competing offers for the Common Shares, and the
representations and warranties to the Offeror from the Corporation
and other obligations and commitments of the Corporation in
connection with the Offer.
ARTICLE 1
THE OFFER
1.1
The Offeror agrees to make the Offer
for all of the Common Shares as promptly as is reasonably
practicable after the date hereof, but in any event not later than
April 28, 2004, unless prior to April 28, 2004 an
Acquisition Proposal shall have been made and not rejected by the
board of directors of the Corporation (the “ Board of
Directors ”) (or, if the Board of Directors shall not
have recommended rejection thereof to holders of Common Shares, as
applicable), in which event the Offeror may, but shall not be
obligated to, make the Offer, which Offer shall be made in
compliance with all applicable laws, on the terms and subject to
the conditions contained in the Lock-up Agreement and in this
Agreement including, without limitation, the conditions precedent
set forth in Section 1.2 of the Lock-up Agreement and the
conditions to the Offer set forth on Schedule B to the Lock-up
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
The Corporation hereby represents
and warrants to the Offeror, and acknowledges that the Offeror is
relying on such representations and warranties in making the Offer,
that:
2.1
Incorporation and
Qualification . The
Corporation and each of its subsidiaries is a corporation or legal
entity duly incorporated or constituted, as the case may be,
organized, validly subsisting and in good standing under the laws
of its jurisdiction of incorporation or organization, as
applicable, and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business
as now being conducted and is duly registered, licensed or
qualified to carry on business in each jurisdiction in which the
nature of the business as now being conducted by it or the property
owned or leased by it makes such registration, licensing or
qualification necessary, except where the failure to be so licensed
or qualified would not, individually or in the aggregate, be
material to the Corporation and its subsidiaries taken as a whole.
The copies of the Corporation’s and each of its
subsidiaries’ articles and by-laws which have been furnished
to the Offeror reflect all amendments made thereto at any time
prior to the execution of the Agreement and are correct and
complete. The Corporation and its subsidiaries are not in default
under, or in violation of, any provision of their respective
articles or by-laws.
2
2.2
Capitalization
. The authorized share capital of the Corporation
consists of an unlimited number of Common Shares, without par
value, an unlimited number of preferred shares, without par value
and issuable in series, and an unlimited number of special voting
shares, without par value (the “ Special Voting Shares
”).
As of the close of business on
April 6, 2004, 5,476,202 Common Shares and 6,499,509 Special
Voting Shares are issued and outstanding, 90,000 Common Shares are
reserved for issuance upon the exercise of outstanding stock
options under the Option Plan and 7,930,858 Common Shares are
issuable upon the conversion or exchange of the Exchangeable
Shares. The issued and outstanding Common Shares have been, and the
Common Shares issuable upon the exercise of stock options and upon
the conversion or exchange of the Exchangeable Shares will be,
validly authorized and issued, fully paid and non-assessable shares
free of pre-emptive rights. The Common Shares are listed and posted
for trading on the Toronto Stock Exchange.
The authorized share capital of THC
consists of 12 million shares of voting common stock, par value
US$0.01 per share (“ Voting Common Stock ”), 8
million Exchangeable Shares and 1 million shares of preferred
stock, par value $0.01 per share, of which one share has been
designated as Special Dividend Preferred Stock. As of the close of
business on April 6, 2004, 5,476,202 shares of Voting Common
Stock, 6,499,509 Exchangeable Shares and one share of Special
Dividend Preferred Stock are issued and outstanding. All of the
issued and outstanding shares in the capital of THC have been
validly authorized and issued and are fully paid, non-assessable
and free of pre-emptive rights.
Except as set forth on
Schedule 2.2, there are not as of the close of business on
April 6, 2004, and at the Effective Date (as defined in
section 4.2 herein) there will not be, any other outstanding
options, warrants or rights to purchase or acquire, or securities
convertible into or exchangeable for, Common Shares and there are
no contracts, commitments, agreements, understandings, arrangements
or restrictions which require the Corporation or of its
subsidiaries to issue, sell or deliver Common Shares or any
securities or obligations convertible into, or exchangeable for,
Common Shares. Neither the Corporation nor any of its subsidiaries
has outstanding any bonds, debentures, notes or other indebtedness
the holders of which have the right to vote (or that are
convertible or exercisable into securities having the right to
vote) with holders of Common Shares or in respect of the election
of directors of the Corporation. None of the outstanding shares of
the capital stock of the Corporation or of its subsidiaries were
issued, and none of the shares of capital stock issuable upon
exercise of stock options, the conversion or exchange of
Exchangeable Shares or otherwise will be issued, in violation of
applicable Canadian or U.S. securities laws. Except as disclosed in
this section 2.2, there are no other issued and outstanding
equity securities of either of the Corporation or THC and no Common
Shares are held as treasury stock or by any subsidiary of the
Corporation.
2.3
Corporate
Authority . The
Corporation has the corporate power and authority and has received
all necessary corporate approvals to enter into this Agreement and
to perform the transactions contemplated herein. This Agreement has
been duly authorized, executed and delivered by the Corporation and
constitutes a legal, valid and binding obligation of the
Corporation enforceable by Reebok against it in accordance with its
terms subject, however, to limitations with respect to enforcement
imposed by law in connection with bankruptcy or similar
3
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.
2.4
Consents
. Other than in connection with or in compliance
with the provisions, to the extent applicable, of the Investment
Canada Act (Canada), the Competition Act (Canada), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (United
States) and equivalent legislation of the European Union and/or any
of its member countries or such other countries where the
Corporation has operations or assets, no consent, waiver, approval,
authorization, exemption, registration, license or declaration of
or by, or filing with, or notification to any governmental,
administrative or regulatory authority is required to be made or
obtained by the Corporation and THC in connection with (i) the
execution and delivery by the Corporation and THC and enforcement
against them of this Agreement or (ii) the consummation of any
transactions by the Corporation and THC provided for herein, except
for the filing of press releases and material change reports,
insider reports or early warning reports under applicable
securities legislation and the appropriate notices with the
relevant stock exchanges.
2.5
Absence of
Changes . Since December 31, 2002, and except as set
forth on Schedule 2.5 or in the public disclosure documents
filed by the Corporation and THC since December 31, 2002 with
the Canadian or U.S. securities regulators and all press releases
issued by the Corporation since December 31, 2002 (the “
Disclosure Documents ”), there has not been any
Material Adverse Change (as such term is defined in
section 8.9 hereof). Without limiting the generality of the
foregoing, from December 31, 2002 to the date hereof and
except as disclosed in the Disclosure Documents or in
Schedule 2.5 to this Agreement:
(a)
neither the Corporation nor any of
its subsidiaries has sold, leased, transferred or assigned to any
third party (including any joint venture), in one or more
transactions, any assets, tangible or intangible, outside the
ordinary course of business consistent with past practice other
than transactions which, individually or in the aggregate, are not
material to the Corporation and its subsidiaries taken as a
whole;
(b)
neither the Corporation nor any of
its subsidiaries has entered into any agreement, contract, lease,
or license, in one or more transactions, outside the ordinary
course of business consistent with past practice other than
transactions which, individually or in the aggregate, are not
material to the Corporation and its subsidiaries taken as a
whole;
(c)
no person (including any of the
Corporation and its subsidiaries) has accelerated, terminated, made
material modifications to, or cancelled any agreement, contract,
lease, or license to which any of the Corporation and its
subsidiaries is a party or by which any of them is bound or to
which their property is subject outside the ordinary course of
business consistent with past practice other than transactions
which, individually or in the aggregate, are not material to the
Corporation and its subsidiaries taken as a whole;
4
(d)
neither the Corporation nor any of
its subsidiaries has made, outside the ordinary course of business
consistent with past practice, any loan to, or any other investment
in, any other person other than the Corporation or any of its
subsidiaries other than transactions which, individually or in the
aggregate, are not material to the Corporation and its subsidiaries
taken as a whole;
(e)
neither the Corporation nor any of
its subsidiaries has created, incurred, assumed, or guaranteed
indebtedness for borrowed money or obligations in respect of
material capitalized leases, other than under existing credit
facilities and other than in the ordinary course of business
consistent with past practice;
(f)
there has been no change made or
authorized in the articles or by-laws of any of the Corporation and
its subsidiaries;
(g)
neither the Corporation nor any of
its subsidiaries has issued, sold, or otherwise disposed of any of
its capital stock, granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock, other than pursuant to (i) the
Corporation’s stock option plan (the “ Option
Plan ”), (ii) the option agreement dated May 9,
2003 between the Corporation and NHL Enterprises L.P., and (iii)
the Corporation’s initial public offering of June 11,
2003 and the subsequent exercise of the over-allotment option, or
split, combined or reclassified any of its capital
stock;
(h)
neither the Corporation nor any of
its subsidiaries (x) has granted (or made a commitment to grant)
any increase in the compensation (including incentive or bonus
compensation) of any employee, except for increases in the base
salaries of, or grants of incentive or bonus compensation to,
employees (other than officers, senior managers or executives) in
the ordinary course of business consistent with past practice or as
listed in Schedule 2.5 ,or (y) instituted, adopted, terminated
or amended (or committed to institute, adopt, terminate or amend),
any compensation or benefit, including any severance or change in
control, agreement, plan, policy, program or arrangement or
collective bargaining agreement applicable to any employee
(including any officer, senior manager or executive), other than
(i) in the ordinary course of business consistent with past
practice, (ii) in connection with regularly scheduled annual
reviews of employees of the Corporation and its subsidiaries, (iii)
pursuant to a previously entered into binding written agreement,
(iv) as approved by the Offeror in writing, or (v) as listed in
Schedule 2.5;
(i)
with the exception of any change
required under Canadian generally accepted accounting principles or
United States generally accepted accounting principles, as
applicable, there has been no change in the accounting or tax
practices, methods or principles followed by the Corporation or any
of its subsidiaries, and no tax elections have been made, that
would result in a Material Adverse Change; and
5
(j)
with the exception of inter-company
lending arrangements, dividends or distributions among the
Corporation and its wholly-owned subsidiaries in the ordinary
course of business and consistent with past practice, neither the
Corporation nor any of its subsidiaries has entered into any
inter-company lending arrangements or has declared, set aside, or
paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its capital stock.
2.6
Absence of Undisclosed
Liabilities . Except as set forth in Schedule 2.6,
neither the Corporation nor any of its subsidiaries has any
material liabilities or obligations of any nature (whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), except (i)
liabilities or obligations reflected or reserved against in the
financial statements of the Corporation, being the audited
consolidated financial statements of THC as at and for the fiscal
year ended December 31, 2002 and the unaudited consolidated
financial statements of the Corporation for the nine months ended
September 30, 2003, and the notes thereto (collectively, the
“ Financial Statements ”), and (ii) liabilities
and obligations incurred in the ordinary course of business
consistent with past practice since September 30, 2003, none
of which have had, or would result in, a Material Adverse
Change.
2.7
Financial
Statements . The
Financial Statements present fairly in all material respects, the
assets, liabilities, financial position, income, changes in cash
flow, changes in shareholders’ equity, and the results of
operations of the Corporation and its subsidiaries as at the dates
of and for the periods covered by such Financial Statements and
such Financial Statements have been prepared in conformity with
Canadian generally accepted accounting principles and any
applicable Canadian or U. S. laws, rules or regulations applied on
a consistent basis throughout the periods involved.
2.8
Accountants
. Ernst & Young, LLP are independent public
accountants with respect to (i) the Corporation within the meaning
of the Code of Ethics of the Chartered Accountants of Quebec, the
Canada Business Corporations Act and applicable Canadian securities
legislation, and, to the best of the Corporation’s knowledge,
there has not been any reportable disagreement (within the meaning
of National Policy Statement No. 31 of the Canadian securities
regulators) between the Corporation and such accountants, and (ii)
THC within the meaning of the Securities Act of 1933 and the
rules and regulations of the United States Securities and Exchange
Commission thereunder.
2.9
Securities Law
Filings . Except as disclosed to the Offeror, each of the
Corporation and THC has filed all documents required to be filed by
it pursuant to applicable securities legislation. Each Disclosure
Document was, as of the date of filing such document, in compliance
in all material respects with all applicable requirements of
applicable securities legislation and none of the Disclosure
Documents, as of their respective filing dates, contained any
untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
6
None of the information provided by
the Corporation and THC to the Offeror specifically for inclusion
in the Offer to Purchase and Circular (the “ Circular
”) in respect of the Offer will contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading at the time such information was provided.
2.10
No Conflict
. Except as set forth in Schedule 2.10, the
execution and delivery of the Agreement by the Corporation does
not, and the performance of the Agreement by the Corporation and
the consummation by it of the transactions contemplated in the
Agreement will not (subject to any waiver that has been obtained in
writing and provided to the Offeror), breach or violate, or
conflict with, or constitute a default under, or create a state of
facts which after notice or lapse of time, or both, would
constitute a default under, or result in the creation or imposition
of any hypothec, lien, charge or encumbrance upon any property,
assets, or operations of the Corporation or any of its subsidiaries
under any term or provision of (a) the constating documents or
by-laws of the Corporation or any of its subsidiaries or any
resolution of the directors or shareholders of the Corporation or
any of its subsidiaries, (b) any contract, mortgage, note,
indenture, joint venture or partnership arrangement, agreement
(written or oral), instrument or lease to which the Corporation or
its subsidiaries are party and that is material to the Corporation
and its subsidiaries taken as a whole (each, a “ Material
Agreement ”), or (c) any statute, rule, licence,
regulation, judgment, decree, order of any government,
governmental, regulatory or administrative agency, authority,
commission or instrumentality or court having jurisdiction over the
Corporation or any of its subsidiaries, except for any breach,
violation, conflict or default, in the case of clauses (b) and (c)
above, which has not had, or would not result in, a Material
Adverse Change. Except as set forth in Schedule 2.10, neither
the Corporation nor any of its subsidiaries is in violation of any
of the foregoing, and the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated herein will not result in any default, or give rise to
the acceleration of any debt, under any agreement, note, bond,
indenture or instrument relating to indebtedness for borrowed money
(each, a “ Debt Agreement ”) to which the
Corporation or any of its subsidiaries is a party.
2.11
Restrictions on Business
Activities . Except as set forth in Schedule 2.11, there
is no agreement, judgment, injunction, order or decree to which the
Corporation or any of its subsidiaries is a party, or which is
otherwise binding on the Corporation or any of its subsidiaries,
which has had or could reasonably be expected to have the effect of
prohibiting or restricting the operation of the Corporation’s
business, the acquisition or disposition of property or the taking
of any action necessary for the Corporation to conduct its business
activities.
2.12
Compliance
. Neither the Corporation nor any of its
subsidiaries is in conflict with, or in default (including
cross-defaults) or violation of:
(a)
its articles or by-laws or
equivalent organizational documents;
(b)
any law, rule, order, permit,
judgement, injunction or decree applicable to the Corporation or
any of its subsidiaries or by which any one of their respective
properties is bound or affected including, without limitation, all
laws relating to human rights, child and forced labor,
worker’s rights (including health and safety
7
laws) and local minimum wage
standards, the violation of which has had, or would result in, a
Material Adverse Change;
(c)
any Debt Agreement or Material
Agreement to which the Corporation or any of its subsidiaries is a
party or by which the Corporation or any of its subsidiaries or any
of their respective properties is bound or affected; or
(d)
the Fair Labor Association Code of
Conduct.
2.13
Interests in
Subsidiaries . Except as set forth in Schedule 2.13, the
Corporation does not have any investment in any person or entity
other than its subsidiaries. Except as set forth in
Schedule 2.13, all of the issued and outstanding shares in the
capital of each subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable and are owned,
directly or indirectly, by or on behalf of the Corporation, free
and clear of any hypothec, security interest, mortgage, pledge,
lien, encumbrance, claim or equity. None of the outstanding shares
in the capital of each of the subsidiaries was issued in violation
of any preemptive or other similar rights of any shareholder of
such subsidiary.
2.14
Litigation
. Except as set forth in Schedule 2.14, there
is no action, suit, proceeding or investigation at law or in equity
before any court or before or by any federal, provincial, state,
municipal or other governmental commission, board, agency or body,
domestic or foreign, pending or threatened (and the Corporation
does not know of any basis therefor) to which the Corporation or
any of its subsidiaries is a party, or involving the assets,
properties or business of the Corporation or any of the
subsidiaries, other than such actions, suits, proceedings or
investigations which, individually or in the aggregate, are not
material to the Corporation and its subsidiaries taken as a
whole.
2.15
Benefit Plans
. Except as set forth in Schedule 2.15, (i)
there are no material pension, retirement, supplemental executive
retirement plan, profit sharing, bonus, savings, deferred
compensation, stock option, purchase, or appreciation, health, life
insurance, disability, sick pay, severance pay, group insurance or
other material employee benefit plans, programs or arrangements
maintained or contributed to by the Corporation or any of its
subsidiaries, or for which the Corporation or any of its
subsidiaries has any material liability, contingent or otherwise
(each such plan, program or arrangement, a “ Benefit
Plan ”), (ii) there are no outstanding violations or
defaults thereunder nor any actions, claims, or other proceedings
pending or, to the knowledge of the Corporation, threatened with
respect to the Benefit Plans which violations, defaults, actions,
claims or other proceedings have had, or would result in, a
Material Adverse Change, (iii) no Benefit Plan is currently under a
governmental investigation or audit and, to the knowledge of the
Corporation, no such investigation or audit is contemplated or
under consideration, (iv) each Benefit Plan covers only current or
former employees of the Corporation and its subsidiaries and their
dependants or beneficiaries, (v) no promise or commitment to
increase benefits under any Benefit Plan or to adopt any additional
Benefit Plan has been made except as required by law or in the
ordinary course of business consistent with past practice, (vi) no
event has occurred which could subject any person or fund to any
tax, penalty or fiduciary liability in connection with any Benefit
Plan which tax, penalty or fiduciary liability has had, or would
result in, a Material Adverse Change, (vii) the fair market value
of assets held under any
8
Benefit Plan that is a defined
benefit pension plan equal or exceed the present value of each such
Benefit Plan’s liabilities, determined, based on reasonable
actuarial assumptions, (viii) all contributions or premiums
required to be paid in connection with each Benefit Plan have been
timely paid, or if not presently due, have been appropriately
accrued on the Financial Statements of the Corporation or its
subsidiaries in accordance with generally accepted accounting
principles in Canada or the United States, as applicable, and the
Corporation’s customary accounting practices, and (ix)
there have been no withdrawals of surplus or contributions
holidays, except as permitted by law and the terms of the Benefit
Plans.
2.16
Employees
. Each of the Corporation and its subsidiaries is
in compliance with all material provisions of all federal,
provincial, local and foreign laws and regulations respecting
employment and employment practices, terms and conditions of
employment and wages and hours (collectively, “ Employment
Laws ”). Other than as set forth in Schedule 2.16,
there is no pending investigation, inquiry or, to the
Corporation’s knowledge, claim involving the Corporation or
any of its subsidiaries by or before the Commission des Normes
du Travail, Commission de la Santé et de la Sécurité
du Travail or Commission des Lésions Professionnelles,
la Commission des droits de la personne et de la jeunesse,
pertaining to employees, or the Quebec Minister of Labour, any
labour commissioner or the Commission des relations du
travail , or any other governmental authority or body of any
province of Canada or any other country responsible for the
enforcement of any Employment Law. Except as set forth in
Schedule 2.16, no grievance or arbitration proceeding is
pending and no labor dispute with the employees of the Corporation
or its subsidiaries exists or, to the knowledge of the Corporation,
is imminent. The Corporation is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers, customers or contractors. Except as set
forth on Schedule 2.16, no union has been accredited or
otherwise designated to represent any employees of the Corporation
or any of its subsidiaries and, to the Corporation’s
knowledge, no accreditation request or other representation
question is pending with respect to the employees of the
Corporation or any of its subsidiaries. Each union identified on
Schedule 2.16 has a collective bargaining agreement that is
currently in force and effect. Except as set forth in
Schedule 2.16, no collective agreement or collective
bargaining agreement or modification thereof is in effect in any of
the Corporation’s facilities and none is currently being
negotiated by the Corporation or its subsidiaries.
2.17
Contracts and
Commitments . The
Material Agreements of the Corporation have been accurately
described in or are appended as exhibits to the Disclosure
Documents, or are listed in Schedule 2.17 hereto. Each of the
Corporation and its subsidiaries has performed its obligations in
all material respects under the terms of each indenture, credit
agreement, note, bond, mortgage, lease, permit, franchise or any
other contract, arrangement or agreement (collectively, “
Contracts ”) to which the Corporation or any of its
subsidiaries is a party or by which any of their properties or
assets are bound, and the Corporation and its subsidiaries are not
in violation of or default under (nor does there exist any
condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) such
Contracts, except for such violations or defaults that have not
had, and would not result in, a Material Adverse Change.
9
2.18
Inventories
. The inventory of the Corporation reflected in
the Financial Statements has been determined and valued in
accordance with Canadian generally accepted accounting principles
applied on a consistent basis. Except as reflected in the Financial
Statements, all inventories wheresoever situated owned by the
Corporation and its subsidiaries: (i) are of such quality as
to meet in all material respects the quality control standards of
the Corporation and any applicable governmental quality standards;
and (ii) are of a quality and quantity usable or saleable in the
normal course of business in amounts consistent with past practice,
and (iii) no previously sold inventory is subject to refunds
materially in excess of that historically experienced by the
Corporation or its subsidiaries.
2.19
Accounts
Receivable . The
receivables of the Corporation and its subsidiaries (including
accounts receivable, loans receivable and advances, which are
reflected in the Financial Statements) have arisen only from
bona fide transactions in the ordinary course of business
consistent with past practice. The Corporation does not have
knowledge of any facts or circumstances generally (other than
general economic conditions) which could result in any material
increase in the uncollectability of such receivables in excess of
the reserves therefore (if any) set forth in the Financial
Statements. There has not been any change in the
collectability of such receivables since December 31, 2002
that has had, or would result in, a Material Adverse
Change.
2.20
Certain
Payments . Neither the Corporation nor any of its
subsidiaries nor any director, officer, agent, or employee of
either the Corporation or any of its subsidiaries or, to the
Corporation’s knowledge, any other person associated with or
acting for or on behalf of either the Corporation or any of its
subsidiaries, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, pay-off, influence payment, kick-back, or
other payment to any person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favourable
treatment in securing business, (ii) to pay for favourable
treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of
the Corporation or any of its subsidiaries, or (iv) in violation of
any legal requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the
Corporation and its subsidiaries.
2.21
Customers and
Suppliers . There has been no termination or cancellation
of, and no material modification or change in, the business
relationship between the Corporation and any of its top 10
customers, based on the Corporation’s consolidated sales, or
of its top 10 suppliers, based on the Corporation’s
consolidated purchases, since January 1, 2003 except as set
forth on Schedule 2.21 and in the Disclosure Documents. No
creditor, employee, consultant or customer or other person having a
material business relationship with the Corporation has informed
the Corporation that such person intends to change the relationship
because of the transactions contemplated by this
Agreement.
2.22
Related Party
Transactions . Except as set forth in Schedule 2.22 and in
the Disclosure Documents, no shareholder, employee, officer or
director of the Corporation or its subsidiaries, or any shareholder
or any member of his or her immediate family, is indebted to the
Corporation or any subsidiary, nor is the Corporation or any
subsidiary indebted (or committed to make loans or extent to
guarantee credit) to any them, other than for (i) payment of salary
for
10
services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the
Corporation or its subsidiaries, and (iii) for other standard
employee benefits made generally available to other employees or
consultants. To the Corporation’s knowledge, none of such
persons has any direct or indirect ownership interest in (i) any
firm or corporation with which the Corporation or any of its
subsidiaries has a material business relationship, or (ii) any firm
or corporation that competes with the Corporation or any of its
subsidiaries, except that, in either case, employees, officers or
directors of the Corporation or its subsidiaries and members of
their immediate families may own a non-controlling interest in any
publicly traded company that competes or does business with the
Corporation or its subsidiaries. No member of the immediate family
of any officer or director or of the Corporation or its
subsidiaries is directly or indirectly interested in any material
contract with the Corporation or any of its subsidiaries (other
than such contracts as related to any such person’s ownership
of capital stock or other securities of the Corporation or its
subsidiaries).
2.23
Intellectual
Property .
2.23.1
Except in each case as set forth in
Schedule 2.23:
(a)
the Corporation and its subsidiaries
own or are validly licensed to use all Intellectual Property Rights
necessary to conduct the business of the Corporation and its
subsidiaries as presently conducted provided, however, that no
representation is made with respect to commercial, off-the-shelf
software used or licensed by the Corporation and its subsidiaries
in the ordinary course of its business consistent with past
practice (such Intellectual Property Rights being hereinafter
collectively referred to as the “ Company IP Rights
”). All Company IP Rights owned by the Corporation or
its subsidiaries are free and clear of any liens, encumbrances,
pledges, mortgages and security interest of any kind, and may be
freely transferred, assigned, licensed or sublicensed;
(b)
the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not constitute a breach of
any instrument or agreement governing any Company IP Rights (the
“ Company IP Rights Agreements ”), will not
cause the forfeiture or termination, or give rise to a right of
forfeiture or termination, of any Company IP Rights or impair the
right of the Corporation and its subsidiaries to use, sell or
license any Company IP Rights or portion thereof, except for such
breach, right of forfeiture, termination or impairment which has
not had, or would not result in, a Material Adverse
Change;
(c)
except as has not had, or would not
result in, a Material Adverse Change, the conduct of the
Corporation’s and its subsidiaries’ businesses, as
presently conducted and as conducted as of the Closing, does not
and will not violate any license or agreement between the
Corporation or any of its subsidiaries, as the case may be, and any
third party, or infringe any Intellectual Property Right of any
third party;
11
(d)
there is no pending or, to the
knowledge of the Corporation, threatened, claim or litigation
contesting the validity, ownership or right to use, sell, license
or dispose of any Company IP Right owned by the Corporation or any
of its subsidiaries;
(e)
there is no pending or, to the
knowledge of the Corporation, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license
or dispose of any Company IP Right to which the Corporation or any
of its subsidiaries has exclusive or non-exclusive license
rights;
(f)
to the knowledge of the Corporation
there is no reasonable basis for any claim contesting the validity,
ownership or right to use, sell, license or dispose of (as
applicable) any Company IP Right which claim would result in a
Material Adverse Change;
(g)
neither the Corporation nor any of
its subsidiaries has received any written notice asserting that any
Company IP Right or the use thereof by the Corporation and its
subsidiaries or any person authorized by the Corporation to use the
Company IP Rights conflicts or will conflict with the rights of any
third party nor, to the knowledge of the Corporation, is there any
reasonable basis for any such assertion;
(h)
no current or prior directors,
officers, employees or consultants of the Corporation or any of its
subsidiaries claim or have a right to claim an ownership interest
in any Company IP Rights as a result of having been involved in the
development of such property while employed by or consulting to the
Corporation or any of its subsidiaries, or otherwise;
(i)
Schedule 2.23 also separately
lists the material licenses and other agreements under which the
Corporation or any of its subsidiaries is authorized to use Company
IP Rights owned by the Corporation or any of its
subsidiaries. All such licenses are (i) to the knowledge of
the Corporation, free and clear of any liens, encumbrances,
pledges, mortgages and security interests of any kind and (ii)
valid, enforceable and in full force and effect, and will continue
to be so in all material respects on identical terms immediately
following the consummation of the transactions contemplated hereby,
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the rights of
creditors’ and by general principles of equity;
(j)
except as has not had, or would not
result in, a Material Adverse Change, there is no unauthorized use,
infringement or misappropriation of any Company IP Rights owned by
the Corporation or any of its subsidiaries by any third party,
including any employee or former employee of the Corporation or any
of its subsidiaries; and
(k)
to the knowledge of the Corporation,
there is no unauthorized use, infringement or misappropriation of
any Company IP Rights to which the Corporation or any of
its
12
subsidiaries has exclusive rights by
any third party, including any employee or former employee of the
Corporation or any of its subsid
