Canada |
3563 |
98-0457703 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification Number) |
David Izett Enerflex Ltd. Suite 904, 1331 Macleod Trail S.E. Calgary, Alberta, Canada, T2G 0K3 (403) 387-6377 |
Brian Fenske Norton Rose Fulbright US LLP 1301 McKinney Street, Ste. 5100 Houston, Texas 77010 (713) 651-5151 |
Kelly M. Battle Exterran Corporation 11000 Equity Drive Houston, Texas 77041 (281) 836-7000 |
Keith Townsend Robert J. Leclerc King & Spalding LLP 1180 Peachtree St. NE Atlanta, GA 30309 (404) 572-4600 |
U.S. Exchange Act Rule 13e-4(i) ( Cross-Border Issuer Tender Offer |
☐ | |
U.S. Exchange Act Rule 14d-1(d) ( Cross-Border Third Party Tender Offer |
☐ |
† |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
PROXY STATEMENT OF EXTERRAN CORPORATION |
PROSPECTUS OF ENERFLEX LTD. |
Sincerely, |
|
Andrew J. Way |
President and Chief Executive Officer |
Exterran Corporation |
Exterran Corporation 11000 Equity Drive Houston, Texas 77041 Attention: Corporate Secretary Telephone: (281) 836-7000 |
Enerflex Ltd. Suite 904, 1331 Macleod Trail S.E. Calgary, Alberta, Canada, T2G 0K3 Attention: Office of the Corporate Secretary and Associate General Counsel, Corporate Telephone: (403) 387-6377 |
Period End |
Average |
Low |
High |
|||||||||||||
Year ended (C$ per US$) |
||||||||||||||||
2021 (1) |
1.2740 | 1.2535 | 1.2040 | 1.2933 | ||||||||||||
2020 (2) |
1.2732 | 1.3415 | 1.2718 | 1.4496 | ||||||||||||
2019 (3) |
1.2988 | 1.3269 | 1.2988 | 1.36 | ||||||||||||
2018 (4) |
1.3642 | 1.2957 | 1.2288 | 1.3642 | ||||||||||||
2017 (5) |
1.2545 | 1.2986 | 1.2128 | 1.3743 | ||||||||||||
2016 (6) |
1.3427 | 1.3248 | 1.2544 | 1.4589 | ||||||||||||
Month ended (C$ per US$) |
||||||||||||||||
January 2022 |
1.2719 | 1.2616 | 1.2474 | 1.2772 | ||||||||||||
February 2022 |
1.2698 | 1.2716 | 1.2677 | 1.2832 | ||||||||||||
March 2022 |
1.2496 | 1.2658 | 1.2470 | 1.2867 | ||||||||||||
April 2022 |
1.2895 | 1.2641 | 1.2451 | 1.2895 |
(1) | From January 2, 2021 through December 31, 2021 |
(2) | From January 2, 2020 through December 31, 2020 |
(3) | From January 2, 2019 through December 31, 2019 |
(4) | From January 2, 2018 through December 31, 2018 |
(5) | From January 3, 2017 through December 29, 2017 |
(6) | From January 4, 2016 through December 30, 2016 |
• | to consider and vote on a proposal (which we refer to as the “Exterran merger proposal”) to adopt the Agreement and Plan of Merger, dated as of January 24, 2022 (which, as it may be amended from time to time, we refer to as the “Merger Agreement”), by and among Enerflex Ltd. (which we refer to as “Enerflex”), Enerflex US Holdings Inc., a Delaware corporation and direct wholly owned subsidiary of Enerflex (which we refer to as “merger sub”), and Exterran; |
• | to consider and vote on a proposal (which we refer to as the “Exterran compensation proposal”) to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Exterran’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Merger Agreement; and |
• | to consider and vote on a proposal (which we refer to as the “Exterran adjournment proposal”) to approve the adjournment of the Exterran special meeting from time to time to solicit additional proxies in favor of the Exterran merger proposal if there are insufficient votes at the time of such adjournment to approve the Exterran merger proposal, to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to Exterran stockholders or if otherwise determined by the chairperson of the meeting to be necessary or appropriate. |
11 | ||||
21 | ||||
34 | ||||
34 | ||||
35 | ||||
38 | ||||
38 | ||||
38 | ||||
39 | ||||
39 | ||||
39 | ||||
41 | ||||
42 | ||||
42 | ||||
42 | ||||
43 | ||||
43 | ||||
44 | ||||
44 | ||||
44 | ||||
45 | ||||
45 | ||||
46 | ||||
48 | ||||
49 | ||||
50 | ||||
52 | ||||
52 | ||||
53 | ||||
54 | ||||
54 | ||||
68 | ||||
81 | ||||
84 | ||||
86 | ||||
88 | ||||
88 | ||||
88 | ||||
88 | ||||
89 | ||||
89 | ||||
89 | ||||
91 | ||||
91 | ||||
91 | ||||
92 | ||||
93 |
93 | ||||
93 | ||||
94 | ||||
95 | ||||
95 | ||||
95 | ||||
96 | ||||
108 | ||||
113 | ||||
116 | ||||
123 | ||||
128 | ||||
129 | ||||
129 | ||||
133 | ||||
133 | ||||
134 | ||||
134 | ||||
135 | ||||
135 | ||||
135 | ||||
136 | ||||
136 | ||||
137 | ||||
141 | ||||
148 | ||||
149 | ||||
150 | ||||
151 | ||||
151 | ||||
151 | ||||
152 | ||||
183 | ||||
186 | ||||
188 | ||||
190 | ||||
192 | ||||
201 | ||||
264 | ||||
264 | ||||
275 | ||||
281 | ||||
282 | ||||
325 | ||||
325 | ||||
327 | ||||
329 | ||||
330 | ||||
330 | ||||
330 |
363 | ||||
363 | ||||
363 | ||||
363 | ||||
363 | ||||
363 | ||||
363 | ||||
363 | ||||
364 | ||||
365 | ||||
365 | ||||
F-1 | ||||
F-1 | ||||
A-1 | ||||
B-1 | ||||
C-1 | ||||
D-1 |
• | “Absolute EBIT” means EBIT expressed as a dollar value. |
• | “affiliate” refers, with respect to any person, any other person that, directly or indirectly, controls, or is controlled by, or is under common control with, such person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. |
• | “alternative proposal” refers to any written inquiry, proposal, offer or indication of interest made by any third party relating to or concerning (i) a plan of arrangement, amalgamation, merger, reorganization, share exchange, consolidation, business combination, recapitalization, tender offer, exchange offer, or similar transaction involving Enerflex or Exterran, as applicable, in each case, as a result of which the shareholders or stockholders of Enerflex or Exterran, as applicable, immediately prior to such transaction would cease to own at least 80% of the total voting power of Enerflex or Exterran, as applicable, or the surviving entity (or any direct or indirect parent company thereof), as applicable, immediately following such transaction, (ii) the acquisition by any third party of more than 20% of the net revenues, net income or total assets of Enerflex or Exterran, as applicable, and its subsidiaries, on a consolidated basis, or (iii) the direct or indirect acquisition by any third party of more than 20% of the outstanding Enerflex common shares or shares of Exterran common stock, as applicable. |
• | “antitrust authorities” refers to the relevant competition authorities in the jurisdictions listed as set forth in the Merger Agreement. |
• | “asset-based facility” refers to a credit facility of up to $52.5 million U.S. dollars secured by certain assets of a subsidiary of Enerflex. |
• | “AST” means American Stock Transfer and Trust Company, LLC, the registrar and transfer agent of the shares of Exterran common stock. |
• | “bank facility” refers to the syndicated revolving credit facilities entered into pursuant to a credit agreement made as of June 1, 2011, amended and restated as of June 30, 2014, and further amended and restated as of May 2, 2019, as amended by the first amending agreement made as of July 16, 2021, among Enerflex, Enerflex Australasia Holdings Pty Ltd., the Toronto Dominion Bank, the Bank of Nova Scotia, and certain other lenders. |
• | “business day” refers to any day other than a Saturday, Sunday or a day on which the banks in New York, New York or Calgary, Alberta, Canada, are authorized by law or executive order to be closed. |
• | “Canadian Securities Administrators” means the Alberta Securities Commission and any other applicable securities commission or securities regulatory authority of a province or territory of Canada. |
• | “Canadian tax act” refers to the Income Tax Act |
• | “capital employed” means debt plus equity less cash. |
• | “CBCA” refers to the Canada Business Corporations Act, R.S.C., 1985, c. C-44, as amended. |
• | “closing” refers to the closing of the transaction. |
• | “closing date” refers to the date on which the closing of the transaction actually occurs. |
• | “Code” refers to the U.S. Internal Revenue Code of 1986, as amended. |
• | “combined company” refers to Enerflex, as combined with Exterran, after the closing of the merger. |
• | “compliant” means, with respect to the required financing information, that: (a) the required financing information does not contain any untrue statement of a material fact regarding Exterran or any of its subsidiaries or omit to state any material fact regarding Exterran or any of its subsidiaries necessary in order to make the required financing information not misleading, in light of the circumstances under which the statements contained in the required financing information are made; (b) the financial statements described in clause (a) of the definition of “required financing information” are compliant in all material respects with all requirements of Regulation S-X promulgated by the SEC applicable to offerings of debt securities on a registration statement on Form S-1 that are applicable to such financial statements (other than such provisions for which compliance is not customary in a Rule 144A offering of high yield debt securities); (c) Exterran’s independent auditors will not have withdrawn, or advised Exterran that they intend to withdraw, any audit opinion with respect to any audited financial statements contained in the required financing information, in which case such financial information will not be deemed to be compliant pursuant to this clause (c) (unless and until a new unqualified audit opinion has been received in respect thereof from such auditors or another nationally recognized independent registered accounting firm of national standing); (d) in connection with any debt financing involving the offering of debt securities, Exterran’s independent registered public accounting firm will have consented to the use of its audit opinions with respect to any required financing information audited by such firm and will have confirmed that they are prepared to issue customary comfort letters, including customary negative assurance, upon the “pricing” of such debt securities and throughout the period ending on the last day of the marketing period (subject to the completion by such accountants of customary procedures relating thereto); and (e) Exterran will have not been informed by such independent registered public accounting firm of Exterran that it is required to restate, and Exterran has not restated (or is not actively considering any such restatement; provided, that such required financing information shall be deemed to be compliant pursuant to this clause (e) when Exterran informs Enerflex in writing that it has concluded that no restatement is required in accordance with GAAP) any financial statements contained in the required financing information; provided, further, that if any such restatement occurs, the required financing information will be deemed to be compliant pursuant to this clause (e) if and when such restatement has been completed and the relevant financial statements have been amended and delivered to Enerflex. |
• | “credit facility” refers to the second amended and restated credit agreement, dated as of October 9, 2018, by and among Exterran, Exterran Energy Solutions, L.P., the guarantors party thereto, Wells Fargo Securities, as administrative agent, and the other parties thereto (as the same may be amended, restated or otherwise modified from time to time). |
• | “debt commitment letters” refers to the debt commitment letter delivered at signing of the Merger Agreement and all exhibits, schedules, term sheets, annexes, supplements, amendments and other permitted modifications thereto and any fee letter(s) with respect thereto (in each case together with joinders to add additional financing parties). |
• | “debt financing” refers to the debt financing contemplated in the debt commitment letters, together with any replacement debt financing permitted under the Merger Agreement, including any bank financing or debt securities issued in lieu thereof. |
• | “DGCL” refers to the General Corporation Law of the State of Delaware. |
• | “DSU” means deferred share units—a notional unit with a value equal to an Enerflex share that can only be redeemed when the individual leaves Enerflex. |
• | “DSU plan” means the Enerflex deferred share unit plan, as amended from time to time. |
• | “EBIT” means earnings before interest and taxes for the trailing 12-month period. |
• | “EBIT %” means EBIT expressed as a percent of revenue. |
• | “effective time” refers to such time as the certificate of merger is duly filed with the secretary of state of the state of Delaware, or at such later time as may be agreed by Exterran and merger sub in writing and specified in the certificate of merger in accordance with the DGCL. |
• | “EMT” means the executive management team of Enerflex, and includes the NEOs. |
• | “end date” refers to October 24, 2022; provided, that to the extent the debt financing has not been obtained or the condition to obtain the antitrust authorizations required to be obtained with respect to the transactions contemplated by the Merger Agreement has not been satisfied on or prior to October 24, 2022, the end date will be automatically extended for 30 days; provided, further, that if the marketing period has started within 15 days of the end date but has not ended or will not end on or prior to the end date, the end date will be automatically extended to the next business day after the last scheduled day of such marketing period. |
• | “Enerflex” refers to Enerflex Ltd., a corporation formed under the CBCA. |
• | “Enerflex board” refers to the board of directors of Enerflex. |
• | “Enerflex common shares” refers to common shares in the capital of Enerflex. |
• | “Enerflex disclosure schedules” refers to the disclosure schedules to the Merger Agreement provided by Enerflex. |
• | “Enerflex shareholder approval” refers to the affirmative vote of a majority of the votes cast by the holders of outstanding Enerflex common shares represented in person or by proxy and entitled to vote on such matter in favor of the approval of the issuance of Enerflex common shares at the Enerflex special meeting, or any adjournment or postponement thereof, in accordance with the rules and policies of the CBCA and the TSX. |
• | “Enerflex shareholders” refers to the holders of Enerflex common shares. |
• | “Enerflex special meeting” refers to the special meeting of Enerflex shareholders to be held on [ ], 2022 and any adjournments or postponements thereof. |
• | “ESPP” means the Enerflex employee share purchase plan. |
• | “excepted stockholder” refers to an Exterran stockholder who would be treated as a “five-percent transferee shareholder” of Enerflex within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii) following the transaction who does not enter into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8. |
• | “exchange agent” refers to the transfer agent or bank or trust company designated by Enerflex and merger sub to serve as exchange agent under the Merger Agreement and approved in advance by Exterran in writing (which approval will not be unreasonably withheld, conditioned or delayed). |
• | “exchange ratio” means 1.021. |
• | “Exterran” refers to Exterran Corporation, a Delaware corporation. |
• | “Exterran adjournment proposal” refers to the proposal to approve the adjournment of the Exterran special meeting from time to time to solicit additional proxies in favor of the Exterran merger proposal if there are insufficient votes at the time of such adjournment to approve the Exterran merger proposal, to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to Exterran stockholders or if otherwise determined by the chairperson of the meeting to be necessary or appropriate. |
• | “Exterran board” refers to the board of directors of Exterran. |
• | “Exterran common stockholders” refers to the Exterran stockholders. |
• | “Exterran compensation proposal” refers to the proposal that Exterran stockholders will vote on at the Exterran special meeting to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Exterran’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Merger Agreement. |
• | “Exterran equity awards” collectively refers to the Exterran restricted share awards, Exterran RSU awards, and Exterran performance share awards. |
• | “Exterran intellectual property” refers to all the intellectual property that Exterran and its subsidiaries own or have a written, valid and enforceable right and license to use, which intellectual property is necessary for the operation of their respective businesses conducted as of the date of the Merger Agreement. |
• | “Exterran merger proposal” refers to the proposal to adopt the Merger Agreement that Exterran stockholders will vote on at the Exterran special meeting. |
• | “Exterran performance share award” refers to an award of restricted stock units in respect of shares of Exterran common stock granted subject to performance targets. |
• | “Exterran proposals” collectively refers to the Exterran merger proposal, the Exterran compensation proposal and the Exterran adjournment proposal. |
• | “Exterran recommendation” refers to Exterran board’s recommendation to the Exterran stockholders to adopt the Merger Agreement and the transactions contemplated by the Merger Agreement. |
• | “Exterran restricted share award” refers to an award of shares of Exterran common stock granted subject to any vesting, forfeiture or other lapse restrictions. |
• | “Exterran RSU award” refers to an award of restricted stock units (excluding any Exterran performance share award) in respect of shares of Exterran common stock. |
• | “Exterran special meeting” refers to the special meeting of Exterran stockholders to be held on [ ], 2022, and including any adjournment or postponement thereof, for the purpose of obtaining the Exterran stockholders approval of the Exterran proposals in respect of the transaction. |
• | “Exterran stockholder approval” refers to the affirmative vote of the holders of a majority of the outstanding shares of Exterran common stock in favor of the adoption of the Merger Agreement. |
• | “Exterran stockholders” collectively refers to the holders of Exterran common stock. |
• | “financing amounts” refers, collectively, to the obligations of Enerflex and its affiliates that are required to be satisfied on the closing date pursuant to the Merger Agreement and the initial debt commitment letter, including the payment of any fees, expenses and other amounts of, or payable by, Enerflex or merger sub or Enerflex’s other affiliates on the closing date in connection with the merger and the debt financing contemplated by the initial debt commitment letter and for any repayment or refinancing of the outstanding indebtedness of Exterran, Enerflex and/or their respective subsidiaries in accordance with the Merger Agreement. |
• | “financing parties” refers to each person (including each agent, arranger, lender, underwriter, investor or other entity that has committed to provide or arrange or otherwise entered into agreements in connection with any part of the debt financing or any other financing in connection with the transactions contemplated by the Merger Agreement) that at the applicable time has committed, or proposes, to provide or arrange any part of the debt financing or such other financing (including, for greater certainty, any alternative financing in accordance with the Merger Agreement) to Enerflex or any of its subsidiaries pursuant to a debt commitment letter, a definitive agreement or other agreement in connection with the transactions contemplated by the Merger Agreement, as applicable, and their respective representatives, affiliates and their, and their respective, affiliates’ officers, directors, |
employees, controlling persons, agents and representatives and their respective successors and assigns; provided, that neither Enerflex nor any of its affiliates will be a financing party. |
• | “Form F-4” refers to the registration statement on Form F-4 pursuant to which the offer and sale of Enerflex common shares in connection with the merger will be registered pursuant to the U.S. Securities Act and in which this proxy statement/prospectus is included, together with any supplements thereto. |
• | “GAAP” refers to generally accepted accounting practices in the U.S. |
• | “gEPS” means growth in earnings per Enerflex share. |
• | “governmental entity” refers to any United States or foreign, state, provincial, territorial or local governmental or regulatory agency, commission, court, arbitrator, body, entity or authority. |
• | “HRC committee” means the human resources and compensation committee of the Enerflex board. |
• | “IFRS” refers to the international financial reporting standards as issued by the International Accounting Standards Board. |
• | “indebtedness” means, with respect to either Enerflex or Exterran, all borrowings (or funded indebtedness), whether by loans of cash or issuance and sale of debt securities. |
• | “initial debt commitment letter” refers to the fully executed debt commitment letter, dated as of the date of the Merger Agreement, by and among Enerflex and the financing parties specified therein. |
• | “IRS” refers to the U.S. Internal Revenue Service. |
• | “lien” means a lien, mortgage, pledge, security interest, charge, title defect, adverse claims and interests, option to purchase or other encumbrance of any kind or nature whatsoever, but excluding any license of intellectual property or any transfer restrictions of general applicability as may be provided under the U.S. Securities Act, the “blue sky” laws of the various states of the United States or similar law of other applicable jurisdictions. |
• | “management information circular” refers to the management information circular relating to the Enerflex special meeting (together with any amendments or supplements thereto). |
• | “marketing period” refers to the first period of fifteen (15) consecutive calendar days after the date of the Merger Agreement (a) commencing on the date that is three (3) calendar days after the date on which Enerflex will have received the required financing information from Exterran and (b) throughout such period the required financing information will remain compliant; provided that if the required financing information fails to be compliant at any time during the marketing period, then the marketing period will not be deemed to have commenced and the marketing period will only commence when the required financing information is again compliant; provided, further that such fifteen (15) consecutive calendar day period will either be completed on or prior to August 19, 2022, or commence no earlier than September 6, 2022, and will not include, for purposes of determining the number of consecutive calendar days, July 1, 2022 through July 4, 2022. If Exterran in good faith reasonably believes that it has delivered the required financing information, it may deliver to Enerflex written notice to that effect, stating when it believes it completed the applicable delivery, in which case the required financing information will be deemed to have been delivered, subject to the provisos in the first sentence of this definition, on the date of the delivery of the applicable notice to Enerflex (and, if the requirements set forth above as to being compliant are satisfied, the marketing period will be deemed to have commenced on such date), in each case, unless Enerflex in good faith reasonably believes that Exterran has not completed delivery of the required financing information and within two (2) business days after receipt of such notice, Enerflex specifies in writing to Exterran, in reasonable detail, what required financing information was not delivered. |
• | “material adverse effect” refers to, under the Merger Agreement and with respect to Exterran or Enerflex, as applicable, an event, change, circumstance, fact, condition, occurrence, effect or |
development that has, or would reasonably be expected to have, a material adverse effect on (x) the business, operations or condition (financial or otherwise) of Exterran or Enerflex, and their respective subsidiaries, as applicable, taken as a whole, or (y) would or may reasonably be expected to, prevent, materially delay or materially impair the ability of Exterran or Enerflex, as applicable to consummate the transaction (including the merger), but, in the case of each of clauses (x) and (y), will not include events, changes, occurrences, effects or developments relating to (a) changes in general economic or political conditions or the securities, equity, credit or financial markets in general, or changes in or affecting domestic or foreign interest or exchange rates, (b) any decline in the market price or trading volume of the respective party’s common stock or common shares, as applicable, or any change in the credit rating of such party or any of its securities (provided, that the facts and circumstances underlying any such decline or change may be taken into account in determining whether a material adverse effect has occurred to the extent not otherwise excluded by the definition thereof), (c) changes or developments in the industries in which Exterran or Enerflex, as applicable, or their respective subsidiaries operate, (d) changes in law or interpretations thereof or enforcement thereof after the date of the Merger Agreement, (e) the execution, delivery or performance of the Merger Agreement or the public announcement or pendency or consummation of the merger or other transactions contemplated by the merger agreement, including the impact thereof on the relationships of Exterran or Enerflex, as applicable, or any of their respective subsidiaries with employees, partnerships, customers, suppliers, or governmental entities, (f) compliance with the terms of, or the taking or omission of any action required by, the Merger Agreement or consented to (after disclosure to the respective party of all material and relevant facts and information) or requested by such party in writing, (g) any act of civil unrest, civil disobedience, war, terrorism, cyberterrorism, military activity, sabotage or cybercrime, including an outbreak or escalation of hostilities involving Canada or the United States, as applicable, or any other governmental entity or the declaration by Canada or the United States, as applicable, or any other governmental entity of a national emergency or war, or any worsening or escalation of any such conditions threatened or existing on the date of the Merger Agreement, (h) any hurricane, tornado, flood, earthquake, natural disasters, acts of God or other comparable events, (i) any pandemic, epidemic or disease outbreak (including COVID-19) or other comparable events, (j) changes in International Financial Reporting Standards or GAAP or the interpretation or enforcement after the date of the Merger Agreement, (k) any litigation relating to or resulting from the Merger Agreement or the transactions contemplated hereby; or (l) any failure to meet internal or published projections, forecasts, guidance or revenue or earning predictions; (provided, that the facts and circumstances underlying any such failure may be taken into account in determining whether a material adverse effect has occurred to the extent not otherwise excluded by the definition thereof); except, with respect to clauses (a), (c), (g), (h), (i) and (j), if the impact thereof is materially and disproportionately adverse to Exterran or Enerflex, as applicable, and their respective subsidiaries, taken as a whole, relative to the impact thereof on the operations in the industry that Exterran or Enerflex, as applicable, and other participants conduct business, the incremental material disproportionate impact may be taken into account in determining whether there has been a material adverse effect. |
• | “merger” refers to the merger of merger sub with and into Exterran. |
• | “Merger Agreement” means the Agreement and Plan of Merger, dated as of January 24, 2022, by and among Enerflex, merger sub, and Exterran, as it may be amended from time to time. |
• | “merger sub” refers to Enerflex US Holdings Inc., a Delaware corporation and a direct wholly-owned subsidiary of Enerflex. |
• | “Nasdaq” means Nasdaq, Inc. |
• | “NCG Committee” means the nominating and corporate governance committee of the Enerflex board. |
• | “NEO” means named executive officer. |
• | “non-qualified deferred compensation plan” refers to Exterran’s non-qualified deferred compensation plan that will be terminated no later than the day immediately prior to the closing date, in accordance with the terms of the Merger Agreement. |
• | “note purchase agreement” refers to any one of note purchase agreements among Enerflex and a series of private placement lenders dated June 22, 2011 and dated December 15, 2017 with respect to the senior notes. |
• | “NYSE” refers to the New York Stock Exchange. |
• | “option plan” means the Enerflex amended and restated 2013 stock option plan, as approved by Enerflex shareholders on April 16, 2014, amended and restated by the Enerflex board effective December 6, 2017, and further amended and restated by the Enerflex board on February 21, 2020, with the amendment to increase the total number of Enerflex common shares reserved for issuance under the option plan approved by the Enerflex shareholders on May 8, 2020. |
• | “Options” means the options to purchase Enerflex common shares granted under the option plan. |
• | “ordinary course of business” means, with respect to an action taken by any person, that such action is in the ordinary course of business of such person, acting in its own interest as an independent enterprise, consistent with past custom and practice, taking into account any changes to such practices as may have occurred as a result of the outbreak of COVID- 19, including compliance with any COVID-19 measures, and any actions reasonably taken or not taken in response to exigent circumstances. |
• | “organizational documents” means (a) with respect to any person that is a corporation, its articles or certificate of incorporation, memorandum and articles of association, as applicable, and bylaws, or comparable documents, (b) with respect to any person that is a partnership, its certificate of partnership and partnership agreement, or comparable documents, (c) with respect to any person that is a limited liability company, its certificate of formation and limited liability company or operating agreement, or comparable documents, (d) with respect to any person that is a trust or other entity, its declaration or agreement of trust or other constituent document or comparable documents and (e) with respect to any other person that is not an individual, its comparable organizational documents. |
• | “permitted lien” means (a) any lien for taxes or governmental assessments, charges or claims of payment not yet due or payable, being contested in good faith or for which accruals or reserves have been established in accordance with GAAP or IFRS, as applicable, (b) any lien that is a carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar lien arising in the ordinary course of business for amounts that are not yet due or that do not materially detract from the value of or materially interfere with the use of any of the assets, (c) zoning, entitlement, building, and other land use regulations imposed by governmental entities having jurisdiction over such person’s owned or leased real property, which are not violated by the current use and operation of such real property, (d) covenants, conditions, restrictions, easements, and other similar non-monetary matters of record affecting title to such person’s owned or leased real property, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such person’s businesses or that are listed on the applicable title documentation that was delivered to parent at least five (5) business days prior to closing, (e) liens the existence of which are disclosed in the notes to the most recent consolidated balance sheet of Exterran or Enerflex, as applicable, or the notes thereto (or securing liabilities reflected on such balance sheet), (f) any right of way or easement related to public roads and highways, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such person’s businesses, and (g) liens arising under workers’ compensation, unemployment insurance, social security, retirement, and similar legislation. |
• | “PSEs” means the phantom share entitlements issued under the PSE plan—a notional unit with a value equal to the fair market value of an Enerflex share. PSEs represent the right only to receive a cash payment in accordance with the terms and conditions of the PSE plan. |
• | “PSE plan ” |
• | “PSUs” means the Enerflex performance share units issued under the PSU plan—a notional unit with a value equal to the fair market value of an Enerflex share. The value received is contingent upon meeting predetermined performance targets and the fair market value at the time of payout. |
• | “PSU plan” means the performance share unit plan of Enerflex, as amended from time to time. |
• | “RBC” refers to RBC Dominion Securities, Inc., a financial advisor to Enerflex in connection with the transaction. |
• | “record date” refers to [ ], 2022. |
• | “representatives” refers to the officers, employees, accountants, consultants, legal counsel, financial advisors and agents and other representatives of a given party. |
• | “required financing information” refers to (a) the financial statements of Exterran required by the initial debt commitment letter as of the closing date, (b) all other financial statements and operating, business and other financial data solely regarding Exterran and its subsidiaries of the type and form that are customarily included in an offering memorandum to consummate a Rule 144A-for-life non-convertible, high yield debt securities under Rule 144A promulgated under the 1933 Act (which information is understood not to include (i) financial statements, information and other disclosures required by Rules 3-05, 3-09, 3-10 or 3-16 of Regulation S-X, the Compensation Discussion and Analysis or other information required by Item 402 of Regulation S-K or the executive compensation and related person disclosure rules related to SEC Release Nos. 33-8732A, 34-54302A and IC-27444A, (ii) financial statements or other financial data (including selected financial data) for any period earlier than December 31, 2019, and (iii) other information or financial data customarily excluded from a Rule 144A offering memorandum; provided that Exterran will have no obligation to provide (A) any financial information concerning Exterran that Exterran does not maintain in the ordinary course of business, (B) any other information with respect to Exterran not reasonably available to Exterran under its current reporting systems or (C) trade secrets or information to the extent that the provision thereof would violate any law or obligation of confidentiality binding upon, or waive any privilege that may be asserted by, Exterran or any of Exterran’s affiliates unless any such information referred to in clause (A), (B) or (C), (1) is financial information contemplated by the foregoing clause (a) or (2) is required to ensure that the offering memorandum would not contain any untrue statement of a material fact or omit 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), (c) if the marketing period commences prior to the filing date of an annual report on Form 10-K or a quarterly report on Form 10-Q of Exterran but after the end of its corresponding fiscal year or quarter, as applicable, customary “flash” or “recent developments” data, and (d) such other pertinent and customary information regarding Exterran and its subsidiaries as may be reasonably requested by Enerflex or any of its subsidiaries to the extent necessary to receive from Exterran’s independent accountants customary “comfort” (including “negative assurance” comfort), together with drafts of customary comfort letters that such independent accountants are prepared to deliver upon the “pricing” of any securities, and the closing of the offering thereof with respect to the historical financial information to be included in such offering memorandum. |
• | “ROCE” means a ratio used to measure operating performance and the efficiency of Enerflex’s capital allocation process. The ratio is calculated by taking EBIT for the 12-month trailing period divided by average capital employed for the trailing four quarters. |
• | “RSUs” means the restricted share units issued under the RSU plan—a notional unit with a value equal to the fair market value of an Enerflex share. The value received is contingent upon meeting vesting requirements and the fair market value at the time of payout. |
• | “RSU plan” means the restricted share unit plan of Enerflex, as amended from time to time. |
• | “SEC” refers to the U.S. Securities and Exchange Commission. |
• | “SEC’s website” refers to www.sec.gov . |
• | “SEDAR” refers to the System for Electronic Document Analysis and Retrieval of the Canadian Securities Administrators. |
• | “SEDAR’s website” refers to www.sedar.com. |
• | “senior notes” refers collectively to the US$105.0 million and C$15.0 million seven-year notes maturing on December 15, 2024 issued by Enerflex under the note purchase agreement dated December 15, 2017; and the US$70.0 million and C$30.0 million ten-year notes maturing on December 15, 2027 issued by Enerflex under the note purchase agreement dated December 15, 2017. |
• | “special meeting website” refers to the website located at www.proxydocs.com/EXTN, where Exterran stockholders will be able to attend the Exterran special meeting online and vote their Exterran shares of common stock electronically. |
• | “STI plan” or “STIP” means the short-term incentive plan pursuant to which Enerflex may grant short-term variable pay to its executives. |
• | “subsidiaries” means, with respect to any person, any corporation, limited liability company, partnership or other organization, whether incorporated or unincorporated or person which (a) such first person directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions or (b) such first person directly or indirectly has the power to appoint a general partner, manager or managing member or others performing similar functions, or otherwise has the power to direct the policies, management and affairs of such other person. |
• | “superior proposal” refers to an unsolicited, bona fide written alternative proposal, substituting in the definition of alternative proposal “20%” for “80%” and “80%” for “20%” in each place each such phrase appears, made after January 24, 2022, that the applicable party’s board of directors determines in good faith, after consultation with the applicable party’s outside legal and financial advisors, and considering all legal, financial, financing and regulatory aspects of the proposal, the identity of the person(s) making the proposal, the conditions to the closing and the timing and likelihood of the proposal being consummated in accordance with its terms, would, if consummated, result in a transaction (A) that is more favorable to such party’s shareholders or stockholders, as applicable, from a financial point of view than the transactions contemplated by the Merger Agreement and (B) that is reasonably likely to be completed, taking into account any regulatory, financing or approval requirements and any other aspects considered relevant by such party’s board of directors. |
• | “surviving corporation” refers to Exterran as the company that, under the Merger Agreement, survives the merger under Delaware law as a wholly owned subsidiary of Enerflex at the effective time. |
• | “takeover statute” refers to any “fair price,” “moratorium,” “control share acquisition,” “business combination” or other form of anti-takeover statute or regulation that is applicable to the Merger Agreement or the other transactions contemplated by the Merger Agreement. |
• | “total purchase consideration” collectively refers to the merger consideration, and other amounts as defined as consideration by the acquisition method of accounting. |
• | “transaction” refers to the merger as contemplated under the Merger Agreement. |
• | “Treasury Regulations” refers to U.S. Treasury regulations promulgated under the Code. |
• | “TRIR” means the total recordable injury rate calculated by multiplying the number of recordable injuries in a calendar year by 200,000 (100 employees working 2,000 hours per year) and dividing the value by the total hours worked in the year. |
• | “TSR” means total shareholder return. |
• | “TSX” refers to the Toronto Stock Exchange. |
• | “U.S.” refers to the United States of America. |
• | “U.S. Exchange Act” refers to the U.S. Securities Exchange Act of 1934, as amended. |
• | “U.S. Securities Act” refers to the U.S. Securities Act of 1933, as amended. |
• | “Wells Fargo Securities” refers to Wells Fargo Securities, LLC, financial advisor to Exterran in connection with the transaction. |
Q: |
Why am I receiving this proxy statement/prospectus? |
A: | You are receiving this proxy statement/prospectus because Exterran has agreed to be acquired by Enerflex through a merger of merger sub with and into Exterran, with Exterran surviving as a wholly owned subsidiary of Enerflex. The Merger Agreement, which governs the terms and conditions of the transaction, is attached to this proxy statement/prospectus as Annex A. |
Q: |
What matters am I being asked to vote on? |
A: | In order to complete the transaction, among other things, Exterran stockholders must approve the proposal to adopt the Merger Agreement in accordance with the DGCL. |
• | a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Exterran’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Merger Agreement; and |
• | a proposal to approve the adjournment of the Exterran special meeting from time to time to solicit additional proxies in favor of the Exterran merger proposal if there are insufficient votes at the time of such adjournment to approve the Exterran merger proposal, to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to Exterran stockholders or if otherwise determined by the chairperson of the meeting to be necessary or appropriate. |
Q: |
When and where will the Exterran special meeting take place? |
A: | The Exterran special meeting will be held virtually via the internet on [ ], 2022, beginning at [ ] [am/pm], Central Time. The Exterran special meeting will be held solely via live audio webcast and there will not be a physical meeting location. Exterran stockholders will be able to attend the Exterran special meeting online and vote their shares electronically during the meeting by visiting |
www.proxydocs.com/EXTN. If you choose to attend the Exterran special meeting and vote your shares during the Exterran special meeting, you will need the control number located on your proxy card as described in the section entitled “ The Exterran Special Meeting— Date, Time and Place of the Exterran Special Meeting |
Q: |
Does my vote matter? |
A: | Yes, your vote is very important, regardless of the number of shares that you own. The transaction cannot be completed unless, among other things, the Exterran merger proposal is approved by Exterran stockholders. |
Q: |
What will Exterran stockholders receive for their Exterran common stock if the transaction is completed? |
A: | Under the Merger Agreement, at the effective time, each share of common stock of Exterran, par value $0.01 per share, issued and outstanding immediately prior to the effective time of the merger (other than certain excluded shares as described in the Merger Agreement) will be converted into the right to receive the “exchange ratio” of 1.021 validly issued, fully paid and non-assessable Enerflex common shares. Each holder of Exterran common stock will receive cash (without interest and less any applicable withholding taxes) in lieu of any fractional Enerflex common shares that such stockholder would otherwise receive as merger consideration in the transaction. Any cash amounts to be received by Exterran stockholders in lieu of any fractional Enerflex common shares will be rounded to the nearest cent. |
Q: |
How does the Exterran board recommend that I vote at the Exterran special meeting? |
A: | The Exterran board unanimously recommends that you vote “ FOR FOR FOR |
Q: |
Have any of Exterran’s stockholders already agreed to approve the proposal to adopt the Merger Agreement? |
A: | Yes, pursuant to voting agreements entered into with certain stockholders, all of the funds managed by Chai Trust Company, LLC that own Exterran common stock (which we refer to as “Exterran supporting stockholders”) and all of the directors and officers of Exterran have agreed, subject to the terms and conditions of the voting agreements, to vote the shares beneficially owned by them, specifically, an aggregate of 8,157,415 shares of Exterran common stock (or [24.57]% of the outstanding shares as of [ ], 2022) in the case of the Exterran supporting stockholders, and an aggregate of 1,218,412 shares of Exterran common stock (or [3.67]% of the outstanding shares as of [ ], 2022 and together with the Exterran supporting stockholders, [28.24]% of the outstanding shares as of [ ], 2022), in the case of the directors and officers of Exterran, in favor of the adoption of the Merger Agreement and the approval of the transaction. The Exterran supporting stockholders and directors and officers also agreed to certain restrictions on the transfer of the shares beneficially owned by that stockholder at such time (which we refer to as the “covered shares”), as well as restrictions on transfer of voting rights with respect to the covered shares. For additional information, see the section entitled “ The Voting Agreements |
Q: |
If my Exterran stock is represented by physical stock certificates, should I send my stock certificates now? |
A: | No. After the transaction is completed, you will receive a transmittal form from the exchange agent with instructions for the surrender of your Exterran stock certificates. Please do not send your stock certificates with your proxy card. |
Q: |
Who may vote at the Exterran special meeting? |
A: | All holders of record of shares of Exterran common stock who held shares at the close of business on [ ] are entitled to receive notice of, and to vote at, the Exterran special meeting. Each such holder of Exterran common stock is entitled to cast one vote on each matter properly brought before the Exterran special meeting for each share of Exterran common stock that such holder owned of record as of the record date. Attendance at the Exterran special meeting is not required to vote. See below and the section entitled “ The Exterran Special Meeting—Voting by Proxy or in Person |
Q: |
What is a proxy? |
A: | A proxy is a stockholder’s legal designation of another person to vote shares owned by such stockholder on their behalf. The document used to designate a proxy to vote your shares of Exterran common stock is referred to as a “proxy card.” |
Q: |
How many votes does each share of Exterran common stock have? |
A: | Each Exterran stockholder is entitled to one vote for each share of Exterran common stock held of record as of the record date. As of the record date, there were [ ] outstanding shares of Exterran common stock. |
Q: |
How many votes must be present to hold the Exterran special meeting? |
A: | A quorum is the minimum number of shares required to be represented, either by the appearance of the stockholder in person (including virtually) or through representation by proxy, to hold a valid meeting. |
Q: |
Where will the Enerflex common shares that I receive in the transaction be publicly traded? |
A: | Enerflex intends to apply to list the common shares of Enerflex received by Exterran stockholders in the merger on the NYSE or Nasdaq under the symbol “[ ].” The Enerflex common shares are currently listed on the TSX under the symbol “EFX”. Conditional listing approval of the Enerflex common shares on the NYSE or Nasdaq, as the case may be, and the conditional listing approval by the TSX of the Enerflex common shares to be issued to Exterran stockholders pursuant to the Merger Agreement is a condition to the closing of the Merger Agreement. [The TSX has conditionally approved the listing of the Enerflex common shares to be issued to Exterran stockholders pursuant to the Merger Agreement], which Enerflex common shares will be registered in the U.S. pursuant to this proxy statement/prospectus. Listing of such Enerflex common shares is subject to Enerflex fulfilling all of the requirements of the TSX on or before the business day following the closing date. Enerflex is required under the terms of the Merger Agreement to apply to the NYSE or Nasdaq to list the Enerflex common shares to be issued to Exterran stockholders pursuant to the Merger Agreement on the NYSE or Nasdaq, which Enerflex common shares will be registered in the U.S. pursuant to this proxy statement/prospectus. Listing will be subject to Enerflex fulfilling all the listing requirements of the NYSE or Nasdaq. There can be no assurance that the Enerflex common shares will be accepted for listing on either the NYSE or Nasdaq and the TSX. |
Q: |
What happens if the transaction is not completed? |
A: | If the Exterran merger proposal is not approved by Exterran stockholders, or if the transaction is not completed for any other reason, Exterran stockholders will not receive the merger consideration or any other consideration in connection with the transaction, and their Exterran common stock will remain outstanding. |
Q: |
What is a “broker non-vote”? |
A: | Under the NYSE rules, banks, brokers and other nominees may use their discretion to vote “uninstructed” shares (i.e., shares of record held by banks, brokers or other nominees, but with respect to which the beneficial owner of such shares has not provided instructions on how to vote on a particular proposal) with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. All of the Exterran proposals are “non-routine” matters under NYSE rules. |
Q: |
What stockholder vote is required for the approval of each Exterran proposal at the Exterran special meeting? What will happen if I fail to vote or abstain from voting on each Exterran proposal at the Exterran special meeting? |
A: | Proposal 1: Exterran Merger Proposal AGAINST |
Q: |
Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, the compensation that may be paid or become payable to Exterran’s named executive officers (i.e ., the Exterran compensation proposal)? |
A: | Under SEC rules, Exterran is required to seek a non-binding, advisory vote of its stockholders with respect to the compensation that may be paid or become payable to Exterran’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Merger Agreement. |
Q: |
What happens if Exterran stockholders do not approve, by non-binding, advisory vote, the compensation that may be paid or become payable to Exterran’s named executive officers (i.e., the Exterran compensation proposal)? |
A: | Because the vote to approve the Exterran compensation proposal is advisory in nature, the outcome of the vote will not be binding upon Exterran or the combined company, and the completion of the transaction is |
not conditioned or dependent upon the approval of the Exterran compensation proposal. Accordingly, the compensation that is subject to the vote, which is described in the section entitled “ The Exterran Merger Proposal—Interests of Exterran’s Directors and Executive Officers in the Transaction |
Q: |
How can I vote my shares at the Exterran special meeting? |
A: | Shares held directly in your name as the stockholder of record of Exterran may be voted during the Exterran special meeting via the special meeting website. If you choose to vote your shares during the virtual meeting, you will need the control number included on your proxy card in order to access the special meeting website and to vote as described in the section entitled “ The Exterran Special Meeting—Voting by Proxy or in Person |
Q: |
How can I vote my shares without attending the Exterran special meeting? |
A: | Stockholders of record of Exterran may direct their vote by proxy without attending the Exterran special meeting. If you are a stockholder of record, you can vote by proxy over the internet, or by telephone or by mail by following the instructions provided in the enclosed proxy card. Please note that if you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee. Additional information on voting procedures can be found under the section entitled “ The Exterran Special Meeting |
Q: |
What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in “street name?” |
A: | If your shares of Exterran common stock are registered directly in your name with AST, the transfer agent for Exterran, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote your shares directly at the Exterran special meeting. You may also grant a proxy for your vote directly to Exterran or to a third party to vote your shares at the Exterran special meeting. |
Q: |
If my shares of Exterran common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote those shares for me? |
A: | No. Your bank, broker or other nominee will only be permitted to vote your shares of Exterran common stock if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares. Under NYSE rules, banks, brokers and other nominees who hold shares of Exterran common stock in “street name” for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are prohibited from exercising their voting discretion with respect to non-routine matters, which include all the Exterran proposals. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokers and other nominees are not empowered to vote such shares. |
Q: |
What should I do if I receive more than one set of voting materials for the Exterran special meeting? |
A: | If you hold shares of Exterran common stock in “street name” and also directly in your name as a stockholder of record or otherwise, or if you hold shares of Exterran common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the Exterran special meeting. |
Q: |
If a stockholder gives a proxy, how are the shares of Exterran common stock voted? |
A: | Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Exterran common stock in the way that you indicate. For each item before the Exterran special meeting, you may specify whether your shares of Exterran common stock should be voted for or against, or should abstain from voting. |
Q: |
How will my shares of Exterran common stock be voted if I return a blank proxy? |
A: | If you sign, date and return your proxy and do not indicate how you want your shares of Exterran common stock to be voted, then your shares of Exterran common stock will be voted in accordance with the recommendations of the Exterran board: “ FOR FOR FOR |
Q: |
Can I change my vote after I have submitted my proxy? |
A: | Any Exterran stockholder giving a proxy has the right to revoke the proxy and change their vote before the proxy is voted at the Exterran special meeting by doing any of the following: |
• | by voting again by internet or telephone as instructed on your proxy card before the closing of the voting facilities at [ ], Central Time, on [ ]; |
• | by delivering a signed written notice of revocation to Exterran’s Corporate Secretary, provided such statement is received no later than [ ]; |
• | by submitting a properly signed and dated proxy card with a later date that is received by Exterran no later than the close of business on [ ]; or |
• | by voting at the Exterran special meeting via the special meeting website. |
Q: |
If I hold my shares in “street name,” can I change my voting instructions after I have submitted voting instructions to my bank, broker or other nominee? |
A: | If your shares are held in the name of a bank, broker or other nominee and you previously provided voting instructions to your bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee to revoke or change your voting instructions. |
Q: |
Where can I find the voting results of the Exterran special meeting? |
A: | The preliminary voting results for the Exterran special meeting are expected to be announced at the Exterran special meeting. In addition, within four business days following the special meeting, Exterran will file the final voting results of the Exterran special meeting (or, if the final voting results have not yet been certified, the preliminary results) with the SEC on a Current Report on Form 8-K. |
Q: |
Do Exterran stockholders have dissenters’ or appraisal rights? |
A: | No. Because Exterran common stock will be listed on the NYSE as of the record date for the Exterran special meeting and Exterran stockholders are solely receiving Enerflex common shares (and such shares |
must be listed on NYSE or Nasdaq as a condition to the merger) and cash in lieu of fractions thereof as merger consideration in exchange for their Exterran common stock, no appraisal rights are available under Section 262 of the DGCL with respect to the merger or the other transactions contemplated by the Merger Agreement. |
Q: |
Are there any risks that I should consider in deciding whether to vote for the approval of the Exterran merger proposal? |
A: | Yes. You should read and carefully consider the risk factors set forth in the section entitled “ Risk Factors |
Q: |
What happens if I sell my shares of Exterran common stock after the record date but before the Exterran special meeting? |
A: | The record date is earlier than the date of the Exterran special meeting. If you sell or otherwise transfer your shares of Exterran common stock after the record date but before the Exterran special meeting, you will, unless special arrangements are made, retain your right to vote at the Exterran special meeting. |
Q: |
Who is paying for the Exterran special meeting and this proxy solicitation? |
A: | Exterran has engaged Innisfree M&A Incorporated (which we refer to as “Innisfree”) to assist in the solicitation of proxies for the Exterran special meeting. Exterran estimates that it will pay Innisfree a fee of approximately $20,000, plus reimbursement for certain out-of-pocket |
Q: |
When is Enerflex’s acquisition of Exterran expected to be completed? |
A: | Subject to the satisfaction or waiver of the closing conditions described under the section entitled “ The Merger Agreement—Conditions that Must Be Satisfied or Waived for the Transaction to Occur 30-day extension to obtain antitrust approvals and financing. |
Q: |
What equity stake will Exterran stockholders hold in Enerflex immediately following the transaction? |
A: | Based on the number of Enerflex common shares and shares of Exterran common stock outstanding on [ ], 2022, at the effective time, former Exterran stockholders are expected to own approximately 27.5% of the outstanding Enerflex common shares, and persons who were Enerflex shareholders immediately prior to the transaction are expected to own approximately 72.5% of the outstanding Enerflex |
common shares. The relative ownership interests of Enerflex shareholders and former Exterran stockholders in Enerflex immediately following the transaction will depend on the number of Enerflex common shares and shares of Exterran common stock issued and outstanding immediately prior to the transaction. |
Q: |
If I am a holder of Exterran common stock, how will I receive the merger consideration to which I am entitled? |
A: | If you hold your shares of Exterran common stock in book-entry form, whether through The Depository Trust or otherwise, you will not be required to take any specific actions to exchange your shares for Enerflex common shares. Your shares of Exterran common stock will, at the effective time, be automatically exchanged for the Enerflex common shares and any cash in lieu of fractional Enerflex common shares to which you are entitled. If you instead hold your shares of Exterran common stock in certificated form, then, after receiving the proper and completed documentation from you following the completion of the transaction, [ ] or a bank or trust company or similar institution selected by Enerflex with Exterran’s prior approval will deliver to you the Enerflex common shares and any cash in lieu of any fractional Enerflex common shares to which you are entitled as merger consideration. More information may be found in the sections entitled “ The Merger Agreement—Merger Consideration The Merger Agreement—No Fractional Shares |
Q: |
Will the Enerflex common shares to be issued to Exterran stockholders at the effective time be traded on an exchange? |
A: | Yes. It is a condition to the completion of the transaction that the Enerflex common shares to be issued in connection with the merger be approved for listing on the NYSE or Nasdaq, subject to official notice of issuance, and the TSX, subject to customary listing conditions. Enerflex intends to apply to list the Enerflex common shares received by Exterran stockholders in the merger, on the NYSE or Nasdaq under the symbol “[ ]” and the TSX under the symbol “EFX.” |
Q: |
What are the material U.S. federal income tax consequences of the transaction? |
A: | Enerflex and Exterran intend that the transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (which we refer to as the “Code”) and that Section 367(a)(1) of the Code will not apply to cause the transaction to result in gain recognition by U.S. Exterran stockholders that exchange their shares of Exterran common stock for the merger consideration (other than any such holder of Exterran common stock who would be treated as a “five-percent transferee shareholder” (within the meaning of Section 1.367(a)-3(c)(5)(ii) of the U.S. Treasury regulations promulgated under the Code, which we refer to as the “Treasury Regulations”) of Enerflex following the transaction who does not enter into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8 or does not comply with the requirements of that |
agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain, which we refer to as an “excepted shareholder”). However, neither Enerflex nor Exterran intend to seek or obtain a ruling from the U.S. Internal Revenue Service (which we refer to as the “IRS”) regarding the U.S. federal income tax treatment of the transaction. In addition, neither the obligation of Enerflex nor of Exterran to complete the transaction is conditioned upon the receipt of an opinion from counsel to the effect that the transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that the transaction will not result in gain recognition under Section 367(a)(1) of the Code by Exterran stockholders (other than any excepted stockholder). |
Q: |
What are the material Canadian federal income tax consequences of the transaction? |
A: | A Canadian resident holder (as defined in the section entitled “ The Exterran Merger Proposal—Certain Canadian Federal Income Tax Consequences |
Q: |
Is the exchange ratio subject to adjustment based on changes in the prices of Exterran common stock or Enerflex common shares? Can it be adjusted for any other reason? |
A: | For the merger consideration, for each share of Exterran common stock, you will receive a fixed number of Enerflex common shares equal to the exchange ratio of 1.021, not a number of shares that will be |
determined based on a fixed market value. The market value of Enerflex common shares and the market value of Exterran common stock at the effective time may vary significantly from their respective values on the date that the Merger Agreement was executed or at other dates, such as the date of this proxy statement/prospectus or the date of the Exterran special meeting. Stock price changes may result from a variety of factors, including changes in Enerflex’s or Exterran’s respective businesses, operations or prospects, regulatory considerations, and general business, market, industry or economic conditions. The exchange ratio will not be adjusted to reflect any changes in the market value of Enerflex common shares or the market value of Exterran common stock. Therefore, the aggregate market value of the Enerflex common shares that you are entitled to receive at the effective time could vary significantly from the value of such shares on the date of this proxy statement/prospectus or the date of the Exterran special meeting. See the risk factor entitled “ Because the exchange ratio is fixed and the market price of shares of Enerflex common shares has fluctuated and will continue to fluctuate, Exterran stockholders cannot be sure of the value of the merger consideration they will receive in the transaction prior to the closing of the transaction |
Q: |
What should I do now? |
A: | You should read this proxy statement/prospectus carefully and in its entirety, including the annexes, and return your completed, signed and dated proxy card(s) by mail in the enclosed postage-paid envelope or submit your voting instructions by telephone or over the internet as soon as possible so that your shares will be voted in accordance with your instructions. |
Q: |
How can I find more information about Exterran or Enerflex? |
A: | You can find more information about Exterran or Enerflex from various sources described in the section entitled “ Where You Can Find Additional Information |
Q: |
Whom do I call if I have questions about the Exterran special meeting or the transaction? |
A: | If you have questions about the Exterran special meeting or the transaction, or desire additional copies of this proxy statement/prospectus or additional proxies, you may contact: |
• | Because the exchange ratio is fixed and the market price of Enerflex common shares has fluctuated and will continue to fluctuate, Exterran stockholders cannot be sure of the value of the merger consideration they will receive in the transaction prior to the closing of the transaction. |
• | The Enerflex common shares to be received by Exterran stockholders at the effective time will have different rights from shares of Exterran common stock. |
• | In order to complete the transaction, Enerflex and Exterran must obtain certain governmental approvals, and if such approvals are not granted or are granted with conditions that become applicable to the parties, completion of the transaction may be delayed, jeopardized or prevented and the anticipated benefits of the transaction could be reduced. |
• | The Merger Agreement contains provisions that make it more difficult for Enerflex and Exterran to pursue alternatives to the transaction and may discourage other companies from trying to acquire Exterran for greater consideration than what Enerflex has agreed to pay. |
• | Directors and executive officers of Exterran have interests in the transaction that may differ from the interests of Exterran stockholders generally, including, the treatment of outstanding Exterran equity awards under the Merger Agreement, the potential payment of severance benefits and acceleration of outstanding Exterran equity awards upon certain terminations of employment pursuant to change of control agreements, retention awards and rights to ongoing indemnification and insurance coverage. |
• | Except in specified circumstances, if the effective time has not occurred by the end date, either Exterran or Enerflex may choose not to proceed with the transaction. |
• | Current Enerflex shareholders and Exterran stockholders will have a reduced ownership and voting interest after the transaction and will have less input into the management of the combined company. |
• | Exterran and Enerflex may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the transaction from being completed. |
• | If the transaction is not treated as a “reorganization” for U.S. federal income tax purposes, or if the requirements for exception to Section 367(a) of the Code are not met, Exterran stockholders may be required to recognize gain for U.S. federal income tax purposes upon their exchange shares of Exterran common stock for the merger consideration. |
• | Enerflex and Exterran may have difficulty attracting, motivating and retaining executives and other key employees in light of the combination of Enerflex and Exterran. |
• | If an alternative proposal to acquire Exterran is made, consummation of the transaction may be delayed or impeded. |
• | The financial forecasts are based on various assumptions that may not be realized. |
• | After Enerflex’s combination with Exterran, Enerflex may fail to realize projected benefits and cost savings of the combination, which could adversely affect the value of Enerflex common shares. |
• | Resale of Enerflex common shares following the transaction may cause the market value of Enerflex common shares to decline. |
• | The unaudited pro forma condensed consolidated financial information of Exterran and Enerflex is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of the combined company following the combination of Enerflex and Exterran. |
• | The additional indebtedness that Enerflex will incur in connection with the transaction could adversely affect Enerflex’s financial position, including by decreasing its business flexibility, ability to satisfy its debt obligations or achieve its desired credit rating. |
• | Enerflex or Exterran may waive one or more of the closing conditions without re-soliciting Enerflex shareholder approval or Exterran stockholder approval, respectively. |
• | There may be less publicly available information concerning Enerflex than there is for issuers that are not foreign private issuers because, as a foreign private issuer, Enerflex is exempt from a number of rules under the U.S. Exchange Act and is permitted to file less information with the SEC than issuers that are not foreign private issuers and Enerflex, as a foreign private issuer, is permitted to and intends to follow home country practice in lieu of the listing requirements of the NYSE, subject to certain exceptions. |
• | As a foreign private issuer, Enerflex will not be subject to the provisions of Regulation FD or U.S. proxy rules and will be exempt from filing certain U.S. Exchange Act reports, which could result in the Enerflex common shares being less attractive to investors. |
• | Enerflex has not yet completed its determination regarding whether its existing internal controls over financial reporting are compliant with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. |
• | Enerflex is organized under the laws of Canada and a substantial portion of its assets are, and many of its directors and officers reside, outside of the U.S. As a result, it may not be possible for shareholders to enforce civil liability provisions of the securities laws of the U.S. against Enerflex, its officers, or members of the Enerflex board. |
• | Exchange rate fluctuations may adversely affect the foreign currency value of Enerflex common shares and any dividends. |
• | Energy prices, industry conditions, and the cyclical nature of the energy industry could adversely impact Enerflex’s business and financial operations. |
• | Enerflex’s failure to execute on its projects in a timely and cost-effective manner could have a material adverse effect on Enerflex. |
• | The effects of climate change in the markets Enerflex operates in could result in increased costs, damage to assets and supply chain disruptions, among other impacts, which would adversely impact Enerflex’s business and financial operations. |
• | Technological advances related to alternative energy sources may reduce demand for Enerflex’s products and services. |
• | Investor sentiment regarding the oil and gas industry may impact Enerflex’s access to capital while evolving environmental, social and governance disclosure standards are attracting increased scrutiny from stakeholders and could lead to more costly policies and practices being implemented to the detriment of Enerflex. |
• | Enerflex’s rental contracts vary in duration and Enerflex’s inability to extend or renew rental contracts with customers could adversely impact Enerflex’s business. |
• | Contracted revenue may be adversely impacted as the result of customer cash flow and access to capital constraints. |
• | Enerflex is subject to evolving Health, Safety and Environment (which we refer to as “HSE”) laws and regulations which are becoming increasingly stringent and may have adverse impacts on Enerflex’s financial results and operations. |
• | Enerflex is exposed to various risks associated with conducting its operations internationally. |
• | Enerflex relies on suppliers to source raw materials, component parts and finished products and any loss of relationship with such suppliers could negatively impact Enerflex’s results or operations and customer relationships. |
• | Enerflex is subject to risks inherent in the oil and natural gas services industry which could expose it to substantial liability. To the extent a significant event falls outside the scope of Enerflex’s insurance policies, Enerflex’s results could be materially impacted. |
• | The Enerflex common shares have no trading history in the United States. |
• | The Enerflex common shares will be traded on more than one market and this may result in price variations. |
Date |
Enerflex common shares TSX(1) |
Exterran common stock NYSE(1) |
Equivalent value of merger consideration per share of Exterran stock based on price of Enerflex common shares on TSX |
|||||||||
(C$) |
(US$) |
(C$) |
||||||||||
January 21, 2022 |
7.90 | 3.00 | 8.07 | |||||||||
[ ], 2022 |
(1) | Share prices are based on closing prices. |
• | the affirmative vote of the holders of a majority of the outstanding shares of Exterran common stock in favor of the adoption of the Merger Agreement by Exterran stockholders; |
• | the affirmative vote of a majority of the votes cast by the holders of outstanding Enerflex common shares represented in person or by proxy at the Enerflex special meeting and entitled to vote on the Enerflex share issuance resolution in connection with the transaction by Enerflex shareholders; |
• | the Form F-4 (of which this proxy statement/prospectus forms a part) having become effective in accordance with the provisions of the U.S. Securities Act and no stop order suspending the effectiveness of the Form F-4 having been issued and remaining in effect and no proceeding to that effect having been commenced, unless subsequently withdrawn; |
• | no governmental entity of competent jurisdiction having enacted, issued or promulgated any law that remains in effect that prohibits or makes illegal the consummation of the transaction; |
• | the approvals by the antitrust authorities having been obtained from the antitrust authorities with respect to the transactions contemplated by the Merger Agreement, or deemed obtained as a result of the expiration of all statutory waiting periods, as required; and |
• | Enerflex common shares to be issued to Exterran stockholders pursuant to the Merger Agreement having been conditionally approved for listing on the NYSE or Nasdaq, subject to official notice of issuance, and the TSX, subject to customary listing requirements. |
• | certain representations and warranties of Enerflex and merger sub in the Merger Agreement relating to the absence of certain changes or events that would have a material adverse effect of Enerflex being true and correct in all respects, as of the date of the Merger Agreement and as of the closing date as though made as of such date; |
• | certain representations and warranties of Enerflex and merger sub in the Merger Agreement relating to the capitalization of Enerflex being true and correct in all respects, each as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except for de minimis |
• | certain representations and warranties of Enerflex in the Merger Agreement relating to the qualification, organization, existence and good standing of Enerflex and merger sub, the requisite power and authority of Enerflex and merger sub to enter into the Merger Agreement, the proper authorization by the board of Enerflex and the board and the sole stockholder of merger sub to approve the Merger Agreement and related matters and resolving to recommend that Enerflex shareholders adopt the Merger Agreement, the merger and other transactions contemplated do not conflict with Enerflex’s organizational documents, and no finders or brokers being true and correct in all material respects, each as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date); |
• | all other representations and warranties of Enerflex and merger sub in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except where the failure of such representations and warranties to be true or correct would not have or would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Enerflex, provided that for the purposes of this section, all representations and warranties will be read without giving effect to any limitation indicated by the words material adverse effect or any general materiality qualifier; |
• | Enerflex and merger sub having performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by the Merger Agreement to be performed or complied with by them prior to the closing of the transaction; |
• | no event, change, occurrence, effect or development having occurred since January 24, 2022, that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Enerflex; and |
• | Exterran’s receipt of a certificate, dated as of the closing date and executed by the chief executive officer or another senior officer of Enerflex, certifying that the conditions set forth in the bullets directly above have been satisfied. |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the absence of certain changes or events that would have a material adverse effect being true and correct in all respects, as of the date of the Merger Agreement and as of the closing date as though made as of such date; |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the capitalization of Exterran being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except for de minimis |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the qualification, organization, existence and good standing of Exterran, the proper issuance under applicable securities laws for the outstanding capital stock of Exterran, the requisite power and authority of Exterran to enter into the Merger Agreement, the proper authorization by the board of Exterran to approve the Merger Agreement and related matters and resolving to recommend that Exterran stockholders adopt the Merger Agreement, the merger and other transactions contemplated do not conflict with Exterran’s organizational documents, and no finders or brokers being true and correct in all material respects, each as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date); |
• | all other representations and warranties of Exterran in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be true or correct, individually or in the aggregate, would not have or would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Exterran, provided that for the purposes of this section, all representations and warranties will be read without giving effect to any limitation indicated by the words material adverse effect or any general materiality qualifier; |
• | Exterran having performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by the Merger Agreement to be performed or complied with by it prior to the closing of the transaction; |
• | no event, change, occurrence, effect or development having occurred since January 24, 2022, that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Exterran; and |
• | Enerflex’s receipt of a certificate, dated as of the closing date and executed by the chief executive officer or another senior officer of Exterran, certifying that the conditions set forth in the bullets directly above have been satisfied. |
• | solicit, initiate or knowingly encourage or knowingly facilitate any inquiry regarding, or the making or submission of any proposal, offer or indication of interest that constitutes, or would reasonably be expected to lead to, or result in, an alternative proposal; |
• | engage in, knowingly encourage, continue or otherwise participate in any discussions or negotiations with any person regarding an alternative proposal or any communications regarding or any inquiry, proposal or offer that would reasonably be expected to lead to, or result in, an alternative proposal (except to notify such person that the provisions of the Merger Agreement prohibit any such discussions or negotiations); |
• | furnish any nonpublic information relating to such party or its subsidiaries in connection with or for the purpose of facilitating an alternative proposal or any inquiry, proposal, offer or indication of interest that would reasonably be expected to lead to, or result in, an alternative proposal and request the prompt return or destruction of any confidential information provided to any third party in connection with an alternative proposal; |
• | recommend or enter into any other letter of intent, memorandum of understandings, agreement in principle, option agreement, acquisition agreement, Merger Agreement, joint venture agreement, partnership agreement or other similar agreement with respect to an alternative proposal (except for permitted confidentiality agreements as discussed below); |
• | approve any transaction under, or any third party becoming an “interested stockholder” under Section 203 of the DGCL (or similar takeover statute applicable to Enerflex under Canadian law); or |
• | adopt, approve, endorse, authorize, agree or publicly propose to adopt, approve, endorse or authorize to do any of the foregoing or otherwise knowingly facilitate any effort or attempt to make an alternative proposal. |
• | such party may furnish non-public information to the third party making such alternative proposal (including its representatives, including its equity and debt financing sources) in response to a request for such non-public information, if, and only if, (A) prior to furnishing such information, Exterran or Enerflex, as applicable, receives from the third party making such alternative proposal, an executed confidentiality agreement with confidentiality and use provisions that, in each case, are not less restrictive to such third party than the terms in the Confidentiality Agreement, dated as of October 3, 2021, between Exterran and Enerflex are to the other party (it being understood that such confidentiality agreement does not need to include any “standstill” or similar provisions or otherwise prohibit the making or amendment of any alternative proposal, but such confidentiality agreement will not grant such third party the exclusive right to negotiate with Exterran or Enerflex, as applicable); and (B) such party also provides to the other party, prior to or substantially concurrently with the time such non-public information is provided or made available to such third party, any non-public information furnished to such third party that was not previously furnished to the other party to the Merger Agreement; provided, however, that if the third party making such alternative proposal is a known competitor of Exterran or Enerflex, such party will not provide any commercially sensitive non-public information to such third party other than in accordance with customary “clean room” or other similar procedures designed to limit the disclosure of competitively sensitive information; and |
• | such party may engage in discussions or negotiations with the third party (including its representatives) with respect to the alternative proposal. |
• | by mutual written consent of Exterran and Enerflex; |
• | by either Exterran or Enerflex, if: |
• | the effective time has not occurred on or before the end date; however, if the conditions in the Merger Agreement have not been satisfied or the debt financing has not been obtained on prior to the end date, then the end date will be automatically extended for thirty (30) days. Further, if the marketing period has started within fifteen (15) calendar days of the end date but has not ended or will not end on or prior to the end date, the end date will be automatically extended to the next business date after the last scheduled day of such marketing period. The right to terminate the Merger Agreement pursuant to this prong is not available to the party if the failure of closing to occur by the end date is due to such party’s failure to perform its obligations, covenants or agreement set forth in the Merger Agreement; |
• | any court or other governmental entity of competent jurisdiction that must grant a required antitrust approval has denied approval of the merger and such denial has become final and nonappealable, or any governmental entity of competent jurisdiction has issued a final and nonappealable order permanently enjoining or otherwise prohibiting or making illegal the consummation of the transaction; unless the failure to obtain a required antitrust approval is due to the failure of the party seeking termination to perform or observe its obligations, covenants or agreement set forth in the Merger Agreement; |
• | Exterran stockholder approval is not obtained at Exterran special meeting or at any adjournment or postponement thereof; or |
• | Enerflex shareholder approval is not obtained at Enerflex special meeting or at any adjournment or postponement thereof; or |
• | by Exterran: |
• | if there has been a breach or failure to perform in any material respect by Enerflex or merger sub of any representation, warranty, covenant or agreement set forth in the Merger Agreement and such breach or failure would result in a failure of certain conditions to closing and such breach or failure is not curable prior to the end date, or if curable prior to the end date, has not been cured within 20 business days after the giving of notice thereof by Exterran; however, the right to terminate the Merger Agreement due to such a breach or failure will not be available to Exterran if Exterran is in material breach of any representation, warranty, agreement or covenant contained in the Merger Agreement; |
• | prior to receipt of Exterran stockholder approval, in order to enter into a definitive agreement providing for a superior proposal in respect of Exterran to the extent permitted and subject to compliance with the terms of the Merger Agreement; however, immediately prior to or contemporaneously with the termination of the Merger Agreement, Exterran will pay to Enerflex the Exterran termination fee; |
• | prior to receipt of Enerflex shareholder approval, if Enerflex board has effected a change of recommendation or Enerflex materially breaches its non-solicitation obligations under the Merger Agreement; or |
• | if all the conditions to the merger under the Merger Agreement have been satisfied (other than conditions which by their nature cannot be satisfied until closing), Enerflex and merger sub fail to consummate the closing on the anticipated closing date due to failure of all or a portion of the debt financing to be funded at closing for any reason, and Exterran has delivered to Enerflex written notice confirming that the conditions to merger have been satisfied or waived, as applicable, and Exterran is ready to close but Enerflex and merger sub fail to consummate the closing within five business days following the later of the date the closing should have occurred and receipt of the written notice by Exterran; or |
• | by Enerflex: |
• | if there has been a breach or failure to perform in any material respect by Exterran of any representation, warranty, covenant or agreement set forth in the Merger Agreement and such breach or failure would result in a failure of certain conditions to closing and such breach or failure is not curable prior to the end date, or if curable prior to the end date, has not been cured within 20 business days after the giving of notice thereof by Enerflex; however, the right to terminate the Merger Agreement due to such a breach or failure will not be available to Enerflex if Enerflex or merger sub is in material breach of any representation, warranty, agreement or covenant contained in the Merger Agreement; |
• | prior to the receipt of Enerflex shareholder approval, in order to enter into an agreement providing for an Enerflex superior proposal in accordance with the terms of the Merger Agreement; however, immediately prior to or contemporaneously with the termination of the Merger Agreement, Enerflex pays to Exterran the Enerflex termination fee; or |
• | prior to receipt of Exterran stockholder approval, if Exterran board has effected a change of recommendation, or Exterran materially breaches its non-solicitation obligations under the Merger Agreement. |
• | Exterran may experience negative reactions from the financial markets, including negative impacts on trading prices of Exterran common stock, and from Exterran’s employees, suppliers, vendors, regulators or customers; |
• | Exterran will be required to pay Enerflex a termination payment of $10.0 million, in consideration for the disposition by Enerflex of its contractual rights under the Merger Agreement, if the Merger Agreement is terminated in certain circumstances, including because the Exterran board has changed its recommendation in favor of the transaction or in certain circumstances where, after the date of the Merger Agreement, Exterran enters into an agreement providing for an alternative proposal (for these purposes, substituting in the definition of alternative proposal “50%” for “20%” and for “80%” in each place each such phrase appears, and we refer to such proposal, as a “qualifying transaction”) in respect of Exterran that is publicly proposed or publicly disclosed prior to, and not publicly withdrawn at least two business days prior to, the Exterran special meeting following termination of the Merger Agreement; |
• | the Merger Agreement places certain restrictions on the conduct of Exterran’s business, and such restrictions, the waiver of which is subject to the consent of Enerflex, may prevent Exterran from making certain material acquisitions, entering into or amending certain contracts, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the transaction or, with respect to certain actions, prior to the control date, that Exterran would have made, taken or pursued if these restrictions were not in place; and |
• | matters relating to the transaction (including integration planning) will require substantial commitments of time and resources by Exterran’s management and the expenditure of significant funds in the form of fees and expenses, which would otherwise have been devoted to day-to-day operations |
• | reduced global economic activity and a corresponding decrease in demand for oil and natural gas, which could result in producers being forced to shut-in production and serve to lower demand for Enerflex’s products and services; |
• | impaired supply chain as a result of mass quarantines, lockdowns, or border closures, thereby limiting the supply and increasing the cost of goods and services used in Enerflex’s operations; and |
• | restricted workforce as a result of quarantines and health impacts, rendering employees unable to work or travel. |
• | changes in political and economic conditions, including general political unrest and the imposition of sanctions on countries in which we operate or on customers which we service; |
• | adverse fines or sanctions from regulatory bodies, legal judgments or settlements; |
• | changes in foreign government policies, laws, regulations, and regulatory requirements, or the interpretation, application and/or enforcement thereof; |
• | tax increases or changes in tax laws or in the interpretation, application and/or enforcement thereof; |
• | difficulties in staffing and managing foreign operations including logistical, safety, security, and communication challenges; |
• | difficulties, delays, and expenses that may be experienced or incurred in connection with the movement and clearance of personnel and goods through the customs and immigration authorities of multiple jurisdictions; |
• | recessions and other economic crises that may impact Enerflex’s cost of conducting business in those countries; |
• | the adoption of new, or the expansion of existing, trade restrictions, or embargoes; |
• | limitations on Enerflex’s ability to repatriate cash, funds, or capital invested or held in jurisdictions outside Canada; |
• | difficulty or expense of enforcing contractual rights due to the lack of a developed legal system or otherwise; |
• | confiscation, expropriation, or nationalization of property without fair compensation; |
• | difficulties in engaging third-party agents to interface with clients or otherwise act on Enerflex’s behalf in certain jurisdictions; and |
• | failure to comply with applicable anti-corruption, anti-bribery, sanctions, and trade laws. |
• | Making it more difficult to satisfy contractual obligations; |
• | Increasing vulnerability to general adverse economic conditions and industry conditions; |
• | Limiting the ability to fund future working capital, capital expenditures or acquisitions; |
• | Limiting the ability to refinance debt in the future or borrow additional funds to fund ongoing operations; and |
• | Paying future dividends to shareholders. |
Enerflex Common Shares TSX |
Exterran Common Stock NYSE |
|||||||||||||||
High |
Low |
High |
Low |
|||||||||||||
(in C$) |
(in US$) |
|||||||||||||||
Annual information for the past five calendar years |
||||||||||||||||
2021 |
11.02 | 6.51 | 5.70 | 2.84 | ||||||||||||
2020 |
12.22 | 4.52 | 8.69 | 3.35 | ||||||||||||
2019 |
20.00 | 10.30 | 19.70 | 5.20 | ||||||||||||
2018 |
18.39 | 13.69 | 33.10 | 17.00 | ||||||||||||
2017 |
20.34 | 14.56 | 33.89 | 23.51 | ||||||||||||
Quarterly information for the past quarter and the past two years |
||||||||||||||||
2022 |
||||||||||||||||
First Quarter |
9.70 | 7.44 | 7.70 | 5.57 | ||||||||||||
2021 |
||||||||||||||||
Fourth Quarter |
11.02 | 7.16 | 5.19 | 2.84 | ||||||||||||
Third Quarter |
9.43 | 6.77 | 4.94 | 3.47 | ||||||||||||
Second Quarter |
8.94 | 7.51 | 5.45 | 2.87 | ||||||||||||
First Quarter |
9.58 | 6.51 | 5.70 | 3.36 | ||||||||||||
2020 |
||||||||||||||||
Fourth Quarter |
7.57 | 4.67 | 5.13 | 3.35 | ||||||||||||
Third Quarter |
6.31 | 4.62 | 5.94 | 4.03 | ||||||||||||
Second Quarter |
6.84 | 4.52 | 8.69 | 3.52 | ||||||||||||
First Quarter |
12.22 | 4.81 | 8.50 | 4.60 |
Date |
Enerflex common shares TSX |
Exterran common stock NYSE |
Equivalent value of merger consideration per share of Exterran stock based on price of Enerflex common shares on TSX |
|||||||||
(C$) |
(US$) |
(C$) |
||||||||||
January 21, 2022 |
7.90 | 3.00 | 8.07 | |||||||||
[ ], 2022 |
[ | ] | [ | ] | [ | ] |
Enerflex |
Enerflex |
|||||||
(C$) |
(US$)* |
|||||||
Year Ended December 31, |
||||||||
2021 |
.085 | .067 | ||||||
2020 |
.175 | .137 | ||||||
2019 |
.430 | .331 | ||||||
2018 |
.390 | .286 | ||||||
2017 |
.350 | .279 |
* | Based on Enerflex annual dividend converted to US$ at the Canadian dollar/U.S. dollar annual exchange rate, as reported by the Bank of Canada. |
• | Proposal 1 Adoption of the Merger Agreement |
• | Proposal 2 Approval, on an Advisory (Non-Binding) Basis, of Certain Merger-Related Compensatory Arrangements with Exterran’s Named Executive Officers |
• | Proposal 3 Adjournment of the Exterran Special Meeting |
• | Proposal 1: FOR |
• | Proposal 2: FOR |
• | Proposal 3: FOR |
Proposal |
Required Vote |
Effect of Certain Actions | ||
Proposal 1 Exterran Merger Proposal |
Under Delaware law, approval requires the affirmative vote of at least a majority of the shares of Exterran common stock outstanding as of the record date and entitled to vote on the Exterran merger proposal (assuming a quorum is present). | Shares of Exterran common stock not present at the Exterran special meeting, shares that are present and not voted on the Exterran merger proposal, including due to the failure of any Exterran stockholder who holds their shares in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee with respect to the Exterran merger proposal, and abstentions will have the same effect as a vote “ AGAINST | ||
Proposal 2 Exterran Compensation Proposal |
Pursuant to Exterran’s bylaws, approval requires the affirmative vote of at least a majority of the votes cast affirmatively or negatively on the Exterran compensation proposal. | Assuming a quorum is present, the failure to return or submit your proxy or to attend the Exterran special meeting will have no effect on the Exterran compensation proposal. The failure of any shares present or represented by proxy at the Exterran special meeting to vote affirmatively or negatively on the Exterran compensation proposal will have no effect on such proposal. | ||
Proposal 3 Exterran Adjournment Proposal |
Pursuant to Exterran’s bylaws, assuming a quorum is present at the Exterran special meeting, approval of the Exterran adjournment proposal requires the affirmative vote of at least a majority of the votes cast affirmatively or negatively on the Exterran adjournment proposal. If a quorum is not present, the Exterran adjournment proposal requires the approval of the stockholders present at the Exterran special meeting, by the |
Whether or not a quorum is present, the failure to return or submit your proxy or to attend the Exterran special meeting will have no effect on the Exterran adjournment proposal. Assuming a quorum is present, the failure of any shares present or represented by proxy at the Exterran special meeting to vote affirmatively or negatively on the Exterran adjournment proposal will have no effect on such proposal. |
Proposal |
Required Vote |
Effect of Certain Actions | ||
affirmative vote of the holders of a majority in voting power thereof; provided that the chairperson of the Exterran special meeting may also adjourn such meeting in accordance with Exterran’s bylaws. | Assuming a quorum is not present, the failure of any shares present or represented by proxy at the Exterran special meeting to vote affirmatively on the Exterran adjournment proposal will be treated as a vote “ AGAINST |
• | By Internet |
• | By Telephone |
• | By Mail |
• | Via the Special Meeting Website |
• | by voting again by internet or telephone as instructed on your proxy card before the closing of the voting facilities at [ ] [am/pm], Central Time, on [ ]; |
• | by delivering a signed written notice of revocation to Exterran’s Corporate Secretary, provided such statement is received no later than [ ]; |
• | by submitting a properly signed and dated proxy card with a later date that is received by Exterran no later than the close of business on [ ]; or |
• | by voting at the Exterran special meeting via the special meeting website. |
• | The current, historical and projected financial condition and results of operations of Exterran on a standalone basis, including the risk-adjusted probabilities associated with achieving Exterran’s long-term strategic plan as a standalone company amid greater industry volatility as compared to the opportunity afforded to the Exterran stockholders via the merger consideration. |
• | The Exterran board’s analysis of other potential strategic alternatives for Exterran, including continuing on as an independent company, monetizing Exterran’s water business, and the potential to acquire, be acquired or combine with other third parties. |
• | The oral opinion of Wells Fargo Securities, Exterran’s financial advisor, delivered to the Exterran board, which was confirmed by delivery of a written opinion, dated as of January 23, 2022, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the Exterran stockholders, as more fully described below under the section entitled “ Opinion of the Financial Advisor to Exterran — Opinion of Wells Fargo Securities, LLC |
• | The fact that Wells Fargo Securities and King & Spalding were involved throughout the negotiations and updated the Exterran board directly and regularly, which provided the Exterran board with perspectives on the negotiation in addition to those of management. |
• | The Exterran board’s expectation that the combined company will have the ability to leverage the increased scale of the resulting entity to make additional investments in innovation and technology to address competition and disruption in the oilfield and energy services industries and enhance customer offerings on a global basis. |
• | The fact that Enerflex obtained committed financing to refinance or repay Exterran’s existing indebtedness and pay other expenses in connection with the transaction. |
• | The Exterran board’s belief that Enerflex’s earnings and prospects, and the synergies potentially available in the proposed merger, which are estimated to be up to at least $40.0 million of annual run-rate synergies within 12 to 18 months following the Closing, would create the opportunity for the combined company to have superior future earnings and prospects compared to Exterran’s earnings and prospects on a standalone basis. |
• | The Exterran board’s belief that the pro forma profile of the combined company is expected to have sufficient liquidity and financial flexibility to execute on its strategy, and return capital to shareholders. |
• | The Exterran board’s belief that the combined company will generate significant free cash flow, allowing the return of cash to the combined investor base through dividends, share repurchases and similar actions. |
• | The Exterran board’s belief that the merger will combine complementary product lines, global presence and technology, create a premier integrated global provider of energy infrastructure with the ability to serve customers through strong positions in key business lines and have a fully integrated product and services platform. |
• | The Exterran board’s belief that the merger will result in operational improvements, including margin improvement, personnel reorganization, real estate, corporate costs, research and development optimization and other administrative and organizational efficiencies. |
• | The fact that Exterran stockholders as of immediately prior to the completion of the merger are expected to own approximately twenty-seven and one half percent (27.5%) of the issued and outstanding shares of the combined company immediately following the completion of the merger, and will have the opportunity to share in the future growth and expected synergies of the combined company while retaining the flexibility of selling all or a portion of those shares. |
• | The historical and current market prices of Exterran common stock and Enerflex common shares. |
• | The value to be received by the Exterran stockholders in the merger, including the fact that, as of January 21, 2022, the transaction value represented a premium of 18% to Exterran’s enterprise value. |
• | The fact that the value to be received by the Exterran stockholders in the merger represented a premium of approximately 115% to the closing market price of Exterran on January 21, 2022 based on Enerflex’s closing market price on the same day, up from a premium of approximately 45% to the closing market price of Exterran on August 31, 2021 based on Enerflex’s closing market price on the same day. |
• | The recommendation of Exterran management in favor of the transaction. |
• | The fact that the exchange ratio is fixed, which the Exterran board believes is consistent with market practice for transactions of this type and with the strategic purpose of the transaction, and which also allows for the Exterran stockholders to potentially benefit from any increase in the trading price of Enerflex common shares between the announcement and completion of the merger. |
• | The customary nature of the representations, warranties and covenants of Exterran and Enerflex in the Merger Agreement. |
• | The flexibility permitted under the interim operating covenants which restrict the conduct of Exterran’s business prior to closing of the merger, and the fact that Enerflex is subject to certain restrictions on the conduct of its business prior to the closing of the merger. |
• | The Exterran board’s belief that the terms of the Merger Agreement, taken as a whole, increase the degree of certainty that the merger will be completed, including the fact that: |
• | There are limited circumstances in which the Enerflex board may terminate the Merger Agreement or change its recommendation that its shareholders approve the issuance of Enerflex common shares in connection with the merger; |
• | Enerflex is required to use reasonable best efforts to obtain regulatory approvals, including agreeing to divestitures and remedies, unless (1) such divestiture or remedy would, in the good |
faith reasonable judgment of Enerflex, be reasonably expected to materially impair or diminish the benefits or advantages it expects to receive from the merger and the transactions contemplated by the Merger Agreement, or (2) such divestiture or remedy would have a material adverse effect on the business of (x) Enerflex and the Enerflex subsidiaries, taken as a whole, or (y) Exterran and the Exterran subsidiaries, taken as a whole; |
• | Enerflex has agreed to pay a termination fee of $20.0 million to Exterran less any amounts required to be withheld or deducted on account of taxes, if Exterran terminates the Merger Agreement due to the Enerflex board making a change of recommendation or if Enerflex terminates the Merger Agreement to enter into a definitive agreement providing for a superior proposal; |
• | Enerflex has agreed to pay a termination fee of $30.0 million to Exterran less any amounts required to be withheld or deducted on account of taxes, if Exterran terminates the Merger Agreement in connection with Enerflex’s failure to secure all, or any portion of, the debt financing to be funded at closing for any reason; and |
• | The Merger Agreement contains no financing condition. |
• | The corporate governance provisions of the Merger Agreement, including the provisions providing that the Enerflex board would include the representation of one Exterran designee, selected by Enerflex, and that Enerflex will take all actions necessary to cause the Exterran director to be renominated for election so that such director has the opportunity to remain on Enerflex’s board for at least one (1) year following the effective time. |
• | The review of the Exterran board, with the assistance of Exterran’s advisors, of the terms and conditions of other recent comparable transactions, including the governance terms, premiums relative to share prices, consideration mix, credit ratings and leverage targets, and announced synergy targets, and its overall belief that the terms of the Merger Agreement were consistent with market practice and in the best interest of Exterran and the Exterran stockholders. |
• | The fact that the Exterran board, subject to certain conditions and the potential payment of a termination fee of $10.0 million, less any amounts required to be withheld or deducted on account of taxes, has the right to change its recommendation in support of the merger in response to an intervening event, even if there is no competing or superior proposal, if the Exterran board determines that the failure to take such action would likely be inconsistent with its fiduciary duties. |
• | The fact that the Exterran board has the right to terminate the Merger Agreement to enter into a definitive agreement related to a superior proposal, subject to giving Enerflex notice and an opportunity to propose changes to the Merger Agreement, and the payment of a termination fee of $10.0 million, less any amounts required to be withheld or deducted on account of taxes, in the event of actual termination. The fact that the Exterran board, after discussing this termination fee with its advisors, believed that such fee was consistent with market practice and would not preclude or deter a willing and financially capable third party, were one to exist, from making a superior proposal following the announcement of a transaction with Enerflex. |
• | The expected qualification of the merger as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. |
• | Exterran’s ability to specifically enforce Enerflex’s obligations under the Merger Agreement, including Enerflex’s obligations to complete the merger. |
• | The risks and costs to Exterran if the merger is not completed, including the diversion of management attention, potential employee attrition and the potential effect on Exterran’s business and relations with customers, suppliers and vendors. |
• | The transaction costs to be incurred in connection with the merger. |
• | The restrictions on the conduct of Exterran’s business prior to completion of the merger, which could delay or prevent Exterran from undertaking material strategic opportunities that might arise pending completion of the merger to the detriment of the Exterran stockholders. |
• | The risk of not realizing all of the anticipated strategic and other benefits between Exterran and Enerflex, including, without limitation, the challenges of combining the businesses, operations and workforces of Exterran and Enerflex, the risk that expected operating efficiencies and cost savings may not be realized or will cost more to achieve than anticipated, and the risk that agreed upon divestitures or remedies required by antitrust authorities may decrease the anticipated strategic and other benefits of the merger to the combined company. |
• | The fact that the merger consideration is all share consideration at a fixed number of Enerflex common shares, which could result in the Exterran stockholders being adversely affected by a decrease in the trading price of Enerflex common shares after the date of execution of the Merger Agreement. |
• | The fact that, under the DGCL, because the merger consideration is in the form of a stock for stock exchange, no appraisal rights are available to the Exterran stockholders with respect to the merger or the other transactions contemplated by the Merger Agreement. |
• | The fact that the Exterran directors and executive officers may have interests in the merger that are different from, or in addition to, those of the Exterran stockholders generally, including certain interests arising from the employment and compensation arrangements of Exterran’s executive officers, and the manner in which they would be affected by the merger. |
• | The risk factors of the type and nature described under the sections entitled “ Risk Factors Cautionary Statement Regarding Forward-Looking Statements |
• | Creates a premier integrated global provider of energy infrastructure: |
• | Highly complementary product lines, geographies, and asset bases provide enhanced scale, efficiencies, and expanded offerings for customers. |
• | The pro forma geographic exposure will be well-balanced with approximately 25-35% of revenues from each of North America, the Middle East, and Latin America. |
• | Accelerates Growth of Gross Margin from Recurring Segments: |
• | Combination significantly accelerates the generation of predictable, recurring gross margin from energy infrastructure and after-market services platforms. |
• | Over 70% of the combined entity’s gross margin will derive from recurring sources, strengthening its margin profile and reducing market cyclicality. |
• | Offers Improved Operational Efficiencies: |
• | Expect to realize at least US$40 million of annual run-rate synergies within 12 to 18 months after closing through overhead savings and operating efficiencies. |
• | Accretive to Shareholders: |
• | Expected to approximately double Adjusted EBITDA and be over 50% accretive to cash flow per share and approximately 50% accretive to earnings per share (subject to purchase price allocation to be determined upon closing), for Enerflex shareholders. |
• | Enhanced scale with pro forma 2023 Adjusted EBITDA of US$360 million to US$400 million, inclusive of synergies. |
• | Meaningful excess free cash flow beginning in 2023 that supports debt reduction, shareholder returns, and continued growth. |
• | After closing, Enerflex expects to maintain its quarterly dividend of C$0.025 per common share. |
• | Transaction Benefits From a Long-Term, Stable Capital Structure: |
• | The combined entity will benefit from a capital structure that provides ample liquidity. |
• | In conjunction with the transaction, Enerflex has entered into a binding agreement with the Royal Bank of Canada to provide Enerflex with a fully committed financing consisting of a US$700 million 3-year revolving credit facility and a US$925 million 5-year bridge loan facility. The bridge loan will provide financing to backstop an anticipated issuance of new debt securities prior to closing of the transaction. The committed financing is sufficient to fully repay existing Enerflex and Exterran notes and revolving credit facilities and support putting in place a new capital structure, provide for capital expenditures and other ordinary course capital needs, and provide significant liquidity for the pro forma business. |
• | The new revolving credit facility will be subject to a bank-adjusted total net debt to EBITDA covenant of 4.5x, stepping down to 4.0x by the fourth quarter of 2023. |
• | Enerflex targets a bank-adjusted net debt to EBITDA ratio of 2.5x—3.0x within 12 to 18 months after closing. |
• | Following capital project commitments in 2022, the combined entity’s capital allocation in 2023 onwards will prioritize: (i) balance sheet strength; (ii) sustainable shareholder returns; and (iii) disciplined growth focused on full-cycle earnings. |
• | Commitment to Sustainability: |
• | Aligns strong cultures emphasizing the health and safety of our global workforce and corporate citizenship. |
• | Global coverage enhances the ability to deliver sustainable natural gas, water, and energy transition solutions, including carbon capture utilization and sequestration, biofuels (including renewable natural gas), produced water reuse and recycling, and electrification. |
• | The fact that the Exterran has agreed to pay a termination fee of $10.0 million to Enerflex less any amounts required to be withheld or deducted on account of taxes, if Enerflex terminates the Merger Agreement due to the Exterran board making a change of recommendation or if Exterran terminates the Merger Agreement to enter into a definitive agreement providing for a superior proposal. |
• | The fact that the Enerflex board has the right to terminate the Merger Agreement to enter into a definitive agreement related to a superior proposal, subject to giving Exterran notice and an opportunity to propose changes to the Merger Agreement, and the payment of a termination fee of $20.0 million, less any amounts required to be withheld or deducted on account of taxes, in the event of actual termination. |
• | The fact that the Enerflex board, subject to certain conditions and the potential payment of a termination fee of $20.0 million, less any amounts required to be withheld or deducted on account of taxes, has the right to change its recommendation in support of the merger in response to an intervening event, even if there is no competing or superior proposal, if the Enerflex board determines that the failure to take such action would likely be inconsistent with its fiduciary duties. |
• | reviewed a draft, dated January 21, 2022, of the Merger Agreement; |
• | reviewed certain publicly available business and financial information relating to Exterran and Enerflex and the industries in which they operate; |
• | compared the financial and operating performance of Exterran and Enerflex with publicly available information concerning certain other companies Wells Fargo Securities deemed relevant, and compared current and historic market prices of Exterran common stock and the Enerflex common shares with similar data for such other companies; |
• | compared the proposed financial terms of the proposed merger with the publicly available financial terms of certain other business combinations that Wells Fargo Securities deemed relevant; |
• | reviewed certain prospective financial information, prepared by the managements of Exterran and Enerflex, respectively; |
• | reviewed certain estimates prepared by the management of Exterran and Enerflex as to the potential cost savings and synergies expected by such management to be achieved as a result of the proposed merger (the “Synergies”); |
• | discussed with the managements of Exterran and Enerflex certain aspects of the proposed merger, the business, financial condition and prospects of Exterran and Enerflex, respectively, the effect of the proposed merger on the business, financial condition and prospects of Exterran and Enerflex, respectively, and certain other matters that Wells Fargo Securities deemed relevant; and |
• | considered such other financial analyses and investigations and such other information that Wells Fargo Securities deemed relevant. |
Implied per Share Equity Value |
||||||||
Low |
High |
|||||||
TEV / 2022E EBITDA |
$ | 4.08 | $ | 9.49 |
Announce Date |
Target |
Acquiror | ||
December 18, 2017 | Chicago Bridge & Iron Company N.V. | McDermott International | ||
June 1, 2014 | Axip Energy Services, LP (contact compression and processing business and after-market services business) | Enerflex Ltd. |
Implied per Share Equity Value |
||||||||
Low |
High |
|||||||
Enterprise Value / LTM Adjusted EBITDA |
$ | 9.58 | $ | 16.38 |
Implied per Share Equity Value |
||||||||
Low |
High |
|||||||
Discounted Cash Flow Analysis |
$ | 7.23 | $ | 9.94 |
Implied per Share Equity Value |
||||||||
Low |
High |
|||||||
TEV / 2022E EBITDA |
$ | 3.47 | $ | 5.83 |
Implied per Share Equity Value |
||||||||
Low |
High |
|||||||
Discounted Cash Flow Analysis |
$ | 7.64 | $ | 10.38 |
Implied Exchange Ratios |
||||||||
Low |
High |
|||||||
TEV / 2022E EBITDA |
0.700x | 2.737x | ||||||
Discounted Cash Flow |
0.696x | 1.301x |
• | The Exterran prospective financial information focused on Exterran’s contracted backlog for both its contract operations and product sales business segments. |
• | With respect to the assumptions regarding Exterran’s contract operations business, the Exterran prospective financial information includes two projects which are currently under construction and expected to commence operations in 2023. In addition to these two projects, Exterran assumed that the contracts operations business would continue to generate revenue and incur operating capital with respect to other projects in line with market projections and historic Exterran performance. |
• | With respect to the assumptions regarding Exterran’s product sales business, the Exterran prospective financial information projects sales growth by probability weighting projects in Exterran’s near-term pipeline, taking into account growing demand for natural gas processing and treating equipment and produced water treatment equipment, and longer-term pipeline, taking into account market and customer based projections. |
• | The Exterran prospective financial information assumes adjusted gross margin percentage expansion of over 800 bps in the product sales business between 2022 and 2025 attributable to new product development and improving mix of business. |
• | The Exterran prospective financial information assumes aftermarket services growth of roughly 7% per year attributable to improving macro indicators for natural gas along with Exterran’s expectations for a growing product sales segment enhancing Exterran’s install base. |
• | The Exterran prospective financial information assumes additional personnel and other costs required to support growth, with SG&A as a percentage of revenue holding in the mid-teens between 2022 and 2025. |
• | The Enerflex prospective financial information focused on Enerflex’s contracted backlog for its Engineered Systems business segment as well as the contracted projects in its Asset Ownership business segment plus forecasted growth capital expenditures in the Asset Ownership business segment with investment returns and business performance will be similar to past experience. |
• | With respect to the assumptions regarding Enerflex’s Asset Ownership business segment, the Enerflex prospective financial information includes one project that commenced operations in January 2022 and another project currently under construction with start up expected in late 2022. In addition to these two projects, Enerflex assumed that the Asset Ownership business segment would continue to generate revenue, incur operating expenses and invest future growth capital expenditures in line with market projections and historic Enerflex performance. |
• | With respect to the assumptions regarding Enerflex’s Engineered Systems business segment, the Enerflex prospective financial information projects sales growth by probability weighting projects in Enerflex’s near-term pipeline, and over the longer-term takes into account growing demand for natural gas compression, processing and treating equipment due to expected growth in natural gas supply and demand per well-known industry consultants. |
• | With respect to the assumptions regarding Enerflex’s After-Market Service business segment, the Enerflex prospective financial information assumes sales growth averaging 6.9% per year due to customers’ deferred maintenance in 2020 and 2021, improving macro indicators for natural gas, and Enerflex’s expectations for continued growth in the installed base of serviceable natural gas compression, processing, treating and reciprocating power generation equipment. |
• | The Enerflex prospective financial information assumes gross margin percentages per business segment strengthen over the forecast period at a pace and magnitude similar to past business cycles. Aggregate gross margin in 2025 is expected to be 6.5% higher than 2022, reflecting Enerflex’s expectation of cyclical margin improvement over the forecast period toward levels in line with Enerflex’s historical experience. Additionally, it is assumed that the resultant outcome is that over 70% of the combined entity’s gross margin will be derived from recurring sources. |
• | The Enerflex prospective financial information assumes additional personnel and other costs required to support growth, with selling, general, and administrative expenses (SG&A) expense increasing roughly 2% per year. |
• | The Enerflex prospective financial information assumes the amount of annual capital expenditures are similar to average historical levels of capex investment, biased toward the earlier years of the forecast period due to greater visibility of our capital expenditure pipeline in the near-term. Investment returns and asset performance are expected to be similar to past experience. |
Q4 2021E |
2022E |
2023E |
2024E |
2025E |
||||||||||||||||
Revenue |
$ | 209 | $ | 890 | $ | 891 | $ | 951 | $ | 1,045 | ||||||||||
EBITDA (1) |
$ | 46 | $ | 185 | $ | 212 | $ | 233 | $ | 259 | ||||||||||
Unlevered Free Cash Flow (2) |
$ | 18 | $ | (173 | ) | $ | 122 | $ | 161 | $ | 164 | |||||||||
Capital Expenditures |
$ | 17 | $ | 180 | $ | 60 | $ | 70 | $ | 75 |
(1) | EBITDA means earnings before interest, taxes, depreciation and amortization. |
(2) | Unlevered Free Cash Flow means EBITDA minus cash taxes, capital expenditures and changes in working capital. |
Q4 2021E |
2022E |
2023E |
2024E |
2025E |
||||||||||||||||
Revenue |
$ | 295 | $ | 1,160 | $ | 1,148 | $ | 1,242 | $ | 1,314 | ||||||||||
EBITDA (1) |
$ | 26 | $ | 149 | $ | 184 | $ | 238 | $ | 275 | ||||||||||
Unlevered Free Cash Flow (2) |
$ | (5 | ) | $ | (33 | ) | $ | (13 | ) | $ | 58 | $ | 132 | |||||||
Capital Expenditures |
$ | 33 | $ | 200 | $ | 188 | $ | 132 | $ | 95 |
(1) | EBITDA means earnings before interest, taxes, depreciation and amortization. |
(2) | Unlevered Free Cash Flow means EBITDA minus cash taxes, capital expenditures and changes in working capital. |
* | Assumes C$ to US$ exchange rate of 0.80. |
Cash ($) (1) |
Equity ($) (2) |
Perquisites/ Benefits ($) (3) |
Total ($) | |||||||||||||
Andrew James Way |
5,795,625 | 7,290,172 | 40,420 | 13,126,218 | ||||||||||||
David Alan Barta |
1,743,750 | 1,552,032 | 21,686 | 3,317,468 | ||||||||||||
Roger George |
1,627,550 | 1,186,844 | 34,346 | 2,848,690 |
(1) | Cash. |
(2) | Equity per-share closing price of Enerflex over the first five business days following January 24, 2022, determined pursuant to Item 402(t) of Regulation S-K) and a conversion of the underlying shares of Exterran to Enerflex common shares based on the exchange ratio of 1.021. All equity held by Exterran’s named executive officers was granted in connection with its regular executive officer new hire or annual compensation practices, including the grant of 2022 Exterran RSU awards, and Exterran has not provided |
any special grants or bonuses to any of the named executive officers. All equity awards will be settled in cash and not stock. |
Named Executive Officer | Company RSUs (#) |
Value of Company RSUs ($) |
Company PSUs (at target) (#) |
Value of Company PSUs ($) |
Total Value of Exterran Equity Awards ($) |
|||||||||||||||
Andrew James Way |
858,540 | 4,517,262 | 493,625 | 2,772,910 | 7,290,172 | |||||||||||||||
David Alan Barta |
199,070 | 1,048,400 | 89,655 | 503,632 | 1,552,032 | |||||||||||||||
Roger George |
152,230 | 801,716 | 68,559 | 385,127 | 1,186,844 |
(3) | Perquisites/ Benefits |
(i) | one or any combination of (a) the non-Canadian resident holder, (b) persons with whom the non-Canadian resident holder does not deal at arm’s length, and (c) partnerships in which the non-Canadian resident holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, owned 25% or more of the issued shares of any class or series of the capital stock of Exterran or Enerflex, as the case may be, and |
(ii) | more than 50% of the fair market value of Exterran common stock or Enerflex common shares, as the case may be, was derived directly or indirectly from one or any combination of: (A) real or immovable properties situated in Canada, (B) “Canadian resource properties” (as defined in the Canadian tax act), (C) “timber resource properties” (as defined in the Canadian tax act), and (D) options in respect of, or interests in, any of the foregoing property whether or not the property exists. |
• | the affirmative vote of the holders of a majority of the outstanding shares of Exterran voting stock in favor of the adoption of the Merger Agreement by Exterran stockholders; |
• | the affirmative vote of a majority of the votes cast by the holders of outstanding Enerflex common shares represented in person or by proxy at the Enerflex special meeting and entitled to vote on such matter in favor of issuance of Enerflex common shares in connection with the transaction by Enerflex shareholders; |
• | the Form F-4 (of which this proxy statement/prospectus forms a part) having become effective in accordance with the provisions of the U.S. Securities Act and no stop order suspending the effectiveness of the Form F-4 having been issued and remaining in effect and no proceeding to that effect having been commenced, unless subsequently withdrawn; |
• | no governmental entity of competent jurisdiction having enacted, issued or promulgated any law that remains in effect that prohibits or makes illegal the consummation of the transaction; |
• | the approvals by the antitrust authorities having been obtained from the antitrust authorities with respect to the transactions contemplated by the Merger Agreement, or deemed obtained as a result of the expiration of all statutory waiting periods, as required; and |
• | Enerflex common shares to be issued to Exterran stockholders pursuant to the Merger Agreement having been conditionally approved for listing on the NYSE or Nasdaq, subject to official notice of issuance, and the TSX, subject to customary listing requirements. |
• | certain representations and warranties of Enerflex and merger sub in the Merger Agreement relating to the absence of certain changes or events that would have a material adverse effect of Enerflex being true and correct in all respects, as of the date of the Merger Agreement and as of the closing date as though made as of such date; |
• | certain representations and warranties of Enerflex and merger sub in the Merger Agreement relating to the capitalization of Enerflex being true and correct in all respects, each as of the date of the Merger |
Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except for de minimis |
• | certain representations and warranties of Enerflex in the Merger Agreement relating to the qualification, organization, existence and good standing of Enerflex and merger sub, the requisite power and authority of Enerflex and merger sub to enter into the Merger Agreement, the proper authorization by the board of Enerflex and the board and the sole stockholder of merger sub to approve the Merger Agreement and related matters and resolving to recommend that Enerflex shareholders adopt the Merger Agreement, the merger and other transactions contemplated do not conflict with Enerflex’s organizational documents, and no finders or brokers being true and correct in all material respects, each as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date); |
• | all other representations and warranties of Enerflex and merger sub in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except where the failure of such representations and warranties to be true or correct, individually or in the aggregate, would not have or would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Enerflex, provided that for the purposes of this section, all representations and warranties will be read without giving effect to any limitation indicated by the words material adverse effect or any general materiality qualifier; |
• | Enerflex and merger sub having performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by the Merger Agreement to be performed or complied with by them prior to the closing of the transaction; |
• | no event, change, occurrence, effect or development having occurred since January 24, 2022, that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Enerflex; and |
• | Exterran’s receipt of a certificate, dated as of the closing date and executed by the chief executive officer or another senior officer of Enerflex, certifying that the conditions set forth in the bullets directly above have been satisfied. |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the absence of certain changes or events that would have a material adverse effect being true and correct in all respects, as of the date of the Merger Agreement and as of the closing date as though made as of such date; |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the capitalization of Exterran being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date), except for de minimis |
• | certain representations and warranties of Exterran in the Merger Agreement relating to the qualification, organization, existence and good standing of Exterran, the proper issuance under applicable securities laws for the outstanding capital stock of Exterran, the requisite power and authority of Exterran to enter into the Merger Agreement, the proper authorization by the board of Exterran to approve the Merger Agreement and related matters and resolving to recommend that Exterran stockholders adopt the Merger Agreement, the merger and other transactions contemplated do not conflict with Exterran’s organizational documents, and no finders or brokers being true and correct |
in all material respects, each as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case, as of such date); |
• | all other representations and warranties of Exterran in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date as though made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be true or correct would not have or would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Exterran, provided that for the purposes of this section, all representations and warranties will be read without giving effect to any limitation indicated by the words material adverse effect or any general materiality qualifier; |
• | Exterran having performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by the Merger Agreement to be performed or complied with by it prior to the closing of the transaction; |
• | no event, change, occurrence, effect or development having occurred since January 24, 2022, that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Exterran; and |
• | Enerflex’s receipt of a certificate, dated as of the closing date and executed by the chief executive officer or another senior officer of Exterran, certifying that the conditions set forth in the bullets directly above have been satisfied. |
• | due organization, valid existence, good standing, corporate power and authority, qualification to do business, organizational documents and with respect to Exterran and Enerflex, ownership of their respective subsidiaries; |
• | capital structure, including in particular the number of shares of equity-based awards issued and outstanding and the absence of certain outstanding debt and securities; |
• | corporate power and authority to enter into the Merger Agreement and to complete the transactions contemplated by the Merger Agreement, board recommendations, requisite stockholder/shareholder approvals and the enforceability of the Merger Agreement; |
• | absence of any consents and approvals relating to the execution, delivery and performance of the Merger Agreement, other than certain listed required filings with, and the consents and approvals of, government entities in connection with the transactions contemplated by the Merger Agreement; |
• | absence of conflicts with or breaches of its or its subsidiaries’ governing documents, certain contracts or applicable laws as a result of the execution, delivery and performance of the Merger Agreement and the completion of the transactions contemplated by the Merger Agreement; |
• | timely and materially compliant historical filings with the SEC pursuant to the U.S. Exchange Act or U.S. Securities Act with respect to Exterran and with applicable Canadian Securities Administrators with respect to Enerflex; |
• | compliance with the applicable listing and corporate governance rules and regulations of the NYSE with respect to Exterran and the TSX with respect to Enerflex; |
• | disclosure controls and procedures and internal controls over financial reporting; |
• | preparation of financial statements in compliance with U.S. GAAP or IFRS, as applicable; |
• | fair presentation of consolidated financial position in financial statements; |
• | no undisclosed liabilities; |
• | compliance with laws since December 31, 2018, and possession of requisite permits; |
• | compliance with anti-corruption, anti-bribery and anti-money-laundering laws and export and sanctions regulations in the past five years and institution of compliance policies since December 31, 2018; |
• | environmental matters; |
• | matters related to employee benefit plans, and labor and employment; |
• | the absence of any event, change, occurrence or development that has had or would reasonably be expected to have a material adverse effect, individually or in the aggregate, on Exterran or Enerflex, as applicable, since December 31, 2020; |
• | the absence of certain investigations, litigation, orders and injunctions; |
• | accuracy of the information supplied for inclusion in this proxy statement/prospectus and in the management information circular; |
• | tax matters; |
• | receipt of fairness opinions of financial advisors; |
• | required stockholder/shareholder approvals; |
• | lack of related party transactions; |
• | no brokers’ fees in connection with the transactions contemplated by the Merger Agreement except as enumerated; |
• | matters with respect to certain suppliers and customers; and |
• | no representations or warranties other than set forth in the Merger Agreement and no reliance on forward-looking information. |
• | intellectual property, IT assets and data privacy matters; |
• | valid title to or leasehold interests in assets and properties (including real property); |
• | sufficient inventory of parts and materials to meet unsatisfied performance obligations backlog; |
• | no undisclosed material contracts; |
• | sufficiency and effect of insurance policies; |
• | the aggregate value of assets and revenues in Canada is under certain threshold required under the Competition Act (Canada) and related regulations; |
• | inapplicability of any anti-takeover statutes or regulations or anti-takeover provisions in Exterran’s organizational documents; and |
• | customary nature of Exterran’s warranties; quality and workmanship of its products; no undisclosed product liability claims or non-standard product warranties or indemnities. |
• | capitalization of merger sub; |
• | the Enerflex common shares to be issued as merger consideration pursuant to the Merger Agreement; |
• | absence of ownership by Enerflex and merger sub, and their respective subsidiaries or affiliates, of Exterran common stock; |
• | debt financing matters; and |
• | solvency. |
• | changes in general economic or political conditions or the securities, equity, credit or financial markets in general, or changes in or affecting domestic or foreign interest or exchange rates; |
• | any decline in the market price or trading volume of such party’s shares, or any change in the credit rating of such party or any of its securities (provided, that the facts and circumstances underlying such decline or change may be taken into account in determining whether a material adverse effect in respect of such part has occurred to the extent not otherwise excluded by the definition thereof); |
• | changes or developments in the industries in which such party or its subsidiaries operate; |
• | changes in law or the interpretation or enforcement thereof after the date of the Merger Agreement; |
• | the execution, delivery or performance of the Merger Agreement or the public announcement or pendency or consummation of the transactions contemplated thereby, including the impact thereof on the relationships of such party or any of its subsidiaries with employees, partnerships, customers or suppliers or governmental entities; |
• | compliance with the terms of, or the taking or omission of any action required by, the Merger Agreement or consented to (after disclosure to the other party of all material and relevant facts and information) or requested by such party in writing; |
• | any act of civil unrest, civil disobedience, war, terrorism, cyberterrorism, military activity, sabotage or cybercrime, including an outbreak or escalation of hostilities involving any governmental entity or the declaration by any governmental entity of a national emergency or war, or any worsening or escalation of any such conditions threatened or existing on the date of the Merger Agreement; |
• | any hurricane, tornado, flood, earthquake, natural disaster, acts of God or other comparable events; |
• | any pandemic, epidemic or disease outbreak (including COVID-19) or other comparable events; |
• | changes in the generally accepted accounting principles in the U.S. or the enforcement thereof (in the case of Exterran) or changes in the international financial reporting standards or the interpretation or enforcement thereof (in the case of Enerflex) after the date of the Merger Agreement; |
• | any litigation relating to or resulting from the Merger Agreement or the transactions contemplated thereby; or |
• | any failure of such party to meet internal or published projections, forecasts, guidance or revenue or earning predictions (provided, that the facts and circumstances underlying any such failure may be taken into account in determining whether a material adverse effect in respect of such party has occurred to the extent not otherwise excluded by the definition thereof); except, with respect to the first, third, fourth, seventh, eighth, ninth, and tenth bullets above, if the impact thereof is materially and disproportionately adverse to such party and its subsidiaries, taken as a whole, relative to the impact thereof on the operations in the industry that such party and other participants conduct business, the incremental material disproportionate impact may be taken into account in determining whether there has been a material adverse effect in respect of such party. |
• | will not, and will not permit any of its subsidiaries that is not wholly owned to, authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (other than dividends, distributions, payments or return of capital made to Exterran or a wholly owned subsidiary by any of its subsidiaries) or other equity interests (whether in cash, assets, shares, property or other securities or any combination); |
• | will not, and will not permit any of its subsidiaries to, split, combine, redeem or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except for any such transaction by a wholly owned subsidiary of Exterran that remains a wholly owned subsidiary after consummation of such transaction; |
• | will not, and will not permit any of its subsidiaries to (A) except in the ordinary course of business, (1) hire any employee or engage any independent contractor who is a natural person, in each case with annual base salary, base wages or base compensation in excess of US$100,000 (except where such employment is terminable on no more than 30 days’ prior notice without material cost or penalty) or (2) terminate the employment of any employee of Exterran or any of its subsidiaries at the vice president-level (or its equivalent) or above, (B)(1) increase the compensation or other benefits, or accelerate the vesting or payment of any compensation or other benefits, payable or provided, to Exterran’s or any of its subsidiaries’ directors or officers or (2) increase the compensation or other benefits, or accelerate the vesting or payment of any compensation or other benefits, payable or provided, to Exterran’s or any of its subsidiaries’ employees, which increases do not exceed (I) 10% of the aggregate annualized compensation paid to an employee during calendar year 2021 (any such increases over 6% to be limited to non-union employees) and, (II) in the aggregate, 4.5% of total compensation for all employees (except as required pursuant to the terms of any new or amended union contract), or (C) except as required pursuant to the terms of any Exterran benefit plan in effect as of the date of the Merger Agreement, (1) grant any transaction or retention bonuses, (2) grant any Exterran equity awards or other equity or long-term incentive compensation awards, or (3) enter into any employment, change of control, severance or retention agreement with any employee of Exterran or any of its subsidiaries; |
• | will not, and will not permit any of its subsidiaries to, change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by applicable law, GAAP or SEC rule or policy; |
• | will not adopt any amendments, modifications, waivers, rescissions or otherwise make changes to the organizational documents of Exterran or any of its subsidiaries; |
• | will not, and will not permit any of its subsidiaries to, issue, deliver, grant, sell, pledge, transfer, dispose, or otherwise encumber, or authorize or approve or agree to issue, grant, sell, pledge or otherwise encumber any shares of Exterran common stock or other securities of Exterran or any of its subsidiaries, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, shares of Exterran common stock or other securities of Exterran or any of its subsidiaries including but not limited to the issue or award of any Exterran equity awards or any rights, warrants or options to acquire any such shares, voting securities or equity interest or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units, except vesting in the ordinary course of business pursuant to awards under Exterran benefit plans in effect as of the date of the Merger Agreement or as disclosed on the Exterran disclosure schedules; |
• | will not, and will not permit any of its subsidiaries to, redeem, terminate early, unwind, repurchase, prepay, defease, create, suffer to exist, incur, enter into, assume, endorse, guarantee, or otherwise become liable for or modify or amend (including seeking or obtaining a waiver) in any material respects the terms of, any indebtedness for borrowed money, or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, any indebtedness or assume, guarantee, endorse or otherwise become liable or responsible for such obligations or the obligations of any other person, or make any loans or advances, except for (A) intercompany loans or advances among Exterran and its subsidiaries or among Exterran’s wholly owned subsidiaries in the ordinary course of business and (B) incremental borrowings under Exterran’s existing credit facility contemplated by the budget set forth in the Exterran disclosure schedules which do not require any amendments or waivers to such credit facility; |
• | will not, and will not permit any of its subsidiaries to make any loans, advances, guarantees or capital contributions to or investments in any person, except for (A) loans solely between or among Exterran or any of its wholly-owned subsidiaries, on the one hand, and any of Exterran’s wholly-owned subsidiaries, on the other hand, and (B) advances for reimbursable employee expenses in the ordinary course of business; |
• | will not, and will not permit any of its subsidiaries to, sell, lease, license, transfer, exchange or swap, or subject to any lien (other than permitted liens), or otherwise dispose of, any of its businesses, material properties or assets, whether voluntarily or by the failure to exercise a right or make a payment, except (A) dispositions of obsolete or worthless equipment, in the ordinary course of business, (B) non-exclusive licenses or other non-exclusive grants of rights in, to or under Exterran intellectual property entered in the ordinary course of business with customers of Exterran or any of its subsidiaries (C) sales of products or services in the ordinary course of business that do not require the incurrence of indebtedness in breach of the Merger Agreement or the extension of capital in breach of the Merger Agreement and (D) for transactions solely among Exterran and its wholly-owned subsidiaries or solely among Exterran’s wholly-owned subsidiaries; |
• | will not, and will not permit any of its subsidiaries to (i) enter into any contract that would have been an Exterran material contract under the Merger Agreement if it been entered into prior to the Merger Agreement, or amend or modify any contract in a manner that would make it an Exterran material contract under the Merger Agreement, (ii) enter into any other contract that would require aggregate expenditures by Exterran or any Exterran subsidiary in excess of the budget set forth in the Exterran disclosure schedules, (iii) materially modify, materially amend, extend, accelerate, terminate, cancel, exercise or fail to exercise an expiring renewal option or terminate any Exterran material contract (in each case, in a manner adverse to Exterran or its subsidiaries and not including terminations or expirations due to the natural expiration or termination of such agreements) or (iv) waive, release or assign any material rights or claims thereunder (other than in the ordinary course of business or as would not result in a breach of the Merger Agreement); |
• | will not, and will not permit any of its subsidiaries to, acquire (including by merger, consolidation or acquisition of stock or assets or any other means) or authorize or announce an intention to so acquire, or enter into any agreements providing for any acquisitions of, directly or indirectly, any equity interests in or assets (including intangible assets) of any person or any business, division, securities, properties or interests thereof, or otherwise engage in any mergers, consolidations or business combinations (other than pursuant to any capital expenditures permitted under the Merger Agreement) from any other person, other than (A) transactions solely between Exterran and a wholly-owned Exterran subsidiary or solely between wholly-owned Exterran subsidiaries or acquisitions of supplies or equipment in the ordinary course of business and (B) acquisitions of properties, assets, equipment or inventory in the ordinary course of business and consistent with the budget set forth in the Exterran disclosure schedules; |
• | will not, and will not permit any of its subsidiaries to, settle, pay, discharge or satisfy any action, other than any action that involves only the payment of monetary damages not in excess of US$250,000 individually or US$1,000,000 in the aggregate over the amount reflected or reserved against in the September 30, 2021 consolidated balance sheet of Exterran for such specific actions and would not result in (A) the imposition of any order that would restrict the future activity or conduct of Exterran or any of its subsidiaries (excluding, for the avoidance of doubt, releases of claims, confidentiality and other de minimis |
• | will not, and will not permit any of its subsidiaries to incur or commit to capital expenditures or development expenses or expenses relating to integration of its accounting or ERP systems, in each case, in excess of the amounts set forth in the budget set forth in the Exterran disclosure schedules; |
• | will not, and will not permit any of its subsidiaries to, terminate or permit any material Exterran permit to lapse, other than in accordance with the terms and regular expiration thereof, or fail to apply on a timely basis for any renewal of any renewable material Exterran permit (excluding, in each case, any Exterran permit that Exterran, in its reasonable judgment, no longer believes to be material or necessary to the conduct of the business); |
• | will not, and will not permit any of its subsidiaries to, adopt any plan of merger, consolidation, reorganization, liquidation or dissolution, adopt resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization, file a petition in bankruptcy under any provisions of federal or state bankruptcy applicable law on behalf of Exterran or any of its subsidiaries or consent to the filing of any bankruptcy petition against Exterran or any of its subsidiaries under applicable law; |
• | will not, and will not permit any of its subsidiaries to, enter into any new line of business that is not reasonably related to the existing business lines of Exterran and its subsidiaries, or abandon or discontinue any existing line of business of Exterran or its subsidiaries; |
• | except as required by applicable law, will not (A) make (other than in the ordinary course of business), change or revoke any material tax election, (B) change any material method of tax accounting or tax accounting period, (C) file any amended tax return with respect to any material tax, (D) settle or compromise any material tax proceeding, (E) surrender any right to claim a material tax refund, or (F) agree to an extension or waiver of the statute of limitations with respect to the assessment of any material tax; |
• | will not, and will not permit any of its subsidiaries to become a party to, establish, adopt, materially amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; |
• | will not, and will not permit any of its subsidiaries to enter into any consent decree or similar agreement that, individually or in the aggregate, is material to Exterran and its subsidiaries, taken as a whole; |
• | will not, and will not permit any of its subsidiaries to terminate or fail to exercise renewal rights with respect to any insurance policies of Exterran and its subsidiaries in a manner that would (after taking into account any replacement insurance policies) materially and adversely affect the insurance coverage of Exterran and its subsidiaries; |
• | will not, and will not permit any of its subsidiaries to, sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest, or otherwise dispose of any material Exterran intellectual property (other than permitted liens), except for non-exclusive licenses of Exterran intellectual property granted in the ordinary course of business; |
• | will not, and will not permit any of its subsidiaries to abandon or otherwise allow to lapse or expire any registered Exterran intellectual property, other than lapses or expirations of any registered Exterran intellectual property that is at the end of its maximum statutory term (with renewals); |
• | will not, and will not permit any of its subsidiaries to engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of Exterran or other person that would be required to be disclosed pursuant to Item 404 of Regulation S-K; |
• | will not convene any special meeting (or any adjournment or postponement thereof) of the stockholders of Exterran; |
• | will not, and will not permit any of its subsidiaries to modify, amend or replace that certain lease contract listed in the Exterran disclosure schedules; and |
• | will not, and will not permit any of its subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions. |
• | will not, and will not permit any of its subsidiaries that is not wholly owned to, authorize or pay any dividends on or make any distribution with respect to its outstanding shares (whether in cash, assets, shares or other securities of Enerflex or its subsidiaries), except (A) regular quarterly cash dividends paid on the Enerflex common shares in the ordinary course of business, appropriately adjusted to reflect any stock dividends, subdivisions, splits, combinations or other similar events relating to the Enerflex common shares, and (B) dividends and distributions paid by subsidiaries of Enerflex to Enerflex or to any of Enerflex’s other wholly owned subsidiaries; |
• | will not, and will not permit any of its subsidiaries to, split, combine or reclassify any of its capital or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for its shares, except for any such transaction by a wholly owned subsidiary of Enerflex that remains a wholly owned subsidiary after consummation of such transaction; |
• | will not, and will not permit any of its subsidiaries to, issue, deliver, grant, sell, transfer, dispose, or otherwise encumber, or authorize or approve or agree to issue, grant, sell, pledge or otherwise encumber any Enerflex common shares or other equity securities of Enerflex, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, Enerflex common shares or other equity securities of Enerflex, including but not limited to the issue or award of any Enerflex options or any rights, warrants or options to acquire any such shares, voting equity securities or equity interest or share based performance units, except (A) in the ordinary course of business pursuant to awards under Enerflex benefit plans in effect as of the date of the Merger Agreement or as disclosed in the Enerflex disclosure schedules or (B) pledges or encumbrances required in connection with the debt financing (including for the repayment or refinancing of the “Refinanced Indebtedness” (as defined in the debt commitment letter) or any other repayment or refinancing contemplated thereby); |
• | will not, and will not permit any of its subsidiaries to, materially change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by IFRS or rule or policy of the Canadian Securities Administrators; |
• | will not, and will not permit any of its subsidiaries to, redeem, terminate early, unwind, repurchase, prepay, defease, create, suffer to exist, incur, enter into, assume, endorse, guarantee or otherwise become liable for or modify in any material respects the terms of any indebtedness for borrowed money, or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities (directly, contingently or otherwise), except for (A) any indebtedness solely among Enerflex and its wholly-owned subsidiaries or solely among wholly-owned Enerflex subsidiaries, (B) incremental borrowings under Enerflex’s existing credit facilities if either (1) contemplated by the budget set forth in the Enerflex disclosure schedules or (2) not in excess of US$25.0 million greater than the amount set forth in the budget set forth in the Enerflex disclosure schedules, (C) any repayment of borrowings under Enerflex’s existing revolving credit facilities to the extent that the aggregate amount available to Enerflex and the Enerflex’s subsidiaries for borrowings does not decrease or (D) the debt financing (including the guarantees to be provided for the debt financing) and other actions taken in furtherance of the debt financing (including for the repayment or refinancing of the “Refinanced Indebtedness” as defined in the debt commitment letter) or any other repayment or refinancing contemplated thereby; |
• | will not adopt any amendments to the organizational documents of Enerflex; |
• | will not, and will not permit any of its subsidiaries to, acquire (including by merger, consolidation or acquisition of stock or assets or any other means) or authorize or announce an intention to so acquire, or enter into any agreements providing for any acquisitions of, directly or indirectly, any equity interests in or |
assets (including intangible assets) of any person or any business, division, securities, properties or interests, or otherwise engage in any mergers, consolidations or business combinations from any other person, other than (A) transactions solely between and among wholly-owned subsidiaries, (B) acquisitions of supplies, properties, assets, equipment or inventory in the ordinary course of business and (C) transactions that would not reasonably be expected to have a material adverse effect on Enerflex’s ability to complete the merger or the financing; and |
• | will not, and will not permit any of its subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions. |
• | solicit, initiate or knowingly encourage or knowingly facilitate any inquiry regarding, or the making or submission of any proposal, offer or indication of interest that constitutes, or would reasonably be expected to lead to, or result in, an alternative proposal; |
• | engage in, knowingly encourage, continue or otherwise participate in any discussions or negotiations with any person regarding an alternative proposal or any communications regarding or any inquiry, proposal or offer that would reasonably be expected to lead to, or result in, an alternative proposal (except to notify such person that the provisions of the Merger Agreement prohibit any such discussions or negotiations); |
• | furnish any nonpublic information relating to such party or its subsidiaries in connection with or for the purpose of facilitating an alternative proposal or any inquiry, proposal, offer or indication of interest that would reasonably be expected to lead to, or result in, an alternative proposal and request the prompt return or destruction of any confidential information provided to any third party in connection with an alternative proposal; |
• | recommend or enter into any other letter of intent, memorandum of understandings, agreement in principle, option agreement, acquisition agreement, Merger Agreement, joint venture agreement, partnership agreement or other similar agreement with respect to an alternative proposal (except for permitted confidentiality agreements as discussed below); |
• | approve any transaction under, or any third party becoming an “interested stockholder” under Section 203 of the DGCL (or similar takeover statute applicable to Enerflex under Canadian law); or |
• | adopt, approve, endorse, authorize, agree or publicly propose to adopt, approve, endorse or authorize to do any of the foregoing or otherwise knowingly facilitate any effort or attempt to make an alternative proposal. |
• | such party may furnish non-public information to the third party making such alternative proposal (including its representatives, including its equity and debt financing sources) in response to a request for such non-public information, if, and only if, (A) prior to furnishing such information, Exterran or Enerflex, as applicable, receives from the third party making such alternative proposal, an executed confidentiality agreement with confidentiality and use provisions that, in each case, are not less restrictive to such third party than the terms in the Confidentiality Agreement, dated as of October 3, 2021, between Exterran and Enerflex are to the other party (it being understood that such confidentiality agreement does not need to include any “standstill” or similar provisions or otherwise prohibit the making or amendment of any alternative proposal, but such confidentiality agreement will not grant such third party the exclusive right to negotiate with Exterran or Enerflex, as applicable); and (B) such party also provides to the other party, prior to or substantially concurrently with the time such non-public information is provided or made available to such third party, any non-public information furnished to such third party that was not previously furnished to the other party to the Merger Agreement; provided, however, that if the third party making such alternative proposal is a known competitor of Exterran or Enerflex, such party will not provide any commercially sensitive non-public information to such third party other than in accordance with customary “clean room” or other similar procedures designed to limit the disclosure of competitively sensitive information; and |
• | such party may engage in discussions or negotiations with the third party (including its representatives) with respect to the alternative proposal. |
• | withdraw, withhold, qualify or modify, or propose publicly to withdraw, withhold, qualify or modify: (i) in the case of the Exterran board, its recommendation to the Exterran stockholders to adopt the Merger Agreement and the transactions contemplated by the Merger Agreement (which we refer to as the “Exterran recommendation”); and (ii) in the case of the Enerflex board, the recommendation to the Enerflex shareholders to approve the Enerflex common share issuance in connection with the merger (which we refer to as the “Enerflex recommendation”); |
• | fail to include (i) in the case of Exterran, the Exterran recommendation in this proxy statement/prospectus or (ii) in the case of Enerflex, the Enerflex recommendation in the management information circular; |
• | if any alternative proposal that is structured as a tender offer or exchange offer for the outstanding Enerflex common shares or shares of Exterran common stock, as applicable, is commenced (other than by the other party or an affiliate of the other party), fail to recommend and publicly announce, within ten (10) business days after its commencement, against acceptance of such tender offer or exchange offer by its shareholders or stockholders, as applicable; |
• | approve, adopt, recommend, or declare advisable any alternative proposal or publicly propose to approve, adopt or recommend or declare advisable any alternative proposal; |
• | fail to publicly reaffirm the recommendation to Exterran stockholders or Enerflex shareholders, as applicable, within ten (10) business days after an alternative proposal (or material modification thereto) is first publicly announced by such party or the person making such alternative proposal (or, with respect to any material amendments, revisions or changes to the terms of any such previously publicly disclosed alternative proposal that are publicly disclosed within the last five (5) business days prior to the effective time, fail to take these affirming actions, with references to the applicable ten (10) business day period being replaced with three (3) business days); |
• | approve, adopt or recommend, or declare advisable or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, Merger Agreement, option agreement, joint venture agreement, partnership agreement or other agreement (other than a confidentiality agreement referred to and entered into in compliance with the section of the Merger Agreement described above under the subsection entitled “ No Solicitation |
• | exempt any person other than the other party to the Merger Agreement (or in Exterran’s case, Enerflex or merger sub) from any takeover statute or approve or authorize, or cause or permit the other party or any of its subsidiaries to enter into, an acquisition agreement in connection with an alternative proposal; or |
• | resolve or publicly propose to take any action described in the foregoing of this section. |
• | In response to a superior proposal, effect a change of recommendation and/or, cause Exterran or Enerflex to terminate the Merger Agreement to enter into a definitive agreement providing for a superior proposal, if the respective board determines in good faith after consultation with the outside legal counsel and financial advisors, that such proposal is a superior proposal, but only if the Exterran board, or Enerflex board, as applicable, has determined in good faith after consultation with the outside legal counsel, that the failure to make such change of recommendation and/or terminate the Merger Agreement to enter into such acquisition agreement providing for such superior proposal would breach or reasonably be expected to breach the respective boards’ fiduciary duty to the shareholders or stockholders, respectively, under applicable law; |
and if: (i) Exterran or Enerflex, as applicable, has given the other party written notice of its intent to take such action at least five (5) business days in advance, setting forth a description of the terms and conditions of the superior proposal that is the basis for such action (and including the identity of the person making the superior proposal and a copy of the proposed definitive agreement for such superior proposal, if any); (ii) Exterran or Enerflex, as applicable, negotiates in good faith during such five-business-day period with the other party and its representatives (to the extent such other party wishes to negotiate) to enable such other party to make such amendments to the terms of the Merger Agreement as would permit the Exterran board or the Enerflex board, as applicable, not to effect a change of recommendation in connection with such superior proposal or not to cause the party to terminate the Merger Agreement in connection with the entry into a definitive agreement providing for a superior proposal; and (iii) at the end of such five-business-day period, prior to taking action to effect a change of recommendation or, terminating the Merger Agreement, the Exterran board or the Enerflex board, as applicable, makes the fiduciary determination as set forth under the Merger Agreement again, and concludes that the superior proposal would continue to constitute a superior proposal if such amendments were to be given effect. For purposes of the aforementioned negotiation period, any material modification to the terms of the superior proposal (including any change in the amount or, if applicable, form of consideration) will be deemed to be a new alternative proposal, except that references to five business days will be deemed to be references to three business days. |
• | In response to an intervening event, effect a change of recommendation, if the Exterran board or the Enerflex board, as applicable, determines in good faith, after consultation with the applicable party’s outside legal counsel, that the failure of the Exterran board or the Enerflex board, as applicable, to take such action would breach or would reasonably be expected to breach fiduciary duties of Exterran’s or Enerflex’s board, as applicable, under applicable law provided, that the Exterran board or the Enerflex board, as applicable, will not be entitled to make such a change in recommendation unless: (i) Exterran or Enerflex, as applicable, has given the other party written notice of its intent to take such action at least ten (10) business days in advance, setting forth in reasonable detail, the reasons for effecting a change of recommendation; (ii) Exterran or Enerflex, as applicable, will cause their respective representatives (including executive officers) to be available to negotiate in good faith during such ten-business-day ten-business-day ten-business-day |
• | as promptly as reasonably practical, furnish Enerflex, merger sub and the financing parties (and their respective representatives, as applicable) with the required financing information and such further information as may be reasonably necessary for the required financing information to remain compliant and such other customary financial and other information regarding Exterran and its subsidiaries as may be reasonably requested by, and is necessary for, Enerflex or merger sub to fulfill its conditions and obligations under the debt commitment letters; |
• | provide reasonable and customary assistance to Enerflex, merger sub and the financing parties (and their respective representatives, agents and advisors, as applicable) in their preparation of (A) offering documents, offering memoranda, offering circulars, private placement memoranda, registration statements, prospectuses, syndication documents and other syndication materials, including information memoranda, lender and investor presentations, bank books and other marketing documents, and similar documents to be used in connection with any portion of the debt financing and (B) materials for rating agency presentations, including (but subject to the limitation set forth below) by providing any financial information and other data required to prepare any pro forma financial statements that are required under applicable securities laws to be included in, or as may otherwise be reasonably required for and are customarily included in the foregoing financing materials; |
• | make senior management of Exterran available, at reasonable times and locations and upon reasonable prior notice, to participate in meetings, drafting sessions, presentations, road shows, rating agency presentations and due diligence sessions and other customary syndication activities; |
• | cause Exterran’s independent registered accounting firm to provide customary assistance, including by using reasonable best efforts to cause Exterran’s independent registered accounting firm (A) to provide customary comfort letters (including “negative assurance” comfort) in connection with any capital markets transaction comprising a part of the debt financing to the applicable financing parties, (B) to provide any necessary consent to the inclusion of its audit report in respect of any financial statements of Exterran included or incorporated in any of the applicable financing materials, and (C) to participate in a reasonable number of due diligence sessions at reasonable times and locations and upon reasonable prior notice; |
• | provide customary authorization letters authorizing the distribution of Exterran’s information to prospective lenders in connection with a syndicated bank financing; |
• | assist Enerflex, merger sub and the financing parties in obtaining or updating corporate, facility and issue credit ratings; |
• | assist in the negotiation, preparation and (contingent upon the closing) execution and delivery of any credit agreement, indenture, note, debenture or other debt security, purchase, underwriting, or agency agreement, guarantees, security documents, including any required information schedules or disclosures thereto, cash management agreements, hedging agreements, other supporting documents and customary closing certificates, and any other definitive and ancillary documentation for the debt financing as may be reasonably requested by Enerflex, in each case as contemplated in connection with the debt financing; |
• | make introductions of Enerflex to Exterran’s existing lenders and facilitate relevant coordination between Enerflex and such lenders; |
• | cooperate with the due diligence of the financing parties and their representatives in connection with the debt financing, to the extent customary and reasonable, including the provision of all such information requested with respect to the property and assets of Exterran and its subsidiaries and by providing to internal and external counsel of Enerflex, merger sub and the financing parties, as applicable, customary back-up certificates and factual information to support any legal opinion that such counsel may be required to deliver in connection with the debt financing; provided, that, Exterran and its affiliates will not be required to deliver or cause the delivery of any legal opinions related to the debt financing; |
• | deliver, at least seven business days prior to closing of the transaction, to the extent reasonably requested in writing at least ten business days prior to closing, all documentation and other information regarding Exterran and its subsidiaries that any financing party reasonably determines is required by domestic and foreign regulatory authorities under applicable “know your customer” and domestic and foreign anti-money-laundering rules and regulations and, to the extent required by any financing party, beneficial ownership certificates; |
• | cooperate with and use reasonable best efforts to provide all reasonable assistance to Enerflex in connection with any steps Enerflex may determine are necessary or desirable to take to prepay some or all amounts outstanding under Exterran existing credit facility, including (A) prepare and submit customary notices in respect of any such prepayment; provided that such prepayment will be contingent upon the occurrence of the closing unless otherwise agreed in writing by Exterran; (B) obtain from the agent a customary payoff letter in respect of Enerflex’s existing credit facility; and (C) cooperate in the discharge and release of liens securing indebtedness referenced in this section, including obtaining customary lien termination and other instruments of discharge, in each case in a form reasonably acceptable to Enerflex; |
• | to the extent requested by Enerflex, provide guarantees and facilitate the pledging of collateral and granting of security interests in connection with the debt financing (which discharges, releases, guarantees and security interests will not be required to take effect before the closing); |
• | as soon as reasonably practical following the receipt of written request of Enerflex, (A) commence one or more consent solicitations to the holders of the Exterran’s senior notes, to waive, amend or remove any applicable change of control provisions, defaults or other covenants that would apply in connection with, or otherwise restrict the ability of the parties to consummate, the merger or the debt financing as contemplated in the Merger Agreement or the debt commitment letters, as applicable, (B) commence one or more offers to purchase Exterran’s senior notes, (C) issue a notice of optional redemption to redeem Exterran’s senior notes pursuant to the terms, or (D) take such other actions as may be permitted or required by the terms of Exterran’s senior notes to satisfy and discharge, or defease any or all obligations under Exterran’s senior notes, in each case on the terms and conditions specified by Enerflex; provided that Exterran will not be required to commence any debt transaction until Enerflex has provided the necessary consent solicitation statement, offer to purchase, related letter of transmittal, supplemental indenture, redemption notice and other related documents; Enerflex will also consult with Exterran regarding the timing of any debt transaction in light of the regular financial reporting schedule of Exterran and the requirements of applicable law; and |
• | consent to the use of Exterran’s and its subsidiaries’ trademarks, trade names and logos in connection with the debt financing; provided that such trademarks, trade names and logos are used solely in a manner that is not intended to, nor reasonably likely to, harm or disparage Exterran or its subsidiaries or their respective reputation or goodwill. |
• | make an appropriate and complete filing of a notification and report form pursuant to the HSR Act with respect to the merger within ten (10) business days of the date of the Merger Agreement; |
• | make all other filings that are required to be made in order to consummate the merger with the antitrust authorities; |
• | not extend any waiting period under the HSR Act or the applicable laws of other applicable non-U.S. jurisdictions of the antitrust authorities, if required to have a waiting period, or enter into any agreement with the antitrust authorities or any other governmental entity not to consummate the merger, without consulting with the other party in good faith; and |
• | supply as promptly as practicable any additional information or documentation that may be requested by the antitrust authorities and use their respective reasonable best efforts to take all other actions necessary, proper or advisable to obtain the required antitrust approvals or to cause the expiration or termination of the applicable waiting periods under the HSR Act and any other antitrust law as soon as practicable (including complying with any “second request” for information or similar request from a governmental entity pursuant to other regulatory laws). |
• | cooperate in all respects with each other in connection with any material communication, filing or submission and in connection with any investigation or other inquiry, including any action initiated by a private party; |
• | keep the other party and its counsel promptly informed of any material communication received by such party from, or given by such party to, the antitrust authorities or other governmental entity and of any material communication received or given in connection with any action by a private party, in each case regarding the merger; |
• | consult with each other in advance of any meeting or conference with the antitrust authorities or any other governmental entity or, in connection with any action by a private party, with any other person, and to the extent permitted by the antitrust authorities or such other governmental entity or other person, give the other party or its counsel the opportunity to attend and participate in such meetings and conferences; and |
• | permit the other party and its counsel to review in advance any submission, filing or material communication (and documents submitted therewith) intended to be given by it to the antitrust authorities or any other governmental entity; provided that materials may be redacted to remove business secrets and other confidential material so long as the disclosing party acts reasonably in identifying such material for redaction. Enerflex and Exterran may, as each deems advisable and necessary, reasonably designate any competitively sensitive material to be provided to the other party as “Antitrust Counsel Only Material.” Such materials and the information contained therein will be given only to the outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials (Enerflex or Exterran, as the case may be) or its legal counsel. |
• | propose, negotiate or offer to effect, or consent or commit to, any sale, leasing, licensing, transfer, disposal, divestiture or other encumbrance, or holding separate, of any assets, licenses, operations, rights, product lines, businesses or interest therein (which we refer to as a “divestiture”); and |
• | take or agree to take any other action, agree or consent to, make any concession in respect of, or permit or suffer to exist any condition or requirement setting forth, any limitations or restrictions on freedom of actions with respect to, or its ability to retain, or make changes in, any assets, licenses, operations, rights, product lines, businesses or interest therein (which we refer to as a “remedy”). |
• | each party providing the other party with reasonable access, subject to compliance with applicable laws, to such party’s businesses, properties, personnel, agents, contracts, commitments, books and records and other reasonably requested information during the period prior to the effective time; |
• | cooperation between Enerflex and Exterran in the preparation and filing of this proxy statement/prospectus and the management information circular and coordination of the Exterran special meeting and Enerflex special meeting, including commercially reasonable efforts to cause the respective record dates and dates and times of the two meetings to occur on the same calendar day (and in any event as close in time as possible); |
• | each party taking such actions as are necessary to complete the transactions contemplated by the Merger Agreement if any takeover statute is or may become applicable to the transactions contemplated by the Merger Agreement; |
• | cooperation between Exterran, Enerflex and merger sub in connection with public announcements regarding the transactions contemplated by the Merger Agreement; |
• | cooperation with Enerflex and the use of reasonable best efforts by Exterran to delist Exterran common stock from the NYSE and deregister Exterran common stock under the U.S. Exchange Act as promptly as practicable after the effective time; |
• | the use of reasonable best efforts by Enerflex to cause the Enerflex common shares that are to be issued in the merger to be listed on the NYSE or Nasdaq, subject to official notice of issuance, and the TSX, subject to customary listing conditions, prior to the effective time; |
• | each party taking reasonably necessary or advisable steps to cause any dispositions of Exterran equity securities and any acquisitions of Enerflex equity securities, pursuant to the transactions contemplated |
by the Merger Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the U.S. Exchange Act to be exempt under Rule 16b-3 promulgated under the U.S. Exchange Act; |
• | Exterran giving Enerflex the reasonable opportunity to participate in the defense or settlement of any stockholder litigation brought against Exterran or the Exterran board relating to the transactions contemplated by the Merger Agreement and Exterran refraining from compromising or settling, or agreeing to compromise or settle, any such stockholder litigation without the prior written consent of Enerflex (which will not be unreasonably withheld, conditioned or delayed); |
• | certain tax matters; |
• | coordination between the parties of the declaration, setting of record dates and payment dates of dividends on Exterran common stock; and |
• | Enerflex executing and delivering written stockholder consent of merger sub adopting and approving the Merger Agreement. |
• | by mutual written consent of Exterran and Enerflex; |
• | by either Exterran or Enerflex, if: |
• | the effective time has not occurred on or before the end date; however, if the conditions in the Merger Agreement have not been satisfied or the debt financing has not been obtained on or prior to the end date, then the end date will be automatically extended for thirty (30) days. Further, if the marketing period has started within fifteen (15) calendar days of the end date but has not ended or will not end on or prior to the end date, the end date will be automatically extended to the next business date after the last scheduled day of such marketing period. The right to terminate the Merger Agreement pursuant to this prong is not available to the party if the failure of closing to occur by the end date is due to such party’s failure to perform its obligations, covenants or agreement set forth in the Merger Agreement; |
• | any court or other governmental entity of competent jurisdiction that must grant a required antitrust approval has denied approval of the merger and such denial has become final and nonappealable, or any governmental entity of competent jurisdiction has issued a final and nonappealable order permanently enjoining or otherwise prohibiting or making illegal the consummation of the transaction; unless the failure to obtain a required antitrust approval is due to the failure of the party seeking termination to perform or observe its obligations, covenants or agreement set forth in the Merger Agreement; |
• | Exterran stockholder approval is not obtained at Exterran special meeting or at any adjournment or postponement thereof; or |
• | Enerflex shareholder approval is not obtained at Enerflex special meeting or at any adjournment or postponement thereof; or |
• | by Exterran: |
• | if there has been a breach or failure to perform in any material respect by Enerflex or merger sub of any representation, warranty, covenant or agreement set forth in the Merger Agreement and such breach or failure (A) would result in a failure of certain conditions to closing and (B) is not curable prior to the end date, or if curable prior to the end date, has not been cured within 20 |
business days after the giving of notice thereof by Exterran; however, the right to terminate the Merger Agreement due to such a breach or failure will not be available to Exterran if Exterran is in material breach of any representation, warranty, agreement or covenant contained in the Merger Agreement; |
• | prior to receipt of Exterran stockholder approval, in order to enter into a definitive agreement providing for a superior proposal in respect of Exterran to the extent permitted and subject to compliance with the terms of the Merger Agreement; however, immediately prior to or contemporaneously with the termination of the Merger Agreement, Exterran will pay to Enerflex the Exterran termination fee; |
• | prior to receipt of Enerflex shareholder approval, if Enerflex board has effected a change of recommendation or Enerflex materially breaches its non-solicitation obligations under the Merger Agreement; or |
• | if all the conditions to the merger under the Merger Agreement have been satisfied (other than conditions which by their nature cannot be satisfied until closing), Enerflex and merger sub fail to consummate the closing on the anticipated closing date due to failure of all or a portion of the debt financing to be funded at closing for any reason, and Exterran has delivered to Enerflex written notice confirming that the conditions to merger have been satisfied or waived, as applicable, and Exterran is ready to close but Enerflex and merger sub fail to consummate the closing within five business days following the later of the date the closing should have occurred and receipt of the written notice by Exterran; or |
• | by Enerflex: |
• | if there has been a breach or failure to perform in any material respect by Exterran of any representation, warranty, covenant or agreement set forth in the Merger Agreement and such breach or failure (A) would result in a failure of certain conditions to closing and (B) is not curable prior to the end date, or if curable prior to the end date, has not been cured within 20 business days after the giving of notice thereof by Enerflex; however, the right to terminate the Merger Agreement due to such a breach or failure will not be available to Enerflex if Enerflex or merger sub is in material breach of any representation, warranty, agreement or covenant contained in the Merger Agreement; |
• | prior to the receipt of Enerflex shareholder approval, in order to enter into an agreement providing for an Enerflex superior proposal in accordance with the terms of the Merger Agreement; however, immediately prior to or contemporaneously with the termination of the Merger Agreement, Enerflex pays to Exterran the Enerflex termination fee; or |
• | prior to receipt of Exterran stockholder approval, if Exterran board has effected a change of recommendation, or Exterran materially breaches its non-solicitation obligations under the Merger Agreement. |
• | the Merger Agreement is terminated by Exterran prior to receipt of Exterran stockholder approval, in order to enter into a definitive agreement providing for a superior proposal in respect of Exterran; |
• | the Merger Agreement is terminated by Enerflex because, prior to receipt of Exterran stockholder approval, Exterran board has effected a change of recommendation; or |
• | after the date of the Merger Agreement, a qualifying transaction in respect of Exterran is publicly proposed or publicly disclosed prior to, and not publicly withdrawn at least two business days prior to, the Exterran special meeting; (ii) the Merger Agreement is terminated by (A) either party as a result of the occurrence of the end date prior to receipt of Exterran stockholder approval or due to the failure to obtain Exterran stockholder approval or (B) Enerflex for Exterran having breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreement contained in the Merger Agreement (as described above); and (iii) concurrently with or within 12 months after such termination Exterran consummates a qualifying transaction or enters into a definitive agreement providing for a qualifying transaction and later consummates such transaction. |
• | the Merger Agreement is terminated by Enerflex prior to receipt of the Enerflex Shareholder Approval, in order to enter into a definitive agreement providing for a superior proposal in respect of Enerflex; |
• | the Merger Agreement is terminated by Exterran prior to receipt of Enerflex shareholder approval because the Enerflex board has effected a change of recommendation; or |
• | after the date of the Merger Agreement, a qualifying transaction in respect of Enerflex is publicly proposed or publicly disclosed prior to, and not publicly withdrawn at least two business days prior to, the Enerflex special meeting; (ii) the Merger Agreement is terminated by (A) either party for the effective time not occurring on or before the end date prior to the receipt of the Enerflex shareholder approval or due to the failure to obtain the Enerflex shareholder approval or (B) Exterran for Enerflex or merger sub having breached or failed to perform in any material respect any of their representations, warranties, covenants or other agreements contained in the Merger Agreement (as described above); and (iii) concurrently with or within 12 months after such termination Enerflex consummates a qualifying transaction or enters into a definitive agreement providing for a qualifying transaction and later consummates such transaction. |
• | in favor of (i) the proposal to adopt the Merger Agreement and (ii) the proposal to adjourn or postpone such meeting if necessary or appropriate; and |
• | against (i) any action, proposal, transaction or agreement that could reasonably be expected to result in a breach of any covenant, representation or warranty, or any other obligation or agreement of Exterran under the Merger Agreement or of such stockholder under the voting agreements, (ii) any Exterran acquisition proposal, or any of the other transactions contemplated thereby other than the Merger Agreement and (iii) any other action, proposal, transaction, agreement which could reasonably be expected to delay, postpone or adversely affect the timely consummation of the merger or the fulfillment of Exterran’s, Enerflex’s, or merger sub’s conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of Exterran (including any amendments to Exterran’s certificate of incorporation and bylaws). |
• | the effective time of the merger; |
• | the termination of the Merger Agreement in accordance with its terms; |
• | the termination of the voting agreements by mutual written consent of the parties; |
• | December 23, 2022; and |
• | with respect to each stockholder, the election of such stockholder in its sole discretion to terminate the applicable voting agreement promptly following any amendment of any term of the Merger Agreement that reduces or changes the form of consideration payable pursuant to the Merger Agreement. |
• | an estimated purchase price of $210.6 million comprised of the non-cash estimated share value of share conversion of $198.9 million based on 33,315,011 outstanding Exterran common stock and Enerflex’s closing share price of $5.97 on July 8, 2022, the non-cash estimated share value of the share-based awards of $7.5 million and the estimated fractional share amount of approximately $4.2 million in cash as merger consideration; |
• | the use of proceeds of $1,155.9 million (USD $925.0 million) from the bridge loan, $53.6 million drawn from the new revolving credit facility, and existing cash in Exterran and Enerflex of $72.5 million to fund a portion of the merger consideration as above, to repay existing indebtedness of Exterran of $797.8 million (USD $638.5 million) and existing indebtedness of Enerflex of $342.3 million, and to pay related fees and expenses; |
• | the payment of financing costs of approximately $68.1 million related to cancellation, make-whole, bridge financing and debt costs, $10.1 million of financing costs capitalized as part of the issuance of the new financing facilities, $5.7 million related to the settlement of share-based compensation awards liabilities, $23.3 million in post-combination expenses such as severances and $30.4 million in advisory, legal fees and other transaction costs; |
• | adjustments to convert the historical financial statements of Exterran prepared in accordance with GAAP to IFRS and to conform to the accounting policies used by Enerflex; |
• | adjustments to translate the Exterran unaudited consolidated balance sheet as at March 31, 2022 and the Exterran unaudited consolidated statement of operations for the three months ended March 31, |
2022 into Canadian dollars at a rate of USD$1.00 = CAD$1.25 and USD$1.00 = CAD$1.27, respectively and translate the Exterran audited consolidated statement of operations for the year ended December 31, 2021 into Canadian dollars at a rate of USD$1.00 = CAD$1.25; and |
• | changes in the carrying values of certain assets and liabilities of Exterran to reflect their preliminary, estimated fair values at the date of closing of the transaction, as well as values assigned to previously unrecognized intangible assets and related changes in amortization expenses. |
Historical | Transaction Accounting Adjustments |
|||||||||||||||||||||||||||||||
CAD Enerflex (IFRS) |
USD Exterran (US GAAP) |
CAD Exterran (US GAAP) |
Presentation- conforming adjustments |
Notes | Pro forma adjustments |
Notes | Pro forma consolidated (IFRS) |
|||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 133,214 | $ | 60,001 | $ | 74,977 | $ | — | $ | (72,835 | ) | 4,5a | $ | 135,356 | ||||||||||||||||||
Restricted cash |
— | 8,718 | 10,894 | — | — | 10,894 | ||||||||||||||||||||||||||
Accounts receivable |
222,046 | 165,221 | 206,460 | — | — | 428,506 | ||||||||||||||||||||||||||
Contract assets |
114,178 | 57,771 | 72,192 | 104 | 3c | — | 186,474 | |||||||||||||||||||||||||
Inventories |
195,559 | 80,092 | 100,084 | 18,856 | 3c | 3,355 | 5b | 317,854 | ||||||||||||||||||||||||
Work-in-progress |
32,377 | — | — | — | — | 32,377 | ||||||||||||||||||||||||||
Current portion of finance leases receivable |
20,235 | — | — | — | — | 20,235 | ||||||||||||||||||||||||||
Income taxes receivable |
3,545 | — | — | — | — | 3,545 | ||||||||||||||||||||||||||
Derivative financial instruments |
258 | — | — | — | — | 258 | ||||||||||||||||||||||||||
Other current assets |
13,713 | 26,428 | 33,024 | — | — | 46,737 | ||||||||||||||||||||||||||
Current assets associated with discontinued operations |
— | 15,626 | 19,526 | (18,960 | ) | 3c | (566 | ) | 5e | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total current assets |
735,125 | 413,857 | 517,157 | — | (70,046 | ) | 1,182,236 | |||||||||||||||||||||||||
Property, plant, and equipment |
93,509 | 607,144 | 758,687 | (19,363 | ) | 3b | — | 832,833 | ||||||||||||||||||||||||
Rental equipment |
594,040 | — | — | — | — | 594,040 | ||||||||||||||||||||||||||
Lease right-of-use |
47,280 | 21,654 | 27,059 | — | 12,171 | 5c | 86,510 | |||||||||||||||||||||||||
Finance leases receivable |
117,322 | — | — | — | — | 117,322 | ||||||||||||||||||||||||||
Deferred tax assets |
9,261 | 9,392 | 11,736 | 19,151 | 3d | — | 40,148 | |||||||||||||||||||||||||
Other assets |
58,824 | 63,159 | 78,923 | 131,585 | 3d | (3,325 | ) | 5f | 266,007 | |||||||||||||||||||||||
Long-term contract assets |
— | 105,302 | 131,585 | (131,585 | ) | 3d | — | — | ||||||||||||||||||||||||
Intangible assets |
8,399 | — | — | 19,363 | 3b | 881 | 5d | 28,643 | ||||||||||||||||||||||||
Goodwill |
563,215 | — | — | — | — | 4 | 563,215 | |||||||||||||||||||||||||
Long-term assets associated with discontinued operations |
— | 1,687 | 2,108 | — | (2,108 | ) | 5e | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total assets |
$ | 2,226,975 | $ | 1,222,195 | $ | 1,527,255 | $ | 19,151 | $ | (62,427 | ) | $ | 3,710,954 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Historical | Transaction Accounting Adjustments |
|||||||||||||||||||||||||||||||
CAD Enerflex (IFRS) |
USD Exterran (US GAAP) |
CAD Exterran (US GAAP) |
Presentation- conforming adjustments |
Notes | Pro forma adjustments |
Notes | Pro forma consolidated (IFRS) |
|||||||||||||||||||||||||
Liabilities and Shareholders’ Equity |
||||||||||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities |
$ | 256,296 | $ | 206,789 | $ | 258,403 | $ | 92 | 3c | $ | (3,223 | ) | 4 | $ | 511,568 | |||||||||||||||||
Warranty provision |
5,608 | — | — | — | — | 5,608 | ||||||||||||||||||||||||||
Income taxes payable |
10,976 | — | — | 19,151 | 3d | — | 30,127 | |||||||||||||||||||||||||
Deferred revenues |
109,217 | 76,944 | 96,149 | 31 | 3c | (2,049 | ) | 5g | 203,348 | |||||||||||||||||||||||
Current portion of lease liabilities |
13,286 | 5,084 | 6,353 | — | — | 19,639 | ||||||||||||||||||||||||||
Derivative financial instruments |
409 | — | — | — | — | 409 | ||||||||||||||||||||||||||
Current liabilities associated with discontinued operations |
— | 1,823 | 2,278 | (124 | ) | 3c | — | 2,154 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total current liabilities |
395,792 | 290,640 | 363,183 | 19,150 | (5,272 | ) | 772,853 | |||||||||||||||||||||||||
Long-term debt |
339,126 | 635,529 | 794,157 | — | 66,054 | 5f | 1,199,337 | |||||||||||||||||||||||||
Lease liabilities |
41,157 | 26,310 | 32,877 | — | — | 74,034 | ||||||||||||||||||||||||||
Deferred tax liabilities |
90,796 | 844 | 1,055 | — | 2,343 | 5h | 94,194 | |||||||||||||||||||||||||
Other liabilities |
18,002 | 45,265 | 56,563 | 81,160 | 3c,d | (1,663 | ) | 5g | 154,062 | |||||||||||||||||||||||
Long-term contract liabilities |
— | 64,655 | 80,793 | (80,793 | ) | 3d | — | — | ||||||||||||||||||||||||
Long-term liabilities associated with discontinued operations |
— | 947 | 1,183 | (366 | ) | 3c | — | 817 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total liabilities |
884,873 | 1,064,190 | 1,329,811 | 19,151 | 61,462 | 2,295,297 | ||||||||||||||||||||||||||
Shareholders’ equity: |
||||||||||||||||||||||||||||||||
Share capital |
375,540 | 381 | 476 | — | 198,415 | 5i | 574,431 | |||||||||||||||||||||||||
Contributed surplus |
659,067 | 753,340 | 941,374 | — | (941,374 | ) | 5i | 659,067 | ||||||||||||||||||||||||
Retained earnings |
272,351 | (560,882 | ) | (700,878 | ) | — | 575,542 | 5i | 147,015 | |||||||||||||||||||||||
Accumulated other comprehensive income |
35,144 | 23,083 | 28,845 | — | (28,845 | ) | 5i | 35,144 | ||||||||||||||||||||||||
Treasury stock |
— | (57,917 | ) | (72,373 | ) | — | 72,373 | 5i | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total shareholders’ equity |
1,342,102 | 158,005 | 197,444 | — | (123,889 | ) | 1,415,657 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total liabilities and shareholders’ equity |
$ | 2,226,975 | $ | 1,222,195 | $ | 1,527,255 | $ | 19,151 | $ | (62,427 | ) | $ | 3,710,954 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Historical | Transaction Accounting Adjustments |
|||||||||||||||||||||||||||||||
CAD Enerflex (IFRS) |
USD Exterran (US GAAP) |
CAD Exterran (US GAAP) |
Presentation- conforming adjustments |
Notes | Pro forma adjustments |
Notes | Pro forma consolidated (IFRS) |
|||||||||||||||||||||||||
Revenue |
$ | 323,069 | $ | 191,748 | $ | 242,791 | $ | — | $ | (286 | ) | 6a | $ | 565,574 | ||||||||||||||||||
Cost of goods sold |
269,426 | 119,463 | 151,264 | 54,747 | 3c,e,g | (7,190 | ) | 6b | 468,247 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gross margin |
53,643 | 72,285 | 91,527 | (54,747 | ) | 6,904 | 97,327 | |||||||||||||||||||||||||
Selling and administrative expenses |
46,804 | 41,880 | 53,028 | (3,078 | ) | 3e,g | 55 | 6c | 96,809 | |||||||||||||||||||||||
Depreciation and amortization |
— | 40,355 | 51,098 | (51,098 | ) | 3e | — | — | ||||||||||||||||||||||||
Impairment |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Restructuring and other charges |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Interest expense |
— | 11,049 | 13,990 | (13,990 | ) | 3h | — | — | ||||||||||||||||||||||||
Transaction related costs |
— | 3,988 | 5,050 | — | — | 5,050 | ||||||||||||||||||||||||||
Other (income) expense, net |
— | (1,630 | ) | (2,064 | ) | — | — | (2,064 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Operating income (loss) |
6,839 | (23,357 | ) | (29,575 | ) | 13,419 | 6,849 | (2,468 | ) | |||||||||||||||||||||||
Gain (loss) on disposal of property, plant and equipment |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Equity earnings from associate and joint venture |
284 | — | — | — | — | 284 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) before finance costs and income taxes |
7,123 | (23,357 | ) | (29,575 | ) | 13,419 | 6,849 | (2,184 | ) | |||||||||||||||||||||||
Net finance costs |
3,871 | — | — | 13,990 | 3h | 8,085 | 6e | 25,946 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) before income taxes |
3,252 | (23,357 | ) | (29,575 | ) | (571 | ) | (1,236 | ) | (28,130 | ) | |||||||||||||||||||||
Income taxes |
3,621 | 5,769 | 7,305 | — | — | 10,926 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net earnings (loss) from continuing operations |
(369 | ) | (29,126 | ) | (36,880 | ) | (571 | ) | (1,236 | ) | (39,056 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gain (loss) from discontinued operations |
$ | — | $ | (519 | ) | $ | (657 | ) | $ | 571 | 3c | $ | — | $ | (86 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) |
$ | (369 | ) | $ | (29,645 | ) | $ | (37,537 | ) | $ | — | $ | (1,236 | ) | $ | (39,142 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) per share: |
||||||||||||||||||||||||||||||||
Basic |
$ | (0.00 | ) | $ | (0.89 | ) | $ | — | $ | — | $ | — | $ | (0.32 | ) | |||||||||||||||||
Diluted |
(0.00 | ) | (0.89 | ) | — | — | — | (0.32 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Weighted average number of shares: |
||||||||||||||||||||||||||||||||
Basic |
89,679,811 | 33,317,000 | 6g | 122,994,822 | ||||||||||||||||||||||||||||
Diluted |
89,679,811 | 33,317,000 | 6g | 122,994,822 |
Historical | Transaction Accounting Adjustments |
|||||||||||||||||||||||||||||||
CAD Enerflex (IFRS) |
USD Exterran (US GAAP) |
CAD Exterran (US GAAP) |
Presentation- conforming adjustments |
Notes | Pro forma adjustments |
Notes | Pro forma consolidated (IFRS) |
|||||||||||||||||||||||||
Revenue |
$ | 960,156 | $ | 630,245 | $ | 790,012 | $ | 7,705 | 3c | $ | (2,055 | ) | 6a | $ | 1,755,818 | |||||||||||||||||
Cost of goods sold |
757,934 | 353,779 | 443,462 | 233,498 | 3c,e,g | (9,032 | ) | 6b | 1,425,862 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gross margin |
202,222 | 276,466 | 346,550 | (225,793 | ) | 6,977 | 329,956 | |||||||||||||||||||||||||
Selling and administrative expenses |
147,931 | 132,510 | 166,101 | (3,760 | ) | 3c,e,g | 664 | 6c | 310,936 | |||||||||||||||||||||||
Depreciation and amortization |
— | 175,063 | 219,441 | (219,441 | ) | 3e | — | — | ||||||||||||||||||||||||
Impairment |
— | 7,959 | 9,977 | — | — | 9,977 | ||||||||||||||||||||||||||
Restructuring and other charges |
— | 1,338 | 1,677 | (1,677 | ) | 3f | — | — | ||||||||||||||||||||||||
Interest expense |
— | 41,574 | 52,113 | (52,113 | ) | 3h | ||||||||||||||||||||||||||
Transaction related costs |
— | — | — | 1,677 | 3f | 125,336 | 6d | 127,013 | ||||||||||||||||||||||||
Other (income) expense, net |
— | (1,292 | ) | (1,620 | ) | (74 | ) | 3c | — | (1,694 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Operating income (loss) |
54,291 | (80,686 | ) | (101,139 | ) | 49,595 | (119,023 | ) | (116,276 | ) | ||||||||||||||||||||||
Gain (loss) on disposal of property, plant and equipment |
135 | — | — | — | — | 135 | ||||||||||||||||||||||||||
Equity earnings from associate and joint venture |
671 | — | — | — | — | 671 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) before finance costs and income taxes |
55,097 | (80,686 | ) | (101,139 | ) | 49,595 | (119,023 | ) | (115,470 | ) | ||||||||||||||||||||||
Net finance costs |
16,995 | 52,113 | 3h | 34,215 | 6e | 103,323 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) before income taxes |
38,102 | (80,686 | ) | (101,139 | ) | (2,518 | ) | (153,238 | ) | (218,793 | ) | |||||||||||||||||||||
Income taxes |
56,557 | 30,238 | 37,903 | — | — | 94,460 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net earnings (loss) from continuing operations |
(18,455 | ) | (110,924 | ) | (139,042 | ) | (2,518 | ) | (153,238 | ) | (313,253 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gain (loss) from discontinued operations |
$ | — | $ | (1,784 | ) | $ | (2,236 | ) | $ | 2,518 | 3c | $ | — | $ | 282 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss) |
$ | (18,455 | ) | $ | (112,708 | ) | $ | (141,278 | ) | $ | — | $ | (153,238 | ) | $ | (312,971 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Earnings (loss) per share: |
||||||||||||||||||||||||||||||||
Basic |
$ | (0.21 | ) | $ | (3.38 | ) | $ | — | $ | — | $ | — | $ | (2.54 | ) | |||||||||||||||||
Diluted |
(0.21 | ) | (3.38 | ) | — | — | — | (2.54 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Weighted average number of shares: |
||||||||||||||||||||||||||||||||
Basic |
89,679,811 | 33,315,011 | 6g | 122,994,822 | ||||||||||||||||||||||||||||
Diluted |
89,679,811 | 33,315,011 | 6g | 122,994,822 |
1. |
Description of the Transaction |
2. |
Basis of presentation |
i. | Enerflex consolidated statement of financial position as at March 31, 2022, the Enerflex consolidated statement of earnings for the three months ended March 31, 2022, and the Enerflex consolidated statement of earnings for the year ended December 31, 2021 (collectively referred to as the ‘‘Enerflex historical consolidated financial statements”); and |
ii. | Exterran consolidated balance sheet as at March 31, 2022, and the Exterran consolidated statement of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 (collectively referred to as the ‘‘Exterran historical consolidated financial statements’’). |
3. |
Reconciliation from US GAAP to IFRS and Conforming Adjustments |
(a) | The Exterran consolidated balance sheet as at March 31, 2022 was translated from USD to CAD using the period end exchange rate of $1.25 whereas the Exterran consolidated statement of operations for the three months ended March 31, 2022 was translated from USD to CAD using the average exchange rate of $1.27 and the Exterran consolidated statement of operations for the year ended December 31, 2021 was translated from USD to CAD using the average exchange rate of $1.25. |
(b) | Reflects a reclassification of computer software from property, plant and equipment to intangible assets as required under IAS 38, Intangible Assets |
(c) | Reflects a reclassification of certain discontinued operations in the Exterran historical consolidated financial statements related to the U.S. compression fabrication business that is core to the overall business of Enerflex and will no longer be considered discontinued operations upon completion of the merger. Approximately $19.0 million in assets have been reclassified into inventory and contract assets and approximately $0.5 million in liabilities have been reclassified to accounts payables and accrued liabilities, deferred revenues and other liabilities in the unaudited pro forma consolidated financial position as at March 31, 2022. Approximately $0.6 million in income from discontinued operations has also been reclassified to operating income and expenses in the unaudited pro forma consolidated statement of earnings for the three months ended March 31, 2022 and $2.5 million for the year ended December 31, 2021. The remaining assets and liabilities have been adjusted to fair value in the preliminary purchase price allocation as described in note 5(e). |
(d) | Reflects presentation conforming adjustments to reclassify and combine certain asset and liability balances presented separately on the face of the Exterran consolidated balance sheet as at March 31, 2022 that are presented as a single line-item in the Enerflex consolidated financial position as at March 31, 2022. |
(e) | Reflects a presentation conforming adjustment to reclassify depreciation and amortization expense presented separately on the face of the Exterran consolidated statement of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 into both cost of goods sold and selling and administrative expenses consistent with the Enerflex consolidated statement of earnings for the three months ended March 31, 2022 and for the year ended December 31, 2021. |
(f) | Reflects a presentation conforming adjustment to reclassify legal fees incurred related to the merger recorded in restructuring and other related charges in the Exterran unaudited consolidated statement of operations for the year ended December 31, 2021 into merger expenses consistent with the Enerflex consolidated statement of earnings for the year ended December 31, 2021. No such reclassification was required for the Exterran consolidated statement of operations for the three months ended March 31, 2022. |
(g) | Reflects a presentation conforming adjustment to reclassify sales taxes recorded in selling and administrative expenses in the Exterran consolidated statement of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 into cost of goods sold consistent with the Enerflex consolidated statement of earnings for the three months ended March 31, 2022 and for the year ended December 31, 2021. |
(h) | Reflects a presentation conforming adjustment to reclassify interest expense recorded in interest expense in the Exterran consolidated statement of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 into net finance costs consistent with the Enerflex consolidated statement of earnings for the three months ended March 31, 2022 and for the year ended December 31, 2021. |
4. |
Estimated preliminary purchase price allocation |
Purchase Price |
||||
Non-cash estimated fair value of share conversion |
198.9 | |||
Estimated fractional share amount cash consideration |
4.2 | |||
Estimated fair value of vested share-based awards |
7.5 | |||
|
|
|||
Total merger consideration |
$ | 210.6 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed 1 |
||||
Net book value of assets acquired as at March 31, 2022 |
197.4 | |||
Adjustments to fair value: |
||||
Increase in inventories |
3.4 | |||
Increase in right-of-use assets |
12.2 | |||
Derecognize existing intangible assets |
(3.4 | ) | ||
Identifiable intangible assets |
4.3 | |||
Increase in deferred tax liabilities |
(2.3 | ) | ||
Derecognition of deferred financing fees |
(7.1 | ) | ||
Decrease of assets associated with discontinued operations |
(2.7 | ) | ||
Decrease of share-based compensation awards liability |
5.1 | |||
Decrease in deferred revenue and other liabilities |
3.7 | |||
|
|
|||
Total goodwill |
$ | — |
1 |
Represents USD converted to CAD at a rate of $1.25 to reflect the merger in the presentation currency of Enerflex. |
5. |
Pro forma adjustments to the consolidated statement of financial position of Enerflex |
(a) |
Cash and cash equivalents |
Sources of Funds |
||||
New Bank Facility (i) |
53.6 | |||
Bridge loan (ii) |
1,155.9 | |||
Existing cash (iii) |
72.5 | |||
|
|
|||
Total sources |
$ | 1,282.0 | ||
Uses of Funds |
||||
Estimated cash consideration of the Merger Consideration (iv) |
4.2 | |||
Repayment Exterran debt (v) |
797.9 | |||
Repayment of Enerflex debt (vi) |
342.3 | |||
Transaction related costs (including financing fees) (vii) |
137.6 | |||
|
|
|||
Total uses |
$ | 1,282.0 |
i. | Concurrently with the closing of the merger, for the purposes of the pro forma financial information, Enerflex has assumed it will draw from the bridge loan to fund the merger, repay all the outstanding debt of both Enerflex and Exterran and certain transaction fees and expenses. The total bridge loan of $1,155.9 million (USD $925.0 million) is expected to be fully withdrawn upon the closing date. |
ii. | Concurrently with the closing of the merger, Enerflex will enter into the New Bank Facility with expected borrowing capacity of USD $700.0 million. Enerflex has assumed it will draw from the New Bank Facility to the extent the bridge loan isn’t sufficient to fund the merger, repay all the outstanding debt of both Enerflex and Exterran and certain transaction fees and expenses. As such, a total amount of $53.6 million (USD $42.9 million) is expected to be drawn from the New Bank Facility. |
iii. | A total amount of $72.5 million of existing cash in Exterran and Enerflex is expected to be utilized for the merger. |
iv. | Represents the estimated cash consideration payable on the closing date of the merger related to the fractional share amounts. |
v. | Represents approximately $360.5 million (USD $288.5 million) aggregate principal amount of Exterran’s revolving credit facility due October 2023 and approximately $437.4 million (USD $350.0 million) of 8.125% senior notes due May 2025 expected to be repaid in connection with the transaction. |
vi. | Represents approximately $46.2 million aggregate principal amount of Enerflex’s revolving credit facility, approximately $32.4 million of the U.S. asset-based credit facility, approximately $146.2 million of senior notes due December 2024 and approximately $117.5 million of senior notes due December 2027, expected to be repaid in connection with the transaction. |
vii. | Represents the estimated fees and expenses associated with the transaction including financing costs of approximately $68.1 million related to cancellation, make-whole, bridge financing and debt costs, $10.1 million of financing costs capitalized as part of the issuance of the new financing facilities, $5.7 million related to the settlement of share-based compensation awards liabilities, $23.3 million in post-combination expenses such as severances and $30.4 million in advisory, legal fees and other transaction costs. |
(b) |
Inventories |
(c) |
Right-of-Use assets |
(d) |
Intangible assets |
(e) |
Assets and liabilities associated with discontinued operations |
(f) |
Debt |
i. | an increase of $1,155.9 million aggregate principal amount of debt relating to the bridge loan and $53.6 relating to the New Bank Facility; |
ii. | a decrease of $1,140.2 million net book value of debt expected to be repaid in the transaction consisting of $342.3 million of Enerflex’s debt and $797.9 million of Exterran’s debt, and an increase of $6.9 million relating to the elimination of historical debt issuance costs of Enerflex and Exterran as of March 31, 2022; and |
iii. | a decrease of $10.1 million relating to the incurrence of new debt issuance costs for the bridge loan, which are capitalized against the debt and recognized as non-cash interest expense periodically over the estimated life of the related debt obligations. |
(g) |
Deferred revenue and other liabilities |
(h) |
Deferred tax liability |
(i) |
Total equity |
i. | a net decrease $269.8 million to reflect the elimination of Exterran historical common stock, additional paid-in capital, accumulated deficit and accumulated other comprehensive income; |
ii. | an increase of $72.4 million to reflect the elimination of 4,771,565 common shares held as treasury stock that is cancelled as part of the merger; |
iii. | an increase of $198.9 million to reflect the non-cash estimated fair value of share conversion; and |
iv. | a decrease of $125.4 million in retained earnings to reflect the costs incurred related to the transaction and the refinancing. |
6. |
Pro forma adjustments to the consolidated statement of earnings of Enerflex |
(a) |
Revenue |
(b) |
Cost of goods sold |
i. | An increase of $0.1 million in amortization expense for three months ended March 31, 2022 and $0.4 million for year ended December 31, 2021 resulting from the adjustment of the identifiable intangible assets to fair value in connection with purchase accounting as described in note 5(d). The preliminary amortization expense was calculated on a straight-line basis over the respective estimated weighted-average lives of all intangible assets. For a 10% change in the valuation of the definite-lived intangible assets, assuming a weighted average useful life of 10 years, amortization expense would increase or decrease by $0.01 million for the three months ended March 31, 2022 and $0.04 million for the year ended December 31, 2021; |
ii. | A decrease of $0.5 million in amortization expense for the three months ended March 31, 2022 and $1.7 million for the year ended December 31, 2021 to eliminate the historical amortization of intangible assets; |
iii. | A net decrease in compensation expense of $9.4 million for the three months ended March 31, 2022 ($8.6 million for the year ended December 31, 2021) resulting from the difference between Exterran’s historical stock-based compensation expense of approximately $9.6 million ($10.1 million for the year ended December 31, 2021) and the estimated share-based post-combination compensation expense of approximately $0.2 million ($1.5 million for the year ended December 31, 2021) related to replacement awards issued to continuing employees as part of the Merger Agreement. The fair value of the replacement awards (including restricted stock units and performance units) was determined based on the most recent share price and the exchange ratio of 1.021 and will be recognized ratably over the post-combination service weighted average vesting period of 1 year. The Enerflex replacement awards are subject to the same terms and conditions (including settlement terms) as the corresponding stock-based payment awards of Exterran on the Closing Date; |
iv. | An estimated prorated increase of $0.3 million for the three months ended March 31, 2022 and $0.9 million for the year ended December 31, 2021 in amortization resulting from the adjustment to the right-of-use asset as described in note 5(c); and |
v. | An estimated increase of $2.3 million for the three months ended March 31, 2022 resulting from the work-in-progress inventory that is expected to be sold in this period. |
(c) |
Selling and administrative expenses |
i. | An increase of $3 thousand for the three months ended March 31, 2022 and $24 thousand for the year ended December 31, 2021 in amortization expense resulting from the adjustment of the identifiable intangible assets to fair value in connection with purchase accounting as described in note 5(d). The preliminary amortization expense was calculated on a straight-line basis over the respective estimated weighted-average lives of all intangible assets; |
ii. | A decrease of $11.0 thousand in amortization expense for the three months ended March 31, 2022 and $0.1 million for the year ended December 31, 2021 to eliminate the historical amortization of intangible assets; and |
iii. | An estimated prorated increase of $63.0 thousand in amortization for the three months ended March 31, 2022 and $0.74 million for the year ended December 31, 2021 resulting from the adjustment to the right-of-use asset as described in note 5(c). |
(d) |
Transaction related costs (including financing fees) |
(e) |
Interest expenses |
(f) |
Income tax expenses |
(g) |
Pro forma earnings per share |
• | The Engineered Systems product line consists of custom and standard compression packages for reciprocating and screw compressor applications from Enerflex’s manufacturing facility located in Houston, Texas. In addition, the Company engineers, designs, manufactures, constructs, and installs modular natural gas processing equipment, energy transition solutions, refrigeration systems, and electric power solutions. Retrofit provides re-engineering, re-configuration, and re-packaging of compressors for various field applications. |
• | The Service product line provides mechanical services and parts, as well as maintenance solutions to the oil and natural gas industry in the USA. The Company packages CAT engines and is also a Platinum Tier Gas Compression Solution Provider of INNIO Waukesha, providing worldwide access to parts and service for both products. Enerflex’s USA service branches are located in Colorado, Louisiana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas, West Virginia, and Wyoming. |
• | The Energy Infrastructure product line provides natural gas compression equipment rentals to oil and natural gas customers in the USA under its Contract Compression operations, primarily operating in the Permian and SCOOP/STACK formations utilizing a fleet of low- to high-horsepower packages. These compressor packages are typically used in wellhead, gas-lift and natural gas gathering systems, and other applications primarily in connection with natural gas and oil production. In addition, power generation rental solutions are also available in the USA region. The Energy Infrastructure product line in the USA operates out of the Houston, Texas head office facility along with branches in West Texas, New Mexico and Oklahoma. |
• | The Rest of World segment deploys products typically fabricated by Enerflex’s Engineered Systems division in Houston, Texas. |
• | The Latin America region, with locations in Argentina, Bolivia, Brazil, Colombia, and Mexico, provides Engineered Systems products, including integrated turnkey natural gas compression, processing, and electric power solutions, with local construction and installation capabilities. The Service product line in the region focuses on after-market services, parts, and components, as well as operations, maintenance, and overhaul services. The Energy Infrastructure product line provides natural gas compression and processing equipment for rent to oil and gas customers in the region. |
Enerflex has several operating Build-Own-Operate-Maintain (“BOOM”) facilities of varying size and scope in this region, providing customers with alternate solutions to meet their natural gas compression, processing, and electric power needs. These BOOM facilities can be treated as either operating or finance leases. |
• | The Middle East/Africa (“MEA”) region, through its operations in Bahrain, Oman, Kuwait, and the UAE, provides engineering, design, procurement, project management, and construction services for compression, process, and power generation equipment, as well as rentals, after-market service, parts, and operations and maintenance services for gas compression, power generation, and processing facilities in the region. The Energy Infrastructure product line provides natural gas compression, power generation, and processing equipment for rent to oil and gas customers in the region. Enerflex has several BOOM facilities of varying size and scope in this region providing customers with alternate solutions to meet their natural gas compression, processing, and electric power needs. These BOOM facilities can be treated as either operating or finance leases. |
• | The Australia region is headquartered in Brisbane, Queensland with additional locations in Queensland, Western Australia, and New Zealand providing after-market services, equipment supply, parts supply, and general asset management. The Brisbane facility also packages power generation equipment for use across the region. |
• | The Asia region, with locations and operations in Indonesia, Malaysia, and Thailand, provides Engineered Systems, as well as after-market services and parts through the Company’s local operations. |
• | Through its location in the United Kingdom, the Company provides customized compression, processing, and high-end refrigeration solutions in the Europe region. |
• | As a Platinum Tier Gas Compression Solution Provider of INNIO Waukesha engines, the Company provides factory-direct access to Waukesha engines and parts in its Rest of World regions. This region also packages CAT engines and parts. |
• | The Engineered Systems product line is comprised of compression, process, energy transition, and electric power solutions. Enerflex provides custom and standard compression packages for reciprocating and screw compressor applications. It also engineers, designs, manufactures, constructs, and installs modular processing equipment and waste gas systems for natural gas facilities. Enerflex provides integrated turnkey (“ITK”) power generation, gas compression, and processing facilities. Retrofit solutions provide re-engineering, re-configuration, and re-packaging of compressors for various field applications. Enerflex has a manufacturing facility in Calgary, Alberta and retrofit facilities in Calgary, Grand Prairie, and Red Deer, Alberta. |
• | The Service product line provides after-market mechanical service and parts distribution. As a Platinum Tier Gas Compression Solution Provider of INNIO Waukesha, the Company has worldwide factory-direct access to Waukesha engines and parts. In addition, Enerflex is also the authorized distributor and service provider of INNIO’s Jenbacher gas engines and parts in Canada. The Company also packages CAT and MAN engines and parts. The Service product line operates out of service branches located in Alberta, British Columbia, Ontario, and Quebec. |
• | The Energy Infrastructure product line provides reciprocating and rotary screw natural gas compression packages ranging from 50 horsepower to 2,000 horsepower, as well as electric power equipment for rent to customers. |
Twelve months ended December 31, | ||||||||||||
($ Canadian thousands, except percentages) |
2021 1 |
2020 1 |
2019 1 |
|||||||||
Revenue |
$ |
960,156 |
$ | 1,217,052 | $ | 2,045,422 | ||||||
Gross margin |
202,222 |
279,322 | 414,223 | |||||||||
Selling and administrative expenses |
147,931 |
163,310 | 182,315 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
54,291 |
116,012 | 231,908 | |||||||||
Earnings before finance costs and income taxes (“EBIT”) |
55,097 |
118,052 | 233,902 | |||||||||
Net earnings (loss) |
$ |
(18,455) |
$ | 88,257 | $ | 152,128 | ||||||
Key Financial Performance Indicators 2 |
||||||||||||
Engineered Systems bookings |
$ |
768,703 |
$ | 273,782 | $ | 508,916 | ||||||
Engineered Systems backlog |
557,549 |
142,973 | 467,757 | |||||||||
Recurring revenue growth 3 |
(2.0)% |
3.6% | 14.5% | |||||||||
Gross margin as a percentage of revenue |
21.1% |
23.0% | 20.3% | |||||||||
EBIT as a percentage of revenue |
5.7% |
9.7% | 11.4% | |||||||||
Earnings before finance costs, income taxes, depreciation and amortization (“EBITDA”) |
$ |
142,719 |
$ | 203,317 | $ | 320,461 | ||||||
Return on capital employed (“ROCE”) |
3.5% |
6.6% | 15.8% | |||||||||
Rental horsepower |
800,271 |
713,929 | 674,153 |
1 |
Certain balances have been reclassified between COGS and SG&A following management’s continuing review of the function of expenditures incurred. Please refer to Note 2(a) of the notes to the consolidated financial statements for additional details. |
2 |
These key financial performance indicators are Non-IFRS measures. Further detail is provided in the Non-IFRS Measures section. |
3 |
Recurring revenue is comprised of revenue from the Service and Energy Infrastructure product lines, which are typically contracted and extend into the future. While the contracts are subject to cancellation or have varying lengths, the Company does not believe these characteristics preclude them from being considered recurring in nature. Growth in recurring revenue is calculated on a period-over-period basis. |
• | Engineered Systems bookings totaled $768.7 million, up from $273.8 million in the same period last year reflecting improving conditions for customers and renewed optimism in the oil and gas sector. The movement in foreign exchange rates resulted in an increase of $5.7 million on foreign currency denominated backlog during the twelve months of 2021, compared to $7.5 million in the comparable period. |
• | Operating income was lower than the prior year, primarily due to reduced Engineered Systems revenue on lower opening backlog, the recognition of large finance leases in the prior year, significantly higher share-based compensation costs, reduced contribution from certain large, high margin Engineered Systems projects that were largely completed by the third quarter of 2020 and lower government grants received. These impacts were partially offset by improved Service revenues, increased contribution from higher margin recurring revenue product offerings, and lower SG&A due to the bad debt expense in the prior year. |
• | During the fourth quarter of 2021, the Company negotiated an extension of an existing contract on a significant BOOM asset. The extension is accounted for as a finance lease and is similar to the extensions that were signed in the fourth quarter of 2020 but has a lower impact in the current year and is the primary driver in the decrease in recurring revenues for the year. |
• | Engineered Systems backlog at December 31, 2021 is $557.5 million, an increase of $414.5 million, compared to the backlog of $143.0 million on December 31, 2020 due to Engineered Systems bookings outpacing revenue recognized in the period, and favourable foreign exchange impacts of $5.7 million. |
• | SG&A costs of $147.9 million in the twelve months of 2021 were down from $163.3 million in the same period last year. This favourable variance was the result of lower bad debt provisions, decreased compensation expense on reduced average headcount, and decreased profit share on lower operational results, partially offset by higher share-based compensation, and lower cost recoveries from government subsidies. The movement in share price resulted in $12.9 million of share-based compensation expense, compared to $1.8 million in the twelve months ended 2020 – a net increase of $11.1 million period-over-period. |
• | The Company derecognized $44.7 million of deferred tax assets. This non-cash event related to unused tax losses and other deductible temporary differences in Canada. The derecognized tax assets have a finite life and the continued challenging market conditions create uncertainty whether sufficient taxable income will be available to offset these unused tax losses prior to expiry. |
• | Inventory levels decreased $39.6 million when compared to December 31, 2020 as the Company continued to realize major equipment inventory into Engineered Systems projects and new contract compression units throughout 2021. |
• | The Company invested $52.2 million in rental assets; the majority of which was used to fund the organic expansion of the USA contract compression fleet. |
• | At December 31, 2021, the USA contract compression fleet totaled approximately 400,000 horsepower with an average fleet utilization of 86 percent for the twelve months ended December 31, 2021. |
• | The Company has also invested $36.2 million towards construction of natural gas infrastructure assets, which will be accounted for as a finance lease. |
• | During the third quarter of 2021, the Company extended $660.0 million of its Bank Facility to June 30, 2025, under substantially the same terms and conditions. |
• | The Company maintained balance sheet strength by managing working capital, reducing debt, and continuing to exercise capital discipline. We exited the quarter financially strong, with a bank-adjusted net debt to EBITDA ratio of 1.0:1, compared to a maximum ratio of 3:1. This leverage ratio excludes the non-recourse debt. Enerflex has substantial undrawn credit capacity and cash on hand. |
• | Subsequent to December 31, 2021, the Company’s Board of Directors approved its quarterly dividend of $0.025 per share, payable on April 7, 2022, to shareholders of record on March 10, 2022. The Board will continue to evaluate dividend payments on a quarterly basis, based on the availability of cash flow and anticipated market conditions. |
• | On January 24, 2022, Enerflex and Exterran Corporation (NYSE: EXTN) announced they have entered into a definitive agreement to combine the companies in an all-share transaction to create a premier integrated global provider of energy infrastructure. Upon completion of the transaction, which will require shareholder and regulatory approval, the combined entity will operate as Enerflex Ltd. Subject to all approvals, the transaction is expected to close in the second half of 2022. |
• | Engineered Systems booking activity was lower in the twelve months of 2020 versus the comparative period due to restrained spending within the oil and gas industry. Bookings totaled $273.8 million, down from $508.9 million in the comparative period. During the year we recognized $19.8 million of previous bookings in the Canada segment that were de-booked. The de-booking largely related to a project initially recorded in a prior year that the customer deferred. The initial deposit was allocated to other projects that the Company had been awarded with the same customer. The movement in |
exchange rates resulted in an increase of $7.5 million on foreign currency denominated backlog during the twelve months of 2020, compared to a $35.0 million decrease in the comparable period – a $42.5 million period-over-period increase. |
• | Operating income decreased over the comparative period, due largely to lower Engineered Systems revenue and increased bad debt provisions in the USA and ROW segments, partially offset by the impact of the finance lease transaction, as described below, as well as improved gross margin percentage and lower overall SG&A costs. Both the current period and the comparative period also include the impact of higher estimated costs to complete certain projects; however, the effect on the current year was lower than the comparative period. In addition, the comparative period also includes a write-down of equipment. Gross margin percentage is higher as a result of increased contributions from recurring revenue product lines and the proportionately higher contribution of the previously mentioned high margin Engineered Systems projects that were largely completed by the third quarter of 2020. |
• | At December 31, 2020, the Company finalized the extension of two contracts with a customer, which were previously recognized as BOOM projects, for an additional 10 years. These contracts were previously scheduled to end in 2021 and 2024. Under the new agreements, the Company will continue providing, operating, and maintaining the existing equipment for approximately 10 years, after which ownership of the equipment will transfer to the customer. Upon commencement of the new leases, the Company recognized Energy Infrastructure revenue, based on the fair value of the underlying assets, and the associated cost of goods sold, determined to be the net book value of those assets, in the consolidated statements of earnings. The amount of this revenue reflects the amount that the Company would otherwise recognize on a sale of those assets. |
• | SG&A costs of $163.3 million in the twelve months of 2020 were down from $182.3 million in the same period of 2019. The decrease in SG&A is driven by lower compensation expense on lower headcount and profit share, as well as mark-to-market |
• | Engineered Systems backlog at December 31, 2020 decreased compared to December 31, 2019 due to Engineered Systems revenue recognized in the period outpacing bookings, partially offset by favourable foreign exchange impacts. |
• | The Company invested $123.9 million in rental assets to fund both the organic expansion of the USA contract compression fleet and continued construction of a previously announced BOOM project in MEA. At December 31, 2020, the USA contract compression fleet totaled over 350,000 horsepower with an average fleet utilization of 83 percent for the twelve months ended December 31, 2020. |
Twelve months ended December 31, 2021 |
||||||||||||||||
($ Canadian thousands) |
Total |
USA |
ROW |
Canada |
||||||||||||
Reported EBIT |
$ |
55,097 |
$ |
14,442 |
$ |
36,385 |
$ |
4,270 |
||||||||
Severance costs in COGS and SG&A |
749 |
112 |
202 |
435 |
||||||||||||
Government grants in COGS and SG&A |
(16,361 |
) |
(1,645 |
) |
(10 |
) |
(14,706 |
) | ||||||||
Share-based compensation |
12,937 |
5,540 |
4,942 |
2,455 |
||||||||||||
Depreciation and amortization |
87,622 |
42,702 |
37,293 |
7,627 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ |
140,044 |
$ |
61,151 |
$ |
78,812 |
$ |
81 |
||||||||
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2020 | ||||||||||||||||
($ Canadian thousands) |
Total | USA | ROW | Canada | ||||||||||||
Reported EBIT |
$ | 118,052 | $ | 56,496 | $ | 40,542 | $ | 21,014 | ||||||||
Severance costs in COGS and SG&A |
5,718 | 1,437 | 725 | 3,556 | ||||||||||||
Government grants in COGS and SG&A |
(19,569 | ) | — | (2,246 | ) | (17,323 | ) | |||||||||
Share-based compensation |
1,816 | 1,035 | 727 | 54 | ||||||||||||
Depreciation and amortization |
85,265 | 41,312 | 35,107 | 8,846 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 191,282 | $ | 100,280 | $ | 74,855 | $ | 16,147 | ||||||||
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2019 | ||||||||||||||||
($ Canadian thousands) |
Total | USA | ROW | Canada | ||||||||||||
Reported EBIT |
$ | 233,902 | $ | 193,825 | $ | 537 | $ | 39,540 | ||||||||
Write-off of rental equipment in COGS |
14,489 | — | 14,489 | — | ||||||||||||
Write-off of facility and equipment in COGS |
2,654 | — | 2,654 | — | ||||||||||||
Restructuring costs in COGS and SG&A |
869 | — | — | 869 | ||||||||||||
Gain on disposal of idle facilities |
(434 | ) | — | — | (434 | ) | ||||||||||
Share-based compensation |
7,749 | 3,838 | 1,888 | 2,023 | ||||||||||||
Depreciation and amortization |
86,559 | 33,381 | 42,846 | 10,332 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 345,788 | $ | 231,044 | $ | 62,414 | $ | 52,330 | ||||||||
|
|
|
|
|
|
|
|
Twelve months ended December 31, |
||||||||
($ Canadian thousands) |
2021 |
2020 | ||||||
Bookings |
||||||||
USA |
$ |
404,717 |
$ | 146,902 | ||||
Rest of World |
185,979 |
47,720 | ||||||
Canada |
178,007 |
79,160 | ||||||
|
|
|
|
|||||
Total bookings |
$ |
768,703 |
$ | 273,782 | ||||
|
|
|
|
($ Canadian thousands) |
December 31, 2021 |
December 31, 2020 |
||||||
Backlog |
||||||||
USA |
$ |
262,937 |
$ | 76,778 | ||||
Rest of World |
179,655 |
16,176 | ||||||
Canada |
114,957 |
50,019 | ||||||
|
|
|
|
|||||
Total backlog |
$ |
557,549 |
$ | 142,973 | ||||
|
|
|
|
• | USA generates revenue from manufacturing natural gas compression, processing, refrigeration, energy transition, and electric power equipment, including custom and standard compression packages and modular natural gas processing equipment and refrigeration systems, in addition to generating revenue from mechanical services, parts, and maintenance solutions, and contract compression rentals; |
• | Rest of World generates revenue from manufacturing (focusing on large-scale process equipment), after-market services, including parts and components, as well as operations, maintenance, and overhaul services, and rentals of compression and processing equipment. The Rest of World segment has been successful in securing BOOM, ITK, and other long-term finance leases; and |
• | Canada generates revenue from manufacturing both custom and standard natural gas compression, processing, energy transition, and electric power equipment, as well as providing after-market mechanical service, parts, and compression and power generation rentals. |
Twelve months ended December 31, |
||||||||||||
($ Canadian thousands) |
2021 |
2020 | 2019 | |||||||||
Engineered Systems bookings |
$ |
404,717 |
$ | 146,902 | $ | 340,552 | ||||||
Engineered Systems backlog |
262,937 |
76,778 | 320,054 | |||||||||
|
|
|
|
|
|
|||||||
Segment revenue |
$ |
497,630 |
$ | 649,133 | $ | 1,243,760 | ||||||
Intersegment revenue |
(27,247 |
) |
(16,847 | ) | (48,091 | ) | ||||||
|
|
|
|
|
|
|||||||
Revenue |
$ |
470,383 |
$ | 632,286 | $ | 1,195,669 | ||||||
|
|
|
|
|
|
|||||||
Revenue – Engineered Systems |
$ |
218,558 |
$ | 390,178 | $ | 947,451 | ||||||
Revenue – Service |
$ |
153,722 |
$ | 150,939 | $ | 172,130 | ||||||
Revenue – Energy Infrastructure |
$ |
98,103 |
$ | 91,169 | $ | 76,088 | ||||||
Operating income |
$ |
14,442 |
$ | 56,504 | $ | 194,010 | ||||||
EBIT |
$ |
14,442 |
$ | 56,496 | $ | 193,825 | ||||||
EBITDA |
$ |
57,144 |
$ | 97,808 | $ | 227,206 | ||||||
Segment revenue as a % of total revenue |
49.0 |
% |
52.0 | % | 58.5 | % | ||||||
Recurring revenue growth |
4.0 |
% |
(2.5 | )% | 25.7 | % | ||||||
Operating income as a % of segment revenue |
3.1 |
% |
8.9 | % | 16.2 | % | ||||||
EBIT as a % of segment revenue |
3.1 |
% |
8.9 | % | 16.2 | % | ||||||
EBITDA as a % of segment revenue |
12.1 |
% |
15.5 | % | 19.0 | % |
Twelve months ended December 31, |
||||||||||||
($ Canadian thousands) |
2021 |
2020 | 2019 | |||||||||
Engineered Systems bookings |
$ |
185,979 |
$ | 47,720 | $ | 20,179 | ||||||
Engineered Systems backlog |
179,655 |
16,176 | 8,941 | |||||||||
|
|
|
|
|
|
|||||||
Segment revenue |
$ |
309,695 |
$ | 353,210 | $ | 354,680 | ||||||
Intersegment revenue |
(138 |
) |
(199 | ) | (7,846 | ) | ||||||
|
|
|
|
|
|
|||||||
Revenue |
$ |
309,557 |
$ | 353,011 | $ | 346,834 | ||||||
|
|
|
|
|
|
|||||||
Revenue – Engineered Systems |
$ |
22,500 |
$ | 40,485 | $ | 76,813 | ||||||
Revenue – Service 1 |
$ |
111,500 |
$ | 96,092 | $ | 111,357 | ||||||
Revenue – Energy Infrastructure 1 |
$ |
175,557 |
$ | 216,434 | $ | 158,664 | ||||||
Operating income |
$ |
36,250 |
$ | 40,488 | $ | 511 | ||||||
EBIT |
$ |
36,385 |
$ | 40,542 | $ | 537 | ||||||
EBITDA |
$ |
73,678 |
$ | 75,649 | $ | 43,383 | ||||||
Segment revenue as a % of total revenue |
32.2 |
% |
29.0 | % | 17.0 | % | ||||||
Recurring revenue growth 2 |
(8.1 |
)% |
15.7 | % | 6.5 | % | ||||||
Operating income as a % of segment revenue |
11.7 |
% |
11.5 | % | 0.1 | % | ||||||
EBIT as a % of segment revenue |
11.8 |
% |
11.5 | % | 0.2 | % | ||||||
EBITDA as a % of segment revenue |
23.8 |
% |
21.4 | % | 12.5 | % |
1 |
Revenues from the operation and maintenance of BOOM contracts have been reclassified from the Service to Energy Infrastructure product line including $11,717 previously disclosed during the first quarter of 2020. For the twelve months ended December 31, 2019, $43,594 have been reclassified. Please refer to Note 23 of the audited consolidated financial statements for further details. |
2 |
Recurring revenue growth includes revenue recognized on the commencement of a finance lease in the fourth quarter of 2021 and two finance leases in the fourth quarter of 2020. The amount of this revenue reflects the amount that the Company would otherwise recognize on a sale of those assets. Without the effect of these transactions, recurring revenue growth in the Rest of World segment would have increased to 6.9% for the year ended December 31, 2021 and decreased to (7.9)% for the year ended December 31, 2020. |
Twelve months ended December 31, |
||||||||||||
($ Canadian thousands) |
2021 |
2020 | 2019 | |||||||||
Engineered Systems bookings |
$ |
178,007 |
$ | 79,160 | $ | 148,185 | ||||||
Engineered Systems backlog |
114,957 |
50,019 | 138,762 | |||||||||
|
|
|
|
|
|
|||||||
Segment revenue |
$ |
194,439 |
$ | 247,390 | $ | 518,042 | ||||||
Intersegment revenue |
(14,223 |
) |
(15,635 | ) | (15,123 | ) | ||||||
|
|
|
|
|
|
|||||||
Revenue |
$ |
180,216 |
$ | 231,755 | $ | 502,919 | ||||||
|
|
|
|
|
|
|||||||
Revenue – Engineered Systems |
$ |
113,069 |
$ | 167,903 | $ | 424,239 | ||||||
Revenue – Service |
$ |
62,154 |
$ | 56,238 | $ | 67,505 | ||||||
Revenue – Energy Infrastructure |
$ |
4,993 |
$ | 7,614 | $ | 11,175 | ||||||
Operating income |
$ |
3,599 |
$ | 19,020 | $ | 37,387 | ||||||
EBIT |
$ |
4,270 |
$ | 21,014 | $ | 39,540 | ||||||
EBITDA |
$ |
11,897 |
$ | 29,860 | $ | 49,872 | ||||||
Segment revenue as a % of total revenue |
18.8 |
% |
19.0 | % | 24.6 | % | ||||||
Recurring revenue growth |
5.2 |
% |
(18.8 | )% | 12.0 | % | ||||||
Operating income as a % of segment revenue |
2.0 |
% |
8.2 | % | 7.4 | % | ||||||
EBIT as a % of segment revenue |
2.4 |
% |
9.1 | % | 7.9 | % | ||||||
EBITDA as a % of segment revenue |
6.6 |
% |
12.9 | % | 9.9 | % |
Twelve months ended December 31, 2021 1 |
||||||||||||||||
($ Canadian thousands) |
Total |
Engineered Systems |
Service |
Energy Infrastructure |
||||||||||||
Revenue |
$ |
960,156 |
$ |
354,127 |
$ |
327,376 |
$ |
278,653 |
||||||||
Cost of goods sold: |
||||||||||||||||
Operating expenses |
682,574 |
308,334 |
264,133 |
110,107 |
||||||||||||
Depreciation and amortization |
75,360 |
9,923 |
10,679 |
54,758 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin |
$ |
202,222 |
$ |
35,870 |
$ |
52,564 |
$ |
113,788 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
21.1 |
% |
10.1 |
% |
16.1 |
% |
40.8 |
% | ||||||||
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2020 1 |
||||||||||||||||
($ Canadian thousands) |
Total | Engineered Systems |
Service | Energy Infrastructure |
||||||||||||
Revenue |
$ | 1,217,052 | $ | 598,566 | $ | 303,269 | $ | 315,217 | ||||||||
Cost of goods sold: |
||||||||||||||||
Operating expenses |
865,490 | 477,741 | 244,852 | 142,897 | ||||||||||||
Depreciation and amortization |
72,240 | 8,469 | 9,120 | 54,651 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin |
$ | 279,322 | $ | 112,356 | $ | 49,297 | $ | 117,669 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
23.0 | % | 18.8 | % | 16.3 | % | 37.3 | % | ||||||||
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2019 1 |
||||||||||||||||
($ Canadian thousands) |
Total | Engineered Systems |
Service | Energy Infrastructure |
||||||||||||
Revenue |
$ | 2,045,422 | $ | 1,448,503 | $ | 350,992 | $ | 245,927 | ||||||||
Cost of goods sold: |
||||||||||||||||
Operating expenses |
1,559,574 | 1,157,594 | 280,134 | 121,846 | ||||||||||||
Depreciation and amortization |
71,625 | 6,681 | 7,986 | 56,958 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin |
$ | 414,223 | $ | 284,228 | $ | 62,872 | $ | 67,123 | 2 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
20.3 | % | 19.6 | % | 17.9 | % | 27.3 | % | ||||||||
|
|
|
|
|
|
|
|
1 |
Certain balances have been reclassified between COGS and SG&A. Please refer to Note 2(a) of the notes to the consolidated financial statements for additional details . |
2 |
In the twelve months of 2019, Enerflex recognized $26.4 million of write-offs and impairment charges on rental equipment. Of the total value recognized, $14.5 million relates to the write-off of specialized rental assets acquired as part of a business combination in 2014 that we have now determined cannot be redeployed and have never been utilized or generated revenue for Enerflex. |
Twelve months ended December 31, |
||||||||||||
($ Canadian thousands) |
2021 |
2020 | 2019 | |||||||||
EBITDA |
||||||||||||
EBIT |
$ |
55,097 |
$ | 118,052 | $ | 233,902 | ||||||
Depreciation and amortization |
87,622 |
85,265 | 86,559 | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
$ |
142,719 |
$ | 203,317 | $ | 320,461 | ||||||
Recurring Revenue |
||||||||||||
Service 1 |
$ |
327,376 |
$ | 303,269 | $ | 350,992 | ||||||
Energy Infrastructure 1 |
278,653 |
315,217 | 245,927 | |||||||||
|
|
|
|
|
|
|||||||
Total Recurring Revenue |
$ |
606,029 |
$ | 618,486 | $ | 596,919 | ||||||
ROCE |
||||||||||||
Trailing 12-month EBIT |
$ |
55,097 |
$ | 118,052 | $ | 233,902 | ||||||
Capital Employed – beginning of period |
||||||||||||
Net debt 2 |
$ |
294,036 |
$ | 334,232 | $ | 117,848 | ||||||
Shareholders’ equity |
1,396,695 |
1,342,787 | 1,282,519 | |||||||||
|
|
|
|
|
|
|||||||
$ |
1,690,731 |
$ | 1,677,019 | $ | 1,400,367 | |||||||
Capital Employed – end of period |
||||||||||||
Net debt 2 |
$ |
158,664 |
$ | 294,036 | $ | 334,232 | ||||||
Shareholders’ equity |
1,353,754 |
1,396,695 | 1,342,787 | |||||||||
|
|
|
|
|
|
|||||||
$ |
1,512,418 |
$ | 1,690,731 | $ | 1,677,019 | |||||||
Average Capital Employed 3 |
$ |
1,595,281 |
$ | 1,777,890 | $ | 1,483,919 | ||||||
Return on Capital Employed |
3.5 |
% |
6.6 | % | 15.8 | % |
1 |
Revenues from the operation and maintenance of BOOM contracts have been reclassified from the Service to Energy Infrastructure product line including $11,717 previously disclosed during the first quarter of 2020. For the twelve months ended December 31, 2019, $43,594 have been reclassified. Please refer to Note 23 of the audited consolidated financial statements for further details. |
2 |
Net debt is defined as short- and long-term debt less cash and cash equivalents. |
3 |
Based on a trailing four-quarter average. |
($ Canadian millions) |
Increase (Decrease) |
Explanation | ||||
Current assets | $ | 85.4 | The increase in current assets is primarily due to higher cash and contract assets due to increased activity, and work-in-progress | |||
Rental equipment | $ | (27.5 | ) | The decrease is largely due to the extension of a previous BOOM contract in ROW being treated as a sale of the rental equipment under finance lease accounting. Rental equipment also decreased due to higher depreciation compared to last year. This decrease was partially offset by additions during the year, primarily for the contract compression fleet in the USA and a BOOM project in ROW. | ||
Finance leases receivable | $ | 26.9 | The increase in finance leases receivable is due to the recognition of the above noted finance lease transaction that occurred in the fourth quarter of 2021. | |||
Deferred tax assets | $ | (38.9 | ) | The decrease in deferred tax assets is due to the derecognition of $44.7 million of unused tax losses and other deductible temporary differences in Canada. It is unlikely that sufficient taxable income will be available to offset these unused tax losses prior to expiry, nor will we have any available offsets to use against the deductible temporary differences. | ||
Current liabilities | $ | 67.8 | The increase in current liabilities is due to higher accounts payable, accrued liabilities, and deferred revenues on higher activity levels, and an increase in income taxes payable. These increases are partially offset by the repayment of the $40.0 million debt that had been classified as current at December 31, 2020, and lower warranty provisions. | |||
Long-term debt | $ | (18.3 | ) | The decrease in long-term debt is due to repayments made on the Bank Facility, partially offset by drawings on the Asset-Based Facility. | ||
Shareholders’ equity | $ | (42.9 | ) | Shareholders’ equity decreased primarily due to $18.5 million net loss and $18.6 million impact on unrealized loss on translation of foreign operations and foreign denominated debt, and dividends of $7.6 million. This was partially offset by $1.8 million of stock options. |
Twelve months ended December 31, |
||||||||||||
($ Canadian thousands) |
Restated 1 2021 |
Restated 1 2020 |
Restated 1 2019 |
|||||||||
Cash, beginning of period |
$ |
95,676 |
$ | 96,255 | $ | 326,864 | ||||||
Cash provided by (used in): |
||||||||||||
Operating activities |
208,194 |
247,309 | 66,921 | |||||||||
Investing activities |
(48,861 |
) |
(170,497 | ) | (249,831 | ) | ||||||
Financing activities |
(80,456 |
) |
(77,321 | ) | (44,238 | ) | ||||||
Exchange rate changes on foreign currency cash |
(1,795 |
) |
(70 | ) | (3,461 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash, end of period |
$ |
172,758 |
$ | 95,676 | $ | 96,255 | ||||||
|
|
|
|
|
|
1 |
Please refer to note 36 of the consolidated financial statements for the details of this restatement. |
($ Canadian thousands, except per share amounts) |
Revenue |
Net earnings |
Earnings per share – basic |
Earnings per share – diluted |
||||||||||||
December 31, 2021 |
$ |
321,347 |
$ |
(32,707 |
) |
$ |
(0.36 |
) |
$ |
(0.36 |
) | |||||
September 30, 2021 |
231,097 | 6,958 | 0.08 | 0.08 | ||||||||||||
June 30, 2021 |
204,507 | 4,291 | 0.05 | 0.05 | ||||||||||||
March 31, 2021 |
203,205 | 3,003 | 0.03 | 0.03 | ||||||||||||
December 31, 2020 |
298,837 | 32,668 | 0.36 | 0.36 | ||||||||||||
September 30, 2020 |
265,037 | 10,736 | 0.12 | 0.12 | ||||||||||||
June 30, 2020 |
287,438 | 7,415 | 0.08 | 0.08 | ||||||||||||
March 31, 2020 |
365,740 | 37,438 | 0.42 | 0.42 | ||||||||||||
December 31, 2019 |
474,362 | 31,436 | 0.35 | 0.35 | ||||||||||||
September 30, 2019 |
544,284 | 63,074 | 0.71 | 0.70 | ||||||||||||
June 30, 2019 |
541,874 | 40,649 | 0.45 | 0.45 | ||||||||||||
March 31, 2019 |
484,902 | 16,969 | 0.19 | 0.19 |
($ Canadian thousands, except per share amounts) |
Total Assets |
Total Non-Current Financial Liabilities |
Cash Dividends Declared Per Share |
|||||||||
December 31, 2021 |
$ |
2,191,442 |
$ |
331,422 |
$ |
0.085 |
||||||
December 31, 2020 |
2,179,576 | 349,712 | 0.175 | |||||||||
December 31, 2019 |
2,381,008 | 430,487 | 0.430 |
• | reduced global economic activity and a corresponding decrease in demand for oil and natural gas, which could result in producers being forced to shut-in production and serve to lower demand for the Company’s products and services; |
• | impaired supply chain as a result of mass quarantines, lockdowns, or border closures, thereby limiting the supply and increasing the cost of goods and services used in Enerflex’s operations; and |
• | restricted workforce as a result of quarantines and health impacts, rendering employees unable to work or travel. |
($ Canadian thousands) |
December 31, 2021 |
December 31, 2020 |
||||||
Drawings on Bank Facility |
$ |
30,522 |
$ | 84,369 | ||||
Drawings on Asset-Based Facility |
37,411 |
— | ||||||
Notes due June 22, 2021 |
— |
40,000 | ||||||
Notes due December 15, 2024 |
148,119 |
148,686 | ||||||
Notes due December 15, 2027 |
118,746 |
119,124 | ||||||
Deferred transaction costs |
(3,376 |
) |
(2,467 | ) | ||||
|
|
|
|
|||||
$ |
331,422 |
$ | 389,712 | |||||
Current portion of long-term debt |
$ |
— |
$ | 40,000 | ||||
Non-current portion of long-term debt |
331,422 |
349,712 | ||||||
|
|
|
|
|||||
$ |
331,422 |
$ | 389,712 | |||||
|
|
|
|
($ Canadian thousands) |
Leases |
Purchase Obligations |
Total |
|||||||||
2022 |
$ | 15,448 | $ | 243,737 | $ | 259,185 | ||||||
2023 |
11,167 | 2,904 | 14,071 | |||||||||
2024 |
8,192 | 125 | 8,317 | |||||||||
2025 |
6,313 | — | 6,313 | |||||||||
2026 |
4,561 | — | 4,561 | |||||||||
Thereafter |
22,817 | — | 22,817 | |||||||||
|
|
|
|
|
|
|||||||
Total contractual obligations |
$ |
68,498 |
$ |
246,766 |
$ |
315,264 |
||||||
|
|
|
|
|
|
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Associate – Roska DBO |
||||||||||||
Revenue |
$ |
352 |
$ | 558 | $ | 509 | ||||||
Purchases |
— |
— | — | |||||||||
Accounts receivable |
128 |
1 | 4 | |||||||||
Accounts payable |
— |
56 | — | |||||||||
Joint Operation – Geogas |
||||||||||||
Revenue |
$ |
— |
$ | — | $ | 62 | ||||||
Purchases |
— |
— | 74 | |||||||||
Accounts receivable |
— |
— | 19 | |||||||||
Accounts payable |
— |
— | — |
• | a new reconciliation process that will identify any new transactions being reflected in the Statement of Cash Flows; |
• | a robust review methodology for complex and non-normal course transactions which includes all aspects of presentation and disclosure; |
• | a proof to ensure that non-cash transfers are no longer reflected within the Statement of Cash Flows; and |
• | plans to use outside resources to enhance the business process documentation. |
Three months ended March 31, |
||||||||
($ Canadian thousands, except percentages) |
2022 |
2021 1 |
||||||
Revenue |
$ |
323,069 |
$ | 203,205 | ||||
Gross margin |
53,643 |
45,476 | ||||||
Selling and administrative expenses (“SG&A”) |
46,804 |
38,455 | ||||||
|
|
|
|
|||||
Operating income |
6,839 |
7,021 | ||||||
Earnings before finance costs and income taxes (“EBIT”) |
7,123 |
6,584 | ||||||
Net earnings (loss) |
$ |
(369 |
) |
$ | 3,003 | |||
|
|
|
|
Three months ended March 31, |
||||||||
($ Canadian thousands, except percentages) |
2022 |
2021 1 |
||||||
Key Financial Performance Indicators 2 |
||||||||
Engineered Systems bookings |
$ |
236,870 |
$ | 98,692 | ||||
Engineered Systems backlog |
619,988 |
169,433 | ||||||
Recurring revenue growth |
13.5 |
% |
(6.7 | )% | ||||
Gross margin as a percentage of revenue |
16.6 |
% |
22.4 | % | ||||
EBIT as a percentage of revenue 3 |
5.2 |
% |
7.1 | % | ||||
Earnings before finance costs, income taxes, depreciation and amortization (“EBITDA”) |
$ |
29,013 |
$ | 27,656 | ||||
Adjusted EBITDA |
$ |
38,739 |
$ | 29,611 | ||||
Return on capital employed (“ROCE”) 3 |
3.5 |
% |
4.3 | % | ||||
Rental horsepower |
833,872 |
767,842 |
1 |
Certain prior period amounts have been reclassified between COGS and SG&A following management’s continuing review of the function of expenditures incurred. Please refer to Note 1 of the interim condensed consolidated financial statements for additional details. |
2 |
These key financial performance indicators are Non-IFRS measures. Further detail is provided in the Non-IFRS Measures section. |
3 |
Determined by taking the trailing 12-month period. |
• | Bookings totaled $236.9 million, up significantly from $98.7 million in the same period last year, reflecting the increased activity in our Engineered Systems business. Movement in foreign exchange rates resulted in a decrease of $6.0 million on foreign currency denominated backlog during the first quarter of 2022. |
• | Engineered Systems backlog at March 31, 2022 is $620.0 million compared to the backlog of $557.5 million at December 31, 2021. This $62.5 million increase is due to the higher Engineered Systems bookings outpacing revenue recognized in the period, offset by unfavourable foreign exchange impacts of $6.0 million. |
• | The Company experienced a healthy increase in revenue in the current quarter at $323.1 million compared to $203.2 million in the comparable quarter. This increase is mainly due to a stronger opening backlog, revenue recognition on the previously announced 10-year natural gas infrastructure project, higher rental utilizations, and the increased volume of work in all segments. Gross margin was $53.6 million or 16.6 percent for the first quarter of 2022 compared to $45.5 million or 22.4 percent for the comparable period. The higher gross margin in the current quarter is primarily due to the increased volume of work. However, the Company reported a lower gross margin percent due to a shift in the product mix, less government grants received, and competitive pricing pressures on materials and labour. |
• | SG&A costs of $46.8 million in the first quarter of 2022 were up from $38.5 million in the same period last year. The increase is primarily due to the transaction costs associated with the pending Exterran transaction and the reduced cost recoveries from government subsidies. These increases are partially offset by lower share-based compensation. |
• | Operating income was lower than the prior period, primarily due to higher SG&A and competitive margin pressures, partially offset by increased gross margin from higher revenue. Excluding the transaction costs, the Company’s operating income would have been higher than the prior period. |
• | The Company invested $29.2 million towards construction of a natural gas infrastructure asset that was awarded in the fourth quarter of 2021 and will be accounted for as a finance lease. The Company also invested $2.5 million in rental assets; the majority used to fund the organic expansion of the USA contract compression fleet. At March 31, 2022, the USA contract compression fleet totaled approximately 405,000 horsepower with an average fleet utilization of 91 percent for the quarter. |
• | The Company continues to maintain a strong balance sheet and our bank-adjusted net debt to EBITDA ratio is 1.43:1, compared to a maximum ratio of 3:1. This leverage ratio excludes the non-recourse debt. Enerflex has substantial undrawn credit capacity and cash on hand. |
• | Subsequent to March 31, 2022, Enerflex declared a quarterly dividend of $0.025 per share, payable on July 7, 2022, to shareholders of record on May 19, 2022. The Board will continue to evaluate dividend payments on a quarterly basis, based on the availability of cash flow and anticipated market conditions. |
Three months ended March 31, 2022 | ||||||||||||||||
($ Canadian thousands) |
Total |
USA |
ROW |
Canada |
||||||||||||
Reported EBIT |
$ |
7,123 |
$ |
345 |
$ |
10,282 |
$ |
(3,504 |
) | |||||||
Transaction costs |
5,677 |
2,591 |
1,921 |
1,165 |
||||||||||||
Share-based compensation |
4,049 |
1,817 |
1,522 |
710 |
||||||||||||
Depreciation and amortization |
21,890 |
11,695 |
8,230 |
1,965 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ |
38,739 |
$ |
16,448 |
$ |
21,955 |
$ |
336 |
||||||||
|
|
|
|
|
|
|
|
Three months ended March 31, 2021 | ||||||||||||||||
($ Canadian thousands) |
Total | USA | ROW | Canada | ||||||||||||
Reported EBIT |
$ | 6,584 | $ | 366 | $ | 4,703 | $ | 1,515 | ||||||||
Severance costs in COGS and SG&A |
749 | 112 | 202 | 435 | ||||||||||||
Government grants in COGS and SG&A |
(4,061 | ) | (504 | ) | — | (3,557 | ) | |||||||||
Share-based compensation |
5,267 | 2,184 | 2,102 | 981 | ||||||||||||
Depreciation and amortization |
21,072 | 10,204 | 8,884 | 1,984 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 29,611 | $ | 12,362 | $ | 15,891 | $ | 1,358 | ||||||||
|
|
|
|
|
|
|
|
Three months ended March 31, |
||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
Bookings |
||||||||
USA |
$ |
177,584 |
$ | 42,736 | ||||
Rest of World |
29,928 |
41,489 | ||||||
Canada |
29,358 |
14,467 | ||||||
|
|
|
|
|||||
Total bookings |
$ |
236,870 |
$ | 98,692 | ||||
|
|
|
|
($ Canadian thousands) |
March 31, 2022 |
December 31, 2021 |
||||||
Backlog |
||||||||
USA |
$ |
362,889 |
$ | 262,937 | ||||
Rest of World |
160,291 |
179,655 | ||||||
Canada |
96,808 |
114,957 | ||||||
|
|
|
|
|||||
Total backlog |
$ |
619,988 |
$ | 557,549 | ||||
|
|
|
|
• | USA generates revenue from manufacturing natural gas compression, processing, refrigeration, and electric power equipment, including custom and standard compression packages and modular natural gas processing equipment and refrigeration systems, in addition to generating revenue from mechanical services, parts, and maintenance solutions, and contract compression rentals; |
• | Rest of World (“ROW”) generates revenue from manufacturing (focusing on large-scale process equipment), after-market services, including parts and components, as well as operations, maintenance, and overhaul services, and rentals of compression and processing equipment. The ROW segment has been successful in securing BOOM and integrated turnkey (“ITK”) projects; and |
• | Canada generates revenue from manufacturing both custom and standard natural gas compression, processing, and electric power equipment, as well as providing after-market mechanical service, parts, and compression and power generation rentals. |
Three months ended March 31, | ||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
Engineered Systems bookings |
$ |
177,584 |
$ | 42,736 | ||||
Engineered Systems backlog |
362,889 |
90,274 | ||||||
|
|
|
|
|||||
Segment revenue |
$ |
182,755 |
$ | 84,965 | ||||
Intersegment revenue |
(35,291 |
) |
(3,019 | ) | ||||
|
|
|
|
|||||
Revenue |
$ |
147,464 |
$ | 81,946 | ||||
|
|
|
|
|||||
Revenue – Engineered Systems |
$ |
77,632 |
$ | 29,240 | ||||
Revenue – Service |
$ |
42,249 |
$ | 30,114 | ||||
Revenue – Energy Infrastructure |
$ |
27,583 |
$ | 22,592 | ||||
Operating income |
$ |
345 |
$ | 366 | ||||
EBIT |
$ |
345 |
$ | 366 | ||||
EBITDA |
$ |
12,040 |
$ | 10,570 | ||||
USA revenue as a % of consolidated revenue |
45.6 |
% |
40.3 | % | ||||
Recurring revenue growth |
32.5 |
% |
(14.3 | )% | ||||
Operating income as a % of revenue |
0.2 |
% |
0.4 | % | ||||
EBIT as a % of revenue |
0.2 |
% |
0.4 | % | ||||
EBITDA as a % of revenue |
8.2 |
% |
12.9 | % |
Three months ended March 31, | ||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
Engineered Systems bookings |
$ |
29,928 |
$ | 41,489 | ||||
Engineered Systems backlog |
160,291 |
49,223 | ||||||
|
|
|
|
|||||
Segment revenue |
$ |
109,394 |
$ | 70,517 | ||||
Intersegment revenue |
(78 |
) |
(6 | ) | ||||
|
|
|
|
|||||
Revenue |
$ |
109,316 |
$ | 70,511 | ||||
|
|
|
|
|||||
Revenue – Engineered Systems |
$ |
49,292 |
$ | 8,442 | ||||
Revenue – Service |
$ |
23,034 |
$ | 25,911 | ||||
Revenue – Energy Infrastructure |
$ |
36,990 |
$ | 36,158 | ||||
Operating income |
$ |
10,282 |
$ | 4,728 | ||||
EBIT |
$ |
10,282 |
$ | 4,703 | ||||
EBITDA |
$ |
18,512 |
$ | 13,587 | ||||
ROW revenue as a % of consolidated revenue |
33.8 |
% |
34.7 | % | ||||
Recurring revenue growth |
(3.3 |
)% |
(2.4 | )% | ||||
Operating income as a % of revenue |
9.4 |
% |
6.7 | % | ||||
EBIT as a % of revenue |
9.4 |
% |
6.7 | % | ||||
EBITDA as a % of revenue |
16.9 |
% |
19.3 | % |
Three months ended March 31, | ||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
Engineered Systems bookings |
$ |
29,358 |
$ | 14,467 | ||||
Engineered Systems backlog |
96,808 |
29,936 | ||||||
|
|
|
|
|||||
Segment revenue |
$ |
67,124 |
$ | 51,629 | ||||
Intersegment revenue |
(835 |
) |
(881 | ) | ||||
|
|
|
|
|||||
Revenue |
$ |
66,289 |
$ | 50,748 | ||||
|
|
|
|
|||||
Revenue – Engineered Systems |
$ |
47,507 |
$ | 34,550 | ||||
Revenue – Service |
$ |
17,903 |
$ | 14,511 | ||||
Revenue – Energy Infrastructure |
$ |
879 |
$ | 1,687 | ||||
Operating income (loss) |
$ |
(3,788 |
) |
$ | 1,927 | |||
EBIT |
$ |
(3,504 |
) |
$ | 1,515 | |||
EBITDA |
$ |
(1,539 |
) |
$ | 3,499 | |||
Canada revenue as a % of consolidated revenue |
20.5 |
% |
25.0 | % | ||||
Recurring revenue growth |
16.0 |
% |
6.3 | % | ||||
Operating income as a % of revenue |
(5.7 |
)% |
3.8 | % | ||||
EBIT as a % of revenue |
(5.3 |
)% |
3.0 | % | ||||
EBITDA as a % of revenue |
(2.3 |
)% |
6.9 | % |
Three months ended March 31, 2022 | ||||||||||||||||
($ Canadian thousands) |
Total |
Engineered Systems |
Service |
Energy Infrastructure |
||||||||||||
Revenue |
$ |
323,069 |
$ |
174,431 |
$ |
83,186 |
$ |
65,452 |
||||||||
Cost of goods sold: |
||||||||||||||||
Operating expenses |
250,541 |
154,751 |
70,256 |
25,534 |
||||||||||||
Depreciation and amortization |
18,885 |
2,446 |
2,679 |
13,760 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin |
$ |
53,643 |
$ |
17,234 |
$ |
10,251 |
$ |
26,158 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
16.6 |
% |
9.9 |
% |
12.3 |
% |
40.0 |
% | ||||||||
|
|
|
|
|
|
|
|
Three months ended March 31, 2021 1 |
||||||||||||||||
($ Canadian thousands) |
Total | Engineered Systems |
Service | Energy Infrastructure |
||||||||||||
Revenue |
$ | 203,205 | $ | 72,232 | $ | 70,536 | $ | 60,437 | ||||||||
Cost of goods sold: |
||||||||||||||||
Operating expenses |
139,935 | 61,511 | 55,911 | 22,513 | ||||||||||||
Depreciation and amortization |
17,794 | 2,072 | 2,171 | 13,551 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin |
$ | 45,476 | $ | 8,649 | $ | 12,454 | $ | 24,373 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
22.4 | % | 12.0 | % | 17.7 | % | 40.3 | % | ||||||||
|
|
|
|
|
|
|
|
1 |
Certain prior period amounts have been reclassified between COGS and SG&A. Please refer to Note 1 of the interim condensed consolidated financial statements for additional details. |
Three months ended March 31, |
||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
EBITDA |
||||||||
EBIT |
$ |
7,123 |
$ | 6,584 | ||||
Depreciation and amortization |
21,890 |
21,072 | ||||||
|
|
|
|
|||||
EBITDA |
$ |
29,013 |
$ | 27,656 | ||||
Recurring Revenue |
||||||||
Service |
$ |
83,186 |
$ | 70,536 | ||||
Energy Infrastructure |
65,452 |
60,437 | ||||||
|
|
|
|
|||||
Total Recurring Revenue |
$ |
148,638 |
$ | 130,973 | ||||
ROCE |
||||||||
Trailing 12-month EBIT |
$ |
55,636 |
$ | 74,624 | ||||
Capital Employed – beginning of period |
||||||||
Net debt 1 |
$ |
158,664 |
$ | 294,036 | ||||
Shareholders’ equity |
1,353,754 |
1,396,695 | ||||||
|
|
|
|
|||||
$ |
1,512,418 |
$ | 1,690,731 | |||||
Capital Employed – end of period |
||||||||
Net debt 1 |
$ |
205,912 |
$ | 251,503 | ||||
Shareholders’ equity |
1,342,102 |
1,377,396 | ||||||
|
|
|
|
|||||
$ |
1,548,014 |
$ | 1,628,899 | |||||
Average Capital Employed 2 |
$ |
1,575,060 |
$ | 1,717,619 | ||||
Return on Capital Employed |
3.5 |
% |
4.3 | % |
1 |
Net debt is defined as short- and long-term debt less cash and cash equivalents. |
2 |
Based on a trailing four-quarter average. |
($ Canadian millions) |
Increase (Decrease) |
Explanation | ||
Current assets | $25.4 | The increase in current assets is primarily due to higher contract assets, inventories, and accounts receivable from increased activity levels. Offsetting these increases, the Company had lower cash and work-in-progress | ||
Rental equipment | $(16.3) | Rental equipment decreased due to higher depreciation compared to last year, as well as the unfavourable impact of foreign exchange. These decreases were partially offset by additions during the year, primarily for the contract compression fleet in the USA. | ||
Finance leases receivable | $29.2 | The increase in finance leases receivable is due to the recognition of one of our 10-year natural gas infrastructure projects in the Middle East that is considered a finance lease transaction and began operations during the first quarter of 2022. | ||
Current liabilities | $40.4 | The increase in current liabilities is primarily driven by increases in accounts payable and accrued liabilities, and deferred revenues which is based on the increased level of activity. | ||
Total shareholders’ equity | $(11.7) | Shareholders’ equity decreased primarily due to the $9.5 million impact on unrealized loss on translation of foreign operations and foreign denominated debt; dividends of $2.2 million and $0.4 million net loss, offset by $0.4 million of stock options. |
Three months ended March 31, |
||||||||
($ Canadian thousands) |
Restated 2022 1 |
Restated 2021 1 |
||||||
Cash, beginning of period |
$ |
172,758 |
$ | 95,676 | ||||
Cash provided by (used in): |
||||||||
Operating activities |
(22,712 |
) |
58,577 | |||||
Investing activities |
(16,885 |
) |
(12,570 | ) | ||||
Financing activities |
1,385 |
(30,043 | ) | |||||
Exchange rate changes on foreign currency cash |
(1,332 |
) |
(998 | ) | ||||
|
|
|
|
|||||
Cash, end of period |
$ |
133,214 |
$ | 110,642 | ||||
|
|
|
|
1 |
Please refer to note 22 of the interim condensed consolidated financial statements for the details of this restatement |
($ Canadian thousands, except per share amounts) |
Revenue |
Net earnings (loss) |
Earnings (loss) per share – basic |
Earnings (loss) per share – diluted |
||||||||||||
March 31, 2022 |
$ |
323,069 |
$ |
(369 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) | |||||
December 31, 2021 |
321,347 | (32,707 | ) | (0.36 | ) | (0.36 | ) | |||||||||
September 30, 2021 |
231,097 | 6,958 | 0.08 | 0.08 | ||||||||||||
June 30, 2021 |
204,507 | 4,291 | 0.05 | 0.05 | ||||||||||||
March 31, 2021 |
203,205 | 3,003 | 0.03 | 0.03 | ||||||||||||
December 31, 2020 |
298,837 | 32,668 | 0.36 | 0.36 | ||||||||||||
September 30, 2020 |
265,037 | 10,736 | 0.12 | 0.12 | ||||||||||||
June 30, 2020 |
287,438 | 7,415 | 0.08 | 0.08 | ||||||||||||
March 31, 2020 |
365,740 | 37,438 | 0.42 | 0.42 | ||||||||||||
December 31, 2019 |
474,362 | 31,436 | 0.35 | 0.35 | ||||||||||||
September 30, 2019 |
544,284 | 63,074 | 0.71 | 0.70 | ||||||||||||
June 30, 2019 |
541,874 | 40,649 | 0.45 | 0.45 |
($ Canadian thousands) |
March 31, 2022 |
December 31, 2021 |
||||||
Drawings on Bank Facility |
$ |
46,246 |
$ | 30,522 | ||||
Drawings on Asset-Based Facility |
32,363 |
37,411 | ||||||
Senior Notes due December 15, 2024 |
146,208 |
148,119 | ||||||
Senior Notes due December 15, 2027 |
117,472 |
118,746 | ||||||
Deferred transaction costs |
(3,163 |
) |
(3,376 | ) | ||||
|
|
|
|
|||||
$ |
339,126 |
$ | 331,422 | |||||
|
|
|
|
• | a new reconciliation process that will identify any new transactions being reflected in the Statement of Cash Flows; |
• | a robust review methodology for complex and non-normal course transactions which includes all aspects of presentation and disclosure; |
• | a proof to ensure that non-cash transfers are no longer reflected within the Statement of Cash Flows; and |
• | plans to use outside resources to enhance the business process documentation. |
• | Engineering, design, and fabrication of hydrocarbon production and processing facilities, natural gas compression equipment, energy transition solutions, and electric power facilities; |
• | Rental of natural gas compression, processing, and electric power equipment; |
• | After-market service, operations and maintenance, and parts distribution, for compression, process, refrigeration, and power generation equipment, as well as retrofit solutions for compression and power generation equipment; and |
• | ITK systems and BOOM solutions for natural gas compression, processing, and power generation. Certain BOOM contracts are accounted for as finance leases. |
• | The engineered systems product line consists of custom and standard compression packages for reciprocating and screw compressor applications from Enerflex’s manufacturing facility located in Houston, Texas. In addition, Enerflex engineers, designs, manufactures, constructs, and installs modular natural gas processing equipment, energy transition solutions, refrigeration systems, and electric power solutions. Retrofit provides re-engineering, re-configuration, and re-packaging of compressors for various field applications. |
• | The service product line provides mechanical services and parts, as well as maintenance solutions to the oil and natural gas industry in the U.S. Enerflex is a platinum tier gas compression solution provider of INNIO Waukesha, providing worldwide factory-direct access to Waukesha engines and parts. In addition, Enerflex packages CAT engines and parts. Enerflex’s U.S. service branches are located in Colorado, Louisiana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas, West Virginia, and Wyoming. |
• | The energy infrastructure product line provides natural gas compression equipment rentals to oil and natural gas customers in the U.S. (under its contract compression operations), primarily operating in the Permian and SCOOP/STACK formations utilizing a fleet of low- to high-horsepower packages. These compressor packages are typically used in wellhead, gas-lift and natural gas gathering systems, and other applications primarily in connection with natural gas and oil production. In addition, power generation rental solutions are also available in the U.S. region. The energy infrastructure product line in the U.S. operates out of Enerflex’s Houston, Texas facility. |
• | The Rest of World segment deploys products typically fabricated by Enerflex’s engineered systems division in Houston, Texas. |
• | The Latin America region, with locations in Argentina, Bolivia, Brazil, Colombia, and Mexico provides engineered systems products, including integrated turnkey natural gas compression, processing, low-carbon, and electric power solutions, with local construction and installation capabilities. The service product line in the region focuses on after-market services, parts, and components, as well as operations, maintenance, and overhaul services. Enerflex’s energy infrastructure product line provides natural gas compression and processing equipment for rent to oil and gas customers in the region. Enerflex has a number of BOOM facilities of varying size and scope in this region providing customers with alternate solutions to meet their natural gas compression, processing, and electric power needs. |
• | The Middle East/Africa (which we refer to as the “MEA”) region, through its operations in Bahrain, Oman, Kuwait, and the UAE, provides engineering, design, procurement, and construction services for compression, process, low-carbon, and power generation equipment, as well as rentals, after-market service, parts, and operations and maintenance services for gas compression and processing facilities in the region. The energy infrastructure product line provides natural gas compression and processing equipment for rent to oil and gas customers in the region. Enerflex has a number of BOOM facilities of varying size and scope in this region providing customers with alternate solutions to meet their natural gas compression, processing, and electric power needs. |
• | The Australia region is headquartered in Brisbane, Queensland with additional locations in Queensland, Western Australia, and New Zealand providing after-market services, equipment and parts supply, and general asset management. |
• | The Asia region, with locations and operations in Indonesia, Malaysia, and Thailand, provides engineered systems, as well as after-market services and parts through Enerflex’s local operations. |
• | Through its location in the United Kingdom, Enerflex provides customized compression, processing, and high-end refrigeration solutions in the Europe region. |
• | As a platinum tier gas compression solution provider of INNIO Waukesha engines, Enerflex provides factory-direct access to Waukesha engines and parts in its Rest of World regions. This region also packages CAT engines and parts. |
• | The engineered systems product line is comprised of compression, process, low-carbon, and electric power solutions. Enerflex provides custom and standard compression packages for reciprocating and screw |
compressor applications. It also engineers, designs, manufactures, constructs, and installs modular processing equipment and waste gas systems for natural gas facilities. Enerflex provides integrated turnkey power generation solutions and gas compression and processing facilities. Retrofit solutions provide re-engineering, re-configuration, and re-packaging of compressors for various field applications. Enerflex has a manufacturing facility in Calgary, Alberta and retrofit facilities in Calgary, Grand Prairie, and Red Deer, Alberta. |
• | The service product line provides after-market mechanical service and parts distribution. As a platinum tier gas compression solution provider of INNIO Waukesha, Enerflex has worldwide factory-direct access to Waukesha engines and parts. In addition, Enerflex is also the authorized distributor and service provider of INNIO’s Jenbacher gas engines and parts in Canada. Enerflex also packages CAT and MAN engines and parts. The service product line operates out of service branches located in Alberta, British Columbia, Ontario, and Quebec. |
• | The energy infrastructure product line provides reciprocating and rotary screw natural gas compression packages ranging from 50 HP to 2,000 HP, as well as electric power equipment for rent to customers. |
$ Thousands (unaudited) as at December 31, |
2021 Revenue $000 |
% |
2020 Revenue $000 |
% |
||||||||||||
Business Segment |
||||||||||||||||
U.S. |
470,383 |
49 |
632,286 |
52 |
||||||||||||
Rest of World |
309,557 |
32 |
353,011 |
29 |
||||||||||||
Canada |
180,216 |
19 |
231,755 |
19 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
960,156 |
100 |
% |
$ |
1,217,052 |
100 |
% | ||||||||
Product Line |
||||||||||||||||
Engineered Systems |
354,127 |
37 |
598,566 |
49 |
||||||||||||
Service |
327,376 |
34 |
303,269 |
25 |
||||||||||||
Energy Infrastructure |
278,653 |
29 |
315,217 |
26 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
960,156 |
100 |
% |
$ |
1,217,052 |
100 |
% | ||||||||
Engineered Systems |
||||||||||||||||
U.S. |
218,558 |
62 |
390,178 |
65 |
||||||||||||
Rest of World |
22,500 |
6 |
40,485 |
7 |
||||||||||||
Canada |
113,069 |
32 |
167,903 |
28 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
354,127 |
100 |
% |
$ |
598,566 |
100 |
% |
$ Thousands (unaudited) as at December 31, |
2021 Revenue $000 |
% |
2020 Revenue $000 |
% |
||||||||||||
Service |
||||||||||||||||
U.S. |
153,722 |
47 |
150,939 |
50 |
||||||||||||
Rest of World |
111,500 |
34 |
96,092 |
32 |
||||||||||||
Canada |
62,154 |
19 |
56,238 |
18 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
327,376 |
100 |
% |
$ |
303,269 |
100 |
% | |||||||||
Energy Infrastructure |
||||||||||||||||
U.S. |
98,103 |
35 |
91,169 |
29 |
||||||||||||
Rest of World |
175,557 |
63 |
216,434 |
69 |
||||||||||||
Canada |
4,993 |
2 |
7,614 |
2 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
278,653 |
100 |
% |
$ |
315,217 |
100 |
% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
960,156 |
100 |
% |
$ |
1,217,052 |
100 |
% |
Name, Municipality, Country of Residence, and Position with Enerflex |
Principal Occupation | |
Marc E. Rossiter Calgary, Alberta, Canada Director, President, and Chief Executive Officer |
President and Chief Executive Officer, Enerflex Ltd. | |
Fernando Assing (6) Houston, Texas, USA Director |
President and Chief Executive Officer, Centurion Group Limited | |
Maureen Cormier Jackson (2) Calgary, Alberta, Canada Director |
Independent Businesswoman and Corporate Director | |
W. Byron Dunn (6)(7) Dallas, Texas, USA Director |
Chief Executive Officer, Tubular Synergy Group, LP | |
Mona Hale (5) Edmonton, Alberta, Canada Director |
Independent Businesswoman and Corporate Director | |
H. Stanley Marshall (3)(7) Paradise, Newfoundland, Canada Director |
Independent Businessman and Corporate Director | |
Kevin Reinhart (1) Calgary, Alberta, Canada Director |
Independent Businessman and Corporate Director | |
Juan Carlos Villegas (6)(7) Vitacura, Región Metropolitana, Chile Director |
Independent Businessman and Corporate Director | |
Michael A. Weill (4)(5) Houston, Texas, USA Director |
Independent Businessman and Corporate Director |
(1) | Chair of the Enerflex board. |
(2) | Chair of the Audit Committee. |
(3) | Chair of the HRC Committee. |
(4) | Chair of the NCG Committee. |
(5) | Member of the Audit Committee. |
(6) | Member of the HRC Committee. |
(7) | Member of the NCG Committee. |
Name, Municipality, and Country of Residence |
Principal Occupation | |
Marc E. Rossiter (1) Calgary, Alberta, Canada |
President and Chief Executive Officer | |
Sanjay Bishnoi Calgary, Alberta, Canada |
Senior Vice President and Chief Financial Officer | |
Helmuth Witulski Calgary, Alberta, Canada |
President, Canada | |
Patricia Martinez Houston, Texas, USA |
Chief Energy Transition Officer | |
Gregory Stewart Houston, Texas, USA |
President, United States of America |
Name, Municipality, and Country of Residence |
Principal Occupation | |
Phil Pyle Abu Dhabi, United Arab Emirates |
President, International | |
Mauricio Meineri Houston, Texas, USA |
President, Latin America | |
David H. Izett Calgary, Alberta, Canada |
Senior Vice President, General Counsel |
(1) | For Mr. Rossiter’s Directors |
Audit Committee Member |
Relevant Education and Experience |
Maureen Cormier Jackson |
Ms. Cormier Jackson held numerous roles at Suncor Energy Inc., including Senior Vice President, Chief Process and Information Officer, and Vice President, Corporate Controller. She holds a Bachelor of Commerce from Memorial University and is a Chartered Professional Accountant. She also holds a Directors Designation from the Institute of Corporate Directors. |
Michael A. Weill |
Mr. Weill is the former Chief Executive Officer of Global Deepwater Partners LLC and former President of BHP Billiton Petroleum. Mr. Weill holds a Bachelor of Science in Chemical Engineering from Cornell University. |
Mona Hale |
Ms. Hale has over 35 years of executive, financial, and operational leadership experience across the oil and gas, mining, and telecommunication sectors. Over the course of her career, Ms. Hale had roles providing experience in accounting and financial controls, commercial management, operational leadership, and corporate strategic planning. Ms. Hale holds a Bachelor of Commerce from the University of Alberta and is a Fellow of the Chartered Professional Accountants of Alberta. |
2021 | 2020 | |||||||
Audit Fees (1) |
$ | 1,864,023 | $ | 1,714,000 | ||||
Audit Related Fees (2) |
$ | — | $ | 19,000 | ||||
Tax Fees (3) |
$ | 502,000 | $ | 533,900 | ||||
All other Fees (4) |
$ | — | $ | — |
(1) | “Audit Fees” include fees necessary to perform the annual audit and quarterly reviews of Enerflex’s consolidated financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits. |
(2) | “Audit-Related Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation. |
(3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities and guidance to employees transferred internationally. |
(4) | “All Other Fees” include all other non-audit services. |
• | recruit and retain qualified individuals to contribute to Enerflex’s overall success through service as members of the Enerflex board, recognizing the global nature of the company; |
• | align the interests of directors with those of Enerflex shareholders over the long term; and |
• | offer competitive compensation by positioning director compensation at or slightly above the median of director compensation paid by companies in Enerflex’s peer group. |
• | Effective July 1, 2020 through December 31, 2020, the Enerflex board reduced the annual cash retainer component of director compensation by 10%, in light of market conditions and in parallel with the 10% reduction to executive base pay. The reduction was extended in February 2021, effective January 1, 2021, to December 31, 2021 subject to continued review. In light of improved market conditions and the global economy, the Enerflex board removed the 10% reduction effective July 1, 2021. |
• | All directors meet or exceed, or are on pace to meet or exceed, the minimum share ownership requirements. |
• | Six of the eleven directors eligible to receive director compensation elected to receive 100% of their compensation in the form of DSUs in 2021. |
Director Remuneration |
Amount (6) |
|||
Annual Equity Retainers (1) |
||||
Chair of the Board |
C$ | 130,000 | ||
Directors |
C$ | 100,000 | ||
Annual Cash Retainers (2, 3) |
||||
Chair of the Board |
US$ | 112,100 | ||
Directors |
US$ | 38,950 | ||
Audit Committee Chair |
US$ | 17,100 | ||
Audit Committee Member |
US$ | 4,750 | ||
HRC Committee Chair |
US$ | 11,400 | ||
HRC Committee Member |
US$ | 4,750 | ||
NCG Committee Chair |
US$ | 9,500 | ||
NCG Committee Member |
US$ | 4,750 | ||
Meeting Fees (per meeting attended) (3, 4) |
||||
Board Meeting |
US$ | 2,000 | ||
Committee Meeting (5) |
US$ | 2,000 |
1. | A non-management director may elect to receive his or her annual equity retainer in DSUs, Enerflex common shares, or a combination of both. For 2021 compensation, all such directors elected to receive 100% of the annual equity retainer component in deferred stock units. |
2. | The annual cash retainer was reduced by 10% in light of market conditions, effective July 1, 2020 through December 31, 2020. In February 2021, due to the ongoing impact of the COVID-19 pandemic, the Enerflex board extended this director compensation reduction, effective January 1, 2021 through June 30, 2021. In light of improving market conditions and the improving global economy, the 10% reduction was removed effective July 1, 2021. |
3. | A non-management director may elect to receive his or her annual cash retainer and meeting fees in cash, DSUs, or a combination of both. For 2021 compensation, Messrs. Savidant, Assing, Dunn, Reinhart, and Villegas, and Ms. Hale elected to receive 100% of their annual cash retainer and meeting fees in the form of DSUs. |
4. | Committee meeting fees are paid only to those non-management directors who are members of the committee. |
5. | In addition to paying standing committee members a fee of USD $2,000 per meeting attended, Enerflex pays each member of the Ad Hoc Risk Committee a fee of USD $2,000 per meeting attended. |
6. | Amount reflects the 10% reduction in director compensation for the period January 1, 2021 through June 30, 2021. The 10% reduction was terminated effective July 1, 2021. |
Annual Equity Retainers (1) ($) |
Annual Cash Retainers (1, 2) ($) |
Meeting Fees (1, 2) ($) |
% of Total Comp Paid in Shares or DSUs (3) |
|||||||||||||||||||||||||||||
Director |
Board Chair |
Director |
Board or Committee Chair |
Director |
Committee Member |
Board |
Committee |
|||||||||||||||||||||||||
Mr. Assing |
— | 100,000 | — | 49,088 | 5,986 | 37,933 | 30,086 | 100 | % | |||||||||||||||||||||||
Mr. Boswell (5) |
— | 100,000 | 11,996 | 49,185 | 5,998 | 38,092 | 25,172 | 72 | % | |||||||||||||||||||||||
Ms. Cormier Jackson |
— | 100,000 | — | 49,185 | 5,998 | 38,092 | 22,536 | 73 | % | |||||||||||||||||||||||
Mr. Dunn |
— | 100,000 | — | 49,088 | 11,973 | 37,933 | 25,162 | 100 | % | |||||||||||||||||||||||
Ms. Hale (4) |
— | 20,380 | — | 10,594 | — | 15,214 | — | 100 | % | |||||||||||||||||||||||
Mr. Marshall |
— | 100,000 | 14,424 | 49,282 | 6,010 | 38,252 | 25,183 | 43 | % | |||||||||||||||||||||||
Mr. Reinhart |
— | 100,000 | 21,551 | 49,088 | — | 37,933 | 22,544 | 100 | % | |||||||||||||||||||||||
Mr. Savidant (5) |
130,000 | — | 141,279 | — | — | 37,933 | — | 100 | % | |||||||||||||||||||||||
Mr. Villegas |
— | 100,000 | — | 49,088 | 5,986 | 37,933 | 17,620 | 100 | % | |||||||||||||||||||||||
Mr. Weill |
— | 100,000 | — | 49,282 | 8,630 | 38,252 | 22,528 | 46 | % | |||||||||||||||||||||||
Ms. Wesley (5) |
— | 100,000 | — | 49,282 | 12,020 | 35,673 | 17,648 | 47 | % |
1. | For 2021 compensation, all eligible (non-management) directors elected to receive 100% of their annual equity retainer in the form of DSUs. For 2021 compensation, Messrs. Savidant, Assing, Dunn, Reinhart, and Villegas, and Ms. Hale elected to receive 100% of their annual cash retainer and meeting fees in the form of DSUs. Effective January 1, 2018, all directors receive the annual cash retainers and meeting fees in USD. For the directors who receive 100% of their annual cash retainer and meeting fees in the form of DSUs, the amount shown above converts the USD amounts to CAD on the quarterly DSU payment date at the exchange rates of US$1.0000 = C$1.2575, US$1.0000 = C$1.2394, US$1.0000 = C$1.2741, and US$1.0000 = C$1.2678, respectively. |
2. | For 2021 compensation, Messrs. Marshall and Weill and Ms. Wesley elected to receive 100% their annual cash retainer amounts and meeting fees in the form of cash, and Mr. Boswell and Ms. Cormier Jackson elected to receive 50% in cash and 50% in DSUs. The amount shown above converts the form of cash USD amounts to CAD on the quarterly USD payment date at the exchange rates of US$1.000 = C$1.2581, US$1.000 = C$1.2303, US$1.000 = C$1.2790, and US$1.000 = C$1.2895, respectively. |
3. | The percentage noted in the table reflects the percentage of total compensation paid in DSUs. |
4. | Ms. Hale joined the Enerflex board on October 18, 2021. |
5. | Mr. Boswell, Mr. Savidant, and Ms. Wesley did not stand for re-election at the annual meeting of the shareholders of Enerflex held May 3, 2022. |
6. | Compensation in the above table reflects the 10% reduction in director compensation for the period January 1, 2021 through June 30, 2021. The 10% reduction was terminated effective July 1, 2021. |
Share Ownership Requirement |
Share Ownership Attained |
|||||||||||||||
Director |
($ Annual Cash Retainer (1) + $ Equity Retainer) x 3 |
$ Amount |
$ Amount (2) |
Attained |
||||||||||||
Mr. Assing |
(49,088 + 100,000) x 3 | 447,265 | 311,849 | Yes | (3) | |||||||||||
Mr. Boswell (4) |
(49,185 + 100,000) x 3 | 447,555 | 1,416,978 | Yes | ||||||||||||
Ms. Cormier Jackson |
(49,185 + 100,000) x 3 | 447,555 | 1,028,072 | Yes | ||||||||||||
Mr. Dunn |
(49,088 + 100,000) x 3 | 447,265 | 2,337,187 | Yes | ||||||||||||
Ms. Hale |
(49,088 + 100,000) x 3 | 447,265 | 46,734 | Yes | (4) | |||||||||||
Mr. Marshall |
(49,282 + 100,000) x 3 | 447,846 | 2,762,212 | Yes | ||||||||||||
Mr. Reinhart |
(49,088 + 100,000) x 3 | 447,265 | 1,585,491 | Yes | ||||||||||||
Mr. Savidant (4) |
(141,279 + 130,000) x 3 | 813,836 | 3,407,638 | Yes | ||||||||||||
Mr. Villegas |
(49,088 + 100,000) x 3 | 447,265 | 920,372 | Yes | ||||||||||||
Mr. Weill |
(49,282 + 100,000) x 3 | 447,846 | 1,127,938 | Yes | ||||||||||||
Ms. Wesley (4) |
(49,282 + 100,000) x 3 | 447,846 | 1,561,637 | Yes |
1. | The annual cash retainer was reduced by 10% in light of market conditions, effective July 1, 2020 and removed effective July 1, 2021. This reduction is reflected in the ownership requirement above. For the directors who elected to receive their annual cash retainer in the form of DSUs, the amount shown above converts the USD amounts to CAD on the quarterly DSU payment date at the exchange rates of USD $1.0000 = CAD $1.2575, USD $1.0000 = CAD $1.2394, USD $1.0000 = CAD $1.2741, and USD $1.0000 = CAD $1.2678, respectively. For the directors who elected to receive their annual cash retainer in the form of cash, the amount shown above converts the USD amounts to CAD on the quarterly USD payment date at the exchange rates of USD $1.000 = CAD $1.2581, USD $1.000 = CAD $1.2303, USD $1.000 = CAD $1.2790, and USD $1.000 = CAD $1.2895, respectively. |
2. | The dollar value for ownership is calculated as the greater of the value of the DSU or Enerflex share on the grant or acquisition date, and the closing value of the security as of December 31, 2021 ($7.66). |
3. | As a new appointee to the Enerflex board effective August 6, 2020, Mr. Assing has five years following the date of his appointment to achieve the requisite ownership level, with 20% of such amount to be achieved in each of the five years following his appointment. Thus, he must attain a minimum of $89,453 in each of 2021, 2022, 2023, 2024, and 2025. As of December 31, 2021, Mr. Assing’s ownership level is $311,849. |
4. | Mr. Boswell, Mr. Savidant, and Ms. Wesley did not stand for re-election at the annual meeting of the shareholders of Enerflex held May 3, 2022. |
5. | As a new appointee to the Enerflex board effective October 18, 2021, Ms. Hale has five years following the date of her appointment to achieve the requisite ownership level, with 20% of such amount to be achieved in each of the five years following her appointment. Thus, she must attain a minimum of $89,453 in each of 2022, 2023, 2024, 2025, and 2026. As of December 31, 2021, Ms. Hale’s ownership level is $46,734. |
Director |
Fees Earned (1) ($) |
Share-Based Awards (2) ($) |
Option-Based Awards ($) |
Total Compensation ($) |
||||||||||||
Mr. Assing |
123,093 | 101,154 | — | 224,248 | ||||||||||||
Mr. Boswell (3) |
130,444 | 104,540 | — | 234,984 | ||||||||||||
Ms. Cormier Jackson |
115,811 | 105,827 | — | 221,638 | ||||||||||||
Mr. Dunn |
124,155 | 111,646 | — | 235,801 | ||||||||||||
Ms. Hale |
25,807 | 20,380 | — | 46,188 | ||||||||||||
Mr. Marshall |
133,151 | 109,254 | — | 242,405 | ||||||||||||
Mr. Reinhart |
131,116 | 106,428 | — | 237,544 | ||||||||||||
Mr. Savidant (3) |
179,211 | 148,328 | — | 327,540 | ||||||||||||
Mr. Villegas |
110,627 | 103,852 | — | 214,479 | ||||||||||||
Mr. Weill |
118,691 | 105,861 | — | 224,552 | ||||||||||||
Ms. Wesley (3) |
114,623 | 109,539 | — | 224,162 |
1. | The fees earned under this column are comprised of: |
a. | annual cash retainer fees (excluding the equity retainer, which is shown under the Share-Based Awards column); and |
b. | meeting attendance fees earned in 2021. |
2. | Share-based awards consist of DSUs, which are granted at the end of each quarter. The value shown is the sum of: |
a. | the dollar amount of the annual equity retainer paid to each director; and |
b. | the value of the notional dividends credited based on dividends paid in 2021 (determined by multiplying the number of DSUs granted by the grant date fair value on the dividend payment date). The grant date fair value is calculated as the fair market value as of the dividend payment date. |
3. | Mr. Boswell, Mr. Savidant, and Ms. Wesley did not stand for re-election at the annual meeting of the shareholders of Enerflex held May 3, 2022. |
Option-Based Awards (1) |
Share-Based Awards |
|||||||||||||||||||
Director |
# of Securities Underlying Unexercised Options (#) |
Option Exercise Price (#) |
Option Expiration Date |
Value of Unexercised In-The-Money Options ($) |
Market or Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (2) ($) |
|||||||||||||||
Mr. Assing |
— | — | — | — | 294,366 | |||||||||||||||
Mr. Boswell (3) |
— | — | — | — | 570,891 | |||||||||||||||
Ms. Cormier Jackson |
— | — | — | — | 700,423 | |||||||||||||||
Mr. Dunn |
— | — | — | — | 1,307,008 | |||||||||||||||
Ms. Hale |
— | — | — | — | 46,734 | |||||||||||||||
Mr. Marshall |
— | — | — | — | 974,088 | |||||||||||||||
Mr. Reinhart |
— | — | — | — | 810,681 | |||||||||||||||
Mr. Savidant (3) |
— | — | — | — | 2,024,179 | |||||||||||||||
Mr. Villegas |
— | — | — | — | 544,480 | |||||||||||||||
Mr. Weill |
— | — | — | — | 644,916 | |||||||||||||||
Ms. Wesley (3) |
— | — | — | — | 1,006,557 |
1. | Non-management directors of Enerflex do not receive option grants. |
2. | The amount shown reflects the value of all accumulated DSUs held by Enerflex directors as at December 31, 2021 (including notional dividends awarded). All such DSUs are vested but do not pay out until after the Enerflex director resigns or retires. The DSUs are valued at $7.66 per DSU, the closing price of the Enerflex common shares on the TSX on December 31, 2021. The Enerflex directors do not hold any Enerflex common shares or units of Enerflex common shares that have not vested. |
3. | Mr. Boswell, Mr. Savidant, and Ms. Wesley did not stand for re-election at the annual meeting of the shareholders of Enerflex held May 3, 2022. |
Value Vested During the Year |
||||||||
Director |
Option-Based Awards ($) |
Share-Based Awards (1) ($) |
||||||
Mr. Assing |
— | 224,520 | ||||||
Mr. Boswell (2) |
— | 169,946 | ||||||
Ms. Cormier Jackson |
— | 163,910 | ||||||
Mr. Dunn |
— | 236,317 | ||||||
Ms. Hale |
46,734 | |||||||
Mr. Marshall |
— | 109,577 | ||||||
Mr. Reinhart |
— | 237,954 | ||||||
Mr. Savidant (2) |
— | 328,424 | ||||||
Mr. Villegas |
— | 214,871 | ||||||
Mr. Weill |
— | 106,127 | ||||||
Ms. Wesley (2) |
— | 109,860 |
1. | The value vested during the year reflects the value of DSUs awarded and corresponding dividends credited during the year (all such DSUs are vested but do not pay out until after the Enerflex director resigns or retires). The value of the DSUs is calculated using the closing price of Enerflex common shares on the TSX on the applicable quarterly grant dates (or the nearest preceding trading day) for each quarterly award of DSUs. The notional dividends value is calculated based on the closing price of Enerflex common shares on the applicable dividend payment date. |
2. | Mr. Boswell, Mr. Savidant, and Ms. Wesley did not stand for re-election at the annual meeting of the shareholders of Enerflex held May 3, 2022. |
• | Marc E. Rossiter, President and CEO; |
• | Sanjay Bishnoi, SVP, CFO; |
• | Patricia Martinez, President, Latin America and CETO; |
• | Philip A.J. Pyle, President, International; and |
• | Gregory Stewart, President, U.S. |
• | supporting the achievement of Enerflex’s annual and long-term objectives and the enhancement of Enerflex shareholder value by tying awards to key performance metrics; |
• | delivering a meaningful proportion of total compensation using variable pay vehicles, including long-term incentives vesting over varying performance periods; |
• | providing market-competitive compensation opportunities to facilitate attraction, motivation, and retention of qualified individuals with desired leadership and management skills; |
• | motivating executives to achieve excellence within their respective areas of responsibility and together as a cohesive team; and |
• | applying compensation principles in an equitable manner. |
Shareholder Value |
The HRC committee seeks to focus the executive team on several key financial metrics that it considers to be key drivers of Enerflex shareholder value, such as Earnings Before Interest and Taxes for the trailing 12-month period EBIT %, Absolute EBIT, ROCE, and gEPS. |
Performance-Based |
Individual total compensation varies each year depending on enterprise, regional, and individual performance results, and incentive programs do not pay out when unwarranted by performance. |
Pay at Risk |
Executive compensation includes elements of pay-at-risk: |
Business Growth |
Long-term incentive plans focus on achieving enterprise objectives and strategic plans with a medium- to long-term view. |
Workplace Health, Safety, and Environment |
Safety of Enerflex people is integral to Enerflex. Safety performance, as measured using leading and lagging indicators, is reported on a quarterly basis to the HRC committee and TRIR is an environmental, social and governance metric for Enerflex. |
Incentive Structure |
Specific metrics are primarily quantitative in nature and focus on financial measures that the executives have a reasonable ability to influence. |
Teamwork |
For regionally based executives, portions of their short-term bonus ties to both enterprise and regional performance. |
Risk Mitigation |
Executive compensation includes both fixed and variable pay. Performance metrics align with Enerflex’s business strategy. Maximum payouts under the incentive programs are capped, a clawback policy is in place, and executives are required to meet Enerflex share ownership requirements. |
We Do: |
Pay for Performance |
Effective Oversight |
Risk Mitigation |
Shareholder Alignment |
Attract & Retain |
|||||||||||||||
Maintain a pay-for-performance pre-defined metrics that reflect Enerflex’s strategic priorities. |
✓ | ✓ | ✓ | |||||||||||||||||
Conduct annual risk assessments, reviewing compensation programs to ensure the Enerflex directors do not encourage inappropriate or excessive risk-taking. |
✓ | ✓ | ✓ | |||||||||||||||||
Hold an annual say on pay advisory vote. |
✓ | ✓ | ||||||||||||||||||
Provide total compensation through both fixed and variable pay programs based on short- and long-term performance for all executives, including NEOs: 53% to 83% of total direct compensation is in the form of variable pay. |
✓ | ✓ | ||||||||||||||||||
Annually set targets for the short- and long-term incentive awards, using both qualitative and quantitative measures within Enerflex’s risk profile focusing the Enerflex executives including NEOs’ on achieving corporate objectives. |
✓ | ✓ | ✓ | |||||||||||||||||
Benchmark NEOs’ total compensation relative to a peer group comprised of companies similar to Enerflex, headquartered in either Canada or the U.S., ideally with global operations. |
✓ | ✓ | ✓ | |||||||||||||||||
Base the STI Plan on the achievement of certain financial metrics, including EBIT and ROCE, thereby managing payouts based on profitability and performance thresholds, below which payout is zero. Payouts are capped at 200% to avoid excessive risk-taking. |
✓ | ✓ | ✓ | ✓ | ||||||||||||||||
Maintain consistency and Board oversight year-over-year in any STIP funding calculation adjustments. |
✓ | ✓ | ✓ | |||||||||||||||||
Provide NEOs and certain key employees the option to elect to defer awards under the STIP Plan, in whole or in part, in favor of DSUs which can be used to meet Enerflex share ownership requirements and drives long-term performance. |
✓ | ✓ | ✓ | ✓ | ||||||||||||||||
Have overlapping performance cycles in the PSU plan, which serves to encourage improved performance over time. The PSU plan caps awards to executives at 200% of target. |
✓ | ✓ | ✓ | |||||||||||||||||
Establish share ownership requirements for executives, exposing them to the same long-term stock price volatility that Shareholders experience. |
✓ | ✓ | ✓ | |||||||||||||||||
Prohibit all executives, including NEOs, from hedging against or offsetting declines in the market value of equity securities received as compensation. |
✓ | ✓ | ✓ | |||||||||||||||||
Have a clawback policy applicable to all variable compensation, whereby in the event a restatement of Enerflex’s financial statements is necessary due to an executive’s fraud or intentional misconduct and the incentive compensation would have been lower had the financial statements been properly reported, the executive may be required to pay back the excess incentive compensation received. |
✓ | ✓ | ✓ | |||||||||||||||||
Have a double-trigger change of control provision for executives, including all NEOs. Both a change in control and the termination of employment must occur before long- term incentives are payable. |
✓ | ✓ |
We Do: |
Pay for Performance |
Effective Oversight |
Risk Mitigation |
Shareholder Alignment |
Attract & Retain |
|||||||||||||||
Have a code of conduct for all employees, officers, and directors to ensure Enerflex’s assets are protected and the company acts ethically and responsibly, upholding Enerflex’s value to “do the right thing.” |
✓ | ✓ | ✓ | ✓ | ||||||||||||||||
Have an insider trading policy and reporting guidelines, restricting insiders and others who have a special relationship with Enerflex from trading Enerflex securities on material undisclosed information or during blackout periods. |
✓ | ✓ | ✓ |
We Do NOT: |
Pay for Performance |
Effective Oversight |
Risk Mitigation |
Shareholder Alignment |
||||||||||||
Pay out incentive programs when unwarranted by performance. |
✓ | ✓ | ✓ | |||||||||||||
Allow repricing of underwater options. |
✓ | ✓ | ✓ | |||||||||||||
Allow hedging or pledging of any Enerflex securities by executive officers or directors. |
✓ | ✓ | ✓ | |||||||||||||
Guarantee bonuses or annual increases to base salary. |
✓ | ✓ | ✓ | |||||||||||||
Provide tax gross ups. |
✓ | |||||||||||||||
Provide excessive perquisites. |
✓ | ✓ | ||||||||||||||
Include PSUs nor unvested or unexercised stock options towards share ownership requirements. |
✓ | ✓ | ||||||||||||||
Grant loans to directors or executives. |
✓ | ✓ | ✓ | |||||||||||||
Grant stock options to independent directors. |
✓ | ✓ | ✓ |
Enerflex board |
• |
Approves all compensation policies and plans, including the share ownership guidelines, option plan, PSU plan, RSU plan, DSU plan, and pension plans. |
• | Approves all executive appointments, compensation, awards, and payments. |
• | Reviews quarterly reports from the HRC committee. |
HRC committee |
• |
Evaluates and manages executive compensation philosophy and programs. Approval of these programs, particularly those related to performance metrics and incentive payments for all executive officers, lies with the HRC committee and the Enerflex board. |
• | Establishes goals and objectives for the chief executive officer based on Enerflex’s business strategy. Oversees the annual review of enterprise and regional performance and objectives applicable to the compensation of executives. |
• | Reviews and recommends Enerflex board approval for executive appointments, and individual compensation decisions, including hire packages for new executive officers. |
• | Assesses EMT diversity. |
• | Assesses executive performance against the following criteria: |
• | Contributions to the development and execution of Enerflex’s business plans and strategies; |
• | Performance of the EMTs’ regional business units/functional areas including the achievement of their 2021 top five priorities; |
• | Tenure in current role; |
• | Demonstrated leadership ability and teamwork; and |
• | Demonstrated commitment to the Enerflex vision and values. |
• | Reviews NEO compensation annually, taking into consideration past performance and expected future contributions, changing responsibilities, external factors, such as inflation and market competitiveness, and the appropriate level of pay differentiation between roles based on position, scope, and level of responsibility. |
• | Oversees cash-based and equity-based compensation plans, programs, and grants, recommending Enerflex board approval for executives. |
• | Reviews, at least annually, the selection of companies in the peer group in order to determine the competitiveness of executive total direct compensation. |
• | Is authorized to retain the services of independent advisors and consultants to assist with the completion of its responsibilities. The HRC committee and Enerflex board take into consideration the advice received from these consultants, ultimately making their own decisions about such matters. |
Chief Executive Officer |
• |
The chief executive officer reviews salary, bonuses, and other compensation for executives (excluding himself) and makes recommendations with respect to compensation. |
• | Establishes individual goals with each of his direct reports, which support the business’ annual, mid-, and long-term strategies, and aligns with the chief executive officer’s goals. |
• | Reviews the performance of executives and updates the HRC committee on these assessments, including an analysis of individual performance against his/her goals and objectives based on demonstrated delivery of results, execution of the strategic plan, and alignment to Enerflex’s values. |
• | Reviews market data gathered by the independent consultants along with Enerflex performance when making compensation recommendations to the HRC committee. |
Independent Compensation Consultants |
• |
Since 2010, the HRC committee and management have engaged the services of Mercer (Canada) Limited primarily for advice in respect of Enerflex’s compensation programs. |
• | Since the end of 2016, the HRC committee has retained Hugessen Consulting as its independent advisor on executive compensation matters. Without duplicating Mercer (Canada) Limited’s efforts, Hugessen Consulting oversees the reasonableness and completeness of management’s data and analysis and independently advises the HRC committee. |
• | Helps the HRC committee establish procedures so that the HRC committee is confident that the advice received from the compensation consultants is objective, and not influenced by any relationships with management. |
• | Reviews market trends and issues and prepares market analyses for the HRC committee. |
• | Assists analyzing and evaluating the STI plan and LTIP metrics and target setting. |
• | Reviews and makes recommendations for updates to the peer group. |
• | Assists analyzing and evaluating the executive compensation packages, including the compensation mix (base salary, short-, and long-term pay) for each executive. |
The following table summarizes the fees paid by Enerflex to Mercer (Canada) Limited and Hugessen Consulting for director and executive compensation-related matters and other fees not related to director or executive compensation during the periods indicated. |
Fees Paid In: |
||||||||
2021 |
2020 |
|||||||
Mercer (Canada) Limited |
196,394 |
242,149 |
||||||
Director and Executive Compensation-Related Fees |
86,000 | 90,659 | ||||||
All Other Fees (1) |
110,394 | 151,490 | ||||||
Hugessen Consulting |
42,018 |
43,518 |
||||||
Director and Executive Compensation-Related Fees |
42,018 | 43,518 | ||||||
All Other Fees |
— | — |
(1) | These fees were paid for consulting advice provided by Mercer in connection with salary surveys, non-executive regional compensation reviews, and advisory services. Under Company’s policies, the Board and the HRC Committee are not required to pre-approve these additional services provided by Mercer. |
• | The peer group should reflect those companies with a potential pool from which Enerflex could draw executive talent. |
• | Peers should be selected from industries that best represent Enerflex’s business, and the labour and capital markets in which Enerflex operates, including oil and gas equipment and services, midstream, contract compression, and energy infrastructure companies that are based in Canada and the U.S., and ideally with global operations. |
• | The inclusion of drilling and engineering, procurement, and construction companies should be restricted or excluded, as their alignment with Enerflex’s business is limited, from an industry and operational standpoint. |
• | Companies should be within approximately one-third to three times Enerflex’s size, measured in terms of revenue, and have reasonably similar assets, market capitalization, and enterprise value. |
Company Name |
Country |
Company Name |
Country | |||
CES Energy Solutions Corp. |
Canada |
Dril-Quip, Inc. |
U.S. | |||
Finning International Inc. |
Canada |
Exterran Corporation |
U.S. | |||
Gibson Energy Inc. |
Canada |
Forum Energy Technologies, Inc. |
U.S. | |||
Keyera Corp. |
Canada |
Newpark Resources, Inc. |
U.S. | |||
Secure Energy Services Inc. |
Canada |
Oil States International, Inc. |
U.S. | |||
Shawcor Ltd. |
Canada |
Tetra Technologies, Inc. |
U.S. | |||
Archrock, Inc. |
U.S. |
USA Compression, LP |
U.S. |
Criteria (1) |
Peer Group Median |
Enerflex Results |
Enerflex’s Percentile Rank (2) |
|||||||||
Enterprise Value (3) |
$ | 850 | $ | 990 | 54 | % | ||||||
Market Capitalization (3) |
$ | 695 | $ | 687 | 50 | % | ||||||
Assets (4) |
$ | 1,440 | $ | 2,143 | 56 | % | ||||||
Revenue (4) |
$ | 888 | $ | 938 | 52 | % |
1. | Peer group data as provided by Mercer (Canada) Limited. All dollar figures are shown in millions of Canadian dollars for 2021 and all USD values converted to CAD at the 2021 average exchange rate (US$1.0000 = C$1.254). |
2. | Percentile ranking within peer group. |
3. | Market capitalization and enterprise value as of December 31, 2021. |
4. | Trailing 12-month revenue and most recently reported total assets. |
12/31/2017 |
12/31/2018 |
12/31/2019 |
12/31/2020 |
12/31/2021 |
||||||||||||||||
Enerflex |
$ | 118 | $ | 126 | $ | 99 | $ | 55 | $ | 65 | ||||||||||
TSX Composite |
$ | 125 | $ | 110 | $ | 131 | $ | 134 | $ | 163 |
• | Each executive’s individual goals and objectives are aligned with the enterprise’s annual, mid-, and long-term strategic plans; |
• | A sizeable portion of each executive’s compensation is variable, based on the individual’s ability to influence business outcomes and financial performance; and |
• | Variable pay is linked to enterprise, individual, and regional performance, and paid only when Enerflex realizes a profit and performance metric thresholds are met or exceeded, at the discretion of the HRC committee and Enerflex board. |
• | The need to balance Enerflex shareholder interests with those of Enerflex, the EMT, the broader employee and stakeholder base, and the communities where Enerflex operates. |
• | Incentives need to link to value creation, foster retention, and the associated metrics need to reflect business strategy. |
• | Transparency and communication are vital. |
• | Caution around setting any unintended precedents. |
• | Peer group data to estimate what Enerflex would have to pay to recruit executive officers with the required qualifications and experience; |
• | Data and recommendations provided by both the compensation consultants and the chief executive officer, including current market trends and business environments; and |
• | The position held by each NEO, time in the role, demonstrated level of leadership competence, and oversight of strategic initiatives. |
• | Using a “sum of targets” approach to determine the funding pool available for distribution under the STI plan through a combination of enterprise and regional financial and operational metrics, each metric is individually weighted and has threshold and stretch components. |
• | These performance metrics must meet thresholds in order to contribute to the bonus pool. Payouts are capped at 200% when performance exceeds stretch measures. |
• | Payout occurs only with Enerflex board’s approval and when the organization realizes a profit, regardless of how well Enerflex performs on any of the metrics. |
• | When the overall Enerflex realizes a profit yet does not meet the thresholds on any of the enterprise and/or regional performance metrics, there is an opportunity to provide a partial bonus based solely on individual performance and corresponding payout range. |
• | The HRC committee and the Enerflex board retain the ultimate authority to approve or withhold STIP payments, regardless of targets being achieved. |
Position |
STIP Target (1) |
Performance Weighting (2) |
||||||||||||||
Enterprise |
Region |
Individual |
||||||||||||||
President and CEO |
100 | 80 | — | 20 | ||||||||||||
SVP, CFO |
70 | 80 | — | 20 | ||||||||||||
President, Latin America and CETO |
65 | 50 | 30 | 20 | ||||||||||||
President, International |
65 | 50 | 30 | 20 | ||||||||||||
President, U.S. |
65 | 50 | 30 | 20 |
1. | STIP target as a percentage (%) of base salary. |
2. | Performance weighting as a percentage (%) of STIP target. |
Performance Assessed As: |
% of Individual Performance Target Achieved: | |
Not Meeting Expectations |
0 | |
Developing |
Up to 75 | |
Meeting Expectations |
Up to 125 | |
Exceeding Expectations |
Up to 175 |
STIP Target x (Performance Weighting x Enterprise Results) | + | STIP Target x (Performance Weighting x Regional Results) | + | STIP Target x (Performance Weighting x Individual Results) | = | STIP Award |
Executive |
STIP Award Opportunity |
|||||||||||||||
Below Threshold |
Threshold |
Target |
Maximum |
|||||||||||||
Mr. Rossiter |
0 | % | 50 | % | 100 | % | 195 | % | ||||||||
Mr. Bishnoi |
0 | % | 35 | % | 70 | % | 137 | % | ||||||||
Ms. Martinez |
0 | % | 33 | % | 65 | % | 127 | % | ||||||||
Mr. Pyle |
0 | % | 33 | % | 65 | % | 127 | % | ||||||||
Mr. Stewart |
0 | % | 33 | % | 65 | % | 127 | % |
Metric |
Weighting |
Threshold |
Target (1) |
Stretch |
2021 Results |
% of Target Achieved (2) |
Contribution to STIP Pool (2) |
|||||||||||||||||||||
ROCE |
30 | % | 1.91 | % | 3.83 | % | 5.74 | % | 2.76 | % | 72.2 | % | 21.7 | % | ||||||||||||||
Absolute EBIT (3) |
30 | % | 31,815 | 63,631 | 95,446 | 44,425 | 69.8 | % | 20.9 | % | ||||||||||||||||||
EBIT% |
30 | % | 2.89 | % | 5.78 | % | 8.67 | % | 4.63 | % | 80.1 | % | 24.0 | % | ||||||||||||||
TRIR |
10 | % | 0.84 | 0.50 | 0.42 | 0.50 | 100.0 | % | 10.0 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total / Payout % |
100 |
% |
50 |
% |
100 |
% |
200 |
% |
76.6 |
% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
1. | The 2021 STIP targets are based on budget. Results have been normalized for unusual items such as gains/losses on the disposal of fixed assets, goodwill impairments, onerous leases, and severance costs related to restructuring. |
2. | Rounded to the nearest integer. |
3. | In thousands. |
Measure |
Canada |
International (1) |
Latin America |
U.S. |
||||||||||||
ROCE |
||||||||||||||||
% of Target Achieved (2) |
0 | % | 102.8 | % | 118.9 | % | 57.8 | % | ||||||||
Contribution (2,3) |
0 | % | 30.9 | % | 35.7 | % | 17.3 | % | ||||||||
Absolute EBIT |
||||||||||||||||
% of Target Achieved (2) |
0 | % | 117.4 | % | 96.7 | % | 58.4 | % | ||||||||
Contribution (2,3) |
0 | % | 35.2 | % | 29.0 | % | 17.5 | % |
Measure |
Canada |
International (1) |
Latin America |
U.S. |
||||||||||||
EBIT% |
||||||||||||||||
% of Target Achieved (2) |
0 | % | 121.9 | % | 100.0 | % | 68.4 | % | ||||||||
Contribution (2,3) |
0 | % | 36.6 | % | 30 | % | 20.5 | % | ||||||||
TRIR |
||||||||||||||||
% of Target Achieved (2) |
50 | % | 200.0 | % | 70.6 | % | 100.0 | % | ||||||||
Contribution (2,3) |
5 | % | 20.0 | % | 7.1 | % | 10.0 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Regional Contribution: |
5 |
% |
122.7 |
% |
101.7 |
% |
65.4 |
% | ||||||||
|
|
|
|
|
|
|
|
1. | International region includes Europe, Middle East and Africa, and Asia Pacific. |
2. | Rounded to the nearest integer. |
3. | Calculated by multiplying the weighting in the previous table by the percentage of target achieved to determine the contribution each metric makes to the regional portion of the STI plan payout. |
Executive |
STIP Target (1) |
Potential Payout Range (1) |
Potential Award Range (2) |
Overall Weighted Score Achieved (3) |
Actual STIP Earned |
|||||||||||||||||||
% (1) |
$ (2) |
|||||||||||||||||||||||
Mr. Rossiter |
100 | % | 0% – 195% | 0 – 1,462,500 | 74 | % | 74 | % | 527,800 | |||||||||||||||
Mr. Bishnoi |
70 | % | 0% – 137% | 0 – 647,420 | 76 | % | 53 | % | 238,900 | |||||||||||||||
Ms. Martinez |
65 | % | 0% – 127% | 0 – 572,143 | 81 | % | 53 | % | 225,541 | |||||||||||||||
Mr. Pyle |
65 | % | 0% – 127% | 0 – 721,276 | 92 | % | 60 | % | 322,076 | |||||||||||||||
Mr. Stewart |
65 | % | 0% – 127% | 0 – 567,296 | 75 | % | 49 | % | 207,237 |
1. | Rounded to the nearest integer and expressed in percent of base salary. |
2. | In dollars. Enerflex used the average rate for 2021 (US$1.0000 = C$1.2537) for calculation purposes. |
3. | As a percentage of STIP target, using the formula outlined under “ Short-Term Incentive Plan Payout Calculation “Executive Compensation” section |
• | NEOs may elect to receive all or part of their STIP payment in the form of DSUs. If so elected, all or part of the annual bonus can be settled with DSUs by dividing the relevant bonus by the fair market value immediately preceding the conversion date. The conversion date is a date after the annual bonus is awarded and at least five trading days after the release of year-end or interim results. Additional DSUs are credited to key employee participants on the regular dividend payment dates as all dividends are assumed to be reinvested. No NEOs elected to receive any portion of their 2021 STIP in the form of DSUs. |
• | The Enerflex board has the authority to grant DSUs on a discretionary basis to key employees, including NEOs, in recognition of taking on additional roles or as part of a retention package. Discretionary grants under the DSU Plan are extraordinary awards and are not a primary component of long-term compensation. The Enerflex board did not grant DSUs under this provision in 2021 and has not done so in the last seven years. |
LTI Plan |
Features |
Vesting |
Recipients | |||
Options |
• Granted in August, pending blackout restrictions. • Grant requests are reviewed by the HRC committee and recommended to the Enerflex board for approval. • In determining the number of options to be granted to an individual, the HRC committee considers the person’s level of responsibility and past and expected future contributions to Enerflex. • NEOs receive value only if the Enerflex share price appreciates, as options have value only if the price of the underlying Enerflex common shares is higher at the time of exercise than it was at the time of grant. |
• Vest in equal amounts over 5 years beginning on the date determined by the Enerflex board. Options expire on the 7 th anniversary of the grant.• Pursuant to the option plan, and subject to conditions imposed by the Enerflex board, unvested options held by an EMT member fully vest on the second anniversary of the EMT member’s retirement date and are exercisable within three years of the retirement date. |
• Members of the EMT and other designated participants residing in Canada or the U.S., including NEOs. | |||
PSEs |
• The PSE plan operates in the same fashion as the option plans in terms of grant timing, determination of grant amount, vesting schedules, and approvals required. |
• Same as pursuant to option plans. |
• Members of the EMT and other designated participants residing outside of Canada or the U.S., including NEOs. | |||
PSUs |
• PSUs, and any dividends based thereon, are notional Enerflex common shares, which are used to determine the value of potential future payments. • The final number of PSUs that vest may vary from 0% to 200% of the initial grant (plus any dividends) based on the three-year average of the LTIP performance |
• PSUs cliff vest 3 years after the date of grant. • In accordance with the retirement policy, the Enerflex board has discretion to accelerate vesting of PSUs upon an Enerflex board-approved retirement of an EMT member. |
• Members of the EMT, including all NEOs. |
LTI Plan |
Features |
Vesting |
Recipients | |||
metrics used to determine enterprise performance. • The HRC committee recommends the percent of PSUs to vest for Enerflex board approval. Enerflex, at its sole discretion, may satisfy its cash payment obligation under the PSU plan, in whole or in part, by instructing an independent broker to acquire a number of fully paid Shares in the open market. |
||||||
RSUs |
• RSUs, and any dividends based thereon, are notional Enerflex common shares, which are used to determine the value of potential future payments. • The final number of RSUs that vest (plus any dividends) is based on the fair market value of Enerflex common shares at the time of vesting. • Once vested, Enerflex will satisfy its payment obligation under the RSU plan for executives, including all NEOs, in whole, by instructing an independent broker to acquire a number of fully paid Enerflex common shares in the open market on behalf of the participant. For all other participants, Enerflex, at its sole discretion, may satisfy its payment obligation under the RSU plan in either cash or in fully paid Enerflex common shares acquired in the open market. |
• RSUs vest in equal tranches over 3 years after the date of grant. • In accordance with the retirement policy, the Enerflex board has discretion to accelerate vesting of RSUs upon an Enerflex board-approved retirement of an EMT member. |
• Members of the EMT, including all NEOs and other designated participants residing in the International Canadian, and Latin American regions. |
Executive |
Percentage of Base Salary |
|||||||||||||||
LTIP Target |
Provided in PSUs |
Provided in RSUs |
Provided in Options/PSEs |
|||||||||||||
Mr. Rossiter |
375 | % | 187 | % | 94 | % | 94 | % | ||||||||
Mr. Bishnoi |
200 | % | 100 | % | 50 | % | 50 | % | ||||||||
Ms. Martinez |
180 | % | 90 | % | 45 | % | 45 | % | ||||||||
Mr. Pyle |
50 | % | 25 | % | 13 | % | 13 | % | ||||||||
Mr. Stewart |
180 | % | 90 | % | 45 | % | 45 | % |
Executive |
PSUs Granted (1) |
RSUs Granted (1) |
Options Granted (2) |
PSEs Granted (2) |
Total Value of Grants (3) ($) |
|||||||||||||||||||||||||||||||
$ |
# of Units |
$ |
# of Units |
$ |
# of Units |
$ |
# of Units |
|||||||||||||||||||||||||||||
Mr. Rossiter |
1,406,249 | 179,140 | 703,125 | 89,570 | 703,126 | 243,684 | — | — | 2,812,499 | |||||||||||||||||||||||||||
Mr. Bishnoi |
474,297 | 60,420 | 237,149 | 30,210 | 237,151 | 82,190 | — | — | 948,597 | |||||||||||||||||||||||||||
Ms. Martinez |
407,289 | 51,884 | 203,645 | 25,942 | 203,646 | 70,578 | — | — | 814,580 | |||||||||||||||||||||||||||
Mr. Pyle |
142,627 | 18,169 | 71,317 | 9,085 | — | — | 71,313 | 24,715 | 285,257 | |||||||||||||||||||||||||||
Mr. Stewart |
403,843 | 51,445 | 201,918 | 25,722 | 201,920 | 69,980 | — | — | 807,681 |
1. | The fair market value of Enerflex common shares used in the PSU and RSU grants on August 16, 2021 was $7.85. |
2. | Enerflex uses the Black-Scholes method of valuation to derive the fair value for the option and PSE grants. For grants conducted on August 16, 2021, the Black-Scholes Value was $2.89. The value is calculated by multiplying the FMV by the number of units granted. |
3. | Enerflex used the average rate for 2021 (US$1.0000 = C$1.2537) for calculation purposes. The value is calculated by multiplying the BSV by the number of Options/PSEs granted. |
PSU Grant Date |
Annual Performance Results |
3 Year Average |
Vesting Year |
|||||||||||||||||||||||||
2018 |
2019 |
2020 |
2021 |
2022 |
||||||||||||||||||||||||
20 Aug 2018 |
149.3 | % | 168.7 | % | 89.8 | % | 135.9 | % | 2021 | |||||||||||||||||||
19 Aug 2019 |
168.7 | % | 89.8 | % | 76.6 | % | 111.7 | % | 2022 |
Executive (1) |
Amount Granted (2) |
Dividends Earned (#) |
Total Accumulated (#) |
Notional Units (3) (#) |
Total Vested (4) (#) |
Payout ($) |
||||||||||||||||||||||
$ |
# |
|||||||||||||||||||||||||||
Mr. Rossiter |
636,919 | 39,511 | 3,221 | 42,732 | 15,352 | 58,084 | 427,498 | |||||||||||||||||||||
Ms. Martinez |
392,087 | 24,323 | 1,982 | 26,305 | 9,451 | 35,756 | 263,164 | |||||||||||||||||||||
Mr. Pyle |
139,534 | 8,656 | 705 | 9,361 | 3,363 | 12,724 | 93,649 | |||||||||||||||||||||
Mr. Stewart |
382,151 | 23,707 | 1,932 | 25,639 | 9,211 | 34,850 | 256,496 |
1. | Mr. Bishnoi joined Enerflex in September 2019 and thus does not hold any 2018 PSUs. |
2. | At the time of the grant, Enerflex used the August 20, 2018 rate (US$1.0000 = C$1.3065). |
3. | Notional units were calculated by multiplying the total accumulated by the performance result in order to calculate the amount payable. No actual additional PSUs were granted/vested. |
4. | The total vested amount includes vested PSUs, notional units, and dividends for the purposes of calculating the payout amount. |
Metric |
Weighting |
Threshold |
Target |
Stretch |
||||||||||||
ROCE |
50 | % | 3.5 | % | 10 | % | 15 | % | ||||||||
gEPS |
50 | % | -10 | % | 8 | % | 40 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total / Contribution |
100 |
% |
25 |
% |
100 |
% |
200 |
% | ||||||||
|
|
|
|
|
|
|
|
Executive |
Amount Granted in 2020 (#) (1) |
Dividends Earned (#) |
Total Accumulated (#) |
Vested to Date (#) |
Units Vesting in 2021 (#) (2) |
Settled in Stock (3) |
||||||||||||||||||||||
# |
$ |
|||||||||||||||||||||||||||
Mr. Rossiter |
127,609 | 1,520 | 129,129 | 0 | 43,043 | 22,382 | 175,699 | |||||||||||||||||||||
Mr. Bishnoi |
43,040 | 513 | 43,553 | 0 | 14,518 | 7,549 | 59,260 | |||||||||||||||||||||
Ms. Martinez |
38,835 | 462 | 39,297 | 0 | 13,099 | 9,975 | 78,304 | |||||||||||||||||||||
Mr. Pyle |
13,599 | 162 | 13,761 | 0 | 4,587 | 4,587 | 36,008 | |||||||||||||||||||||
Mr. Stewart |
38,506 | 459 | 38,965 | 0 | 12,988 | 10,130 | 79,521 |
1. | At the time of the grant, Enerflex used the August 17, 2020 rate (US$1.0000 = C$1.3207). |
2. | The total vested amount includes vested RSUs and dividends earned for the purposes of calculating the payout amount. |
3. | The total settled in stock reflects the number of Enerflex common shares purchased on the open market on behalf of the NEO by an independent broker using after-tax values. |
• | Pension plans through a defined contribution pension plan for Canada employees in Canada and a 401(k)-matched savings plan in the U.S. (collectively, what we refer to as “DCP”), open to eligible employees of Enerflex and certain of its subsidiaries; and |
• | The supplemental employee retirement plans in Canada and the U.S., offered to key employees, including NEOs. |
Executive |
Accumulated Value at the Start of the Year (1) ($) |
Compensatory (2) ($) |
Accumulated Value at the End of the Year (3) ($) |
|||||||||
Mr. Rossiter |
1,745,271 | 193,469 | 2,040,635 | |||||||||
Mr. Bishnoi |
106,386 | 68,281 | 194,335 | |||||||||
Ms. Martinez |
1,052,873 | 97,315 | 1,285,321 | |||||||||
Mr. Pyle (4) |
510,581 | 79,798 | 590,378 | |||||||||
Mr. Stewart |
868,790 | 97,858 | 1,030,216 |
1. | Accumulated value of defined contribution pension plan for Canada employees or 401(k) (employer and employee contributions) plus supplemental employee retirement plans balance (including interest) at the start of 2021. The accumulated value at the start of the year uses the 2021-year end rate (US$1.000 = C$1.2732). |
2. | 2021 DCPP, 401(k), and supplemental employee retirement plans employer contributions plus interest. All contributions use the 2021 average rate (US$1.0000 = C$1.2537). |
3. | Includes investment gains and losses. The accumulated value at the end of the year uses the 2021-year end rate (US$1.0000 = C$1.2678). |
4. | Mr. Pyle’s accumulated values reflect DSU grants in lieu of his participation in the supplemental employee retirement plans. As an Australian citizen on an expatriate assignment in the U.A.E. where a pension plan arrangement does not exist, 9.25% of actual 2021 salary plus STIP is reflective of superannuation were Mr. Pyle’s employment located in Australia. |
Executive |
Share Ownership Requirement |
Total Ownership Attained (1) ($) |
Requirement Achieved |
|||||||||||||
Multiple of Base Pay |
$ Amount |
|||||||||||||||
Mr. Rossiter |
5 x | 3,750,000 | 4.40 | Yes | (2) | |||||||||||
Mr. Bishnoi |
3 x | 1,422,900 | 1.66 | Yes | (2) | |||||||||||
Ms. Martinez |
2 x | 902,789 | 3.13 | Yes | ||||||||||||
Mr. Pyle |
2 x | 1,138,109 | 2.76 | Yes | ||||||||||||
Mr. Stewart |
2 x | 895,142 | 3.15 | Yes |
1. | The value of a Share, RSU, or DSU held by a NEO is calculated as the greater of the value of the security on the grant or acquisition date, and the closing price of the security as of December 31, 2021 ($7.66). |
2. | Pursuant to the share ownership guidelines, Mr. Rossiter and Mr. Bishnoi have until August 4, 2027 to achieve their respective ownership requirements. Both NEOs are on track to meet these requirements. |
• | Enerflex has materially restated the financial information; |
• | the Enerflex board has granted incentive compensation based on the achievement of results in the financial information originally filed; |
• | the executive engaged in fraud or intentional misconduct that caused or substantially contributed to such restatement; and |
• | the Enerflex board has determined that it is in the best interests of Enerflex to require the executive to reimburse or forfeit incentive compensation received; then the Enerflex board shall seek reimbursement or forfeiture of the excess incentive compensation paid during the three-year period preceding the date on which the restatement is filed. Incentive compensation under the policy includes any short- or long-term incentive and retention-based compensation, including bonuses, options, PSEs, RSUs, and PSUs approved, awarded, or granted to the executive, the amount, payment and/or vesting of which was based wholly or in part on the achievement of results set forth in the financial statements. |
Executive / Year (1) |
Salary ($) |
Share- Based Option Awards (2) ($) |
Option- Based Awards (3) ($) |
Annual Incentive Plans (4) ($) |
Long Term Incentive Plans ($) |
Pension Value ($) |
All Other Compensation (5) ($) |
Total Compensation ($) |
||||||||||||||||||||||||
Marc E. Rossiter, President and Chief Executive Officer |
| |||||||||||||||||||||||||||||||
2021 |
712,500 | 2,168,748 | 703,126 | 527,800 | — | 193,469 | 59,072 | 4,364,715 | ||||||||||||||||||||||||
2020 |
712,500 | 2,197,441 | 703,125 | 711,300 | — | 178,486 | 258,382 | 4,761,234 | ||||||||||||||||||||||||
2019 (6) |
589,199 | 2,361,593 | 595,605 | 979,319 | — | 147,239 | 237,749 | 4,910,703 | ||||||||||||||||||||||||
Sanjay Bishnoi, Senior Vice President, Chief Financial Officer |
| |||||||||||||||||||||||||||||||
2021 |
450,585 | 726,595 | 237,151 | 238,900 | — | 68,281 | 64,264 | 1,785,776 | ||||||||||||||||||||||||
2020 |
450,585 | 724,536 | 237,149 | 332,010 | — | 71,291 | 362,385 | 2,177,956 | ||||||||||||||||||||||||
2019 (7) |
143,959 | 477,822 | 452,173 | 156,150 | — | 12,519 | 38,986 | 1,281,608 | ||||||||||||||||||||||||
Patricia Martinez, President, Latin America and Chief Energy Transition Officer |
| |||||||||||||||||||||||||||||||
2021 (8) |
428,825 | 630,375 | 203,646 | 225,541 | — | 97,315 | 65,045 | 1,650,747 | ||||||||||||||||||||||||
2020 (9) |
458,754 | 685,816 | 213,983 | 386,869 | — | 90,683 | 77,143 | 1,913,248 | ||||||||||||||||||||||||
2019 (6) |
468,360 | 486,183 | 422,095 | 431,210 | — | 95,274 | 68,904 | 1,972,026 | ||||||||||||||||||||||||
Phil Pyle, President, International |
| |||||||||||||||||||||||||||||||
2021 (8) |
540,602 | 222,667 | 71,313 | 322,076 | — | 79,798 | 347,831 | 1,584,285 | ||||||||||||||||||||||||
2020 (9) |
578,332 | 241,539 | 74,934 | 295,254 | — | 80,807 | 407,223 | 1,678,089 | ||||||||||||||||||||||||
2019 (6) |
590,426 | 168,705 | 147,807 | 475,525 | — | 90,111 | 285,575 | 1,758,150 | ||||||||||||||||||||||||
Gregory Stewart, President, U.S. |
| |||||||||||||||||||||||||||||||
2021 (8) |
426,738 | 623,163 | 201,920 | 207,237 | — | 97,858 | 89,590 | 1,646,507 | ||||||||||||||||||||||||
2020 (9) |
454,868 | 666,151 | 212,171 | 309,348 | — | 95,161 | 164,550 | 1,902,248 | ||||||||||||||||||||||||
2019 (6) |
464,380 | 454,226 | 418,508 | 518,314 | — | 89,819 | 118,541 | 2,063,788 |
1. | Enerflex is required to report all amounts in CAD which is the same currency used for financial reporting purposes. Unless otherwise stated, USD compensation for Messrs. Rossiter, Pyle, and Stewart, and Ms. Martinez, has been converted to CAD. |
2. | This column aggregates the theoretical expected value of PSUs, DSUs, and RSUs and notional dividends earned thereon. The value of the PSU, DSU, and RSU awards is calculated as the sum of the applicable grant date fair value of each share-based award plus notional dividends earned thereon. The determination of fair value for share-based awards in this column is consistent with the accounting treatment of share-based awards. This column does not include STI Plan DSU elections (these are set out under the column “Annual Incentive Plans”); however, it does include dividends earned on STI Plan DSU elections. The fair value is calculated by multiplying the number of share-based awards by the fair market value as of the grant date and by multiplying the number of notional dividends by the fair market value as of the dividend payment date. |
3. | Enerflex uses the Black-Scholes method of valuation to derive the grant date fair value for the option grants: |
Option Grant |
Exercise Price ($) |
BSV ($) |
Expected Life (Years) |
Volatility (%) |
Dividend Yield (%) |
Risk Free Rate (%) |
Forfeiture Rate (%) |
|||||||||||||||||||||
2021 |
7.85 | 2.89 | 5.26 | 44.4 | 1.0 | 1.1 | 3.9 | |||||||||||||||||||||
2020 |
5.51 | 2.15 | 5.34 | 43.6 | 1.4 | 0.5 | 3.6 | |||||||||||||||||||||
2019 |
13.38 | 2.87 | 5.28 | 33.9 | 3.2 | 1.2 | 4.1 |
4. | Amounts shown were made pursuant to the STI plan for all NEOs. STIP is earned in each respective fiscal year but paid in the following year. Certain NEOs elected to receive their 2018, 2019, and 2020 STIP awards, in whole or in part, in the form of DSUs as outlined below. Due to certain NEOs’ elections to receive their STIP in the form of DSUs, the actual amounts noted in the Summary Compensation Table may not have been paid out in cash. |
Executive |
Percentage of STIP to be Paid in DSUs |
|||||||||||
2019 |
2020 |
2021 |
||||||||||
Mr. Rossiter |
50 | % | 0 | % | 0 | % |
5. | “All Other Compensation” for 2021 reflects perquisites that in aggregate are worth $50,000 or more or are worth 10% or more of an NEO’s salary for the year. The perquisites paid to the NEOs in 2021 include but are not limited to the following: |
a. | Mr. Rossiter: $16,200 automobile allowance, $19,409 medical allowance, $17,930 financial planning/legal allowance, and $5,534 memberships. |
b. | Mr. Bishnoi: $16,200 automobile allowance, $16,000 medical allowance, $15,000 memberships, $5,644 financial planning/legal allowance, and $11,420 for relocation-related expenses. |
c. | Ms. Martinez: $20,310 automobile allowance, $12,705 medical allowance, $12,537 financial planning/legal allowance, and $19,493 memberships. |
d. | Mr. Pyle: $48,323 vehicle allowance, $16,990 medical allowance, $12,532 financial planning/legal allowance, $22,814 memberships, $247,172 location-related allowances (due to his expatriate assignment). |
e. | Mr. Stewart: $20,310 automobile allowance, $15,421 medical allowance, and $53,859 relocation-related expenses (due to his change in role and subsequent relocation). |
6. | Converting USD to CAD for 2019, the average rate was used (USD $1.0000 = CAD $1.3268). |
7. | Mr. Bishnoi joined Enerflex in September 2019. |
8. | Converting USD to CAD for 2021, the average rate was used (USD $1.0000 = CAD $1.2537). Additionally, converting Mr. Pyle’s 2021 expenses from AED to CAD, the average rate was used (AED $1.0000 = CAD $0.3412) as applicable. |
9. | Converting USD to CAD for 2020, the average rate was used (USD $1.0000 = CAD $1.3412). Additionally, converting Mr. Pyle’s 2020 expenses from AED to CAD, the average rate was used (AED $1.0000 = CAD $0.3650) as applicable. |
Executive / Grant Date |
Option-Based Awards |
Share-Based Awards |
||||||||||||||||||||||||||
# of Securities (1,2) |
Exercise Price (3) |
Expiration Date |
Value of In-The-Money Options (4) |
# of Unvested Units (5) |
Market / Payout Value of: |
|||||||||||||||||||||||
Unvested Awards (6) |
Vested Awards Not Paid Out (7) |
|||||||||||||||||||||||||||
Marc Rossiter |
||||||||||||||||||||||||||||
16-Aug-21 |
243,684 | 7.85 | 15-Aug-28 |
$ | 703,125 | 793,790 | $ | 4,244,886 | $ | 691,361 | ||||||||||||||||||
17-Aug-20 |
327,035 | 5.51 | 15-Aug-27 |
|||||||||||||||||||||||||
19-Aug-19 |
205,381 | 13.74 | 15-Aug-26 |
|||||||||||||||||||||||||
20-Aug-18 |
159,606 | 16.12 | 9-Aug-25 |
|||||||||||||||||||||||||
21-Aug-17 |
108,072 | 15.75 | 9-Aug-24 |
|||||||||||||||||||||||||
12-Aug-16 |
79,906 | 13.27 | 9-Aug-23 |
|||||||||||||||||||||||||
17-Aug-15 |
99,174 | 11.69 | 9-Aug-22 |
|||||||||||||||||||||||||
Sanjay Bishnoi |
||||||||||||||||||||||||||||
16-Aug-21 |
82,190 | 7.85 | 15-Aug-28 |
$ | 237,149 | 247,629 | $ | 1,431,713 | $ | 0 | ||||||||||||||||||
17-Aug-20 |
110,302 | 5.51 | 15-Aug-27 |
|||||||||||||||||||||||||
9-Sept-19 |
160,345 | 12.40 | 15-Aug-26 |
|||||||||||||||||||||||||
Patricia Martinez |
||||||||||||||||||||||||||||
16-Aug-21 |
70,578 | 7.85 | 15-Aug-28 |
$ | 213,983 | 215,525 | $ | 1,264,302 | $ | 442,403 | ||||||||||||||||||
17-Aug-20 |
99,527 | 5.51 | 15-Aug-27 |
|||||||||||||||||||||||||
19-Aug-19 |
145,550 | 13.74 | 15-Aug-26 |
|||||||||||||||||||||||||
20-Aug-18 |
98,254 | 16.12 | 9-Aug-25 |
|||||||||||||||||||||||||
21-Aug-17 |
76,852 | 15.75 | 9-Aug-24 |
|||||||||||||||||||||||||
12-Aug-16 |
41,095 | 13.27 | 9-Aug-23 |
|||||||||||||||||||||||||
17-Aug-15 |
34,003 | 11.69 | 9-Aug-22 |
|||||||||||||||||||||||||
Phil Pyle |
||||||||||||||||||||||||||||
16-Aug-21 |
24,715 | 7.85 | 15-Aug-28 |
$ | 74,934 | 75,473 | $ | 442,744 | $ | 357,102 | ||||||||||||||||||
17-Aug-20 |
34,853 | 5.51 | 15-Aug-27 |
|||||||||||||||||||||||||
19-Aug-19 |
50,968 | 13.74 | 15-Aug-26 |
|||||||||||||||||||||||||
20-Aug-18 |
34,996 | 16.12 | 9-Aug-25 |
|||||||||||||||||||||||||
21-Aug-17 |
27,352 | 15.75 | 9-Aug-24 |
|||||||||||||||||||||||||
12-Aug-16 |
27,397 | 13.27 | 9-Aug-23 |
|||||||||||||||||||||||||
17-Aug-15 |
22,669 | 11.69 | 9-Aug-22 |
|||||||||||||||||||||||||
Gregory Stewart |
||||||||||||||||||||||||||||
16-Aug-21 |
69,980 | 7.85 | 15-Aug-28 |
$ | 212,171 | 213,701 | $ | 1,253,594 | $ | 259,873 | ||||||||||||||||||
17-Aug-20 |
98,684 | 5.51 | 15-Aug-27 |
|||||||||||||||||||||||||
19-Aug-19 |
114,313 | 13.74 | 15-Aug-26 |
|||||||||||||||||||||||||
20-Aug-18 |
95,764 | 16.12 | 9-Aug-25 |
|||||||||||||||||||||||||
21-Aug-17 |
54,377 | 15.75 | 9-Aug-24 |
|||||||||||||||||||||||||
12-Aug-16 |
47,703 | 13.27 | 9-Aug-23 |
|||||||||||||||||||||||||
17-Aug-15 |
64,935 | 11.69 | 9-Aug-22 |
1. | This column includes the number of securities underlying unexercised options or PSEs. The PSE award being applicable to Mr. Pyle only. |
2. | No vested options or PSEs were exercised in 2021. All options vesting in 2021 were underwater with the exception of the August 17, 2020 grant. |
3. | For option or PSE grants the exercise price is the fair market value immediately preceding the date of grant. |
4. | The in-the-money |
5. | This column includes the number of Enerflex share-based unvested awards. The number shown reflects all awarded PSUs and RSUs held by NEOs (including notional dividends paid) as of December 31, 2021. Such PSUs do not vest until 2022, 2023, or 2024 as applicable. The RSUs granted in 2020 and 2021 vest in three equal tranches on the anniversary of the grant date. |
6. | For PSUs granted in 2019, 2020, and 2021, and for the RSUs granted in 2020 and 2021, the values were calculated using the closing market price at December 31, 2021 ($7.66 CAD). PSUs granted in 2021 were assumed to be at target performance for 2022 and 2023; those granted 2020 were assumed to be at target performance for 2022. For PSUs granted in 2019, the values reflect a 111.7% PSU scorecard result: the average performance for 2019, 2020, and 2021. |
7. | This column includes the number of Share-based vested awards that are not paid out or distributed. The amounts shown reflect the value of all accumulated DSUs and notional dividends credited as of December 31, 2021 ($7.66). |
Executive |
Value Vested During the Year |
|||||||||||
Option-Based Awards (1) ($) |
Share-Based Awards (2) ($) |
Non-Equity Incentive Plan Compensation (3) ($) |
||||||||||
Mr. Rossiter |
151,744 | 772,667 | 527,800 | |||||||||
Mr. Bishnoi |
51,179 | 113,966 | 238,900 | |||||||||
Ms. Martinez |
46,180 | 370,658 | 225,541 | |||||||||
Mr. Pyle |
16,173 | 218,634 | 322,076 | |||||||||
Mr. Stewart |
45,790 | 361,192 | 207,237 |
1. | The value vested during the year is calculated on the assumption that all options and PSEs that vested in 2021 were exercised on their respective vesting dates. If the vesting date was a holiday, the closing price of Enerflex common shares on the nearest preceding trading day was used. The closing price for options that vested on August 9, 2021 was $7.63 and on August 15, 2021 was $7.83. All options vesting in 2021 were underwater except for the August 17, 2020 grant. |
2. | The value shown reflects the value of vested PSU and RSU awards. The RSUs were settled in Enerflex common shares purchased on the open market. It also includes any DSU awards, and notional dividends accumulated in 2021, based on the closing price of Enerflex common shares on the TSX on the vesting date. The closing price on the TSX on date DSUs were awarded to Mr. Pyle was $9.47. For the notional dividends accumulated, the closing price on the applicable dividend payment date was used. |
3. | Non-equity incentive plan compensation refers to awards earned under the STI plan in 2021. The award is paid in 2022. The dollar amount noted does not consider the effect of any elections to have all or a portion of the STIP paid in the form of DSUs. |
Resignation, Termination without Cause |
Termination with Cause |
Retirement |
Death | |||
Base Salary | ||||||
Ends as of the resignation date. | Ends as of the termination date. | Ends as of the retirement date. | Ends as of the date of death. | |||
Benefits | ||||||
Pending local legislation, ends as of the resignation date. | Ends as of the termination date. | Ends as of the retirement date. | Ends as of the date of death. Certain benefits may be extended to eligible dependents in accordance with plan provisions. | |||
Perquisites | ||||||
Ends as of the resignation date. | Ends as of the termination date. | Ends as of the retirement date. | Ends as of the date of death. | |||
STI Plan | ||||||
Ends as of the resignation date and no payment is made. | Ends as of the termination date and no payment is made. | Ends as of the retirement date and no payment is made, but the Board has discretion to approve a retirement bonus in lieu of any current year STIP entitlements, in accordance with the retirement policy. | Estate receives pro-rated amount based on proportion of the fiscal year completed as of the date of death. | |||
Option Plan | ||||||
Unvested options are forfeited as of the resignation date. Vested options are exercisable any time within 90 days of the resignation or termination date. |
All vested and unvested options terminate immediately. | Unvested options are forfeited and vested options are exercisable any time within 90 days of the retirement date. For EMT participants, subject to conditions imposed by the Enerflex board, unvested options fully vest on the second anniversary of the | Unvested options fully vest and are exercisable at any time within 120 days of the date of death. |
Resignation, Termination without Cause |
Termination with Cause |
Retirement |
Death | |||
retirement date and are exercisable within three years of the retirement date. | ||||||
DSU Plan | ||||||
DSUs are paid out within 60 days of the resignation or termination date. | DSUs are paid out within 60 days of the termination date. | DSUs are paid out not later than the last day of the calendar year following the year of retirement. | DSUs are paid out within 60 days of death. | |||
PSU plan | ||||||
Subject to Enerflex board discretion, all unvested PSUs are forfeited, provided that in the case of termination without cause, any PSUs that would have vested within 60 days of such termination are deemed to be vested. Vested PSUs are paid out within 60 days of resignation/termination. | Subject to Enerflex board discretion, all unvested PSUs are forfeited. Vested PSUs are paid out within 60 days of the termination date. | All unvested PSUs are forfeited, unless the Enerflex board approves any accelerated vesting in accordance with the retirement policy. Vested PSUs are paid out within 60 days of the retirement date. | All unvested PSUs vest are payable based on average performance measures for the period that has elapsed between the award date and the date of death. | |||
RSU Plan | ||||||
Subject to Enerflex board discretion, all unvested RSUs are forfeited, provided that in the case of termination without cause, any RSUs that would have vested within 60 days of such termination are deemed to be vested. Vested RSUs are paid out within 60 days of the resignation/termination. | Subject to Enerflex board discretion, all unvested RSUs are forfeited. Vested RSUs are paid out within 60 days of the termination date. | All unvested RSUs are forfeited, but the Enerflex board has discretion to approve a retirement bonus up to the value of the forfeited RSUs, in accordance with the retirement policy. Vested RSUs are paid out within 60 days of the termination date. | Unvested RSUs fully vest and are paid out within 60 days of the date of death. | |||
PSE Plan | ||||||
Unvested PSEs are forfeited as of the resignation date. Vested PSEs are exercisable any time within 90 days of the resignation or termination date. | All vested and unvested PSEs terminate immediately. | Unvested PSEs are forfeited as of the retirement date and vested PSEs are exercisable any time within 90 days of the retirement date. EMT participants, subject to conditions imposed by the Enerflex board, unvested PSEs fully vest | Unvested PSEs fully vest and are exercisable at any time within 120 days of the date of death. |
Resignation, Termination without Cause |
Termination with Cause |
Retirement |
Death | |||
on the second anniversary of the retirement date and are exercisable within three years of the retirement date. | ||||||
Pension Plan | ||||||
The employee receives all employee and Company contributions. | The employee receives all employee and Company contributions. | Upon retirement, the employee is entitled to receive a pension consisting of the employee and Enerflex contributions as defined in the DCP. | The Estate / designated beneficiary receives all employee and Company contributions. |
(i) | an individual or group acquires securities of Enerflex or associated rights that attach voting rights sufficient to cast more than 35% of the votes to elect directors of Enerflex; |
(ii) | incumbent directors cease to constitute a majority of the Enerflex board; |
(iii) | approval by Enerflex shareholders of a transaction pursuant to which the Enerflex shareholders immediately prior to the transaction do not immediately after completion of the transaction hold Enerflex common shares entitling them to cast more than 50% of the votes attached to Enerflex common shares in the capital of the continuing corporation to elect directors of that corporation; or |
(iv) | a liquidation, dissolution, or winding up of Enerflex, or sale, lease, or other disposition of all or substantially all the assets of Enerflex (other than to a subsidiary or which does not result in a change in the ultimate Enerflex shareholders of Enerflex or such subsidiary). |
• | “just cause” for dismissal will arise in the event of willful failure to perform duties, willfully engaging in any act, which is injurious to Enerflex, or willfully engaging in certain illegal acts. |
• | “good reason” will arise if Enerflex or its subsidiaries: |
(i) | materially reduces or modifies the executive’s position, responsibilities, or authority, or the executive is effectively prevented from carrying out duties; |
(ii) | reduces any form of remuneration of the executive, adversely changes the basis upon which such remuneration is determined or fails to increase remuneration in a manner consistent with policies prior to a control change; |
(iii) | fails to continue in effect any benefits, bonus, compensation plan, stock option plan or other purchase plan, life insurance, disability plan, pension plan, or retirement plan which the executive is participating in or entitled to participate in prior to the control change, or fails to take action or takes action which adversely affects these rights; |
(iv) | relocates the executive from the location of employment prior to the control change; |
(v) | takes action to deprive the executive of any material fringe or other benefit or entitlement enjoyed before the control change; or |
(vi) | breaches the change of control agreements. |
• | “disability” means an executive’s failure to perform substantially his duties for Enerflex on a full-time basis for a period of six months out of any 18-month period where such inability is a result of a physical or mental illness or disability. |
• | “retirement” means retirement by an executive the date on which he/she turns 65 years of age. |
• | “change of control period” means the three-year period following a control change. |
• | A “trigger event” occurs where the executive’s employment is terminated: |
(i) | subsequent to a control change during the change of control period; or |
(ii) | prior to the date on which a control change occurs; and |
(iii) | it is reasonably demonstrated that such termination was at the request of a third party who has taken steps reasonably calculated to effect a control change or otherwise arose in connection with or anticipation of a control change. |
(i) | the portion of the annual salary earned by or payable to the executive and other amounts that the executive is entitled to receive as of the date of termination; |
(ii) | two times the sum of the annual base salary (the “two-year salary”); |
(iii) | an amount equal to 15% of the two-year salary, as compensation for the loss of benefits; |
(iv) | an amount equal to two times the average annual bonus over the previous 24 months; |
(v) | equity security treatment in accordance with the applicable equity policies or plans of Enerflex as of the date of termination; and |
(vi) | an amount on account of pension benefits to which he/she otherwise would have been entitled plus any pension benefits to which the executive would be entitled had his/her employment continued until the earlier of his/her normal retirement, death, or two years following the date of termination of employment. |
Executive |
Change of Control and Termination |
Termination with Cause |
Termination without Cause (1) |
Retirement |
||||||||||||
Marc E. Rossiter |
| |||||||||||||||
Severance (2,3) |
1,425,000 | (4 |
) |
(4 |
) |
— | ||||||||||
Bonus (5) |
1,239,100 | — | — | — | ||||||||||||
Benefits and Pension (6) |
600,688 | — | — | — | ||||||||||||
Option-Based Awards (unvested and accelerated) (7) |
562,500 | — | — | — | ||||||||||||
Share-Based Awards (unvested and accelerated) (8) |
6,080,431 | — | — | — | ||||||||||||
Total Payment |
9,907,720 |
— |
— |
— |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Sanjay Bishnoi |
| |||||||||||||||
Severance (2,3) |
901,170 | (4 |
) |
(4 |
) |
— | ||||||||||
Bonus (5) |
570,910 | — | — | — | ||||||||||||
Benefits and Pension (6) |
271,737 | — | — | — | ||||||||||||
Option-Based Awards (unvested and accelerated) (7) |
189,720 | — | — | — | ||||||||||||
Share-Based Awards (unvested and accelerated) (8) |
1,896,838 | — | — | — | ||||||||||||
Total Payment |
3,830,375 |
— |
— |
— |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Patricia Martinez (9) |
| |||||||||||||||
Severance (2,3) |
857,650 | (4 |
) |
(4 |
) |
— | ||||||||||
Bonus (5) |
587,170 | — | — | — | ||||||||||||
Benefits and Pension (6) |
323,278 | — | — | — | ||||||||||||
Option-Based Awards (unvested and accelerated) (7) |
171,187 | — | — | — | ||||||||||||
Share-Based Awards (unvested and accelerated) (8) |
1,650,922 | — | — | — | ||||||||||||
Total Payment |
3,590,207 |
— |
— |
— |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Philip A.J. Pyle (9) |
| |||||||||||||||
Severance (2,3) |
1,081,203 | (4 |
) |
(4 |
) |
— | ||||||||||
Bonus (5) |
598,068 | — | — | — | ||||||||||||
Benefits and Pension (6) |
321,776 | — | — | — | ||||||||||||
Option-Based Awards (unvested and accelerated) (7) |
59,946 | — | — | — | ||||||||||||
Share-Based Awards (unvested and accelerated) (8) |
578,123 | — | — | — | ||||||||||||
Total Payment |
2,639,116 |
— |
— |
— |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gregory Stewart (9) |
| |||||||||||||||
Severance (2,3) |
853,476 | (4 |
) |
(4 |
) |
— | ||||||||||
Bonus (5) |
496,403 | — | — | 6,269 | (10) | |||||||||||
Benefits and Pension (6) |
323,738 | — | — | (11) | ||||||||||||
Option-Based Awards (unvested and accelerated) (7) |
169,736 | — | — | (12) | ||||||||||||
Share-Based Awards (unvested and accelerated) (8) |
1,636,950 | — | — | 545,650 | (13) | |||||||||||
Total Payment |
3,480,303 |
— |
— |
551,918 |
||||||||||||
|
|
|
|
|
|
|
|
1. | “termination without cause” includes termination without cause by Enerflex and resignation by the NEO but does not include any retirement that qualifies as normal or early retirement under the retirement policy. |
2. | Enerflex has a change of control agreement with each NEO but does not have employment agreements with any of its NEOs. |
3. | The amount shown is equal to two times the annual base salary pursuant to the NEO’s change of control agreement. |
4. | Any severance amount would be as determined under applicable law. |
5. | The amount shown is an amount equal to two times the average annual bonus earned in the 24 months preceding the date of termination, pursuant to the NEO’s change of control agreement. |
6. | The amount shown is equal to 15% of two times the annual base salary as compensation for the loss of benefits plus the equivalent of any pension benefits to which the NEO would have been entitled had the NEO’s employment continued for two years following the date of termination, pursuant to the NEO’s change of control agreement. |
7. | Value shown includes the incremental value of “in-the-money” in-the-money |
8. | Value shown includes the incremental value of all unvested PSU and RSU awards calculated by using the closing market price of an Enerflex share on December 31, 2021 in accordance with the applicable plan provisions. |
9. | Messrs. Pyle and Stewart, and Ms. Martinez’s USD compensation has been converted to CAD using the average rate for 2021 (US$1.0000 = C$1.2537). |
10. | The amount shown reflects the retirement bonus based on years of service pursuant to the terms of the retirement policy in effect as of December 31, 2021. The amount of any retirement bonus for an executive officer is subject to Enerflex board discretion. Mr. Stewart is the only NEO whose retirement effective December 31, 2021 would qualify as an early retirement under the retirement policy. If Messrs. Rossiter, Bishnoi, Pyle, or Ms. Martinez retired effective December 31, 2021, their retirement would be treated as a resignation. |
11. | In the absence of a retiree benefit program and under special circumstances, the Enerflex board has discretion to provide up to 15% of the annual base salary as compensation for the loss of benefits. |
12. | No options would be early vested as of the retirement date. Pursuant to the terms of the option plan, all unvested options continue to vest during the two-year period following the retirement date; on the second anniversary of the retirement date any unvested options immediately vest; and the NEO has three years from the retirement date to exercise any vested options. |
13. | Value shown reflects the value of 1/3 unvested PSUs and RSUs held by Mr. Stewart, which would be early vested in accordance with the provisions of the retirement policy, subject to Enerflex board discretion to vest all outstanding PSUs and RSUs. Mr. Stewart had no vested PSU or RSU awards at December 31, 2021. |
Plan Category |
# of Securities to be issued Upon Exercise of Outstanding Options |
Weighted Average Exercise Price of Outstanding Options ($) |
# of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (1) |
|||||||||
Equity Compensation Plans Approved by Security Holders |
4,456,444 | $ | 11.66 | 4,342,732 | (2) | |||||||
Equity Compensation Plans Not Approved by Security Holders |
Nil | Nil | Nil | |||||||||
|
|
|
|
|
|
|||||||
Total |
4,456,444 |
$ |
11.66 |
4,342,732 |
(2) | |||||||
|
|
|
|
|
|
1. | Excluding securities reflected in column (a). |
2. | Representing 4.84% of the issued and outstanding Shares as of December 31, 2021. |
Security-Based Compensation Arrangement |
2021 |
2020 |
2019 |
|||||||||
Option Plan |
0.730 | % | 0.936 | % | 0.995 | % |
Provision |
Option Plan | |
Administration | The Enerflex board administers the option plan. | |
Eligible Participants | Officers and other key full-time employees. Non-employee directors are not eligible to participate. | |
Exercise Price | The exercise price is fixed by the Enerflex board at the time a grant of options is approved and shall be equal to the fair market value as of the date determined by the Enerflex board. | |
Vesting | Vesting provisions are as determined by the Enerflex board. | |
Granting and Exercising During a Blackout | If an expiry date of any option falls within any blackout period, then the expiry date of such option is extended to the ten business days after the date that any blackout period ends. |
Provision |
Option Plan | |
Change of Control | The unexercised options will become vested in circumstances where the participant’s employment is terminated in connection with a control change (as defined in the option plan). | |
Assignment | Options may not be assigned but may be exercised by the legal representative or estate of the recipient. | |
Termination Provisions | When a participant ceases to be a director, officer, or full-time employee of Enerflex, that participant ceases to be entitled to receive options and may only exercise vested options within the time limits specified in the option plan. | |
Expiry | Options must be exercised no later than seven years from the date of the grant. | |
Recoupment | All grants of options are subject to the Enerflex clawback policy. | |
Option Plan Limits | There is a fixed maximum of 8,799,176 Enerflex common shares reserved for issuance under the option plan, representing 9.81% of the Enerflex common shares as at December 31, 2021. As of December 31, 2021, Enerflex has 4,342,732 options available for future grant, representing 4.84% of the Enerflex common shares. No one person is entitled to receive options representing more than 5% of the currently outstanding Enerflex common shares. The aggregate number of Enerflex common shares issued to insiders within a one-year period or issuable to insiders at any time shall not exceed 10% of the issued and outstanding Enerflex common shares (insider participation limit). | |
Amendment Provisions | Shareholder approval is required for the following amendments: (i) any amendment to the amending provision; (ii) any increase in the maximum number of Enerflex common shares issuable under the plan; (iii) any reduction in the option price or extension in the period during which an option may be exercised (including a cancellation and re-grant of an option to achieve the foregoing, and a substitution of an option with cash or other award the terms of which are more favorable to the recipient); (iv) any amendment to the definition of participant; (v) any amendment to the assignability of options provision; and (vi) any amendment to remove or exceed the insider participation limit.Subject to the above amendments that require Enerflex shareholder approval, the Enerflex board may amend the option plan or any option granted thereunder for any other purpose (provided that any material, adverse amendment to an outstanding option requires the consent of the holder), including for example: (i) to ensure compliance with applicable laws; (ii) amendments of a housekeeping nature; (iii) changing vesting provisions of the option plan or of any option; (iv) changing the termination provisions of the option plan or any option provided such amendment does not entail an extension beyond the originally scheduled expiry date; and (v) adding a cashless exercise feature. | |
History and Amendments | The option plan was approved by the Enerflex shareholders on April 16, 2014. On December 6, 2017, the Enerflex board amended and restated the option plan to clarify the treatment of options in the event that an EMT participant retires as a “good leaver.” The good leaver provision provides that if, before the expiry of an option in accordance with the terms thereof, an EMT participant retires with Enerflex board approval in accordance with the retirement policy, unvested options will fully vest by the second anniversary of the retirement date, subject to any conditions imposed by the Enerflex board in connection with the retirement, and are exercisable until the third anniversary of the retirement date, subject to any conditions imposed by the Enerflex board in connection with the retirement. On February 21, 2020, the Enerflex board further amended and restated the option plan to: (a) remove the 1% annual cap on option grants; (b) make housekeeping changes to remove references to the legacy 2011 |
Provision |
Option Plan | |
option plan (as there are no further options outstanding under that plan) and to clarify the wording of the eligibility and amendment provisions (without amending the substance of those provisions); and (c) replenish and increase the fixed maximum number of Enerflex common shares available for options granted under the option plan (which increase was approved by the Enerflex shareholders on May 8, 2020). |
Beneficial Owners |
Common Stock (1) |
Percent of Class (1) |
||||||
Chai Trust Co LLC (2) |
8,157,415 | 24.57 | % | |||||
Dimensional Fund Advisors LP (3) |
1,640,092 | 5.1 | % | |||||
Goodyear, William |
177,591 | * | ||||||
Gouin, James |
54,865 | * | ||||||
Ryan, John |
127,514 | * | ||||||
Soliman, Hatem |
45,680 | * | ||||||
Seaver, Christopher |
131,542 | * | ||||||
Sotir, Mark |
139,165 | * | ||||||
Ieda, Yell |
75,387 | * |
Executive Officers |
Common Stock (1) |
Percent of Class (1) |
||||||
Barta, David |
86,489 | * | ||||||
Battle, Kelly |
20,550 | * | ||||||
George, Roger |
45,905 | * | ||||||
Peyton, Kerric |
0 | * | ||||||
Way, Andrew |
448,496 | * | ||||||
Wineinger, Tara |
26,092 | * |
Executive Officers |
Common Stock (1) |
Percent of Class (1) |
||||||
All Directors and Executive Officers as a Group (13 Persons) |
1,379,276 | 4.2 | % |
* | Less than 1% of the outstanding shares. |
(1) | This column includes Exterran common stock, including restricted shares and deferred director shares, beneficially owned by officers, directors, nominees for director and beneficial owners of more than 5% of Exterran common stock. In accordance with SEC rules, this column also includes shares that may be acquired upon the exercise of options or other convertible securities that are exercisable or convertible on the record date, or will become exercisable or convertible within 60 days of that date, which are considered beneficially owned. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares subject to options or other convertible securities held by that person that are exercisable or convertible on the record date, or exercisable or convertible within 60 days of the record date, are deemed outstanding. These shares are not, however, deemed outstanding for the purpose of computing the percentage ownership of any other person. In addition, under applicable law, shares that are held indirectly are considered beneficially owned. Directors, nominees for director and executive officers may also be deemed to own, beneficially, shares included in the amounts shown above which are held in other capacities. The holders may disclaim beneficial ownership of shares included under certain circumstances. A list of Exterran executive officers is included in Exterran’s Annual Report on Form 10-K for the year ended December 31, 2021. See page [ ] of this proxy statement/prospectus for instructions on how to obtain copies of the Form 10-K or Form 10-Q. |
(2) | Based solely on a review of the Schedule 13D filed by Chai Trust and certain other related reporting persons on January 24, 2022 and a Statement of Changes in Beneficial Ownership (Form 4) filed on March 9, 2020. Chai Trust is the non-member manager of EGI-Fund (05-07) Investors, L.L.C., a Delaware limited liability company (“Fund 05-07”), EGI-Fund (08-10) Investors, L.L.C., a Delaware limited liability company (“Fund 08-10”) and EGI-Fund (11-13) Investors, L.L.C., a Delaware limited liability company (“Fund 11-13”), and the managing member of EGI-Fund B, L.L.C., a Delaware limited liability company (“Fund B”); and EGI-Fund C, L.L.C., a Delaware limited liability company (“Fund C”). In such capacity, Chai Trust may be deemed to beneficially own the shares of Exterran common stock held directly by Fund 05-07, Fund 08-10, Fund 11-13, Fund B and Fund C. The shares of common stock beneficially owned by Chai Trust |
include 447,567 shares of Common Stock held by Fund 05-07, 332,327 shares of Common Stock held by Fund 08-10, 908,742 shares of Common Stock held by Fund 11- 13, 1,849,806 shares of Common Stock held by Fund B; and 4,618,973 shares of Common Stock held by Fund C. Mark Sotir, Vice President of Chai Trust, and President of the EGI Division of Chai Trust, has the requisite authority to make investment decisions on behalf of Chai Trust in connection with Chai Trust’s holdings in Exterran. |
(3) | Based solely on a review of the Schedule 13G filed by Dimensional Fund Advisors LP (“Dimensional”) on February 12, 2021. Dimensional provides investment advice to four registered investment companies and acts as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). In certain cases, subsidiaries of Dimensional may act as an advisor or sub-adviser to certain Funds. In its role as investment adviser, sub-adviser and/or manager, Dimensional or its subsidiaries may possess voting and/or investment power over the securities of the issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares. However, all shares are owned by the Funds, and Dimensional disclaims beneficial ownership of such shares. Based solely on a review of Dimensional’s publicly available information, Dimensional’s global leadership team consists of David Booth, Dave Butler, Gerard K. O’Reilly, Stephen A. Clark, Lisa Dallmer, Aaron Marcus, Catherine L. Newell and Selwyn Notelovitz. Additionally, Dimensional’s general partner is Dimensional Holdings Inc., whose board of directors consists of David Booth, Eugene Fama, Kenneth French, John McQuown, Gerard K. O’Reilly and Dave Butler. The foregoing individuals may make investment decisions on behalf of Dimensional or their respective funds or fund groups. |
Beneficial Owners |
Common Shares |
Percent of Class |
||||||
Robert S. Boswell |
44,441 | * | ||||||
Maureen Cormier Jackson |
5,000 | * | ||||||
W. Byron Dunn (1) |
30,000 | * | ||||||
H. Stanley Marshall |
99,000 | * | ||||||
Kevin J. Reinhart |
41,250 | * | ||||||
Marc E. Rossiter (2) |
103,151 | * | ||||||
Stephen J. Savidant |
25,000 | * | ||||||
Juan Carlos Villegas |
28,800 | * | ||||||
Michael A. Weill (3) |
14,000 | * | ||||||
Sanjay Bishnoi |
25,000 | * | ||||||
David Izett |
10,597 | * | ||||||
Patricia Martinez |
19,402 | * | ||||||
Phil Pyle (4) |
74,266 | * | ||||||
Greg Stewart |
47,303 | * | ||||||
Directors and officers as a group |
569,915 | 0.636 | % |
* | Represents less than 1% of the outstanding common shares. |
(1) | Mr. Dunn holds [ ] of common shares directly and [ ] of common shares through [ ], which he has control over the voting power and the disposition of the common shares. |
(2) | Mr. Rossiter holds [ ] of common shares directly and [ ] of common shares through [ ], which he has control over the voting power and the disposition of the common shares. |
(3) | Mr. Weill is the [trustee] of [ ], which holds the 14,000 common shares and he controls the voting power and the disposition of the common shares. |
(4) | Mr. Pyle is the [trustee] of [ ], which holds the 14,000 common shares and he controls the voting power and the disposition of the common shares. |
Provision |
Enerflex |
Exterran | ||
Authorized Share Capital |
Enerflex is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. Holders of Enerflex common shares and preferred shares are entitled to all of the applicable rights and obligations provided under the CBCA, Enerflex’s articles and Enerflex’s by-laws. |
The aggregate number of shares of stock that Exterran has the authority to issue is 300 million, consisting of 250 million shares of Exterran common stock, par value one cent ($0.01) per share, and 50 million shares of Exterran preferred stock, par value one cent ($0.01) per share. | ||
Preferred Shares |
The preferred shares may at any time or from time to time each be issued in one or more series. The Enerflex board may by resolution of the directors (and without further resolution of shareholders) fix from time to time before the issue thereof the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, each series of preferred shares. Holders of preferred shares will not be entitled to receive notice of or to attend any Enerflex shareholder meetings and will not be entitled to vote at such meetings, except as required by law. In addition to the rights attaching to any series of preferred shares, holders of Enerflex’s preferred shares are entitled to all of the applicable rights and obligations provided under the CBCA and Enerflex’s articles and Enerflex’s by-laws. |
The Exterran board is authorized (without further resolution of stockholders) to issue up to 50 million shares of preferred stock in one or more series and to fix and determine the number of shares of preferred stock of any series, to determine the designation of any such series, and to determine the rights, preferences, privileges and restrictions granted to or imposed upon any such series. As of the date of this proxy statement, there are currently no shares of preferred stock outstanding. | ||
Variation of Rights Attaching to a Class or Series of Shares |
Under the CBCA, the rights attaching to Enerflex common shares and preferred shares may be varied only through an amendment of Enerflex’s articles authorized by special resolution of Enerflex’s shareholders, including, if applicable, a | Under the DGCL, the rights attaching to Exterran common stock may be varied only through an approved amendment of Exterran’s certificate of incorporation. The process for amending Exterran’s |
Provision |
Enerflex |
Exterran | ||
separate special resolution of the holders of the affected class or series of shares in accordance with the provisions of the CBCA. For purposes of the CBCA, a “special resolution” is generally a resolution passed by a majority of not less than two-thirds (2/3) of the votes cast by the shareholders entitled to vote in respect of that resolution.Under the Enerflex articles, in addition to the above requirements of the CBCA, the rights attaching to the Enerflex preferred shares may be varied only with the prior approval of the holders of not less than two-thirds (2/3) of the preferred shares then outstanding at a meeting called in accordance with the provisions of the Enerflex articles. |
certificate of incorporation is summarized below. | |||
Consolidation and Division; Subdivision |
Under the CBCA, the issued shares of a class or series of Enerflex common shares may be changed into a different number of shares of the same class or series or into the same or a different number of shares of other classes or series through an amendment to its articles authorized by special resolution of Enerflex shareholders, including, if applicable, a separate special resolution of the holders of the affected class or series of shares in accordance with the provisions of the CBCA. |
Under the DGCL, the issued shares of Exterran common stock may be reclassified, including by being combined into a smaller number of shares or split into a greater number of shares through an amendment to Exterran’s certificate of incorporation. | ||
Reduction of Share Capital |
Under the CBCA, Enerflex may, by a special resolution of Enerflex shareholders, reduce its stated capital for a class or series of shares for any reason, provided there are no reasonable grounds for believing that (i) Enerflex is, or after the proposed reduction of its stated capital would be, unable to pay its liabilities as they become due, or (ii) after the proposed reduction of its stated capital, the realizable value of Enerflex’s assets would be less than the aggregate of its liabilities and stated capital of all classes of Enerflex’s shares. | Under the DGCL, Exterran, by resolution of the Exterran board, may reduce its capital by (i) reducing or eliminating the capital associated with shares of capital stock that have been retired, (ii) applying to an otherwise authorized purchase, redemption, conversion or exchange of outstanding shares of its capital stock some or all of the capital represented by the shares being purchased, redeemed, converted or exchanged, or any capital that has not been allocated to any particular class of its capital stock (in the case of a conversion or exchange, to the extent that such capital in the aggregate exceeds the total aggregate par value of the stated capital of any previously unissued shares issuable upon such |
Provision |
Enerflex |
Exterran | ||
conversion or exchange) or (iii) transferring to surplus some or all of the capital not represented by any particular class of its capital stock or some or all of the capital represented by certain shares of its stock. No reduction of capital may be made unless the assets of Exterran remaining after the reduction are sufficient to pay any debts for which payment has not otherwise been provided. | ||||
Distributions and Dividends; Repurchases and Redemptions |
Distributions/Dividends Under the CBCA, Enerflex shareholders are entitled to receive dividends if, as and when declared by the directors of Enerflex, subject to prior satisfaction of preferential dividends applicable to any preferred shares. Under the CBCA, the Enerflex board may declare and pay dividends to the holders of Enerflex common shares or Enerflex preferred shares provided there are no reasonable grounds for believing that: (i) Enerflex is, or would after the payment be, unable to pay its liabilities as they become due; and (ii) the realizable value of Enerflex’s assets would as a result of the payment be less than the aggregate of Enerflex’s liabilities and the stated capital of all classes of Enerflex’s shares. Under Enerflex’s articles, subject to the rights of the holders of any other class of shares of Enerflex entitled to receive dividends in priority to or ratably with the holders of Enerflex common shares, the Enerflex board may in its sole discretion declare dividends on the Enerflex common shares to the exclusion of any other class of shares of Enerflex. With respect to the payment of dividends and the distribution of assets of Enerflex in the event of any liquidation, dissolution or winding up of Enerflex or the other distribution of the assets of Enerflex among its shareholders for the purpose of winding up its affairs, the preferred shares of each series are entitled to preference over |
Distributions/Dividends Under the DGCL, Exterran stockholders are entitled to receive dividends if, as and when declared by the Exterran board. The Exterran board may declare and pay a dividend to Exterran stockholders (i) out of surplus or, (ii) if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the immediately preceding fiscal year except when the capital is diminished to an amount less than the aggregate amount of capital represented by issued and outstanding stock having a preference on the distribution of assets. A dividend may be paid in cash, in shares of stock or in other property. Repurchases/Redemptions Under the DGCL, Exterran may redeem or repurchase shares of its own common stock, except that generally it may not redeem or repurchase those shares if the capital of Exterran is impaired at the time or would become impaired as a result of the redemption or repurchase of such shares. If Exterran were to designate and issue shares of a series of preferred stock that is redeemable in accordance with its terms, such terms would govern the redemption of such shares. Repurchased and redeemed shares may be retired or held as treasury shares. Shares that have been repurchased but have not been retired may be resold by Exterran for such |
Provision |
Enerflex |
Exterran | ||
Enerflex common shares to the extent of the amount paid up on the preferred shares together with an amount equal to the accrued and unpaid dividends thereon and no more. The preferred shares of each series may also be given such other preferences over the common shares as may be determined as to the respective series authorized to be issued. The preferred shares of each series will rank on parity with the preferred shares of each other series with respect to priority in payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding up of Enerflex. No dividends (other than stock dividends in shares of Enerflex ranking junior to the preferred shares) shall be declared or paid on or set apart for payment on the common shares or any shares ranking junior to the preferred shares unless all dividends up to and including the dividend payment for the last completed period for which such dividends shall be payable on each series of the preferred shares then issued and outstanding shall have been declared and paid or set apart for payment at the date of such declaration or payment or setting apart for payment on the common shares or such other shares of Enerflex ranking junior to the preferred shares; nor shall Enerflex call for redemption or purchase for cancellation any of the preferred shares (less than the total number of preferred shares then outstanding) or any shares of Enerflex ranking junior to the preferred shares unless all dividends up to and including the dividends which shall then be payable on each series of the preferred shares then issued and outstanding shall have been declared and paid or set apart for payment at the date of such call for redemption or purchase. Repurchases/Redemptions Under the CBCA, Enerflex may repurchase its own shares, provided there are no reasonable grounds for believing that (i) Enerflex is, or would be after the |
consideration as the Exterran board may determine in its discretion. Purchases by Subsidiaries of Exterran Under the DGCL, Exterran common stock may be acquired by subsidiaries of Exterran without stockholder approval. Shares of such common stock owned by a majority-owned or otherwise controlled subsidiary are neither entitled to vote nor counted as outstanding for quorum purposes. |
Provision |
Enerflex |
Exterran | ||
payment for the purchase of such shares, unable to pay its liabilities as they become due or (ii) the realizable value of Enerflex’s assets would after the payment for the purchase of such shares be less than the aggregate of Enerflex’s liabilities and the stated capital of all classes of Enerflex’s shares. Under the CBCA, Enerflex may purchase or redeem any redeemable shares issued by it at prices not exceeding the redemption price, or as calculated according to a formula, stated in Enerflex’s articles; provided Enerflex may only purchase or redeem its redeemable shares if there are no reasonable grounds for believing that (i) Enerflex is, or would be after the payment for the purchase or redemption of such shares, unable to pay its liabilities as they become due or (ii) the realizable value of Enerflex’s assets would after the payment for the purchase or redemption of such shares be less than the aggregate of Enerflex’s liabilities and the amount that would be required to pay the holders of Enerflex’s shares that have a right to be paid, on a redemption or in a liquidation, ratably with or before the holders of the shares to be purchased or redeemed, to the extent that the amount has not been included in its liabilities. Under the CBCA, neither Enerflex nor subsidiaries of Enerflex may hold Enerflex common shares , unless it is holding such shares solely in the capacity of a personal representative with no beneficial interest in the shares, or by way of security for the purposes of a transaction entered into in the ordinary course of business that includes the lending of money. |
||||
Lien on Shares, Calls on Shares and Forfeiture of Shares |
Under the CBCA, shares must be fully paid prior to issue, and are non-assessable. Enerflex common shares will not be issued until the consideration for the shares is fully paid in money or in property or past services that are not less in value than the fair equivalent of the money that Enerflex would have received if the shares had been issued for money. The determination of |
Under the DGCL, Exterran may issue the whole or any part of its shares of common stock or preferred stock as partly paid and subject to call for the remainder of the consideration to be paid therefor. When the whole of the consideration payable for shares of Exterran has not been paid in full, and the assets of Exterran are insufficient to |
Provision |
Enerflex |
Exterran | ||
whether property or past services are the fair equivalent of monetary consideration will be made by the Enerflex board. | satisfy the claims of creditors, each holder of shares not paid in full will be bound to pay the unpaid balance due for such shares. | |||
Voting Rights |
The holders of Enerflex common shares are entitled to receive notice of and to attend all annual and special meetings of the shareholders of Enerflex and to one vote in respect of each common share held at all such meetings, except at separate meetings of or on separate votes by the holders of another class or series of shares of Enerflex. The holders of preferred shares will not be entitled to receive notice of or to attend any meeting of the shareholders of Enerflex and will not be entitled to vote at any such meeting, except as may be required by law. |
Each share of Exterran common stock entitles the holder to one vote in the election of each director and on all other matters voted on generally by Exterran stockholders, other than any matter that solely relates to the terms of any outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to the Exterran certificate of incorporation. | ||
Number of Directors |
Under Enerflex’s articles, the actual number of directors on the Enerflex board may be determined from time to time by resolution of the directors, provided that the Enerflex board consists of at least three (3) and at most twelve (12) directors. | Delaware law provides that a corporation’s board of directors must consist of one or more members and that the number of directors will be fixed by, or in the manner provided in, the corporation’s bylaws, or the certificate of incorporation. Exterran’s certificate of incorporation and bylaws provide that the number of directors constituting its board of directors is determined from time to time by resolution adopted by a majority of the “whole board” of directors, meaning the total number of directors that Exterran would have if there were no vacancies or unfilled newly created directorships. Eight directors currently serve on the Exterran board. | ||
Qualification of Directors |
No person will be elected or appointed a director if the person is disqualified from being a director under the CBCA. A director ceases to hold office at the end of an expressly stated term, or if not elected for an expressly stated term, at the close of the first annual meeting of shareholders or when the director ceases to be qualified as a director under the CBCA or Enerflex’s articles. | Under the DGCL, directors need not be stockholders and the certificate of incorporation or bylaws may prescribe other qualifications for directors. Exterran’s certificate of incorporation and bylaws do not provide for any other qualifications for directors. No person nominated for election as a director at a meeting of stockholders shall be eligible to serve as director unless |
Provision |
Enerflex |
Exterran | ||
No person will be eligible for election as a director of Enerflex unless nominated in accordance with the nomination procedures provided for in Enerflex’s by-laws. Nomination Procedures Nominations of persons for election to the Enerflex board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors: (i) by or at the direction of the Enerflex board, including pursuant to a notice of meeting; (ii) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the CBCA, or a requisition of the shareholders made in accordance with the provisions of the CBCA; or (iii) by any person (which we refer to as a “Nominating Shareholder”): (A) who, at the close of business on the date of the giving of the notice provided for in Enerflex’s by-laws and on the record date for notice of such meeting of shareholders, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who has given timely notice in proper written form as set forth in Enerflex’s by-laws (see the information set forth in the table below in the section entitled “Notice of Shareholder Nominations and Proposals |
nominated in accordance with the procedures set forth in Exterran’s bylaws. Nomination Procedures Nominations of persons for election to the Exterran board may be made at an annual meeting of stockholders: (a) pursuant to Exterran’s notice of meeting delivered pursuant to the bylaws (or any supplement thereto); (b) by or at the direction of the board or any committee thereof; or (c) by any Exterran stockholder who (i) was a stockholder of record at the time of giving of notice provided for in Exterran’s bylaws and at the time of the meeting (including any postponement or adjournment thereof), (ii) is entitled to vote at the meeting, and (iii) complies with the notice and other procedures set forth in Exterran’s bylaws as to such nomination. In addition, nominations for persons for election to the Exterran board may be made at a special meeting of stockholders at which directors are to be elected pursuant to Exterran’s notice of meeting: (a) by or at the direction of the Board of Directors; or (b) by any Exterran stockholder who (i) was a stockholder of record at the time of giving of notice provided for in Exterran’s bylaws and at the time of the meeting (including any postponement or adjournment thereof) (ii) is entitled to vote at the meeting and (iii) complies with the notice and other procedures set forth in Exterran’s bylaws as to such nomination. | |||
Citizenship and Residency of Directors |
The CBCA requires that at least 25% of the directors of Enerflex (or if Enerflex ever has less than four directors, at least one director) must be resident Canadians. |
Not applicable. |
Provision |
Enerflex |
Exterran | ||
Election of Directors |
Subject to the CBCA and Enerflex’s articles, Enerflex’s by-laws provide that nominations of persons for election to the Enerflex board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors.Under the CBCA, the Enerflex board has the ability to appoint additional directors between shareholder meetings without shareholder approval, provided that such additional number does not exceed one third of the number of directors elected at the most recent shareholder meeting. Per the requirements of the TSX, Enerflex has a majority voting policy, which requires any director nominee who does not receive at least a majority of votes in their favor in an uncontested election to tender their resignation for consideration by the Nominating and Corporate Governance Committee of the Enerflex board. Upon receipt of such a resignation, the NCG Committee will consider the relevant facts and circumstances and make a recommendation to the Enerflex board of the action to be taken with respect to the offer of resignation. This policy does not apply to contested elections in which the number of director nominees for election is greater than the number of director positions on the board, in which case directors are elected by a plurality of votes cast. There are amendments to the CBCA pending that, once in force, will require a majority voting standard be used for uncontested elections of directors of distributing corporations governed by the CBCA, such as Enerflex. |
Directors are elected at the annual meeting of stockholders or at a special meeting called for such purpose and hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Directors of Exterran are elected by a plurality of the votes cast at an annual or special meeting called for the election of directors; provided that, in uncontested elections (meaning elections in which the number of individuals nominated does not exceed the number of directors to be elected in such election as of the date which is five days prior to the date that Exterran first mails notice of the meeting), a majority of the votes cast is required to elect each director. Exterran’s bylaws contemplate that, in an uncontested election, any director who receives a greater number of “against” votes than “for” votes must submit his or her resignation for consideration by the Exterran board. | ||
Cumulative Voting |
Under the CBCA, cumulative voting is only permitted if the articles of a corporation specifically provide for it. Enerflex’s articles do not provide for cumulative voting. | Under the DGCL, cumulative voting is only permitted if the certificate of incorporation specifically provides for it. Exterran’s certificate of incorporation does not provide for cumulative voting. |
Provision |
Enerflex |
Exterran | ||
Vacancies |
The CBCA generally allows a vacancy on the board of directors to be filled by a quorum of directors, except a vacancy resulting from an increase in the number or the minimum or maximum number of directors or a failure to elect the number or minimum number of directors provided for in the articles. | Under Exterran’s certificate of incorporation, the Exterran board has the exclusive power to fill all vacancies and newly created directorships by resolution adopted by a majority of the whole board. | ||
Votes to Govern |
At all meetings of the Enerflex board, every question must be decided by a majority of the votes cast. The chairman of any meeting may vote as a director. | Under Exterran’s bylaws, a majority of Exterran’s whole board at a meeting duly assembled constitutes a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present will be the act of the Exterran board unless otherwise provided by the Exterran Certificate of Incorporation or required by law or the Exterran Bylaws. In the absence of a quorum, a majority of the directors present may adjourn the meeting to another place, date or time without further notice or waiver thereof. | ||
Duties of Directors |
Under the CBCA, the directors of Enerflex owe a statutory fiduciary duty to Enerflex. The directors have a duty to manage, or supervise the management of, the business and affairs of Enerflex. In exercising their powers and discharging their duties, the directors must: (i) act honestly and in good faith with a view to the best interests of Enerflex; and (ii) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. When acting with a view to the best interests of Enerflex, the directors may consider, but are not limited to, the following factors: (a) the interests of shareholders, employees, retirees and pensioners, creditors, consumers and governments; (b) the environment; and (c) the long-term interests of Enerflex. Under the CBCA, the directors of Enerflex may delegate their duties to a managing director who is a resident Canadian or committee of directors and delegate to such managing director or committee any of the powers of the directors, or to an officer of |
Under Delaware law, the directors of Exterran owe a duty of care and a duty of loyalty. The duty of care requires that directors act on an informed basis after appropriate deliberation and that they inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of care also requires that directors exercise care in overseeing the business of the corporation. The duty of loyalty requires directors to act in good faith and in what they reasonably believe to be the best interests of Exterran and its stockholders and not in their own interests. A party challenging the propriety of a decision of a board of directors typically bears the burden of rebutting the applicability of the “business judgment rule” presumption, which presumes that directors acted in accordance with the duties of care and loyalty. Notwithstanding the foregoing, Delaware courts may subject directors’ conduct to enhanced scrutiny of, among other matters, defensive actions taken in |
Provision |
Enerflex |
Exterran | ||
Enerflex; provided, that the directors may not delegate the power to: (i) submit to the Enerflex shareholders any question or matter requiring the approval of the shareholders; (ii) fill a vacancy among the directors or in the office of auditor, or appoint additional directors; (iii) issue securities except as authorized by the directors; (iv) issue shares of a series except as authorized by the directors; (v) declare dividends; (vi) purchase, redeem or otherwise acquire shares issued by Enerflex; (vii) pay a commission to any person in consideration of the person’s purchasing or agreeing to purchase shares of Enerflex from Enerflex or from any other person, or procuring or agreeing to procure purchasers for any such shares except as authorized by the directors; (viii) approve a management information circular; (ix) approve a takeover bid circular or directors’ circular; (x) approve any financial statements of Enerflex; or (xi) adopt, amend or repeal by-laws. |
response to a threat to corporate control and approval of a transaction resulting in a “sale of control” of the corporation, as the term “sale of control” is used in Delaware caselaw. Under Delaware law, a member of the board of directors, or a member of any committee designated by the board of directors, shall, in the performance of such member’s duties, be fully protected in relying in good faith upon the records of the corporation and upon such information, opinions, reports or statements presented to the corporation by any of the corporation’s officers or employees, or committees of the board of directors, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation. | |||
Conflicts of Interest of Directors and Officers |
Under the CBCA, each of the directors and officers of Enerflex must disclose to Enerflex, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with Enerflex, if the director or officer (i) is a party to the contract or transaction, (ii) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction, or (iii) has a material interest in a party to the contract or transaction. In the case of a director, such disclosure must be made (i) at the meeting at which a |
Under Delaware law, a contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest will not be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because any such director’s or officer’s votes are |
Provision |
Enerflex |
Exterran | ||
proposed contract or transaction is first considered, (ii) if the director was not, at the time of the meeting, interested in a proposed contract or transaction, at the first meeting after he or she becomes so interested, (iii) if the director becomes interested after a contract or transaction is made, at the first meeting after he or she becomes so interested, or (iv) if an individual who is interested in a contract or transaction later becomes a director, at the first meeting after he or she becomes a director. In the case of an officer who is not a director, such disclosure must be made (i) immediately after he or she becomes aware that the contract, transaction, proposed contract or proposed transaction is to be considered or has been considered at a meeting, (ii) if the officer becomes interested after a contract or transaction is made, immediately after he or she becomes so interested, or (iii) if an individual who is interested in a contract later becomes an officer, immediately after he or she becomes an officer. If the contract or material transaction, whether entered into or proposed, is one that, in the ordinary course of Enerflex’s business, would not require approval by the directors or shareholders, a director or officer shall disclose in writing to Enerflex or request to have it entered into the minutes of meetings of directors or meetings of committees of directors, the nature and extent of his or her interest immediately after he or she becomes aware of the contract or transaction. A director who discloses such a conflict of interest will not vote on any resolution to approve the contract or transaction, unless the contract or transaction relates primarily to his or her remuneration as a director, officer, employee, agent or mandatory of Enerflex or an affiliate, is for indemnity or insurance of directors of Enerflex, or is with an affiliate of Enerflex. |
counted for such purpose if (i) the material facts about such interested director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors (even if the disinterested directors are less than a quorum), (ii) the material facts about such interested director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders, or (iii) the transaction is fair to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee that authorizes the contract or transaction. |
Provision |
Enerflex |
Exterran | ||
Where Enerflex enters into a contract or transaction with a director of Enerflex, or with another person or entity of which a director of Enerflex is a director or officer or in which a director of Enerflex has a material interest, the director or officer is not accountable to Enerflex or its shareholders if (i) disclosure of the interest was made as described above, (ii) the directors of Enerflex approved the contract or transaction, and (iii) the contract or transaction was reasonable and fair to Enerflex when it was approved. Despite the foregoing, even if the conditions described immediately above are not met, provided the director was acting honestly and in good faith, such director is not accountable to Enerflex or to its shareholders in respect of a transaction or contract in which the director has an interest; provided, that: (i) the contract or transaction is approved or confirmed by special resolution at a meeting of the Enerflex shareholders; (ii) disclosure of the interest was made to the Enerflex shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and (iii) the contract or transaction was reasonable and fair to Enerflex when it was approved or confirmed. |
||||
Shareholders’ Disclosure of Interests in Shares |
Enerflex shareholders are not required to disclose their interests in shares of Enerflex, except in limited circumstances, including when nominating a candidate for election as a director, making certain other shareholder proposals or requisitioning a meeting of shareholders in accordance with each of the CBCA and Enerflex’s by-laws. Under the U.S. Exchange Act, all beneficial owners of holders of 5% or greater of Enerflex’s outstanding share capital must report their holdings to the SEC on “Schedule 13G” if the holdings are passive and held not with an intent to acquire control and on “Schedule 13D” if the |
Neither the DGCL nor Exterran’s certificate of incorporation or bylaws impose an obligation with respect to disclosure by stockholders of their interests in Exterran common stock, except, in the case of Exterran’s bylaws, as part of a stockholders’ nomination of a director or proposal of business to be made at a stockholder meeting. Under the U.S. Exchange Act, all beneficial owners of holders of 5% or greater of the outstanding shares of Exterran’s capital stock must report their holdings to the SEC on “Schedule 13G” if the holdings are passive and held not |
Provision |
Enerflex |
Exterran | ||
holdings are non-passive and held with an intent to acquire control.In accordance with applicable Canadian securities laws, an Enerflex shareholder is required to disclose their interest in Enerflex’s shares where such shareholder’s holdings equal or exceed 10% of the voting rights attached to the voting securities. |
with an intent to acquire control and on “Schedule 13D” if the holdings are non-passive and held with an intent to acquire control. | |||
Record Dates |
Under the CBCA, the Enerflex board may fix a record date for the purpose of determining shareholders entitled to receive payment of a dividend or entitled to participate in a liquidation distribution or for any other purpose, other than to establish a shareholder’s right to receive notice of or to vote at a meeting, which record date must be not more than 60 days before the day on which the particular action is to be taken. If no record date is fixed by the Enerflex board, the record date will be at the close of business on the day on which the directors pass the resolution in respect of the applicable action. Under the CBCA, the Enerflex board may fix a record date for the purpose of determining shareholders entitled to receive notice of and vote at a meeting of shareholders, which record date must be not less than 21 days and not more than 60 days before the date of the meeting. If no record date is fixed by the Enerflex board, the record date for the determination of shareholders entitled to receive notice of or vote at a meeting of shareholders will be at the close of business on the day immediately preceding the day on which the notice is given, or if no notice is given, the day on which the meeting is held. If a record date is fixed, unless notice of the record date is waived in writing by every holder of a share of the class or series affected, notice thereof will be given, not less than seven days before the date so fixed, (i) by advertisement in a newspaper published or distributed in the place where Enerflex has its registered office and in each |
Under Exterran’s bylaws and the DGCL, the directors may fix a record date to determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, which record date must not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date must be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose will be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Under Exterran’s bylaws and the DGCL, the directors may fix a record date to determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, which record date must not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date must not be more than 60 nor less than 10 days before the date of such meeting. If the board of directors so fixes a date, such date will also be the record date for determining the stockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a later date on or before |
Provision |
Enerflex |
Exterran | ||
place in Canada where it has a transfer agent or where a transfer of its shares may be recorded; and (ii) by written notice to each stock exchange in Canada on which the shares of Enerflex are listed for trading. | the date of the meeting will be the date for making such determination. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders will be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders will apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case will also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting. | |||
Annual Meetings of Shareholders |
Under the CBCA and Enerflex’s articles, the Enerflex board must call an annual meeting of shareholders not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of Enerflex’s preceding financial year. Under the CBCA and Enerflex’s articles, meetings of Enerflex shareholders will be held at such place in Canada as the directors may determine, or at a place outside Canada if all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place. At an annual meeting, shareholders will receive the financial statements of Enerflex and the auditor’s report, elect directors of Enerflex and appoint Enerflex’s auditor. All other business that may properly come before an annual meeting of shareholders or any business coming before a special meeting of shareholders is considered special business. |
Under the DGCL, an annual meeting of stockholders is required for the election of directors and for such other proper business as may be conducted thereat. If there is a failure to hold the annual meeting for a period of 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after its last annual meeting, the Delaware Court of Chancery may order a meeting to be held upon the application of any stockholder or director. The Exterran bylaws provide that the annual meeting of stockholders will be held at the time and place determined by Exterran’s board, and that meetings of the stockholders may be within or without the State of Delaware. |
Provision |
Enerflex |
Exterran | ||
Meeting Notice Provisions |
Under the CBCA, notice of the time and place of a meeting of Enerflex shareholders must be given not less than 21 days and not more than 60 days before the meeting to each director, to the auditor and to each shareholder entitled to vote at the meeting. Notice of a meeting of shareholders at which special business is to be transacted must state (i) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon; and (ii) the text of any special resolution to be submitted to the meeting. Method of Giving Notices Any notice, communication or document to be given, sent, delivered or served under the CBCA, the regulations thereunder, Enerflex’s articles, Enerflex’s by-laws or otherwise, to a shareholder, director, officer or auditor may be delivered personally or sent by prepaid mail to the shareholder or director, as applicable, at their latest address as shown in the records of Enerflex or its transfer agent. A notice or document so delivered will be deemed to be received at the time it would be delivered in the ordinary course of mail unless there are reasonable grounds for believing that the shareholder or director did not receive the notice or document at that time or at all.Under the CBCA, a requirement to provide a person with a notice, document or other information may be satisfied by the provision of an electronic document where the addressee consents and has designated an information system for the receipt of the electronic document and the electronic document is provided to such designated information system, unless otherwise prescribed. |
Under the DGCL and the Exterran bylaws, notice of annual and special meetings of Exterran stockholders must be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. The Exterran bylaws provide that notice of an annual and special meeting of stockholders must be in writing or given by electronic transmission and, in the case of special meetings, state the purpose for which the special meeting is called. | ||
Notice of Shareholder Nominations and Proposals |
Under the CBCA, a shareholder of Enerflex who is entitled to vote at an annual meeting of shareholders may submit to Enerflex notice of a matter that the shareholder proposes to raise at the upcoming annual shareholder meeting, and any such shareholder proposal submitted in | Under Exterran’s bylaws, an Exterran stockholder wishing to nominate a director for election to the Exterran board, or make a proposal for business other than the nomination of directors, must provide written notice, in proper form, within the following time periods: |
Provision |
Enerflex |
Exterran | ||
compliance with the requirements of the CBCA will be set out in or attached to the management information circular for the relevant shareholder meeting. See “ Advance Notice Requirements for Shareholder Proposals and Director Nominations A shareholder proposal submitted in accordance with the CBCA must be submitted to Enerflex at least 90 days before the anniversary date of the previous annual meeting of shareholders and comply with the other requirements set forth in the CBCA for shareholder proposals. See “ Advance Notice Requirements for Shareholder Proposals and Director Nominations In addition to the applicable requirements under the CBCA, Nominating Shareholders wishing to elect nominees for election to the Enerflex’s board must comply with Enerflex’s amended and restated By-Law No. 3 which requires that notice of a nomination of a director must be timely and in proper written form.For a nomination made by a Nominating Shareholder to be a timely notice as required by Enerflex’s by-laws, the Nominating Shareholder’s notice must be received by the corporate secretary of Enerflex and must be made:(i) in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth day following the notice date; and (ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of |
(i) annual meetings (ii) special meetings In the case of special meetings, the time periods are applicable only with respect to nominations of persons for election at a special meeting at which directors are to be elected pursuant to Exterran’s notice of meeting. Only such business shall be conducted at a special meeting as shall have been brought before the meeting pursuant to Exterran’s notice of meeting. In the event that the number of directors to be elected to the Exterran board at the annual meeting is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased board made by Exterran at least 100 days prior to the |
Provision |
Enerflex |
Exterran | ||
electing directors (whether or not called for other purposes as well), not later than the close of business on the fifteenth day following the day on which the first public announcement of the date of the special meeting of shareholders was made. Notwithstanding the above, in either instance, if notice-and-access 101- Communication with Beneficial Owners of Securities of a Reporting Issuer) is used for delivery of proxy related materials in respect of a meeting and the Notice Date in respect of the meeting is not less than 50 days before the date of the applicable meeting, the notice must be received not later than the close of business on the 40th day before the date of the applicable meeting.To be in proper written form, a Nominating Shareholder’s notice to the secretary of Enerflex must set forth: (i) as to each person whom the Nominating Shareholder proposes to nominate for election as a director: (A) the name, age, business address and residential address of the person, principal occupation or employment for the past five (5) years, status as a “resident Canadian”; (B) their direct or indirect beneficial ownership in, or control over, any class of securities of Enerflex; (C) any relationships between the proposed nominee and the Nominating Shareholder; (D) their written consent to being named as a nominee and to serving as a director of Enerflex, if directed; and (E) any other information relating to the person that would be required to be disclosed in a dissident proxy circular in connection with solicitations of proxies for election of directors in accordance with the CBCA and applicable Canadian securities laws; and |
anniversary of the date on which Exterran first mailed its proxy materials for the preceding year’s annual meeting, a stockholder’s notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if delivered not later than the close of business on the 10th day following the day on which such public announcement is first made by Exterran. The public announcement of an adjournment or postponement of an annual meeting of stockholders will not commence a new time period for the giving of a stockholder’s notice as described above. To be in proper form, the notice must include certain information about the stockholder making such nomination or proposal (including any beneficial owner on whose behalf the nomination or proposal is made or their affiliates, associates or others acting in concert therewith) and, in the case of a nomination, the nominee, and in the case of a proposal other than the nomination of directors, a description of the business, the reasons for conducting such business and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made. The notice must also state whether either the stockholder, or beneficial owner on whose behalf a nomination or proposal is made, intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of Exterran’s common stock required by law to carry the proposal or, in the case of a nomination, a sufficient number of holders of Exterran’s common stock to elect such nominees, and such stockholder or beneficial owner must have acted consistent with such statement in order to make such |
Provision |
Enerflex |
Exterran | ||
(ii) as to the Nominating Shareholder giving the notice: (A) their name, business and residential address, direct or indirect beneficial ownership in, or control or direction over, any class or series of securities of Enerflex; (B) their interests in, or rights or obligations associated with, agreements which alter the person’s economic interest in a security of Enerflex; (C) any proxy pursuant to which such person has any interests, rights or obligations relating to the voting of any securities of Enerflex or the nomination of directors to the Enerflex board; (D) any relationships between the proposed nominee and the Nominating Shareholder; (E) a representation as to whether such person intends to deliver a proxy circular and/or form of proxy to any shareholder of Enerflex in connection with such nomination or otherwise solicit proxies or votes from shareholders of Enerflex in support of such nomination; and (F) any information relating to such Nominating Shareholder that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors in accordance with the CBCA and applicable Canadian securities laws. All information to be provided in a timely notice must be provided as of the date of such notice. A Nominating Shareholder’s notice shall be promptly updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct in all material respects as of the date that is ten (10) business days prior to the date of the meeting, or any adjournment or postponement thereof. Notice given to the secretary of Enerflex pursuant to Enerflex’s by-laws may only be given by personal delivery, facsimile transmission or by email (to the secretary of Enerflex), and is deemed to have been given and made only at the time it is served by personal delivery, email or sent by facsimile |
proposal or nomination. Information included in the notice must be supplemented, if necessary, so that the information provided or required to be provided is true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement thereof, within the time periods contemplated by the Exterran bylaws. With respect to any proposed nominee for director, Exterran may require such proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director. A stockholder must also comply with all applicable requirements of the Securities Exchange Act of 1934. |
Provision |
Enerflex |
Exterran | ||
transmission (provided that receipt of confirmation of such transmission has been received) to the secretary at the address of the principal executive offices of Enerflex; provided, that if such delivery or electronic communication is made on a day which is a not a business day or later than 5:00 p.m. (Calgary time) on a day which is a business day, then such delivery or electronic communication will be deemed to have been made on the subsequent day that is a business day. Notwithstanding the foregoing, Enerflex may, in its sole discretion, waive any requirement described in this section of the table entitled “ Notice of Shareholder Nominations Enerflex’s by-laws. |
||||
Proxy Access |
Under the CBCA, Enerflex shareholders may nominate candidates for election to the board through the shareholder proposal mechanism provided for under the CBCA (provided such shareholder either owns, as registered or beneficial holder, or has the support of shareholders who own, as registered or beneficial holders, such number of shares either equal to 1% of the outstanding voting shares of Enerflex or having a fair market value of at least C$2,000 for a period of at least six months immediately prior to the day on which the shareholder submits the proposal) and provided such shareholder complies with the notice procedures in Enerflex’s by-laws (see the information set forth in the table above in the section entitled “Notice of Shareholder Nominations and Proposals |
Delaware law authorizes the bylaws of any corporation to require that, if the corporation solicits proxies with respect to an election of directors, it include in its proxy solicitation materials (including any form of proxy it distributes), in addition to individuals nominated by the board of directors, one or more individuals nominated by a stockholder. Exterran’s bylaws do not provide for such proxy access. Exterran’s bylaws provide that the nomination procedures set forth therein shall not be deemed to affect any rights of stockholders to request inclusion of proposals in Exterran’s proxy statement pursuant to Rule 14a-8 under the Exchange Act. | ||
Calling Special Meetings of Shareholders |
Under the CBCA, the Enerflex board may call a special meeting of shareholders at any time. In addition, holders of 5% or more of the outstanding shares of Enerflex that carry the right to vote at a meeting sought to be held may requisition a shareholders meeting. The requisition must be sent to Enerflex and each of its directors and state the business to be transacted at the meeting. The Enerflex board must call a meeting of shareholders to transact the business stated | Under Delaware law, a special meeting of stockholders may be called only by a corporation’s board of directors or other persons authorized in the corporation’s certificate of incorporation or bylaws. Exterran’s certificate of incorporation provides that special meetings of stockholders for any purpose or purposes may be called only by the chair of the Exterran board, any |
Provision |
Enerflex |
Exterran | ||
in the requisition within 21 days of receiving the requisition; otherwise the shareholder may call the meeting. The Enerflex board is not required to call a meeting upon receiving a requisition by a shareholder if (i) the business stated in the requisition is of a proscribed nature, (ii) a record date has already been fixed and notice provided in respect of a meeting, or (iii) the Enerflex board has already called a meeting and given notice of such meeting. |
Vice Chairman or President, or by a resolution adopted by a majority of the whole board. Only such business shall be conducted at a special meeting as shall have been brought before the meeting pursuant to Exterran’s notice of meeting. | |||
Shareholder Action by Written Consent |
Except where a written statement is submitted by a director or by an auditor in accordance with the CBCA, the CBCA allows any matters required to be voted on at a meeting of shareholders to be approved by Enerflex shareholders via written resolution signed by all of the shareholders entitled to vote on the matter. | Under Delaware law, unless otherwise provided in a corporation’s certificate of incorporation, any action that may be taken at a meeting of stockholders may be taken without a meeting and without prior notice if a consent in writing is signed by the holders of the minimum number of votes necessary to authorize the action at a meeting at which all shares entitled to vote were present and voted. Exterran’s certificate of incorporation provides that no actions may be taken by stockholders by written consent in lieu of a meeting. | ||
Quorum of Shareholders |
Two persons present in person, each holding or representing by proxy at least one issued share of Enerflex shall be a quorum of any meeting of shareholders for the choice of a chair of the meeting and for the adjournment of the meeting to a fixed time and place but may not transact any other business. For all other purposes, a quorum for any meeting shall be not less than two persons present and holding or representing by proxy not less than 10% of the total number of Enerflex common shares entitled to be voted at the meeting. |
Exterran’s bylaws provide that the holders of a majority of the voting power of all of the outstanding shares of the stock entitled to vote at the meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at all meetings of the stockholders, except to the extent that the presence of a larger number may be required by law or Exterran’s certificate of incorporation. Where a separate vote by a class or classes or series is required, the holders of a majority of the voting power of all of the outstanding shares of such class or classes or series, present in person or represented by proxy, will constitute a quorum entitled to take action with respect to that vote on that matter. |
Provision |
Enerflex |
Exterran | ||
Adjournment of Shareholder Meetings |
Under the CBCA, the shareholders may adjourn the meeting if a quorum is not present at the opening of the meeting. If a meeting of the Enerflex shareholders is adjourned for less than 30 days it will not be necessary to give notice of the adjourned meeting, other than by announcement at the meeting that it is adjourned. If a meeting of Enerflex shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting will be given as for an original meeting, in accordance with the provisions of the CBCA. | Exterran’s bylaws provide that if a quorum is not present or represented at any meeting of the stockholders, then either (i) the chair of the meeting, or (ii) the stockholders present at such meeting, by the affirmative vote of the holders of a majority in voting power thereof, will have power to adjourn the meeting to another place, if any, date or time, until a quorum is present. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally noticed. When a meeting is adjourned to another time and/or place, unless Exterran’s bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place (if any) thereof, and the means of remote communications (if any) by which stockholders and proxyholders may be deemed to be present in person and vote at such adjournment meeting, are announced at the meeting at which the adjournment is taken. If the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or a new record date for stockholders entitled to vote is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. | ||
Amendments to Articles or Certificate of Incorporation |
Under the CBCA, an amendment to Enerflex’s articles requires approval by special resolution, being a majority of not less than two-thirds (2/3) of the votes cast, in person or by proxy, in respect of the resolution at a meeting of Enerflex shareholders, including, if applicable, a separate special resolution of the holders of any separately affected class of shares in accordance with the provisions of the CBCA. |
Generally, a proposal to amend, alter, change or repeal any provision of Exterran’s certificate of incorporation, requires approval by the Exterran board and the holders of a majority of the voting power of all of the shares of Exterran’s capital stock entitled to vote thereon and, if applicable, the holders of a majority of the voting power of each class entitled to vote thereon as a separate class, provided that no such stockholder vote is required to amend |
Provision |
Enerflex |
Exterran | ||
the certificate of incorporation to change the name of the corporation. However, except as otherwise required by law, holders of common stock, as such, are not entitled to vote on any amendment to Exterran’s certificate of incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to applicable law or Exterran’s certificate of incorporation. | ||||
Amendments to By-laws |
The Enerflex board may, by resolution, make, amend or repeal any by-law that regulates the business or affairs of Enerflex. Where the directors make, amend or repeal a by-law, they are required under the CBCA to submit the by-law, or the amendment or repeal of a by-law, to the Enerflex shareholders at the next meeting of shareholders and the shareholders may confirm, reject or amend the by-law, by an ordinary resolution. If the by-law, amendment or repeal is rejected by the shareholders, or the directors do not submit the by-law, amendment or repeal to the shareholders as required, the by-law, amendment or repeal ceases to be effective and no subsequent resolution of the directors to make, amend or repeal a by-law having substantially the same purpose or effect is effective until it is confirmed or confirmed as amended by the shareholders. |
Delaware law provides that the stockholders entitled to vote have the power to adopt, amend or repeal bylaws. A corporation may also confer, in its certificate of incorporation, that power upon the board of directors. Exterran’s certificate of incorporation confers upon the board of directors the power to adopt, amend or repeal the Exterran bylaws. Exterran’s certificate of incorporation requires that any amendment to the Exterran bylaws by stockholders be approved by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the Exterran capital stock entitled to vote generally in the election of directors, voting together as a single class. | ||
Shareholder Suits |
Derivative Action Oppression Remedy |
Under Delaware law, a stockholder may bring a derivative action on behalf of, and for the benefit of, a corporation. Generally, a person may institute and maintain such a suit only if such person was a stockholder at the time of the transaction that is the subject of the suit or his or her shares thereafter devolved upon him or her by operation of law. Delaware law also requires that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff, |
Provision |
Enerflex |
Exterran | ||
complainant has given notice to the Enerflex board or its subsidiary of the complainant’s intention to apply to the court for such leave not less than 14 days before bringing the application if the Enerflex board or its subsidiary do not bring, diligently prosecute or defend or discontinue the action; (ii) the complainant is acting in good faith; and (iii) it appears to be in the interests of Enerflex or its subsidiary that the action be brought, prosecuted, defended or discontinued. Under the CBCA, the court in a derivative action may make any order it determines to be appropriate, including, without limitation, an order authorizing the complainant or any other person to control the conduct of the action, an order giving directions for the conduct of the action, an order directing that any amount determined to be payable by a defendant in the action will be paid, in whole or in part, directly to former and present security holders of Enerflex or its subsidiary instead of to Enerflex or its subsidiary and an order requiring Enerflex or its subsidiary to pay reasonable legal fees incurred by the complainant in connection with the action. A complainant is not required to give security for costs in a derivative action. Oppression Remedy (i) restraining the conduct complained of; (ii) appointing a receiver or receiver-manager; (iii) to regulate Enerflex’s affairs by amending Enerflex’s articles or Enerflex’s by-laws or creating or amending a unanimous shareholder agreement;(iv) directing an issue or exchange of securities; |
unless such demand would be futile. In certain circumstances, class action lawsuits are available to stockholders. The DGCL does not provide for a remedy similar to the oppression remedy under the CBCA; however, stockholders may be entitled to remedies for violation of a director’s fiduciary duties under Delaware common law. Exterran’s certificate of incorporation provides that, unless Exterran consents in writing to the selection of an alternate forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on Exterran’s behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder to Exterran or Exterran’s stockholders, (iii) any action asserting a claim against Exterran arising pursuant to any provision of the DGCL, Exterran’s certificate of incorporation or Exterran’s bylaws, or as to which the DGCL confers jurisdiction on the Court of Chancery, or (iv) any action asserting a claim governed by the internal affairs doctrine. |
Provision |
Enerflex |
Exterran | ||
(v) appointing directors in place of or in addition to all or any of the directors then in office; (vi) directing Enerflex or any other person, to purchase securities of a security holder; (vii) directing Enerflex or any other person, to pay a security holder any part of the monies that the security holder paid for securities; (viii) varying or setting aside a transaction or contract to which Enerflex is a party and compensating Enerflex or any other party to the transaction or contract; (ix) requiring Enerflex, within a time specified by the court, to produce to the court or an interested person financial statements in the required form or an accounting in such other form as the court may determine; (x) compensating an aggrieved person; (xi) directing rectification of the registers or other records of Enerflex; (xii) liquidating and dissolving Enerflex; (xiii) directing an investigation under the CBCA to be made; and (xiv) requiring the trial of any issue. An application under the oppression remedy may be made by a “complainant,” which means: (i) a registered holder or beneficial owner, and a former registered holder or former beneficial owner, of a security of Enerflex or any of its affiliates; (ii) a director or an officer or a former director or former officer of Enerflex or any of its affiliates; (iii) the director appointed under the CBCA; or (iv) any other person who, in the discretion of a court, is a proper person to make such an application. |
Provision |
Enerflex |
Exterran | ||
Enforcement of Civil Liabilities Against Foreign Persons |
A judgment for the payment of money rendered by a federal or provincial court in Canada based on civil liability would generally be enforceable elsewhere in Canada. A judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in federal or provincial courts of Canada. The party seeking enforcement would first have to commence proceedings at the appropriate level of court in the Canadian jurisdiction in which enforcement is sought and obtain an order from that court for the recognition and enforcement of the judgment. The following requirements must generally be met before the foreign monetary judgment will be recognized and enforceable in a Canadian court: (i) the foreign court must have properly asserted jurisdiction; (ii) the judgment must not have been obtained by fraud or in a manner contrary to natural justice; (iii) the judgment must be final and conclusive; and (iv) the judgment is not for a penalty, taxes or enforcement of a foreign public law, or otherwise contrary to Canadian public policy. |
A judgment for the payment of money rendered by a U.S. federal court or any state court based on civil liability generally would be enforceable elsewhere in the U.S. | ||
Limitation of Personal Liability of Directors and Officers |
Under the CBCA, no provision in a contract, Enerflex’s articles, Enerflex’s by-laws or a resolution of the Enerflex board or shareholders relieves a director or officer of Enerflex from the duty to act in accordance with the CBCA or the regulations thereunder or relieves them from liability for a breach thereof.Under the CBCA, directors of a corporation who vote for or consent to any resolution authorizing (i) the issuance of shares for consideration other than money are liable to the corporation for any amount by which the consideration received is less than the |
Exterran’s certificate of incorporation provides that, to the fullest extent permitted by the DGCL, a director of Exterran will not be personally liable to Exterran or its stockholders for monetary damages for breach of fiduciary duty as a director. If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of each director shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. |
Provision |
Enerflex |
Exterran | ||
fair equivalent of the money that the corporation would have received if the share had been issued for money on the date of the resolution, and (ii) among other things, will be liable to restore to Enerflex any amounts distributed or paid and not otherwise recovered with respect to a purchase or redemption of shares, a payment of a dividend on shares, a commission contrary to the provisions of the CBCA, a payment to a shareholder contrary to the provisions of the CBCA or the payment of an indemnity to a director or officer contrary to the provisions of the CBCA. In addition, subject to certain conditions, directors of a corporation are liable to its employees for all debts not exceeding six months wages payable to such employees for services performed for the corporation while they are directors. |
||||
Indemnification of Directors and Officers |
Under the CBCA, Enerflex may indemnify its directors and officers, its former directors and officers or another individual who acts or acted at Enerflex’s request as a director or officer, or an individual acting in a similar capacity, of another entity (which we refer to as an “indemnifiable person”) against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the indemnifiable person in respect of any civil, criminal, administrative, investigative or other proceeding in which the indemnifiable person is involved because of that association with Enerflex or other entity, provided that: (i) the indemnifiable person acted honestly and in good faith with a view to the best interests of Enerflex, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at Enerflex’s request; and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the indemnifiable person had reasonable grounds for believing that |
Section 145 of the DGCL provides that a corporation may indemnify any person against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which such person is made a party or threatened to be made a party by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity (other than an action by or in the right of Exterran), if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. A similar standard is applicable in the case of actions by or in the right of Exterran, except that indemnification only extends to expenses (including attorneys’ fees) incurred in connection with the defense or settlement of such action, and the |
Provision |
Enerflex |
Exterran | ||
the indemnifiable person’s conduct was lawful. Enerflex may advance funds to an indemnifiable person for the costs, charges and expenses of a proceeding referred to above; provided, however, that the indemnifiable person will repay the funds if the individual does not fulfill the above-mentioned conditions. An indemnifiable person is also entitled to indemnity from Enerflex in respect of all costs, charges and expenses reasonably incurred by the indemnifiable person in connection with the defense of any civil, criminal, administrative, investigative or other proceeding to which the indemnifiable person is subject because of the indemnifiable person’s association with Enerflex or other entity, if the indemnifiable person: (i) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the indemnifiable person ought to have done; and (ii) fulfills the conditions first set out above. In the case of a derivative action, indemnity may be made only with court approval, if the indemnifiable person fulfills the requirements first mentioned above. In addition, Enerflex may, under the CBCA, purchase and maintain insurance for the benefit of an indemnifiable person. Under Enerflex’s By-Laws No. 1, Enerflex shall indemnify a director or officer of Enerflex, a former director or officer of Enerflex or a person who acts or acted at Enerflex’s request as a director or officer, or an individual acting in a similar capacity, of another entity, to the extent permitted by the CBCA. |
statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by Exterran’s bylaws, disinterested director vote, stockholder vote, agreement or otherwise. In addition, Exterran may purchase and maintain insurance against liability asserted against or incurred by any of the persons referred to above whether or not it would have the power to indemnify them against such liability under Delaware law. A corporation must indemnify directors and officers (as defined in the statute) to the extent they are successful on the merits or otherwise in defense of the action or matter at issue. In addition, Delaware law allows for the advance payment of expenses prior to final disposition of an action, so long as, in the case of a current director or officer, the person undertakes to repay any amount advanced if it is later determined that the person is not entitled to indemnification. The Exterran bylaws provide that, to the full extent permitted by Delaware law, Exterran will indemnify each person who was or is or is threatened to be or is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of Exterran, or while serving in such capacity, is or was serving at the request of Exterran as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, |
Provision |
Enerflex |
Exterran | ||
against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement reasonably incurred in connection with any such action, suit or proceeding, except with respect to certain proceedings initiated by such persons without authorization by the Exterran board. Such right also includes the right to advance payment of expenses prior to the final disposition of an action to the fullest extent permitted by Delaware law. | ||||
Appraisal/Dissent Rights |
The CBCA provides that Enerflex shareholders are entitled to exercise dissent rights in certain situations and to be paid the fair value of their shares as determined in accordance with the provisions of the CBCA by following the dissent procedures set out therein, if Enerflex: (i) is subject to an order in respect of an “arrangement” (as such term is defined in the CBCA) in accordance with the provisions of the CBCA; (ii) resolves to amend its articles to add, change or remove any provisions restricting or constraining the issue, transfer or ownership of shares of that class; (iii) resolves to amend its articles to add, change or remove any restriction on the business or businesses that Enerflex may carry on; (iv) resolves to amalgamate, other than an amalgamation with a parent or a subsidiary or an amalgamation with a sister corporation, in each case in accordance with the provisions of the CBCA; (v) resolves to be continued under the laws of another jurisdiction; (vi) resolves to sell, lease or exchange all or substantially all its property other than in the ordinary course of business; or (vii) resolves to carry out a going-private transaction or a squeeze-out |
Delaware law provides that a holder of shares of any class or series has the right, in specified circumstances, to dissent from a merger or consolidation by demanding payment in cash for the stockholder’s shares equal to the fair value of those shares, as determined by the Delaware Court of Chancery in an action timely brought by the corporation or a dissenting stockholder. Delaware law grants these appraisal rights only in the case of mergers or consolidations and not in the case of a sale or transfer of assets or a purchase of assets for stock. Further, no appraisal rights are available for shares of any class or series that is listed on a national securities exchange or held of record by more than 2,000 stockholders, unless the agreement of merger or consolidation requires the holders to accept for their shares anything other than: • Shares of stock of the surviving corporation; • Shares of stock of another corporation that are either listed on a national securities exchange or held of record by more than 2,000 stockholders; • Cash in lieu of fractional shares of the stock described in the two precedent clauses; or • Any combination of the above. |
Provision |
Enerflex |
Exterran | ||
transaction (as such terms are defined in the CBCA). A shareholder is not entitled to dissent if an amendment to Enerflex’s articles is effected by a court order approving a reorganization (as defined in the CBCA) or by a court order made in connection with an action for an oppression remedy. Enerflex shareholders are not entitled to dissent or appraisal rights under the CBCA in connection with the transactions contemplated by the Merger Agreement. In order to exercise any dissent rights pursuant to the CBCA, Enerflex shareholders will be required to follow the terms and process as outlined in the CBCA. |
In addition, appraisal rights are not available to holders of shares of the surviving corporation in specified mergers that do not require the vote of the stockholders of the surviving corporation. The Exterran certificate of incorporation does not provide for appraisal rights in any additional circumstance. | |||
Approval of Extraordinary Transactions; Anti-Takeover Provisions |
Under the CBCA, a merger, consolidation, sale, lease, exchange or other disposition of all or substantially all of the property of Enerflex other than in the ordinary course of business of Enerflex, including an amalgamation (other than an amalgamation with a parent or a subsidiary or an amalgamation with a sister corporation in accordance with the provisions of the CBCA) and an arrangement (as defined in the CBCA), or a dissolution of Enerflex, is generally required to be approved by special resolution, being a majority of not less than two-thirds (2/3) of the votes cast, in person or by proxy, in respect of the resolution at a meeting of Enerflex shareholders.Additionally, Multilateral Instrument 61-101— Protection of Minority Security Holders in Special Transactions “MI 61-101”) of the Canadian Securities Administrators contains detailed requirements in connection with, among other transactions, “related party transactions” and “business combinations.” A related party transaction means, generally, any transaction by which an issuer, directly or indirectly, consummates one or more specified transactions with a related party, including purchasing or disposing of an asset, issuing securities or assuming liabilities. |
A sale, lease or exchange of all or substantially all of a corporation’s assets, a merger or consolidation of a corporation with another corporation or a dissolution of a corporation generally requires the approval of the corporation’s board of directors and, with limited exceptions, the affirmative vote of at least a majority of the shares of Exterran common stock outstanding as of the record date and entitled to vote. Exterran is subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with any interested stockholder for a three-year period following the time that such stockholder becomes an interested stockholder, unless (i) the board of directors approves the business combination or the transaction by which such stockholder becomes an interested stockholder, in either case, before the stockholder becomes an interested stockholder, (ii) the interested stockholder acquires 85% of the corporation’s outstanding voting stock in the transaction by which such stockholder becomes an interested |
Provision |
Enerflex |
Exterran | ||
“Related party,” as defined in MI 61-101, includes (i) directors and senior officers of the issuer, (ii) holders of voting securities of the issuer carrying more than 10% of the voting rights attached to all the issuer’s outstanding voting securities and (iii) holders of a sufficient number of any securities of the issuer to materially affect control of the issuer. A “business combination” means, generally, any amalgamation, arrangement, consolidation, amendment to share terms or other transaction, as a consequence of which the interest of a holder of an equity security may be terminated without the holder’s consent.MI 61-101 requires, subject to certain exceptions, specific detailed disclosure in the proxy (information) circular sent to security holders in connection with a related party transaction or business combination where a meeting is required and, subject to certain exceptions, the preparation of a formal valuation of the subject matter of the related party transaction or business combination and any non-cash consideration offered in connection therewith, and the inclusion of a summary of the valuation in the proxy circular. MI 61-101 also requires, subject to certain exceptions, that an issuer not engage in a related party transaction or business combination unless, in addition to any other required shareholder approvals, the disinterested shareholders of the issuer have approved the related party transaction or business combination by a simple majority of the votes cast. |
stockholder, or (iii) the business combination is subsequently approved by the board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds (2/3) of the corporation’s outstanding voting stock not owned by the interested stockholder. | |||
Compulsory Acquisitions |
The CBCA provides that if an offer is made to shareholders of a distributing corporation (as defined in the CBCA), such as Enerflex, at approximately the same time to acquire all of the shares of a class of issued shares, including an offer made by a distributing corporation to repurchase all of the shares of a class of its shares (which we refer to as a “takeover bid”) and such offer is accepted within 120 days of the takeover bid by holders of not less than 90% of the shares (other than the shares held by the offeror or | Not applicable. |
Provision |
Enerflex |
Exterran | ||
an affiliate or associate of the offeror) of any class of shares to which the takeover bid relates, then the offeror is entitled to acquire the shares held by those holders of securities of that class who did not accept the takeover bid either on the same terms on which the offeror acquired shares under the takeover bid or for payment of the fair value of such holder’s shares as determined in accordance with the dissent right procedures under the CBCA. |
||||
Rights Upon Liquidation |
Under the CBCA, Enerflex may liquidate and dissolve by special resolution of the holders of each class of Enerflex common shares , whether or not such Enerflex shareholders are otherwise entitled to vote. In the event of the liquidation, dissolution, or winding up of Enerflex or other distribution of assets of Enerflex among its shareholders for the purpose of winding up its affairs, the holders of Enerflex common shares are, subject to the rights of the holders of any other class of shares of Enerflex entitled to receive the assets of Enerflex upon such a distribution in priority to or ratably with the holders of Enerflex common shares, entitled to participate ratably in any distribution of the assets of Enerflex. Under Enerflex’s articles, with respect to any distribution of assets of Enerflex in the event of any liquidation, dissolution or winding up of Enerflex or the other distribution of the assets of Enerflex among its shareholders for the purpose of winding up its affairs, the preferred shares of each series are entitled to priority over the Enerflex common shares to the extent of the amount paid up on the preferred shares together with an amount equal to the accrued and unpaid dividends thereon and no more. The preferred shares of each series may also be given such other preferences over the Enerflex common shares as may be determined as to the respective series authorized to be issued. Under Enerflex’s articles, the preferred shares of each series shall rank on a parity |
In case of liquidation or dissolution of Exterran, subject to the rights of the holders of Exterran preferred stock, if any, the remaining assets and funds of Exterran available for distribution will be paid to the holders of common stock. |
Provision |
Enerflex |
Exterran | ||
with the preferred shares of every other series with respect to priority in payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, or any other distribution of the assets of Enerflex among its shareholders for the purpose of winding up its affairs. |
Exterran Filings with the SEC (File No. 001-36875) |
Period and/or Filing Date | |
Annual Report on Form 10-K | Year ended December 31, 2021 | |
Quarterly Report on Form 10-Q | Quarter ended March 31, 2022 | |
Current Reports on Form 8-K |
Filed January 24, and February 18, 2022, [ ], and [ ] |
* | Other than the portions of those documents not deemed to be filed. |
Exterran Corporation 11000 Equity Drive Houston, Texas 77041 Attention: Corporate Secretary Telephone: (281) 836-7000 |
Enerflex Ltd. 1331 Macleod Trail SE, Suite 904 Calgary, Alberta, Canada T2G 0K3 Attention: Office of the Corporate Secretary and Associate General Counsel, Corporate Telephone: (403) 261-4280 |
Page |
||||
ENERFLEX LTD |
||||
AUDITED CONSOLIDATED FINANCIAL STATEMENTS: |
||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 | ||||
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS: |
||||
F-59 | ||||
F-60 |
||||
F-61 |
||||
F-62 |
||||
F-63 |
||||
F-64 |
|
Ernst & Young LLP 2200, 215 2nd St SW Calgary, AB T2P 1M4 |
Tel: +1 403 206 5000 Fax: +1 403 290 4265 ey.com/ca |
|
Measurement of revenue recognized from the supply of engineered systems products | ||
Description of the Matter |
As described in Note 3q, 5, and 23 to the consolidated financial statements, revenues from the supply of engineered systems involving design, manufacture, installation and start-up are recognized using the percentage of completion method, based on total costs incurred as a proportion of expected total costs of the project. During the year ended December 31, 2021, revenue from the supply of engineered systems was $354 million. | |
How We Addressed the Matter in Our Audit |
Auditing the Company’s measurement of the revenue recognized on projects where the Company has not fulfilled all performance obligations of the contract’s scope of work as at December 31, 2021 was identified as a critical audit matter due to the significant judgment and estimation uncertainty relating to several estimates including expected margin to be earned on the contract and the estimated remaining costs to complete. Our audit procedures, among others, included comparing estimated costs to complete for in-progress jobs to actual costs incurred on similar completed projects and comparing to third-party vendor quotes or price sheets for estimated costs to complete for in-progress jobs. We assessed the historical accuracy of management’s forecasts by comparing them with actual results and assessed monthly trending for significant changes in gross margin. | |
Valuation of goodwill | ||
Description of the Matter |
As described in Notes 3f, 5, and 14 to the consolidated financial statements, the carrying value of $566 million of goodwill is assessed against the estimated recoverable amount of each operating segment, at least annually or at any time an indicator of impairment exists. Auditing the recoverable amounts in the goodwill impairment test was determined to be a critical audit matter due to the significant level of judgment applied by management and the subjectivity of the significant assumptions in determining the recoverable amount. Significant assumptions included cash flow projections, revenue growth rate, earnings margins, and discount rate, which are affected by expectations about future market and economic conditions. | |
How We Addressed the Matter in Our Audit |
Our audit procedures included, among others, comparing assumptions incorporated into the estimated recoverable amount such as revenue forecasts and growth rates to publicly available data and historically realized results. We assessed the historical accuracy of management’s gross margin forecasts by comparing them with actual results and performed a sensitivity analysis to evaluate the assumptions that were most significant to the determination of the recoverable amount. We evaluated the Company’s determination of the industry outlook on price by comparing to externally available third-party future price estimates. We also involved our internal valuation specialists to assist in our evaluation of the methodology and our evaluation of select key assumptions in management’s estimation of the recoverable amounts, such as the discount rate. |
($ Canadian thousands) |
December 31, 2021 |
December 31, 2020 |
||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
|
$ |
|||||
Accounts receivable (Note 7) |
|
|
||||||
Contract assets (Note 7) |
|
|
||||||
Inventories (Note 8) |
|
|
||||||
Work-in-progress |
|
|
||||||
Current portion of finance leases receivable (Note 11) |
|
|
||||||
Income taxes receivable |
|
|
||||||
Derivative financial instruments (Note 28) |
|
|
||||||
Other current assets |
|
|
||||||
|
|
|
|
|
||||
Total current assets |
|
|
||||||
Property, plant and equipment (Note 9) |
|
|
||||||
Rental equipment (Note 9) |
|
|
||||||
Lease right-of-use |
|
|
||||||
Finance leases receivable (Note 11) |
|
|
||||||
Deferred tax assets (Note 20) |
|
|
||||||
Other assets (Note 12) |
|
|
||||||
Intangible assets (Note 13) |
|
|
||||||
Goodwill (Note 14) |
|
|
||||||
|
|
|
|
|
||||
Total assets |
$ |
|
$ |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities and Shareholders’ Equity |
|
|
||||||
Current liabilities |
|
|
||||||
Accounts payable and accrued liabilities (Note 15) |
$ |
|
$ |
|||||
Warranty provisions (Note 16) |
|
|
||||||
Income taxes payable |
|
|
||||||
Deferred revenues (Note 17) |
|
|
||||||
Current portion of long-term debt (Note 18) |
|
|
||||||
Current portion of lease liabilities (Note 19) |
|
|
||||||
Derivative financial instruments (Note 28) |
|
|
||||||
|
|
|
|
|
||||
Total current liabilities |
|
|
||||||
Long-term debt (Note 18) |
|
|
||||||
Lease liabilities (Note 19) |
|
|
||||||
Deferred tax liabilities (Note 20) |
|
|
||||||
Other liabilities |
|
|
||||||
|
|
|
|
|
||||
Total liabilities |
$ |
|
$ |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
||||||
Share capital (Note 21) |
$ |
|
$ |
|||||
Contributed surplus (Note 22) |
|
|
||||||
Retained earnings |
|
|
||||||
Accumulated other comprehensive income |
|
|
||||||
|
|
|
|
|
||||
Total shareholders’ equity |
|
|
||||||
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
$ |
|
$ |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
||||||||||||
($ Canadian thousands, except per share amounts) |
2021 1 |
2020 1 |
2019 1 |
|||||||||
Revenue (Note 23) |
$ |
$ | $ | |||||||||
Cost of goods sold |
||||||||||||
|
|
|
|
|
|
|||||||
Gross margin |
||||||||||||
Selling and administrative expenses |
||||||||||||
|
|
|
|
|
|
|||||||
Operating income |
||||||||||||
Gain on disposal of property, plant and equipment (Note 9) |
||||||||||||
Equity earnings from associate and joint venture |
||||||||||||
|
|
|
|
|
|
|||||||
Earnings before finance costs and income taxes |
||||||||||||
Net finance costs (Note 26) |
||||||||||||
|
|
|
|
|
|
|||||||
Earnings before income taxes |
||||||||||||
Income taxes (Note 20) |
||||||||||||
|
|
|
|
|
|
|||||||
Net earnings (loss) |
$ |
( |
) |
$ | $ | |||||||
|
|
|
|
|
|
|||||||
Net earnings (loss) attributable to: |
||||||||||||
Controlling interest |
$ |
( |
) |
$ | $ |
|||||||
Non-controlling interest |
||||||||||||
|
|
|
|
|
|
|||||||
$ |
( |
) |
$ | $ | ||||||||
|
|
|
|
|
|
|||||||
Earnings (loss) per share – basic (Note 27) |
$ |
( |
) |
$ | $ | |||||||
Earnings (loss) per share – diluted (Note 27) |
$ |
( |
) |
$ | $ | |||||||
Weighted average number of shares – basic |
||||||||||||
Weighted average number of shares – diluted |
||||||||||||
|
|
|
|
|
|
1 |
Certain balances have been reclassified. Refer to Note 2(a) for additional details. |
Years ended December 31, | ||||||||||||
($ Canadian thousands) |
2021 |
2020 | 2019 | |||||||||
Net earnings (loss) |
$ |
( |
) |
$ | $ | |||||||
Other comprehensive income (loss): |
||||||||||||
Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent periods: |
||||||||||||
Change in fair value of derivatives designated as cash flow hedges, net of income tax recovery |
( |
) | ||||||||||
Gain (loss) on derivatives designated as cash flow hedges transferred to net earnings (loss), net of income tax expense |
( |
) |
||||||||||
Unrealized gain on translation of foreign denominated debt |
||||||||||||
Unrealized loss on translation of financial statements of foreign operations |
( |
) |
( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss) |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
|
|
|
|
|
|
|||||||
Total comprehensive income (loss) |
$ |
( |
) |
$ | $ | |||||||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss) attributable to: |
||||||||||||
Controlling interest |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
Non-controlling interest |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
$ |
( |
) |
$ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
Years ended December 31, |
||||||||||||
($ Canadian thousands) |
Restated (Note 36) 2021 |
Restated (Note 36) 2020 |
Restated (Note 36) 2019 |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ |
( |
) |
$ | $ | |||||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
||||||||||||
Equity earnings from associate and joint venture |
( |
) |
( |
) | ( |
) | ||||||
Deferred income taxes (Note 20) |
||||||||||||
Share-based compensation expense (Note 24) |
||||||||||||
Gain on disposal of property, plant and equipment (Note 9) |
( |
) |
( |
) | ( |
) | ||||||
Impairment on property, plant and equipment and rental equipment (Note 9 ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net change in non-cash working capital and other (Note 30) |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
$ |
$ | $ | |||||||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 9) |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
Rental equipment (Note 9) |
( |
) |
( |
) | ( |
) | ||||||
Proceeds on disposal of: |
||||||||||||
Property, plant and equipment (Note 9) |
||||||||||||
Rental equipment (Note 9) |
||||||||||||
Investment in associates and joint ventures |
( |
) |
( |
) | ( |
) | ||||||
Net change in working capital associated with investing activities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
|
|
|
|
|
|
|||||||
Financing Activities |
||||||||||||
Net repayment of the Bank Facility (Note 18 ) |
( |
) |
( |
) | ( |
) | ||||||
Net proceeds from the Asset-Based Facility (Note 18 ) |
||||||||||||
Repayment of the Senior Notes (Note 18 ) |
( |
) |
||||||||||
Lease liability principal repayment (Note 19) |
( |
) |
( |
) | ( |
) | ||||||
Dividends |
( |
) |
( |
) | ( |
) | ||||||
Stock option exercises |
— |
— | ||||||||||
Debt refinancing and transaction costs (Note 30) |
|
|
( |
) |
|
|
( |
) | |
|
( |
) |
|
|
|
|
|
|
|||||||
Cash used in financing activities |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ | ( |
) | $ | ( |
) | |||
Increase (decrease) in cash and cash equivalents |
( |
) | ( |
) | ||||||||
Cash and cash equivalents, beginning of period |
||||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
($ Canadian thousands) |
Share capital |
Contributed surplus |
Retained earnings |
Foreign currency translation adjustments |
Hedging reserve |
Accumulated other comprehensive income |
Total shareholders’ equity before non-controlling interest |
Non-controlling interest |
Total | |||||||||||||||||||||||||||
At January 1, 2019 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||||
Net earnings |
— | — | — | — | — | |||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
— | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
Effect of stock option plans |
— | — | — | — | — | |||||||||||||||||||||||||||||||
Dividends |
— | — | ( |
) | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
At December 31, 2019 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net earnings |
— | — | — | — | — | |||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
— | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
Purchase of non-controlling interest |
— | — | ( |
) | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||
Effect of stock option plans |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||
Dividends |
— | — | ( |
) | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
At December 31, 2020 |
$ | $ | $ | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net loss |
— |
— |
( |
) |
— |
— |
— |
( |
) |
— |
( |
) | ||||||||||||||||||||||||
Other comprehensive income (loss) |
— |
— |
— |
( |
) |
( |
) |
( |
) |
— |
( |
) | ||||||||||||||||||||||||
Effect of stock option plans |
— |
— |
— |
— |
— |
— |
||||||||||||||||||||||||||||||
Dividends |
— |
— |
( |
) |
— |
— |
— |
( |
) |
— |
( |
) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
At December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
— |
$ |
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
Jurisdiction of Incorporation |
Ownership |
Operating Segment | |||
Public Shareholders |
||||||
|
||||||
1 |
||||||
1 |
Enerflex indirectly owns |
(a) |
Statement of Compliance |
Excerpt from the consolidated statements of earnings for the year ended December 31, 2021 ($ Canadian thousands) |
As previously reported |
Reclassification |
Revised |
|||||||||
Revenue |
$ |
$ |
— |
$ |
||||||||
COGS |
||||||||||||
Gross margin |
( |
) |
||||||||||
SG&A |
( |
) |
||||||||||
Net earnings |
( |
) |
— |
( |
) | |||||||
Excerpt from the consolidated statements of earnings for the year ended December 31, 2020 ($ Canadian thousands) |
As previously reported |
Reclassification |
Revised |
|||||||||
Revenue |
$ |
$ |
— |
$ |
||||||||
COGS |
||||||||||||
Gross margin |
( |
) |
||||||||||
SG&A |
( |
) |
||||||||||
Net earnings |
— |
|||||||||||
Excerpt from the consolidated statements of earnings for the year ended December 31, 2019 ($ Canadian thousands) |
As previously reported |
Reclassification |
Revised |
|||||||||
Revenue |
$ |
$ |
— |
$ |
||||||||
COGS |
||||||||||||
Gross margin |
( |
) |
||||||||||
SG&A |
( |
) |
||||||||||
Net earnings |
— |
(b) |
Basis of Measurement |
(c) |
Functional Currency and Presentation Currency |
(d) |
Use of Estimates and Judgment |
(e) |
Basis of Consolidation |
(a) |
Investments in Associates and Joint Ventures |
(b) |
Foreign Currency Translation |
(c) |
Business Combinations |
(d) |
Property, Plant and Equipment |
Asset Class |
Estimated Useful Life Range | |
Buildings | ||
Equipment |
(e) |
Rental Equipment |
(f) |
Goodwill |
(g) |
Intangible Assets |
(h) |
Impairment of Non-Financial Assets (excluding Goodwill) |
(i) |
Inventories |
(j) |
Trade Receivables |
(k) |
Cash |
(l) |
Provisions |
(m) |
Onerous Contracts |
(n) |
Employee Future Benefits |
(o) |
Share-Based Payments |
(p) |
Leases |
• | The contract involves the use of an identified asset, either explicitly or implicitly, and whether the supplier has a substantive substitution right for the asset; |
• | The Company has the right to obtain substantially all the economic benefits from the use of the asset throughout the period; and |
• | The Company has the right to direct the use of the identified asset. |
(q) |
Revenue Recognition |
a) |
the lease transfers ownership of the underlying asset to the lessee by the end of the lease term; |
b) |
the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception date, that the option will be exercised; |
c) |
the lease term is for the major part of the economic life of the underlying asset even if title is not transferred; |
d) |
at the inception date, the present value of the lease payments amounts to at least substantially all of the fair value of the underlying asset; and |
e) |
the underlying asset is of such a specialised nature that only the lessee can use it without major modifications. |
a) |
the lease transfers ownership of the underlying asset to the lessee by the end of the lease term; |
b) |
the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception date, that the option will be exercised; |
c) |
the lease term is for the major part of the economic life of the underlying asset even if title is not transferred; |
d) |
at the inception date, the present value of the lease payments amounts to at least substantially all of the fair value of the underlying asset; and |
e) |
the underlying asset is of such a specialised nature that only the lessee can use it without major modifications. |
(r) |
Financial Instruments |
• |
Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an on-going basis; |
• |
Level 2: Fair value measurements are those derived from inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• |
Level 3: Fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). In these instances, internally developed methodologies are used to determine fair value. |
• |
Cash and cash equivalents are measured at fair value through profit or loss. Gains and losses resulting from the periodic revaluation are recorded in the consolidated statements of earnings; |
• |
Accounts receivable and preferred shares are recorded at amortized cost using the effective interest rate method; and |
• |
Accounts payable, accrued liabilities, and long-term debt are recorded at amortized cost using the effective interest rate method. |
(s) |
Derivative Financial Instruments and Hedge Accounting |
(t) |
Income Taxes |
• |
Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; |
• |
In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future; and |
• |
Deferred income tax assets are recognized only to the extent that it is probable that a taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilized. |
(u) |
Earnings Per Share |
(v) |
Finance Income and Costs |
(w) |
Government Grants |
December 31, |
2021 |
2020 | ||||||
Trade receivables |
$ |
$ | ||||||
Less: allowance for doubtful accounts 1 |
( |
) |
( |
) | ||||
|
|
|
|
|
|
|
|
|
Trade receivables, net |
$ |
$ | ||||||
Other receivables |
||||||||
|
|
|
|
|||||
Total accounts receivable |
$ |
$ | ||||||
|
|
|
|
1 |
During the third quarter of 2020, management identified certain receivable balances in the Rest of World segment that may be at higher risk of credit loss, leading to an increase in the allowance for doubtful accounts provision at September 30, 2020. The value of the provision relating to these receivables at December 31, 2020 represents only the outstanding amounts owed to Enerflex , as the total value of the associated contract was recognized and largely collected prior to 2020. |
December 31, |
2021 |
2020 | ||||||
Current to 90 days |
$ |
$ | ||||||
Over 90 days |
||||||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Impairment provision additions on receivables |
||||||||
Amounts settled and derecognized during the year |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
( |
) | ||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Unbilled revenue recognized |
||||||||
Amounts billed |
( |
) |
( |
) | ||||
Amounts transferred to other assets |
( |
) | ||||||
Currency translation effects |
( |
) |
||||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
December 31, |
2021 |
2020 | ||||||
Direct materials |
$ |
$ | ||||||
Repair and distribution parts |
||||||||
Work-in-progress |
||||||||
Equipment |
||||||||
|
|
|
|
|||||
Total inventories |
$ |
$ | ||||||
|
|
|
|
|||||
December 31, |
2021 |
2020 | ||||||
Work-in-progress |
$ |
$ |
Land | Building | Equipment | Assets under construction |
Total property, plant and equipment |
Rental equipment |
|||||||||||||||||||
Cost |
||||||||||||||||||||||||
January 1, 2021 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Additions |
— | — | ||||||||||||||||||||||
Reclassification |
— | ( |
) | ( |
) | — | ||||||||||||||||||
Disposals |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Accumulated depreciation |
| |||||||||||||||||||||||
January 1, 2021 |
$ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | ||||||||
Depreciation charge |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Impairment |
— | — | — | — | — | ( |
) | |||||||||||||||||
Disposals |
— | — | ||||||||||||||||||||||
Currency translation effects |
— | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2021 |
$ |
— |
$ |
( |
) |
$ |
( |
) |
$ |
— |
$ |
( |
) |
$ |
( |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net book value – December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Land | Building | Equipment | Assets under construction |
Total property, plant and equipment |
Rental equipment |
|||||||||||||||||||
Cost |
||||||||||||||||||||||||
January 1, 2020 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Additions |
— | |||||||||||||||||||||||
Reclassification |
— | ( |
) | ( |
) | — | ||||||||||||||||||
Disposals |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2020 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Accumulated depreciation |
| |||||||||||||||||||||||
January 1, 2020 |
$ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | ||||||||
Depreciation charge |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Impairment |
— | — | — | — | — | ( |
) | |||||||||||||||||
Disposals |
— | — | ||||||||||||||||||||||
Currency translation effects |
— | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2020 |
$ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net book value – December 31, 2020 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Land | Building | Equipment | Assets under construction |
Total property, plant and equipment |
Rental equipment |
|||||||||||||||||||
Cost |
||||||||||||||||||||||||
January 1, 2019 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Additions |
— | |||||||||||||||||||||||
Reclassification |
— | ( |
) | ( |
) | — | ||||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2019 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Accumulated depreciation |
| |||||||||||||||||||||||
January 1, 2019 |
$ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | ||||||||
Depreciation charge |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Impairment |
— | — | — | — | — | ( |
) | |||||||||||||||||
Disposals |
— | — | ||||||||||||||||||||||
Currency translation effects |
— | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2019 |
$ | — | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net book value – December 31, 2019 |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings | Equipment | Total lease right-of-use assets |
||||||||||
Cost |
||||||||||||
January 1, 2021 |
$ | $ | $ | |||||||||
Additions |
||||||||||||
Disposal |
( |
) | ( |
) | ( |
) | ||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
December 31, 2021 |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
|||||||
Accumulated depreciation |
| |||||||||||
January 1, 2021 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Depreciation charge |
( |
) | ( |
) | ( |
) | ||||||
Disposal |
||||||||||||
Currency translation effects |
||||||||||||
|
|
|
|
|
|
|||||||
December 31, 2021 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
|
|
|
|
|
|
|||||||
Net book value – December 31, 2021 |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
Land and buildings | Equipment | Total lease right-of-use assets |
||||||||||
Cost |
||||||||||||
January 1, 2020 |
$ | $ | $ | |||||||||
Additions |
||||||||||||
Disposal |
( |
) | ( |
) | ( |
) | ||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ||||||
December 31, 2020 |
$ | $ | $ | |||||||||
Accumulated depreciation |
||||||||||||
January 1, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Depreciation charge |
( |
) | ( |
) | ( |
) | ||||||
Disposal |
||||||||||||
Currency translation effects |
||||||||||||
December 31, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net book value – December 31, 2020 |
$ | $ | $ | |||||||||
Land and buildings |
Equipment |
Total lease right-of-use assets |
||||||||||
Cost |
||||||||||||
January 1, 2019 |
$ | $ | $ | |||||||||
Additions |
||||||||||||
Disposal |
( |
) | ( |
) | ( |
) | ||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ||||||
December 31, 2019 |
$ | $ | $ | |||||||||
Accumulated depreciation |
||||||||||||
January 1, 2019 |
$ | — | $ | — | $ | — | ||||||
Depreciation charge |
( |
) | ( |
) | ( |
) | ||||||
Disposal |
||||||||||||
Currency translation effects |
||||||||||||
December 31, 2019 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net book value – December 31, 2019 |
$ | $ | $ | |||||||||
Minimum lease payments |
Present value of minimum lease payments |
|||||||||||||||
December 31, |
2021 |
2020 |
2021 |
2020 |
||||||||||||
Less than one year |
$ |
$ | $ |
$ | ||||||||||||
Between one and five years |
||||||||||||||||
Later than five years |
||||||||||||||||
$ |
$ | $ |
$ | |||||||||||||
Less: unearned finance income |
( |
) |
( |
) | — |
— | ||||||||||
$ |
$ | $ |
$ | |||||||||||||
December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Additions |
||||||||
Interest income |
||||||||
Billings and payments |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) | ||||||
$ |
$ | |||||||
December 31, |
2021 |
2020 | ||||||
Investment in associates and joint ventures |
$ |
$ | ||||||
Long-term receivables |
||||||||
Prepaid deposits |
||||||||
$ |
$ | |||||||
Customer relationships and other |
Software | Total intangible assets |
||||||||||
Cost |
||||||||||||
January 1, 2021 |
$ | $ | $ | |||||||||
Reclassification |
— | |||||||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ||||||
December 31, 2021 |
$ |
$ |
$ |
|||||||||
Accumulated amortization |
||||||||||||
January 1, 2021 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Amortization charge |
( |
) | ( |
) | ( |
) | ||||||
Currency translation effects |
||||||||||||
December 31, 2021 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
Net book value – December 31, 2021 |
$ |
$ |
$ |
|||||||||
Customer relationships and other |
Software | Total intangible assets |
||||||||||
Cost |
||||||||||||
January 1, 2020 |
$ | $ | $ | |||||||||
Reclassification |
— | |||||||||||
Disposal |
— | ( |
) | ( |
) | |||||||
Currency translation effects |
( |
) | ( |
) | ||||||||
December 31, 2020 |
$ | $ | $ | |||||||||
Accumulated amortization |
||||||||||||
January 1, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Amortization charge |
( |
) | ( |
) | ( |
) | ||||||
Disposal |
— | |||||||||||
Currency translation effects |
( |
) | ||||||||||
December 31, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net book value – December 31, 2020 |
$ | $ | $ | |||||||||
Customer relationships and other |
Software | Total intangible assets |
||||||||||
Cost |
||||||||||||
January 1, 2019 |
$ | $ | $ | |||||||||
Additions |
— | |||||||||||
Reclassification |
— | |||||||||||
Disposal |
— | ( |
) | ( |
) | |||||||
Currency translation effects |
( |
) | ( |
) | ( |
) | ||||||
December 31, 2019 |
$ | $ | $ | |||||||||
Accumulated amortization |
||||||||||||
January 1, 2019 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Amortization charge |
( |
) | ( |
) | ( |
) | ||||||
Disposal |
— | |||||||||||
Currency translation effects |
||||||||||||
December 31, 2019 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net book value – December 31, 2019 |
$ | $ | $ | |||||||||
December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Currency translation effects |
( |
) |
||||||
$ |
$ | |||||||
• | Earnings Before Finance Costs and Taxes: Management has made estimates relating to the amount and timing of revenue recognition for projects included in backlog, and the assessment of the likelihood of maintaining and growing market share. For each ten percent change in earnings before finance costs and taxes, the impact on the value-in-use |
• | Discount Rate: Management determines a discount rate for each segment based on the estimated weighted average cost of capital of the Company, using the five-year average of the Company’s peer group debt to total enterprise value, adjusted for a number of risk factors specific to each segment. This discount rate has been calculated using an estimated risk-free rate of return adjusted for the Company’s estimated equity market risk premium, the Company’s cost of debt, and the tax rate in the local jurisdiction. For each one percent change in the discount rate, the impact on the value-in-use |
December 31, |
2021 |
2020 |
||||||
Accounts payable and accrued liabilities |
$ |
$ | ||||||
Accrued dividend payable |
||||||||
Cash-settled share-based payments |
||||||||
$ |
$ | |||||||
December 31, |
2021 |
2020 |
||||||
Balance, January 1 |
$ |
$ | ||||||
Additions during the year |
||||||||
Amounts settled and released in the year |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) | ||||||
$ |
$ | |||||||
December 31, |
2021 |
2020 |
||||||
Balance, January 1 |
$ |
$ | ||||||
Cash received in advance of revenue recognition |
||||||||
Revenue subsequently recognized |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
||||||
$ |
$ | |||||||
December 31, |
2021 |
2020 | ||||||
Drawings on Bank Facility |
$ |
$ | ||||||
Drawings on Asset-Based Facility |
— | |||||||
Notes due June 22, 2021 |
— |
|||||||
Notes due December 15, 2024 |
||||||||
Notes due December 15, 2027 |
||||||||
Deferred transaction costs |
( |
) |
( |
) | ||||
$ |
$ | |||||||
Current portion of long-term debt |
$ |
— |
$ | |||||
Non-current portion of long-term debt |
||||||||
$ |
$ | |||||||
December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Additions |
||||||||
Lease interest |
||||||||
Payments made against lease liabilities |
( |
) |
( |
) | ||||
Currency translation effects and other |
( |
) |
( |
) | ||||
Closing balance |
$ |
$ | ||||||
Current portion of lease liabilities |
$ |
$ | ||||||
Non-current portion of lease liabilities |
||||||||
$ |
$ | |||||||
December 31, 2021 |
||||
2022 |
$ |
|||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
$ |
||||
Less: |
||||
Imputed interest |
||||
Short-term leases |
||||
Low-value leases |
||||
$ |
||||
(a) |
Income Tax Recognized in Net Earnings |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Current income taxes |
$ |
$ | ( |
) | $ | |||||||
Deferred income taxes |
||||||||||||
$ |
$ | $ | ||||||||||
(b) |
Reconciliation of Tax Expense |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Earnings before income taxes |
$ |
$ | $ | |||||||||
Canadian statutory rate |
% |
% | % | |||||||||
Expected income tax provision |
$ |
$ | $ | |||||||||
Add (deduct): |
||||||||||||
Exchange rate effects on tax basis |
( |
) |
( |
) | ||||||||
Earnings taxed in foreign jurisdictions |
( |
) | ( |
) | ||||||||
Revaluation of Canadian deferred tax assets due to change in statutory rate |
( |
) |
||||||||||
Withholding tax on dividends received from foreign subsidiaries |
— | — | ||||||||||
Amounts not deductible (taxable) for tax purposes |
||||||||||||
Impact of accounting for associates and joint ventures |
( |
) |
( |
) | ( |
) | ||||||
Change in recognized deferred tax assets |
— | — | ||||||||||
Other |
( |
) |
( |
) | ||||||||
Income tax expense from continuing operations |
$ |
$ | $ | |||||||||
(c) |
Income Tax Recognized in Other Comprehensive Income |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Deferred Tax |
||||||||||||
Arising on income and expenses recognized in other comprehensive income: |
||||||||||||
Fair value remeasurement of hedging instruments entered into for cash flow hedges |
$ |
$ | $ | ( |
) | |||||||
Arising on income and expenses reclassified from other comprehensive income to net earnings: |
||||||||||||
Relating to cash flow hedges |
( |
) |
||||||||||
Arising on foreign exchange movement on long-term debt: |
||||||||||||
Relating to net investment hedge |
— |
— | ||||||||||
|
|
|
|
|
|
|||||||
Total income tax recognized in other comprehensive income |
$ |
$ | $ | ( |
) | |||||||
|
|
|
|
|
|
(d) |
Net Deferred Tax Assets (Liabilities) |
Accounting provisions and accruals |
Tax losses |
Long-term assets |
Other |
Exchange rate effects on tax bases |
Cash flow hedges |
Total 1 |
||||||||||||||||||||||
January 1, 2021 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
Charged to net earnings |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
Charged to OCI |
( |
) | ( |
) | ||||||||||||||||||||||||
Exchange differences |
( |
) | ( |
) | — |
( |
) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
Net deferred tax liabilities at December 31, 2021 of $ |
Accounting provisions and accruals |
Tax losses |
Long-term assets |
Other |
Exchange rate effects on tax bases |
Cash flow hedges |
Total 1 |
||||||||||||||||||||||
January 1, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
Charged to net earnings |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Charged to OCI |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Exchange differences |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
Net deferred tax liabilities at December 31, 2020 of $ |
(e) |
Unrecognized Deferred Tax Assets |
Years ended December 31, |
2021 |
2020 | ||||||
Canadian: |
||||||||
Tax losses |
$ |
$ | — | |||||
Capital assets |
— | |||||||
Accounting provisions & other accruals |
— | |||||||
Foreign: |
||||||||
Tax losses |
||||||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
2021 |
2020 |
|||||||||||||||
Years ended December 31, |
Number of common shares |
Common share capital |
Number of common shares |
Common share capital |
||||||||||||
Balance, January 1 |
$ |
$ | ||||||||||||||
Exercise of stock options |
||||||||||||||||
$ |
$ | |||||||||||||||
Years ended December 31, |
2021 |
2020 | ||||||
Balance, January 1 |
$ |
$ | ||||||
Share-based compensation |
||||||||
Exercise of stock options |
— |
— | ||||||
$ |
$ | |||||||
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Engineered Systems |
$ |
$ | $ | |||||||||
Service 1 |
||||||||||||
Energy Infrastructure 1,2,3 |
||||||||||||
Total revenue |
$ |
$ | $ | |||||||||
1 |
During the second quarter of 2020, revenues from the operation and maintenance of BOOM contracts have been reclassified from the Service to Energy product line, including $I nfrastructure Energy .I nfrastructure |
2 |
Energy Infrastructure revenue for 2021 and 2020 includes the recognition of revenue from finance lease transactions in the fourth quarter of the same period. Upon commencement of the renegotiated leases, the Company recognized the sale of the related rental assets and a corresponding finance lease receivable. Refer to Note 11 for further details on finance leases. |
3 |
During the year ended December 31, 2021, the Company recognized $ ; December 31, 2019 - $; December 31, 2019 - $ |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
United States |
$ |
$ | $ | |||||||||
Canada |
||||||||||||
Oman |
||||||||||||
Australia |
||||||||||||
Bahrain |
||||||||||||
Argentina |
||||||||||||
Mexico |
||||||||||||
Colombia |
||||||||||||
Brazil |
||||||||||||
Nigeria |
||||||||||||
Bolivia |
||||||||||||
Other |
||||||||||||
Total revenue |
$ |
$ | $ | |||||||||
Less than one year |
One to two years |
Greater than two years |
Total | |||||||||||||
Engineered Systems |
$ | $ | $ | $ | ||||||||||||
Service |
||||||||||||||||
Energy Infrastructure |
||||||||||||||||
$ |
$ |
$ |
$ |
|||||||||||||
(a) |
Share-Based Compensation Expense |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Equity settled share-based payments |
$ |
$ | $ | |||||||||
Deferred share units |
( |
) | ( |
) | ||||||||
Phantom share entitlement plan |
( |
) | ( |
) | ||||||||
Performance share units |
||||||||||||
Restricted share units |
||||||||||||
Cash performance target |
||||||||||||
Share-based compensation expense |
$ |
$ | $ | |||||||||
(b) |
Equity-Settled Share-Based Payments |
2021 |
2020 | |||||||||||||||
Years ended December 31, |
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
||||||||||||
Options outstanding, beginning of period |
$ |
$ | ||||||||||||||
Granted |
||||||||||||||||
Forfeited |
( |
) |
( |
) | ||||||||||||
Expired |
( |
) |
( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options outstanding, end of period |
$ |
$ | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options exercisable, end of period |
$ |
$ | ||||||||||||||
|
|
|
|
|
|
|
|
1 |
|
Years ended December 31, |
2021 |
2020 | ||||||
Expected life (years) |
||||||||
Expected volatility 1 |
% |
% | ||||||
Dividend yield |
% |
% | ||||||
Risk-free rate |
% |
% | ||||||
Estimated forfeiture rate |
% |
% |
1 |
Expected volatility is based on the historical volatility of Enerflex over a five-year period, consistent with the expected life of the option. |
Options Outstanding |
Options Exercisable |
|||||||||||||||||||||||
Range of exercise prices |
Number outstanding |
Weighted average remaining life (years) |
Weighted average exercise price |
Number outstanding |
Weighted average remaining life (years) |
Weighted average exercise price |
||||||||||||||||||
$ |
$ | $ | ||||||||||||||||||||||
$ |
||||||||||||||||||||||||
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ |
$ |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
Deferred Share Units |
Number of DSUs | Weighted average grant date fair value per unit |
|||||||
DSUs outstanding, January 1, 2021 |
$ | |||||||
Granted |
||||||||
In lieu of dividends |
||||||||
|
|
|
|
|||||
DSUs outstanding, December 31, 2021 |
$ |
|||||||
|
|
|
|
(d) |
Phantom Share Entitlement Plan |
Number of PSEs | Weighted average grant date fair value per unit |
|||||||
PSEs outstanding, January 1, 2021 |
$ | |||||||
Granted |
||||||||
|
|
|
|
|||||
PSEs outstanding, December 31, 2021 |
$ |
|||||||
|
|
|
|
(e) |
Performance Share Units |
Number of PSUs | Weighted average grant date fair value per unit |
|||||||
PSUs outstanding, January 1, 2021 |
$ | |||||||
Granted |
||||||||
In lieu of dividends |
||||||||
Vested |
( |
) | ||||||
|
|
|
|
|||||
PSUs outstanding, December 31, 2021 |
$ |
|||||||
|
|
|
|
(f) |
Restricted Share Units |
Number of RSUs | Weighted average grant date fair value per unit |
|||||||
RSUs outstanding, January 1, 2021 |
$ | |||||||
Granted |
||||||||
In lieu of dividends |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|
|
|||||
RSUs outstanding, December 31, 2021 |
$ |
|||||||
|
|
|
|
(g) |
Cash Performance Target Plan |
(h) |
Employee Share Purchase Plan |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Defined contribution plans |
$ |
$ | $ | |||||||||
401(k) matched savings plan |
||||||||||||
Net pension expense |
$ |
$ | $ | |||||||||
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Finance Costs |
||||||||||||
Short and long-term borrowings |
$ |
$ | $ | |||||||||
Interest on lease liability |
||||||||||||
Total finance costs |
$ |
$ | $ | |||||||||
Finance Income |
||||||||||||
Interest income |
$ |
$ | $ | |||||||||
Net finance costs |
$ |
$ | $ | |||||||||
Year ended December 31, 2021 |
Net earnings |
Weighted average shares outstanding |
Per share |
|||||||||
Basic |
$ |
( |
) |
$ |
( |
) | ||||||
Dilutive effect of stock option conversion |
||||||||||||
Diluted |
$ |
( |
) |
$ |
( |
) | ||||||
Year ended December 31, 2020 |
Net earnings |
Weighted average shares outstanding |
Per share |
|||||||||
Basic |
$ | $ | ||||||||||
Dilutive effect of stock option conversion |
||||||||||||
Diluted |
$ | $ | ||||||||||
Year ended December 31, 2019 |
Net earnings |
Weighted average shares outstanding |
Per share |
|||||||||
Basic |
$ | $ | ||||||||||
Dilutive effect of stock option conversion |
||||||||||||
Diluted |
$ | $ | ||||||||||
December 31, 2021 |
Carrying value |
Estimated fair value |
||||||
Financial Assets |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Derivative instruments in designated hedge accounting relationships |
||||||||
Loans and receivables: |
||||||||
Accounts receivable |
||||||||
Contract assets |
||||||||
Long-term receivables |
||||||||
Financial Liabilities |
||||||||
Derivative instruments in designated hedge accounting relationships |
||||||||
Other financial liabilities: |
||||||||
Accounts payable and accrued liabilities |
||||||||
Long-term debt – Bank Facility |
||||||||
Long-term debt – Asset-Based Facility |
||||||||
Long-term debt – Notes |
||||||||
Other long-term liabilities |
December 31, 2020 |
Ca rrying valu e |
Estimated fair value |
||||||
Financial Assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Derivative instruments in designated hedge accounting relationships |
||||||||
Loans and receivables: |
||||||||
Accounts receivable |
||||||||
Contract assets |
||||||||
Long-term receivables |
||||||||
Financial Liabilities |
||||||||
Derivative instruments in designated hedge accounting relationships |
||||||||
Other financial liabilities: |
||||||||
Accounts payable and accrued liabilities |
||||||||
Current portion of long-term debt - Notes |
||||||||
Long-term debt – Bank Facility |
||||||||
Long-term debt – Notes |
||||||||
Other long-term liabilities |
Carrying value |
Fair Value | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Financial Assets |
||||||||||||||||
Derivative financial instruments |
$ | $ | $ | $ | ||||||||||||
Long-term receivables |
$ | $ | $ | $ | ||||||||||||
Financial Liabilities |
||||||||||||||||
Derivative financial instruments |
$ | $ | $ | $ | ||||||||||||
Long-term debt – Notes |
$ | $ | $ | $ |
Notional amount |
Maturity |
|||||||||||
Canadian Dollar Denominated Contracts |
||||||||||||
Purchase contracts |
USD | January 2022 – June 2022 | ||||||||||
Sales contracts |
USD | ( |
) |
January 2022 – September 2022 | ||||||||
Purchase contracts |
EUR | June 2022 | ||||||||||
Sales contracts |
EUR | ( |
) |
June 2022 |
Canadian dollar weakens by 5 percent |
USD |
AUD |
BRL |
|||||||||
Earnings before income taxes |
$ |
$ |
( |
) |
$ |
Canadian dollar weakens by 5 percent |
USD |
AUD |
BRL |
|||||||||
Financial instruments held in foreign operations |
||||||||||||
Other comprehensive income |
$ |
$ |
$ |
|||||||||
Financial instruments held in Canadian operations |
||||||||||||
Earnings before income taxes |
$ |
( |
) |
$ |
$ |
Less than 3 months |
3 months to 1 year |
Greater than 1 year |
Total |
|||||||||||||
Derivative financial instruments |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | $ | $ | ||||||||||||
Accounts payable and accrued liabilities |
||||||||||||||||
Long-term debt – Bank Facility |
||||||||||||||||
Long-term debt – Asset-Based Facility |
||||||||||||||||
Long-term debt – Notes |
||||||||||||||||
Other long-term liabilities |
Years ended December 31, |
2021 |
2020 |
||||||
Long-term debt |
$ |
$ | ||||||
Cash and cash equivalents |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Net debt |
$ |
$ | ||||||
|
|
|
|
|||||
Earnings before finance costs and income taxes |
$ |
$ | ||||||
Depreciation and amortization |
||||||||
|
|
|
|
|||||
EBITDA |
$ |
$ | ||||||
|
|
|
|
|||||
Net debt to EBITDA ratio |
:1 |
:1 | ||||||
|
|
|
|
Years ended December 31, |
Restated (Note 36) 2021 |
Restated (Note 36) 2020 |
Restated (Note 36) 2019 |
|||||||||
Net change in non-cash working capital and other |
||||||||||||
Accounts receivable |
$ |
$ | $ | |||||||||
Contract assets |
( |
) |
||||||||||
Inventories |
( |
) | ||||||||||
Work-in-progress |
( |
) |
||||||||||
Finance leases receivable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Income taxes receivable |
( |
) | ||||||||||
Deferred revenue |
( |
) | ( |
) | ||||||||
Accounts payable and accrued liabilities, provisions, and income taxes payable 1 |
( |
) | ||||||||||
Foreign currency and other |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
$ |
$ | $ | ( |
) | ||||||||
|
|
|
|
|
|
1 |
The change in accounts payable and accrued liabilities, provisions, and income taxes payable represents only the portion relating to operating activities. |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Interest paid – short- and long-term borrowings |
$ |
$ | $ | |||||||||
Interest paid – lease liabilities |
||||||||||||
|
|
|
|
|
|
|||||||
Total interest paid |
$ |
$ | $ | |||||||||
Interest received |
||||||||||||
Taxes paid |
||||||||||||
Taxes received |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Long-term debt, opening balance |
$ |
$ | $ | |||||||||
Changes from financing cash flows |
( |
) |
( |
) | ( |
) | ||||||
The effect of changes in foreign exchange rates |
( |
) |
( |
) | ( |
) | ||||||
Amortization of deferred transaction costs |
||||||||||||
Debt refinancing and transaction costs |
( |
) |
( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Long-term debt, closing balance |
$ |
$ | $ | |||||||||
|
|
|
|
|
|
2022 |
$ |
|||
2023 |
||||
2024 |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Associate – Roska DBO |
||||||||||||
Revenue |
$ |
$ | $ | |||||||||
Purchases |
||||||||||||
Accounts receivable |
||||||||||||
Accounts Payable |
||||||||||||
Joint Operation – Geogas |
||||||||||||
Revenue |
$ |
$ | $ | |||||||||
Purchases |
||||||||||||
Accounts receivable |
||||||||||||
Accounts payable |
Years ended December 31, |
2021 |
2020 | 2019 | |||||||||
Short-term compensation |
$ |
$ | $ | |||||||||
Post-employment compensation |
||||||||||||
Share-based payments |
• | USA generates revenue from manufacturing natural gas compression, refrigeration, processing, and electric power equipment, including custom and standard compression packages and modular natural gas processing equipment and refrigeration systems, in addition to generating revenue from mechanical services and parts, operations and maintenance solutions, and contract compression rentals; |
• | Rest of World generates revenue from manufacturing (focusing on large-scale process equipment), after-market services, including parts and components, as well as operations, maintenance, and overhaul services, and rentals of compression and processing equipment. The Rest of World segment has been successful in securing build-own-operate-maintain |
• | Canada generates revenue from manufacturing both custom and standard natural gas compression, processing, and electric power equipment, as well as providing after-market mechanical service, parts, and compression and power generation rentals. |
USA |
Rest of World |
Canada |
Total |
|||||||||||||||||||||||||||||
Years ended December 31, |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
||||||||||||||||||||||||
Segment revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Intersegment revenue |
( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Revenue – Engineered Systems |
||||||||||||||||||||||||||||||||
Revenue – Service |
||||||||||||||||||||||||||||||||
Revenue – Energy Infrastructure 1 |
||||||||||||||||||||||||||||||||
Operating income 2 |
$ |
$ | $ |
$ | $ |
$ | $ |
$ |
1 |
Energy Infrastructure revenue for 2021 includes the recognition of revenue from a finance lease transaction in the fourth quarter of 2021 and 2020. Upon commencement of the renegotiated lease, the Company recognized the sale of the related rental assets and a corresponding finance lease receivable. Refer to Note 11 for further details on finance leases. |
2 |
In the year ended December 31, 2021, the Company recognized $ as a reduction in cost of goods sold and selling and administrative expenses within the consolidated statements of earnings in accordance with where the associated expenses were recognized. |
USA |
Rest of World |
Canada |
Total |
|||||||||||||||||||||||||||||
Years ended December 31, |
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
||||||||||||||||||||||||
Segment revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Intersegment revenue |
( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Revenue – Engineered Systems |
||||||||||||||||||||||||||||||||
Revenue – Service 1 |
||||||||||||||||||||||||||||||||
Revenue – Energy Infrastructure 1,2 |
||||||||||||||||||||||||||||||||
Operating income |
$ |
$ | $ |
$ | $ |
$ | $ |
$ |
1 |
Revenues from the operation and maintenance of BOOM contracts have been reclassified from the Service to Energy Infrastructure product line including $ |
2 |
Energy Infrastructure revenue for 2020 includes the recognition of revenue from a finance lease transaction in the fourth quarter of 2020. Upon commencement of the renegotiated leases, the Company recognized the sale of the related rental assets and a corresponding finance lease receivable. Refer to Note 11 for further details on finance leases. |
USA |
Rest of World | Canada | Total | |||||||||||||||||||||||||||||
As at December 31, |
2021 |
2020 | 2021 |
2020 | 2021 |
2020 | 2021 |
2020 | ||||||||||||||||||||||||
Segment assets |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||||||||||
Corporate |
( |
) |
( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total segment assets |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2021 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ | ( |
) |
$ | — | $ |
( |
) | ||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
— | |||||||||||
Equity earnings from associate and joint venture |
( |
) |
— | ( |
) | |||||||
Deferred income taxes (Note 20) |
— | |||||||||||
Share-based compensation expense (Note 24) |
— | |||||||||||
Gain on disposal of property, plant and equipment (Note 9) |
( |
) |
— | ( |
) | |||||||
Impairment on PP&E and rental equipment (Note 9) |
— |
|||||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash working capital and other (Note 30) |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
$ |
$ | ( |
) | $ |
|||||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 9) |
$ |
( |
) |
$ | — | $ |
( |
) | ||||
Rental equipment (Note 9) |
( |
) |
— | ( |
) | |||||||
Proceeds on disposal of: |
||||||||||||
Property, plant and equipment (Note 9) |
— | |||||||||||
Rental equipment (Note 9) |
||||||||||||
Change in other assets | ( |
) |
— |
|||||||||
Investment in associates and joint ventures |
— |
( |
) |
( |
) | |||||||
Net change in working capital associated with investing activities | — |
|||||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ | $ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Financing Activities |
||||||||||||
Repayment of long-term debt (Note 18 ) |
$ |
( |
) |
$ | $ |
— | ||||||
Net repayment of the Bank Facility (Note 18 ) |
— | ( |
) | ( |
) | |||||||
Net proceeds from the Asset-Based Facility (Note 18 ) |
— | |||||||||||
Repayment of the Senior Notes (Note 18 ) |
— | ( |
) | ( |
) | |||||||
Lease liability principal repayment (Note 19) |
( |
) |
— | ( |
) | |||||||
Lease interest (Note 19) |
( |
) |
— | |||||||||
Dividends |
( |
) |
— | ( |
) | |||||||
Debt refinancing and transaction costs (Note 30) |
— |
( |
) |
( |
) | |||||||
|
|
|
|
|
|
|||||||
Cash provided by (used in) financing activities |
$ |
( |
) |
$ | $ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ | ( |
) | $ |
( |
) | |||
Increase (decrease) in cash and cash equivalents |
— | |||||||||||
Cash and cash equivalents, beginning of period |
— | |||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ | — | $ |
||||||||
|
|
|
|
|
|
Year ended December 31, 2020 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ |
$ |
— |
$ |
||||||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
— |
|||||||||||
Equity earnings from associate and joint venture |
( |
) |
— |
( |
) | |||||||
Deferred income taxes (Note 20) |
— |
|||||||||||
Share-based compensation expense (Note 24) |
— |
|||||||||||
Gain on disposal of property, plant and equipment (Note 9) |
( |
) |
— |
( |
) | |||||||
Impairment on property, plant and equipment and rental equipment (Note 9) |
— |
|||||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash |
||||||||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 9) |
$ |
( |
) |
$ |
— |
$ |
( |
) | ||||
Rental equipment (Note 9) |
( |
) |
— |
( |
) | |||||||
Proceeds on disposal of: |
||||||||||||
Property, plant and equipment (Note 9) |
— |
|||||||||||
Rental equipment (Note 9) |
||||||||||||
Change in other assets |
( |
) |
— |
|||||||||
Investment in associates and joint ventures |
— |
( |
) |
( |
) | |||||||
Net change in working capital associated with investing activities |
— |
( |
) |
( |
) | |||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
|
|
|
|
|
|
|||||||
Financing Activities |
||||||||||||
Repayment of long-term debt (Note 18 ) |
$ |
( |
) |
$ |
$ |
— |
||||||
Net repayment of the Bank Facility (Note 18 ) |
— |
( |
) |
( |
) | |||||||
Lease liability principal repayment (Note 19) |
( |
) |
— |
( |
) | |||||||
Lease interest (Note 19) |
( |
) |
— |
|||||||||
Dividends |
( |
) |
— |
( |
) | |||||||
Debt refinancing and transaction costs (Note 30) |
— |
( |
) |
( |
) | |||||||
|
|
|
|
|
|
|||||||
Cash provided by (used in) financing activities |
$ |
( |
) |
$ |
$ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ |
$ |
( |
) | |||||
Increase (decrease) in cash and cash equivalents |
( |
) |
— |
( |
) | |||||||
Cash and cash equivalents, beginning of period |
— |
|||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ |
— |
$ |
||||||||
|
|
|
|
|
|
Year ended December 31, 2019 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ | $ | — | $ |
||||||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
— | |||||||||||
Equity earnings from associate and joint venture |
( |
) |
— | ( |
) | |||||||
Deferred income taxes (Note 20) |
— | |||||||||||
Share-based compensation expense (Note 24) |
— | |||||||||||
Gain on disposal of property, plant and equipment (Note 9) |
( |
) |
— | ( |
) | |||||||
Impairment on property, plant and equipment and rental equipment (Note 9) |
— |
|||||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash working capital and other (Note 30) |
( |
) |
( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
$ |
$ | $ |
|||||||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 9) |
$ |
( |
) |
$ | — | $ |
( |
) | ||||
Rental equipment (Note 9) |
( |
) |
— | ( |
) | |||||||
Proceeds on disposal of: |
||||||||||||
Property, plant and equipment (Note 9) |
— | |||||||||||
Rental equipment (Note 9) |
||||||||||||
Change in other assets |
( |
) | — | |||||||||
Investment in associates and joint ventures |
— |
( |
) |
( |
) | |||||||
Net change in working capital associated with investing activities |
— |
|||||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ | ( |
) | $ |
( |
) | |||
|
|
|
|
|
|
|||||||
Financing Activities |
||||||||||||
Repayment of long-term debt (Note 18 ) |
$ |
( |
) |
$ | $ |
— | ||||||
Net repayment of the Bank Facility (Note 18 ) |
— |
( |
) | ( |
) | |||||||
Lease liability principal repayment (Note 19) |
( |
) |
— | ( |
) | |||||||
Lease interest (Note 19) |
( |
) |
— | |||||||||
Dividends |
( |
) |
— | ( |
) | |||||||
Stock option exercises |
— | |||||||||||
Debt refinancing and transaction costs (Note 30) |
— |
( |
) |
( |
) | |||||||
|
|
|
|
|
|
|||||||
Cash used in financing activities |
$ |
( |
) |
$ | $ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ | ( |
) | $ |
( |
) | |||
Increase (decrease) in cash and cash equivalents |
( |
) |
— | ( |
) | |||||||
Cash and cash equivalents, beginning of period |
— | |||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ | — | $ |
||||||||
|
|
|
|
|
|
($ Canadian thousands) |
March 31, 2022 |
December 31, 2021 | ||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
$ | ||||||
Accounts receivable (Note 2) |
||||||||
Contract assets (Note 2) |
||||||||
Inventories (Note 3) |
||||||||
Work-in-progress |
||||||||
Current portion of finance leases receivable (Note 6) |
||||||||
Income taxes receivable |
||||||||
Derivative financial instruments (Note 15) |
||||||||
Other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
Property, plant and equipment (Note 4) |
||||||||
Rental equipment (Note 4) |
||||||||
Lease right-of-use |
||||||||
Finance leases receivable (Note 6) |
||||||||
Deferred tax assets (Note 11) |
||||||||
Other assets |
||||||||
Intangible assets |
||||||||
Goodwill (Note 7) |
||||||||
|
|
|
|
|||||
Total assets |
$ |
$ | ||||||
|
|
|
|
|||||
Liabilities and Shareholders’ Equity |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ |
$ | ||||||
Warranty provision |
||||||||
Income taxes payable |
||||||||
Deferred revenues (Note 8) |
||||||||
Current portion of lease liabilities (Note 10) |
||||||||
Derivative financial instruments (Note 15) |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Long-term debt (Note 9) |
||||||||
Lease liabilities (Note 10) |
||||||||
Deferred tax liabilities (Note 11) |
||||||||
Other liabilities |
||||||||
|
|
|
|
|||||
Total liabilities |
$ |
$ | ||||||
|
|
|
|
|||||
Shareholders’ equity |
||||||||
Share capital |
$ |
$ | ||||||
Contributed surplus |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive income |
||||||||
|
|
|
|
|||||
Total shareholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and shareholders’ equity |
$ |
$ | ||||||
|
|
|
|
Three months ended March 31, | ||||||||
($ Canadian thousands, except per share amounts) |
2022 |
2021 1 |
||||||
Revenue (Note 12) |
$ |
$ | ||||||
Cost of goods sold |
||||||||
|
|
|
|
|||||
Gross margin |
||||||||
Selling and administrative expenses |
||||||||
|
|
|
|
|||||
Operating income |
||||||||
Loss on disposal of property, plant and equipment (Note 4) |
( |
) | ||||||
Equity earnings (loss) from associate and joint venture |
( |
) | ||||||
|
|
|
|
|||||
Earnings before finance costs and income taxes |
||||||||
Net finance costs (Note 14) |
||||||||
|
|
|
|
|||||
Earnings before income taxes |
||||||||
Income taxes (Note 11) |
( |
) | ||||||
|
|
|
|
|||||
Net earnings (loss) |
$ |
( |
) |
$ | ||||
|
|
|
|
|||||
Earnings (loss) per share – basic |
$ |
( |
) |
$ | ||||
Earnings (loss) per share – diluted |
$ |
( |
) |
$ | ||||
Weighted average number of shares – basic |
||||||||
Weighted average number of shares – diluted |
||||||||
|
|
|
|
1 |
Certain March 31, 2021 balances have been reclassified. Refer to Note 1 for additional detail. |
Three months ended March 31, | ||||||||
($ Canadian thousands) |
2022 |
2021 | ||||||
Net earnings (loss) |
$ |
( |
) |
$ | ||||
Other comprehensive income (loss): |
||||||||
Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent periods: |
||||||||
Change in fair value of derivatives designated as cash flow hedges, net of income tax recovery |
( |
) |
||||||
Loss on derivatives designated as cash flow hedges transferred to net earnings in the current year, net of income tax expense |
( |
) |
( |
) | ||||
Unrealized gain on translation of foreign denominated debt |
||||||||
Unrealized loss on translation of financial statements of foreign operations |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Other comprehensive loss |
$ |
( |
) |
$ | ( |
) | ||
|
|
|
|
|||||
Total comprehensive income (loss) |
$ |
( |
) |
$ | ( |
) | ||
|
|
|
|
Three months ended March 31, |
||||||||
Restated (Note 22) |
Restated (Note 22) |
|||||||
($ Canadian thousands) |
2022 |
2021 |
||||||
Operating Activities |
||||||||
Net earnings (loss) |
$ |
( |
) |
$ | ||||
Items not requiring cash and cash equivalents: |
||||||||
Depreciation and amortization |
||||||||
Equity (earnings) loss from associate and joint venture |
( |
) |
||||||
Deferred income taxes (Note 11) |
( |
) | ||||||
Share-based compensation expense (Note 13) |
||||||||
Loss on disposal of property, plant and equipment (Note 4) |
— |
|||||||
|
|
|
|
|||||
Net change in non-cash working capital and other (Note 16) |
( |
) |
||||||
|
|
|
|
|||||
Cash provided by (used in) operating activities |
$ |
( |
) | $ | ||||
|
|
|
|
|||||
Investing Activities |
||||||||
Additions to: |
||||||||
Property, plant and equipment (Note 4) |
$ |
( |
) |
$ | ( |
) | ||
Rental equipment (Note 4) |
( |
) |
( |
) | ||||
Proceeds on disposal of: |
||||||||
Rental equipment (Note 4) |
||||||||
Net change in working capital associated with investing activities |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Cash used in investing activities |
$ |
( |
) |
$ | ( |
) | ||
|
|
|
|
|||||
Financing Activities |
||||||||
Net proceeds from (repayment of) the Bank Facility (Note 9) |
( |
) | ||||||
Net repayment of the Asset-Based Facility (Note 9) |
( |
) |
||||||
Lease liability principal repayment (Note 10) |
( |
) |
( |
) | ||||
Dividends paid |
( |
) |
( |
) | ||||
Stock option exercises (Note 13) |
— | |||||||
Debt refinancing and transaction costs |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
$ |
$ | ( |
) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ | ( |
) | ||
Increase (decrease) in cash and cash equivalents |
( |
) |
||||||
Cash and cash equivalents, beginning of period |
||||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ |
$ | ||||||
|
|
|
|
($ Canadian thousands) |
Share capital | Contributed surplus |
Retained earnings |
Foreign currency translation adjustments |
Hedging reserve | Accumulated other comprehensive income |
Total | |||||||||||||||||||||
At January 1, 2021 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Net earnings |
— | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss |
— | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||
Effect of stock option plans |
— | — | — | — | — | |||||||||||||||||||||||
Dividends |
— | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
At March 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
At January 1, 2022 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Net loss |
— | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||
Other comprehensive loss |
— | — | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||
Effect of stock option plans |
— | — | — | — | ||||||||||||||||||||||||
Dividends |
— | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
At March 31, 2022 |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Statement of Compliance |
(b) |
Basis of Presentation and Measurement |
Excerpt from unaudited interim condensed consolidated statements of earnings for the three months ended March 31, 2021 ($ Canadian thousands) |
As previously reported |
Reclassification | Revised | |||||||||
Revenue |
$ | $ | $ | |||||||||
COGS |
||||||||||||
Gross margin |
( |
) | ||||||||||
SG&A |
( |
) | ||||||||||
Net earnings |
Excerpt from consolidated statements of earnings for the year ended December 31, 2021 ($ Canadian thousands) |
As previously reported |
Q1 2021 Reclass |
Q2 2021 Reclass |
Q3 2021 Reclass |
Q4 2021 Reclass |
Revised | ||||||||||||||||||
Revenue |
$ | $ | ||||||||||||||||||||||
COGS |
||||||||||||||||||||||||
Gross margin |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
SG&A |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Net earnings |
( |
) | ( |
) |
March 31, 2022 |
December 31, 2021 | |||||||
Trade receivables |
$ |
$ | ||||||
Less: allowance for doubtful accounts |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Trade receivables, net |
$ |
$ | ||||||
Other receivables |
||||||||
|
|
|
|
|||||
Total accounts receivable |
$ |
$ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 | |||||||
Current to 90 days |
$ |
$ | ||||||
Over 90 days |
||||||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 | |||||||
Balance, January 1 |
$ |
$ | ||||||
Impairment provision additions on receivables |
||||||||
Amounts settled and derecognized during the period |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Closing balance |
$ |
$ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 | |||||||
Balance, January 1 |
$ |
$ | ||||||
Unbilled revenue recognized |
||||||||
Amounts billed |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Closing balance |
$ |
$ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 | |||||||
Direct materials |
$ |
$ | ||||||
Repair and distribution parts |
||||||||
Work-in-progress |
||||||||
Equipment |
||||||||
|
|
|
|
|||||
Total inventories |
$ |
$ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 | |||||||
Work-in-progress |
$ |
$ |
Minimum lease payments and unguaranteed residual value |
Present value of minimum lease payments and unguaranteed residual value |
|||||||||||||||
March 31, 2022 |
December 31, 2021 |
March 31, 2022 |
December 31, 2021 |
|||||||||||||
Less than one year |
$ |
$ | $ |
$ | ||||||||||||
Between one and five years |
||||||||||||||||
Later than five years |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
$ | $ |
$ | |||||||||||||
Less: Unearned finance income |
( |
) |
( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
$ | $ |
$ | |||||||||||||
|
|
|
|
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Balance, January 1 |
$ |
$ | ||||||
Additions |
||||||||
Interest income |
||||||||
Billings and payments |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
||||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Balance, January 1 |
$ |
$ | ||||||
Currency translation effects |
( |
) |
( |
) | ||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Balance, January 1 |
$ |
$ | ||||||
Cash received in advance of revenue recognition |
||||||||
Revenue subsequently recognized |
( |
) |
( |
) | ||||
Currency translation effects |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Closing balance |
$ |
$ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Drawings on Bank Facility |
$ |
$ | ||||||
Drawings on Asset-Based Facility |
||||||||
Notes due December 15, 2024 |
||||||||
Notes due December 15, 2027 |
||||||||
Deferred transaction costs |
( |
) |
( |
) | ||||
|
|
|
|
|||||
$ |
$ | |||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Balance, January 1 |
$ |
$ | ||||||
Additions |
||||||||
Lease interest |
||||||||
Payments made against lease liabilities |
( |
) |
( |
) | ||||
Currency translation effects and other |
( |
) |
( |
) | ||||
Closing balance |
$ |
$ | ||||||
Current portion of lease liabilities |
$ |
$ | ||||||
Non-current portion of lease liabilities |
||||||||
$ |
$ | |||||||
March 31, 2022 |
||||
2022 |
$ |
|||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
$ |
||||
Less: |
||||
Imputed interest |
||||
Short-term leases |
||||
Low-value leases |
||||
$ |
||||
(a) |
Income Tax Recognized in Net Earnings |
Three months ended March 31, |
2022 |
2021 | ||||||
Current income taxes |
$ |
$ | ||||||
Deferred income taxes |
( |
) | ||||||
$ |
$ | ( |
) | |||||
(b) |
Reconciliation of Tax Expense |
Three months ended March 31, |
2022 |
2021 | ||||||
Earnings before income taxes |
$ |
$ | ||||||
Canadian statutory rate |
% |
% | ||||||
Expected income tax provision |
$ |
$ | ||||||
Add (deduct): |
||||||||
Exchange rate effects on tax basis |
( |
) |
( |
) | ||||
Earnings taxed in foreign jurisdictions |
( |
) | ||||||
Amounts not deductible for tax purposes |
||||||||
Impact of accounting for associates and joint ventures |
( |
) |
||||||
Change in recognized deferred tax asset 1 |
||||||||
Other |
||||||||
Income taxes from continuing operations |
$ |
$ | ( |
) | ||||
1 |
This balance is the result of the Company no longer recognizing deferred tax recoveries in Canada, as it is unlikely that sufficient future taxable income will be available to offset against the existing deductible temporary differences and any unused Canadian tax losses or credits. |
Three months ended March 31, |
2022 |
2021 | ||||||
Engineered Systems |
$ |
$ | ||||||
Service |
||||||||
Energy Infrastructure 1 |
||||||||
Total revenue |
$ |
$ | ||||||
1 |
During the three months ended March 31, 2022, the Company recognized $ |
Three months ended March 31, |
2022 |
2021 | ||||||
United States |
$ |
$ | ||||||
Canada |
||||||||
Oman |
||||||||
Australia |
||||||||
Argentina |
||||||||
Nigeria |
||||||||
Bahrain |
||||||||
Colombia |
||||||||
Mexico |
||||||||
Brazil |
||||||||
Other |
||||||||
|
|
|
|
|||||
Total revenue |
$ |
$ | ||||||
|
|
|
|
Less than one year |
One to two years |
Greater than two years |
Total | |||||||||||||
Engineered Systems |
$ | $ | $ | $ | ||||||||||||
Service |
||||||||||||||||
Energy Infrastructure |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
$ |
$ |
$ |
|||||||||||||
|
|
|
|
|
|
|
|
(a) |
Share-Based Compensation Expense |
Three months ended March 31, |
2022 |
2021 | ||||||
Equity settled share-based payments |
$ |
$ | ||||||
Cash settled share-based payments |
||||||||
|
|
|
|
|||||
Share-based compensation expense |
$ |
$ | ||||||
|
|
|
|
(b) |
Equity-Settled Share-Based Payments |
March 31, 2022 |
December 31, 2021 | |||||||||||||||
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|||||||||||||
Options outstanding, beginning of period |
$ |
$ | ||||||||||||||
Granted |
— |
— |
||||||||||||||
Exercised 1 |
( |
) |
— | — | ||||||||||||
Forfeited |
( |
) |
( |
) | ||||||||||||
Expired |
— |
— |
( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options outstanding, end of period |
$ |
$ | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options exercisable, end of period |
$ |
$ | ||||||||||||||
|
|
|
|
|
|
|
|
1 |
The weighted average share price of Options at the date of exercise for the three months ended March 31, 2022 was $ |
Options Outstanding |
Options Exercisable |
|||||||||||||||||||||||
Range of exercise prices |
Number outstanding |
Weighted average remaining life (years) |
Weighted average exercise price |
Number outstanding |
Weighted average remaining life (years) |
Weighted average exercise price |
||||||||||||||||||
$ |
$ | $ | ||||||||||||||||||||||
$ |
||||||||||||||||||||||||
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ |
$ |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
Cash-Settled Share-Based Payments |
Number of DSUs |
Weighted average grant date fair value per unit |
|||||||
DSUs outstanding, January 1, 2022 |
$ | |||||||
Granted |
||||||||
In lieu of dividends |
||||||||
|
|
|
|
|||||
DSUs outstanding, March 31, 2022 |
$ |
|||||||
|
|
|
|
Three months ended March 31, |
2022 |
2021 | ||||||
Finance Costs |
||||||||
Short and long-term borrowings |
$ |
$ | ||||||
Interest on lease liability |
||||||||
|
|
|
|
|||||
Total finance costs |
$ |
$ | ||||||
|
|
|
|
|||||
Finance Income |
||||||||
Interest income |
$ |
$ | ||||||
|
|
|
|
|||||
Net finance costs |
$ |
$ | ||||||
|
|
|
|
Notional amount |
Maturity |
|||||||||||
Canadian Dollar Denominated Contracts |
|
|||||||||||
Purchase contracts |
USD | April 2022 – February 2023 | ||||||||||
Sales contracts |
USD | ( |
) |
April 2022 – September 2022 | ||||||||
Purchase contracts |
EUR | May 2022 – October 2022 | ||||||||||
Sales contracts |
EUR | ( |
) |
June 2022 |
Canadian dollar weakens by 5 percent |
USD |
AUD |
BRL |
|||||||||
Earnings from foreign operations |
||||||||||||
Earnings before income taxes |
$ |
$ |
( |
) |
$ |
|||||||
Financial instruments held in foreign operations |
||||||||||||
Other comprehensive income |
$ |
$ |
$ |
|||||||||
Financial instruments held in Canadian operations |
||||||||||||
Earnings before income taxes |
$ |
( |
) |
$ |
$ |
Less than 3 months |
3 months to 1 year |
Greater than 1 year |
Total |
|||||||||||||
Derivative financial instruments |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | $ | $ | ||||||||||||
Accounts payable and accrued liabilities |
||||||||||||||||
Long-term debt – Bank Facility |
||||||||||||||||
Long-term debt – Asset-Based Facility |
||||||||||||||||
Long-term debt – Notes |
||||||||||||||||
Other long-term liabilities |
Restated (Note 22) |
Restated (Note 22) |
|||||||
Three months ended March 31, |
2022 |
2021 |
||||||
Net change in non-cash working capital and other |
||||||||
Accounts receivable |
$ |
( |
) |
$ | ||||
Contract assets |
( |
) |
||||||
Inventories |
( |
) |
||||||
Work-in-progress |
— | |||||||
Finance leases receivable |
( |
) |
||||||
Income taxes receivable |
||||||||
Accounts payable and accrued liabilities, provisions, and income taxes payable 1 |
( |
) | ||||||
Deferred revenue |
( |
) | ||||||
Foreign currency and other |
( |
) | ( |
) | ||||
|
|
|
|
|||||
$ |
( |
) |
$ | |||||
|
|
|
|
1 |
The change in accounts payable and accrued liabilities, provisions, and income taxes payable represents only the portion relating to operating activities. |
Three months ended March 31, |
2022 |
2021 | ||||||
Interest paid – short- and long-term borrowings |
$ |
$ | ||||||
Interest paid – lease liabilities |
||||||||
|
|
|
|
|||||
Total interest paid |
$ |
$ | ||||||
Interest received |
||||||||
Taxes paid |
||||||||
Taxes received |
Three months ended March 31, |
2022 |
2021 | ||||||
Long-term debt, opening balance |
$ |
$ | ||||||
Changes from financing cash flows |
( |
) | ||||||
The effect of changes in foreign exchange rates |
( |
) |
( |
) | ||||
Amortization of deferred transaction costs |
||||||||
Debt refinancing and transaction costs |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Long-term debt, closing balance |
$ |
$ | ||||||
|
|
|
|
2022 |
$ |
|||
2023 |
||||
2024 |
• | USA generates revenue from manufacturing natural gas compression, refrigeration, processing, and electric power equipment, including custom and standard compression packages and modular natural gas processing equipment and refrigeration systems, in addition to generating revenue from mechanical services and parts, and maintenance solutions, and contract compression rentals; |
• | Rest of World generates revenue from manufacturing (focusing on large-scale process equipment), after-market services, including parts and components, as well as operations, maintenance, and overhaul services, and rentals of compression and processing equipment. The Rest of World segment has been successful in securing build-own-operate-maintain |
• | Canada generates revenue from manufacturing both custom and standard natural gas compression, processing, and electric power equipment, as well as providing after-market mechanical service, parts, and compression and power generation rentals. |
Three months ended March 31, |
USA | Rest of World | Canada | Total | ||||||||||||||||||||||||||||
2022 |
2021 | 2022 |
2021 | 2022 |
2021 | 2022 |
2021 | |||||||||||||||||||||||||
Segment revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Intersegment revenue |
( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ( |
) |
( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Revenue |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Revenue – Engineered Systems |
||||||||||||||||||||||||||||||||
Revenue – Service |
||||||||||||||||||||||||||||||||
Revenue – Energy Infrastructure |
||||||||||||||||||||||||||||||||
Operating income (loss) 1 |
$ |
$ | $ |
$ | $ |
( |
) |
$ | $ |
$ |
1 |
The company did |
USA |
Rest of World |
Canada |
Total |
|||||||||||||||||||||||||||||
Mar. 31 2022 |
Dec. 31 2021 |
Mar. 31 2022 |
Dec. 31 2021 |
Mar. 31 2022 |
Dec. 31 2021 |
Mar. 31 2022 |
Dec. 31 2021 |
|||||||||||||||||||||||||
Segment assets |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||||||||||
Corporate |
— |
— | — |
— | — |
— | ( |
) |
( |
) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total segment assets |
$ |
$ | $ |
$ | $ |
$ | $ |
$ | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2022 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ |
( |
) |
$ |
$ |
( |
) | |||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
||||||||||||
Equity (earnings) loss from associate and joint venture |
( |
) |
( |
) | ||||||||
Deferred income taxes (Note 11) |
||||||||||||
Share-based compensation expense (Note 13) |
||||||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash working capital and other (Note 16) |
( |
) |
( |
) |
( |
) | ||||||
|
|
|
|
|
|
|||||||
Cash provided by (used in) operating activities |
$ |
$ |
( |
) | $ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 4) |
$ |
( |
) |
$ |
$ |
( |
) | |||||
Rental equipment (Note 4) |
( |
) |
( |
) | ||||||||
Proceeds on disposal of: |
||||||||||||
Rental equipment (Note 4) |
( |
) | ||||||||||
Change in other assets |
( |
) |
||||||||||
Net change in working capital associated with investing activities |
( |
) |
( |
) | ||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ |
$ |
( |
) | |||||
|
|
|
|
|
|
Three months ended March 31, 2022 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Financing Activities |
||||||||||||
Proceeds from long-term debt (Note 9) |
$ |
$ |
( |
) | $ |
|||||||
Net proceeds from the Bank Facility (Note 9) |
||||||||||||
Net repayment of the Asset-Based Facility (Note 9) |
( |
) | ( |
) | ||||||||
Lease liability principal repayment (Note 10) |
( |
) |
( |
) | ||||||||
Lease interest (Note 10) |
( |
) |
||||||||||
Dividends paid |
( |
) |
( |
) | ||||||||
Stock option exercises (Note 13) |
||||||||||||
Debt refinancing and transaction costs |
( |
) |
( |
) | ||||||||
|
|
|
|
|
|
|||||||
Cash provided by (used in) financing activities |
$ |
( |
) | $ |
$ |
|||||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
$ |
( |
) | $ |
( |
) | |||||
Increase (decrease) in cash and cash equivalents |
( |
) |
( |
) | ||||||||
Cash and cash equivalents, beginning of period |
||||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
Three months ended March 31, 2021 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Operating Activities |
||||||||||||
Net earnings (loss) |
$ |
$ |
$ |
|||||||||
Items not requiring cash and cash equivalents: |
||||||||||||
Depreciation and amortization |
||||||||||||
Equity (earnings) loss from associate and joint venture |
||||||||||||
Deferred income taxes (Note 11) |
( |
) |
( |
) | ||||||||
Share-based compensation expense (Note 13) |
||||||||||||
(Gain) loss on disposal of property, plant and equipment (Note 4) |
||||||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash working capital and other (Note 16) |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
$ |
$ |
( |
) | $ |
|||||||
|
|
|
|
|
|
|||||||
Investing Activities |
||||||||||||
Additions to: |
||||||||||||
Property, plant and equipment (Note 4) |
$ |
( |
) |
$ |
$ |
( |
) | |||||
Rental equipment (Note 4) |
( |
) |
( |
) | ||||||||
Proceeds on disposal of: |
||||||||||||
Rental equipment (Note 4) |
||||||||||||
Change in other assets |
( |
) | ||||||||||
Net change in working capital associated with investing activities |
( |
) |
( |
) | ||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
|
|
|
|
|
|
Three months ended March 31, 2021 |
||||||||||||
($ Canadian thousands) |
As previously reported |
Re-statement |
As restated |
|||||||||
Financing Activities |
||||||||||||
Proceeds from (repayment of) long-term debt (Note 9) |
$ |
( |
) |
$ |
$ |
|||||||
Net repayment of the Bank Facility (Note 9) |
( |
) | ( |
) | ||||||||
Lease liability principal repayment (Note 10) |
( |
) |
( |
) | ||||||||
Lease interest (Note 10) |
( |
) |
||||||||||
Dividends paid |
( |
) |
( |
) | ||||||||
Debt refinancing and transaction costs |
( |
) |
( |
) | ||||||||
|
|
|
|
|
|
|||||||
Cash used in financing activities |
$ |
( |
) |
$ |
$ |
( |
) | |||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
Increase (decrease) in cash and cash equivalents |
||||||||||||
Cash and cash equivalents, beginning of period |
||||||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
ARTICLE 1 THE MERGER |
A-2 | |||||
1.1 |
The Merger | A-2 | ||||
1.2 |
Closing | A-2 | ||||
1.3 |
Effective Time | A-2 | ||||
1.4 |
Effects of the Merger | A-2 | ||||
1.5 |
Organizational Documents of the Surviving Corporation | A-3 | ||||
1.6 |
Directors and Officers of the Surviving Corporation | A-3 | ||||
ARTICLE 2 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES |
A-3 | |||||
2.1 |
Effect of the Merger on Capital Stock | A-3 | ||||
2.2 |
Exchange of Certificates | A-4 | ||||
2.3 |
Treatment of Company Equity Awards | A-7 | ||||
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
A-8 | |||||
3.1 |
Qualification, Organization, Subsidiaries | A-8 | ||||
3.2 |
Capitalization | A-9 | ||||
3.3 |
Corporate Authority Relative to This Agreement; Consents and Approvals; No Violation | A-10 | ||||
3.4 |
Reports and Financial Statements | A-11 | ||||
3.5 |
Internal Controls and Procedures | A-13 | ||||
3.6 |
No Undisclosed Liabilities | A-14 | ||||
3.7 |
Compliance with Law; Permits | A-14 | ||||
3.8 |
Anti-Corruption; Anti-Bribery; Anti-Money Laundering | A-15 | ||||
3.9 |
Sanctions | A-15 | ||||
3.10 |
Environmental Laws and Regulations | A-16 | ||||
3.11 |
Employee Benefit Plans; Labor Matters | A-16 | ||||
3.12 |
Absence of Certain Changes or Events | A-19 | ||||
3.13 |
Investigations; Litigation | A-19 | ||||
3.14 |
Company Information | A-19 | ||||
3.15 |
Tax Matters | A-20 | ||||
3.16 |
Intellectual Property; IT Assets; Privacy | A-21 | ||||
3.17 |
Title to Assets; Backlog | A-22 | ||||
3.18 |
Title to Properties | A-23 | ||||
3.19 |
Opinion of Financial Advisor | A-23 | ||||
3.20 |
Required Vote of the Company Stockholders | A-24 | ||||
3.21 |
Material Contracts | A-24 |
3.22 |
Suppliers and Customers | A-26 | ||||
3.23 |
Canadian Assets and Revenues | A-26 | ||||
3.24 |
Insurance Policies | A-26 | ||||
3.25 |
Affiliate Party Transactions | A-26 | ||||
3.26 |
Finders or Brokers | A-27 | ||||
3.27 |
Takeover Laws | A-27 | ||||
3.28 |
Warranties; Products | A-27 | ||||
3.29 |
No Other Representations or Warranties; No Reliance | A-27 | ||||
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
A-28 | |||||
4.1 |
Qualification, Organization, Subsidiaries | A-28 | ||||
4.2 |
Capitalization | A-28 | ||||
4.3 |
Corporate Authority Relative to This Agreement; Consents and Approvals; No Violation | A-30 | ||||
4.4 |
Reports and Financial Statements | A-31 | ||||
4.5 |
Disclosure Controls and Internal Control over Financial Reporting | A-32 | ||||
4.6 |
No Undisclosed Liabilities | A-33 | ||||
4.7 |
Compliance with Law; Permits | A-33 | ||||
4.8 |
Anti-Corruption; Anti-Bribery; Anti-Money Laundering | A-34 | ||||
4.9 |
Sanctions | A-34 | ||||
4.10 |
Environmental Laws and Regulations | A-35 | ||||
4.11 |
Employee Benefit Plans; Labor Matters | A-35 | ||||
4.12 |
Absence of Certain Changes or Events | A-37 | ||||
4.13 |
Investigations; Litigation | A-37 | ||||
4.14 |
Parent Information | A-37 | ||||
4.15 |
Tax Matters | A-38 | ||||
4.16 |
Opinion of Financial Advisor | A-39 | ||||
4.17 |
Capitalization of Merger Sub | A-39 | ||||
4.18 |
Required Vote of Parent Shareholders | A-39 | ||||
4.19 |
Finders or Brokers | A-39 | ||||
4.20 |
Certain Arrangements; Related Party Transactions | A-39 | ||||
4.21 |
Ownership of Common Stock | A-40 | ||||
4.22 |
Suppliers and Customers | A-40 | ||||
4.23 |
Financing | A-40 | ||||
4.24 |
Solvency | A-41 | ||||
4.25 |
No Other Representations or Warranties; No Reliance | A-42 |
ARTICLE 5 COVENANTS AND AGREEMENTS |
A-42 | |||||
5.1 |
Conduct of Business by the Company | A-42 | ||||
5.2 |
Conduct of Business by Parent | A-46 | ||||
5.3 |
Reorganization | A-47 | ||||
5.4 |
Access to Information; Confidentiality | A-48 | ||||
5.5 |
No Solicitation by the Company | A-49 | ||||
5.6 |
No Solicitation by Parent | A-53 | ||||
5.7 |
Preparation of Registration Statement and Management Information Circular; Shareholders Meetings; Regulatory Filings; Other Actions | A-58 | ||||
5.8 |
Employee Matters | A-63 | ||||
5.9 |
Company Material Contracts; Consents | A-64 | ||||
5.10 |
Legal Conditions to the Merger | A-64 | ||||
5.11 |
Takeover Statute | A-64 | ||||
5.12 |
Public Announcements | A-65 | ||||
5.13 |
Indemnification and Insurance | A-65 | ||||
5.14 |
Stock Exchange De-listing; 1934 Act Deregistration; US Stock Exchange Listing |
A-66 | ||||
5.15 |
Rule 16b-3 |
A-66 | ||||
5.16 |
Stockholder Litigation | A-66 | ||||
5.17 |
Certain Tax Matters | A-66 | ||||
5.18 |
Merger Sub Stockholder Approvals | A-67 | ||||
5.19 |
Governance | A-67 | ||||
5.20 |
Advice of Changes | A-67 | ||||
5.21 |
Financing Cooperation | A-68 | ||||
5.22 |
Debt Financing | A-71 | ||||
ARTICLE 6 CONDITIONS TO THE MERGER |
A-73 | |||||
6.1 |
Conditions to Obligation of Each Party to Effect the Merger | A-73 | ||||
6.2 |
Conditions to Obligation of the Company to Effect the Merger | A-74 | ||||
6.3 |
Conditions to Obligations of Parent and Merger Sub to Effect the Merger | A-75 | ||||
6.4 |
Frustration of Closing Conditions | A-75 | ||||
ARTICLE 7 TERMINATION |
A-76 | |||||
7.1 |
Termination or Abandonment | A-76 | ||||
7.2 |
Notice of Termination; Effect of Termination | A-77 | ||||
7.3 |
Termination Fees | A-78 |
ARTICLE 8 MISCELLANEOUS |
A-80 |
|||||
8.1 |
No Survival of Representations and Warranties | A-80 | ||||
8.2 |
Expenses | A-80 | ||||
8.3 |
Counterparts; Effectiveness | A-80 | ||||
8.4 |
Governing Law; Jurisdiction | A-80 | ||||
8.5 |
Specific Enforcement | A-81 | ||||
8.6 |
WAIVER OF JURY TRIAL | A-81 | ||||
8.7 |
Notices | A-81 | ||||
8.8 |
Assignment; Binding Effect | A-82 | ||||
8.9 |
Severability | A-82 | ||||
8.10 |
Entire Agreement; No Third-Party Beneficiaries | A-83 | ||||
8.11 |
Amendments; Waivers | A-83 | ||||
8.12 |
Headings | A-83 | ||||
8.13 |
Interpretation | A-83 | ||||
8.14 |
Obligations of Merger Sub and Subsidiaries | A-84 | ||||
8.15 |
Financing Provisions | A-84 | ||||
8.16 |
Definitions | A-85 | ||||
8.17 |
Certain Defined Terms | A-94 |
1.1 | The Merger. |
1.2 | Closing. |
1.3 | Effective Time. |
1.4 | Effects of the Merger. |
1.5 | Organizational Documents of the Surviving Corporation. |
1.6 | Directors and Officers of the Surviving Corporation. |
2.1 | Effect of the Merger on Capital Stock. |
(a) | At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holders of any securities of the Company or Merger Sub: |
(i) | Conversion of Company Common Stock. Merger Consideration Book-Entry Shares Certificate |
(ii) | Treatment of Excluded Shares. Excluded Shares |
(iii) | Conversion of Merger Sub Common Stock. non-assessable share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence. |
(b) | No Dissenters ’ Rights. |
(c) | Certain Adjustments. |
(d) | No Fractional Shares. |
(i) | No fractional Parent Common Shares shall be issued in connection with the Merger and no certificates or scrip representing fractional Parent Common Shares shall be delivered on the conversion of shares of Company Common Stock pursuant to Section 2.1(a)(i). Each holder of shares of Company Common Stock who would otherwise have been entitled to receive as a result of the Merger a fraction of a Parent Common Share (after aggregating all shares represented by the Certificates and Book-Entry Shares delivered by such holder) shall receive, in lieu of such fractional Parent Common Share, cash (without interest) in an amount (rounded to the nearest cent) representing such holder’s proportionate interest in the net proceeds from the sale by the Exchange Agent, on behalf of all such holders, of the aggregate number of fractional Parent Common Shares that would otherwise have been issuable to such holders as part of the Merger Consideration (the “ Fractional Share Cash Amount |
(ii) | As soon as practicable after the Effective Time, the Exchange Agent shall, on behalf of all such holders of fractional Parent Common Shares, effect the sale of all such Parent Common Shares that would otherwise have been issuable as part of the Merger Consideration at the then-prevailing prices on the NYSE or Nasdaq, as applicable, or the TSX. After the proceeds of such sale have been received, the Exchange Agent shall determine the applicable Fractional Share Cash Amount payable to each applicable holder and shall make such amounts available to such holders in accordance with Section 2.2(b). The Parties acknowledge that payment of such cash consideration in lieu of issuing fractional shares is not separately bargained-for consideration, but merely represents a mechanical rounding off for purposes of avoiding the expense and inconvenience that would otherwise be caused by the issuance of fractional shares. |
(iii) | No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional Parent Common Share that would otherwise have been issuable as part of the Merger Consideration. |
(e) | Issuance of Compensatory Shares |
2.2 | Exchange of Certificates. |
(a) | Exchange Agent. Exchange Agent |
Agent from time to time, as needed, cash sufficient to pay any dividends and other distributions pursuant to Section 2.2(c). Any such cash and book-entry shares deposited with the Exchange Agent shall be referred to as the “ Exchange Fund |
(b) | Payment Procedures. |
(i) | As soon as reasonably practicable after the Effective Time and in any event not later than the fifth (5 th ) Business Day following the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of shares of Company Common Stock whose shares were converted into the right to receive the Merger Consideration pursuant to Section 2.1, (A) a letter of transmittal, in form and substance reasonably satisfactory to the Company (which approval shall not be unreasonably withheld, conditioned or delayed), with respect to Book-Entry Shares (to the extent applicable) and Certificates (which shall specify that delivery shall be effected, and risk of loss and title to Certificates shall pass, only on delivery of Certificates (or effective affidavits of loss in lieu thereof) to the Exchange Agent and shall be in such form and have such other provisions as Parent and the Company may mutually reasonably agree), and (B) instructions for use in effecting the surrender of Book-Entry Shares (to the extent applicable) or Certificates (or effective affidavits of loss in lieu thereof) in exchange for the Merger Consideration. |
(ii) | On surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, or, in the case of Book-Entry Shares, receipt of an “agent’s message” by the Exchange Agent, and such other documents as may customarily be required by the Exchange Agent, the holder of such Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares shall be entitled to receive in exchange therefor, and the Exchange Agent shall be required to promptly deliver to each such holder, the Merger Consideration, into which the shares represented by such Certificates or Book-Entry Shares have been converted pursuant to this Article 2 (together with any Fractional Share Cash Amount and any dividends or other distributions payable pursuant to Section 2.2(c)). No interest shall be paid or accrued on any amount payable on due surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition precedent of payment that (A) the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and (B) the Person requesting such payment shall have paid any transfer and other similar Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established that such Tax either has been paid or is not required to be paid. |
(iii) | The Parties and any other Person that has any withholding obligation with respect to any payment made pursuant to this Agreement as determined by such Party or person in good faith shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from any payment such amounts as are required to be withheld or deducted under the Internal Revenue Code of 1986, as amended (the “ Code non-U.S. Tax Law. To the extent that amounts are so withheld and paid over to the appropriate Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the deduction and withholding was made. The Parties shall use reasonable best efforts to reduce or eliminate withholding tax in connection with any payment made pursuant to Section 7.3 hereof to the extent permitted by applicable Law. |
(c) | Treatment of Unexchanged Shares. |
of Company Common Stock to be converted into Parent Common Shares pursuant to Section 2.1(a)(i), the holder thereof shall be entitled to receive (in addition to the Merger Consideration and the Fractional Share Cash Amount payable to such holder pursuant to this Article 2) any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to the Parent Common Shares represented by such share of Company Common Stock, less such withholding or deduction for any Taxes required by applicable Law. Until the holders of any unsurrendered shares of Company Common Stock surrender such shares of Company Common Stock in accordance with this Section 2.2, each unsurrendered share of Company Common Stock shall represent only the right to receive, upon surrender, the Merger Consideration and the Fractional Share Cash Amount payable to such holder pursuant to this Article 2, and the holders of such unsurrendered shares of Company Common Stock shall have no rights as a stockholder of the Company or the Surviving Corporation. After and only after surrender in accordance with this Section 2.2, the record holder thereof shall be entitled to receive any dividends or other distributions, without interest thereon, which theretofore had become payable with respect to the whole Parent Common Shares that the shares of Company Common Stock represented by such unsurrendered certificate have been converted into the right to receive. |
(d) | Closing of Transfer Books. |
(e) | Termination of Exchange Fund. |
(f) | No Liability. |
(g) | Investment of Exchange Fund. provided provided further |
Company Common Stock. Any interest and other income resulting from such investments shall be paid to or at the direction of Parent pursuant to Section 2.2(e). |
(h) | Lost Certificates. |
2.3 | Treatment of Company Equity Awards. |
(a) | Each award of shares of Company Common Stock granted subject to any vesting, forfeiture or other lapse restrictions (each, a “ Company Restricted Share Award Parent Restricted Share Award multiplied by (ii) the Exchange Ratio. Except as expressly provided in this Section 2.3(a), each such Parent Restricted Share Award shall be subject to the same terms and conditions (including settlement terms) as applied to the corresponding Company Restricted Share Award immediately prior to the Effective Time. |
(b) | Each award of restricted stock units (excluding any Company Performance Share Award described in Section 2.3(c)) in respect of shares of Company Common Stock (a “ Company RSU Award Parent RSU Award |
(c) | Each award of restricted stock units in respect of shares of Company Common Stock granted subject to performance targets (each, a “ Company Performance Share Award i.e |
same terms and conditions (including settlement terms) as applied to the corresponding Company Performance Share Award immediately prior to the Effective Time. |
(d) | Prior to the Effective Time, the Company, through the Company Board or an appropriate committee thereof, shall adopt such resolutions as may reasonably be required to effectuate the actions contemplated by this Section 2.3. |
3.1 | Qualification, Organization, Subsidiaries. |
(a) | (i) The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the state of Delaware. The Company has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. The Company is qualified to do business in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except, in each case, as would not reasonably be expected to be material to the Company |
(b) | All of the outstanding shares of capital stock or voting securities of, or other equity interests in, each of the Company’s Subsidiaries, is owned directly or indirectly by the Company, have been validly issued, where applicable, are fully paid and non-assessable and were issued free of pre-emptive rights, and are free and clear of all Liens other than restrictions imposed by applicable securities Laws or the Organizational Documents of any such Subsidiary or any Permitted Liens. No Company Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of the Company’s Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of the Company’s Subsidiaries. |
(c) | Except for the capital stock and voting securities of, and other equity interests in, the Company’s Subsidiaries, none of the Company or the Company’s Subsidiaries owns, directly or indirectly, any capital stock or voting securities of, or other equity interests in, or any interest convertible into or exchangeable or exercisable for, any capital stock or voting securities of, or other equity interests in, any Person. |
(d) | The Company has made available to Parent true, complete and correct copies of the Organizational Documents of the Company and of each other entity in which the Company owns directly or indirectly an equity interest of less than 100%, each as amended prior to the date of this Agreement, and each as made available to Parent is in full force and effect. |
3.2 | Capitalization. |
(a) | The authorized capital of the Company consists of 250,000,000 shares of Company Common Stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share. As of 5:00 p.m. Central time on the Business Day prior to the date hereof (the “ Reference Time non-assessable, and are not subject to and were not issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. |
(b) | Section 3.2(b) of the Company Disclosure Schedules sets forth as of the date of this Agreement a list of each outstanding Company Equity Award granted under the Company stock plans and: (A) the name of the holder of such Company Equity Award; (B) the number of shares of Company Common Stock subject to such outstanding Company Equity Award; (C) if applicable, the exercise price, purchase price, or similar pricing of such Company Equity Award; (D) the date on which such Company Equity Award was granted or issued; (E) the applicable vesting, repurchase, or other lapse of restrictions schedule, and the extent to which such Company Equity Award is vested and exercisable as of the date hereof; and (F) with respect to Company stock options, the date on which such Company stock option expires. |
(c) | (i) All outstanding shares of capital stock, voting securities or other ownership interests of each Material Subsidiary are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized and validly issued as fully paid and non-assessable, and are not subject to and were not issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. All outstanding shares of stock of each Material Subsidiary and all other outstanding shares of capital stock, voting securities or other ownership interests of each Subsidiary have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws. |
(d) | Except as set forth in Section 3.2(a), as of the date of this Agreement, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of capital stock of any of the Company’s Subsidiaries to which the Company or any of the Company’s Subsidiaries is a party obligating any of the Company’s Subsidiaries to (i) issue, transfer or sell any shares of capital stock of any of the Company’s Subsidiaries or securities convertible into, exercisable for or exchangeable for such shares, (ii) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares of capital stock. All outstanding shares of capital stock, voting securities, or other ownership interests in any Subsidiary of the Company, have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws. None of the Company’s Subsidiaries has outstanding bonds, debentures, notes or other similar obligations, the holders of which have the right to vote (or which are convertible into, exercisable for or exchangeable for securities having the right to vote) with the stockholders of the Company or a Company Subsidiary on any matter. |
(e) | Neither the Company nor any of its Subsidiaries has outstanding bonds, debentures, notes or other similar obligations, the holders of which have the right to vote (or which are convertible into, exercisable for or exchangeable for securities having the right to vote) with the stockholders of the Company on any matter. No Subsidiary of the Company owns any capital stock of the Company. Except for its interests (i) in its Subsidiaries and (ii) in any Person in connection with any joint venture, partnership or other similar arrangement with a third party, the Company does not own, directly or indirectly, any capital stock of, or other equity interests in any Person. |
(f) | Except for the Company Voting Agreements, there are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting or issuance, or restricting the transfer of, or providing registration rights with respect to the capital stock of the Company or any of its Subsidiaries. |
(g) | Section 3.2(g) of the Company Disclosure Schedules lists each Subsidiary of the Company, its jurisdiction of organization and the percentage of its equity interests directly or indirectly held by the Company. |
3.3 | Corporate Authority Relative to This Agreement; Consents and Approvals; No Violation. |
(a) | The Company has all requisite corporate power and authority to enter into this Agreement and, subject to receipt of the Company Stockholder Approval, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Except for the Company Stockholder Approval and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no other corporate proceedings on the part of the Company are necessary to authorize the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company, and, assuming this Agreement constitutes the valid and binding agreement of Parent and Merger Sub, constitutes the valid and binding agreement of the Company, enforceable against the |
Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (ii) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought (collectively, the “ Enforceability Exceptions |
(b) | The Company Board at a duly called and held meeting has unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby and (iii) resolved to recommend that the stockholders of the Company adopt this Agreement (the “ Company Recommendation |
(c) | The execution, delivery and performance by the Company of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by the Company do not and will not require the Company or any of its Subsidiaries to procure, make or provide prior to the Closing Date any consent, approval, authorization or permit of, action by, filing with or notification to any United States or foreign, state, provincial, territorial or local governmental or regulatory agency, commission, court, arbitrator, body, entity or authority (each, a “ Governmental Entity Company Approvals |
(d) | Assuming compliance with the matters referenced in Section 3.3(c) and receipt of the Company Approvals and the Company Stockholder Approval, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby, do not and will not (i) contravene or conflict with the Organizational Documents of (A) the Company or (B) any of its Subsidiaries, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding on or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, (iii) require any consent, waiver or approval, result in any violation of, or default (or an event that with or without notice or lapse of time or both would become a default) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under any Contract, instrument, permit, concession, franchise, right or license binding on the Company or any of its Subsidiaries, or (iv) result in the creation of a Lien (other than Permitted Lien), other than, in the case of clauses (ii), (iii) and (iv), any such contravention, conflict, violation, default, termination, cancellation, acceleration, right, loss or Lien that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
3.4 | Reports and Financial Statements. |
(a) | The Company has filed or furnished, on a timely basis, all forms, statements, certifications, documents, correspondence, registrations, and reports required to be filed or furnished by it with the SEC pursuant to the Exchange Act or the Securities Act since December 31, 2018 (the forms, statements, certifications, documents and reports so filed or furnished by the Company and those filed or furnished to the SEC subsequent to the date of this Agreement, including any amendments thereto, including |
exhibits, schedules thereto and all other information incorporated by reference, the “ Company SEC Documents |
(b) | The Company and each Material Subsidiary has filed or furnished, on a timely basis (taking into account any relevant extensions), all material forms, statements, certifications, documents, correspondence, registrations, and reports required to be filed or furnished by it with any Governmental Entity since December 31, 2018 (the “ Company Governmental Filings |
(c) | The Company is in all material respects in compliance with the applicable listing and corporate governance rules and regulations of the NYSE. Except as permitted by the Exchange Act, neither the Company nor any of its Affiliates has made, arranged or modified (in any material way) any extensions of credit in the form of a personal loan to any executive officer or director of the Company. There (i) is no unresolved violation, criticism, or exception by any regulatory agency with respect to any report or statement relating to any examinations or inspections of the Company or any Company Subsidiaries and (ii) has been no formal or informal inquiries by, or disagreements or disputes with, any regulatory agency with respect to the business, operations, policies or procedures of the Company or any Company Subsidiary since December 31, 2018. |
(d) | The consolidated financial statements (including all related notes and schedules) of the Company included in or incorporated by reference into the Company SEC Documents (or, if any such Company SEC Document is amended or superseded by a filing prior to the date of this Agreement, such amended or superseding Company SEC Document) (i) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries, (ii) fairly presented, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto), (iii) complied, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (iv) and were prepared, in all material respects, in conformity with GAAP (except, in the case of the unaudited financial statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto). Since December 31, 2018, no independent public accounting firm of the Company has resigned (or informed the Company that it intends to resign) or been dismissed as independent public accountants of the |
Company as a result of or in connection with any disagreements with the Company on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. |
(e) | Section 3.4(e) of the Company Disclosure Schedules lists and describes any amounts of cash or funds that are subject to any restrictions on transfer or that otherwise cannot be transferred to the equity holders of the Company at will or without incurring material costs, Taxes or penalties, such as cash held by Company Subsidiaries that are subject to foreign exchange restrictions by foreign governments. |
3.5 | Internal Controls and Procedures. |
(a) | The Company has established and maintains disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act. Such disclosure controls and procedures are effective in providing reasonable assurance that all information required to be disclosed by the Company is recorded and reported on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC and other public disclosure documents. |
(b) | The Company maintains a system of internal controls over financial reporting (as defined in Rule 13a-15 under the Exchange Act) that is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company in all material respects, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, that access to assets is permitted only in accordance with authorizations of management and directors of the Company and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. The records, systems, controls, data and information of the Company and its Subsidiaries that are used in the systems of disclosure controls and procedures and of financial reporting controls and procedures described above are recorded, stored, maintained and operated under means that are under the exclusive ownership and direct control of the Company or a wholly-owned Subsidiary of the Company or its accountants, except as would not reasonably be expected to materially and adversely affect or disrupt the Company’s systems of disclosure controls and procedures and of financial reporting controls and procedures or the reports generated thereby. |
(c) | The Company’s management has completed an assessment of the effectiveness of the Company’s internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2020, and such assessment concluded that such controls were effective. The Company has disclosed, based on its most recent evaluation of its internal controls prior to the date of this Agreement, to the Company’s auditors and the audit committee of the Company Board, (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in internal control over financial reporting. As of the date of its most recent audited financial statements, neither the Company nor its auditors had identified any significant deficiencies or material weaknesses in its internal controls over financial reporting and, as of the date of this Agreement, to the Knowledge of the Company, nothing has come to the auditors’ attention, that has caused it to believe that there are any material weaknesses or significant deficiencies in such internal controls. To the Company’s Knowledge, since December 31, 2018, no material complaints from any source regarding accounting, internal accounting controls or auditing matters, and no concerns from Company employees regarding questionable accounting or auditing matters, have been received by the Company. To the Company’s Knowledge, since December 31, 2018, no attorney representing the Company or any of its Subsidiaries, whether or not |
employed by the Company or any of its Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company’s chief legal officer, audit committee (or other committee designated for the purpose) of the Company Board pursuant to the rules adopted pursuant to Section 307 of the Sarbanes-Oxley Act or any Company policy contemplating such reporting, including in instances not required by those rules. |
(a) | The Company and its Subsidiaries are, and since December 31, 2018 have been, in material compliance with and not in default under or in violation of all applicable Laws, including any federal, state, provincial, local and foreign law, statute, ordinance, rule, resolutions, determinations, injunctions, common law rulings, awards (including awards of any arbitrator) regulation, judgment, Order, injunction or decree of any Governmental Entity, in the U.S. and foreign jurisdictions (collectively, “ Laws Law |
(b) | The Company and its Subsidiaries are in possession of all material franchises, grants, concessions, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals, clearances, tariffs, qualifications, registrations and Orders of any Governmental Entities (“ Permits Company Permits non-renewal, adverse modifications, administrative or judicial proceeding that would reasonably be expected to result in modification, termination or revocation thereof, and the Company and each of its Subsidiaries is in compliance with the terms and requirements of such Company Permit, except where the failure to be in full force and effect or in compliance would not reasonably be expected to be material to the Company or any of its Material Subsidiaries. |
(c) | Since December 31, 2018, neither the Company nor any of its Subsidiaries has received any written notice that the Company or its Subsidiaries is in material violation of any Law applicable to the Company or any of its Subsidiaries or any Permit. There are no Actions pending, threatened in writing or, to the Knowledge of the Company, otherwise threatened that would reasonably be expected to result in the revocation, withdrawal, suspension, non-renewal, termination, revocation, or adverse modification or limitation of any such Permit material to the Company or any of its Material Subsidiaries. |
(d) | The Company, including any Subsidiaries or Affiliates, is not a TID U.S. Business, as such term is defined in 31 C.F.R. § 800.248. |
3.8 | Anti-Corruption; Anti-Bribery; Anti-Money Laundering. |
(a) | The Company, its Subsidiaries and, to the Knowledge of the Company, each of their employees, directors, officers, agents and each other Person acting on behalf of the Company or its Subsidiaries are in all respects compliant with and for the past five (5) years, have complied with (i) the Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA Anti-Corruption Laws |
(b) | None of the Company, its Subsidiaries or, to the Knowledge of the Company, any of their directors, officers and employees and each other Person acting on behalf of the Company or its Subsidiaries has, in the past five (5) years, directly or indirectly, violated any, or been subject to actual or, to the Knowledge of the Company, pending or threatened Action alleging violations on the part of any of the foregoing Persons of the FCPA or Anti-Corruption Laws or any terrorism financing Law. |
(c) | None of the Company, its Subsidiaries or, to the Knowledge of the Company, any of their directors, officers, employees or any other Person acting on behalf of the Company or its Subsidiaries has, in the past five (5) years: (i) directly or indirectly, paid, offered or promised to pay, or authorized or ratified the payment of any monies, gifts or anything of value (A) which would violate any applicable Anti-Corruption Law, including the FCPA, or (B) to any national, provincial, municipal or other Government Official or any political party or candidate for political office for the purpose of (x) influencing any act or decision of such official or of any Governmental Entity, (y) to obtain or retain business, or direct business to any Person or (z) to secure any other improper benefit or advantage; (ii) established or maintained any unlawful fund of monies or other assets of the Company or any of the Company Subsidiaries; (iii) made any fraudulent entry on the books or records of the Company or any of the Company Subsidiaries; (iv) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for the Company or any of the Company Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for the Company or any of the Company Subsidiaries; or (v) aided, abetted, caused (directly or indirectly), participated in, or otherwise conspired with, any Person to violate the terms of any Order or applicable Law. |
3.9 | Sanctions. |
(a) | The Company and each of its Subsidiaries are and, in the past five (5) years have been, in all material respects in compliance with all applicable economic sanctions and export control Laws (collectively “ Export and Sanctions Regulations |
(b) | None of the Company or any of its Subsidiaries, or, to the Knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of any of the Company or its Subsidiaries, in their capacity as such, is currently, or has been in the past five (5) years: (i) a Sanctioned Person or (ii) engaging in any dealings or transactions with, or for the benefit of, any Sanctioned Person or in any Sanctioned Country, to the extent such activities would cause the Company to violate applicable Export and Sanctions Regulations in the United States or in other jurisdictions in which the Company or any of its Subsidiaries do business or are otherwise subject to such jurisdiction. |
(c) | For the past five (5) years, the Company and its Subsidiaries have (i) instituted policies and procedures that are reasonably designed to ensure compliance, in all material respects, with the Export and |
Sanctions Regulations in each jurisdiction in which the Company and its Subsidiaries operate or are otherwise subject to jurisdiction and (ii) maintained such policies and procedures in full force and effect, in all material respects. |
(d) | For the past five (5) years, neither the Company nor any of its Subsidiaries (i) has been found in violation of, charged with or convicted of, any Export and Sanctions Regulations, (ii) to the Knowledge of the Company, is under investigation by any Governmental Entity for possible violations of any Export and Sanctions Regulation, (iii) has been assessed civil penalties under any Export and Sanctions Regulations or (iv) has filed any voluntary disclosures with any Governmental Entity regarding possible violations of any Export and Sanctions Regulations. |
3.10 | Environmental Laws and Regulations . |
3.11 | Employee Benefit Plans; Labor Matters. |
(a) | Section 3.11(a) of the Company Disclosure Schedules lists all material Company Benefit Plans. |
(b) | Each Company Benefit Plan (including any related trusts) has been established, maintained and administered in material compliance with its terms and with applicable Law, including ERISA and the Code to the extent applicable thereto and all material premiums required by contract or Law to be paid, all material benefits, expenses and other amounts due and payable and all material contributions, transfers or payments required to be made to or under the terms of any Company Benefit Plan prior to the date hereof have been timely made, paid or accrued in accordance with GAAP and are reflected, to the extent required, in the Company’s financial statements. To the Knowledge of the Company, no material fact, event or omission has occurred which would reasonably be expected to cause any Company Benefit Plan to lose its qualification to provide Tax-favored benefits under applicable Law including the Code (including under, Sections 105, 106, 125, 132, 137 or 401(a) of the Code). |
(c) | No employee benefit plan of the Company, its Subsidiaries or its ERISA Affiliates is (i) a “multiemployer plan” within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA, (ii) a plan subject to Title IV of ERISA or Section 412, 430 or 4971 of the Code, (iii) a plan that has two (2) or more contributing sponsors at least two (2) of whom are not under common control, within the meaning of Section 4063 of ERISA, or (iv) a plan to which the Company is required to contribute pursuant to a collective agreement, participation agreement, any other agreement or statute or |
municipal by-law and which is not maintained or administered by the Company or its Affiliates, and none of the Company, its Subsidiaries or any of its ERISA Affiliates has, at any time during the last six (6) years, contributed to, been obligated to contribute to or incurred any liability with respect to, any such plan. |
(d) | For each Company Benefit Plan intended to be “qualified” under Section 401(a) of the Code, the Company has received a favorable determination letter from the Internal Revenue Service or is entitled to rely on a favorable opinion or advisory letter issued by the Internal Revenue Service and, to the Knowledge of the Company, no fact or event has occurred that would reasonably be expected to adversely affect the qualified status of any such Company Benefit Plan under Section 401(a) of the Code, No trust funding any Company Benefit Plan is intended to meet the requirements of Section 501(c)(9) of the Code. |
(e) | No Company Benefit Plan provides health or other welfare benefits after retirement or other termination of employment for current, former or future retired or terminated employees, their spouses, or their dependents (other than (i) continuation coverage required under Section 4980B(f) of the Code or other similar applicable Law, (ii) coverage or benefits the full cost of which is borne by the employee or former employee (or any beneficiary of the employee or former employee), (iii) death benefits when termination occurs upon death or (iv) benefits provided during any applicable severance period). |
(f) | There are no pending, threatened or, to the Knowledge of the Company, anticipated claims, including any audit or inquiry by the Internal Revenue Service or Department of Labor (other than claims for benefits in accordance with the terms of the Company Benefit Plans) by, on behalf of or against any of the Company Benefit Plans or any trusts related thereto and, to the Knowledge of the Company, no set of circumstances exists which may reasonably give rise to a valid claim or lawsuit against the Company Benefit Plans, any fiduciaries thereof with respect to their duties to the Company Benefit Plans or the assets of any of the trusts under any of the Company Benefit Plans that would reasonably be expected to result in any material liability of the Company or any of its Subsidiaries or to the U.S. Pension Benefit Guaranty Corporation, the Internal Revenue Service, the U.S. Department of Labor, any participant in a Company Benefit Plan, or any other Person. Neither the Company nor any of its Subsidiaries has taken any action to take corrective action or make a filing under any voluntary correction program of the Internal Revenue Service, the Department of Labor or any other Governmental Entity with respect to any Company Benefit Plan that remains unresolved, and to the Knowledge of the Company, no plan defect including, any defect that would qualify for correction under any such program, exists. |
(g) | None of the Company, its Subsidiaries or any of its ERISA Affiliates, or any other Person, including any fiduciary, has engaged in any “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) that would reasonably be expected to subject any of the Company Benefit Plans or their related trusts, the Company, any of its Subsidiaries, any of its ERISA Affiliates or any Person to any material Tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA. |
(h) | Section 3.11(h) of the Company Disclosure Schedules lists each Company Benefit Plan that provides for the payment (whether in cash or property or the vesting of property) as a result of the consummation of the transactions contemplated by this Agreement, including the Merger (either alone or, upon the occurrence of any additional or subsequent event), to any employee, officer or director of the Company or any Subsidiary of the Company who is a “disqualified individual” (as such term is defined in Treasury Regulation §1.280G-1) under any Company Benefit Plan that is reasonably expected to be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code). The Company has provided to Parent and Merger Sub preliminary calculations reflecting a good faith estimate of the consequences of Sections 280G and 4999 on any “disqualified individuals” within the meaning of Section 280G of the Code in connection with the consummation of the transactions contemplated hereby (either alone or in conjunction with any other event). |
(i) | Except as provided in this Agreement or required by applicable Law, the consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee or director of the Company or any of its Subsidiaries to severance pay, or any other payment from the Company or its Subsidiaries, (ii) accelerate the time of payment or vesting, or increase the amount of, compensation due to any such employee, director or a consultant, (iii) directly or indirectly cause the Company to transfer or set aside any assets to fund any material benefits under any Company Benefit Plan or (iv) limit or restrict the right to merge, materially amend, terminate or transfer the assets of any Company Benefit Plan on or following the Effective Time. |
(j) | Except as provided in this Agreement or required by applicable Law, there has been no amendment to, written interpretation of or announcement (whether or not written) by the Company or any of the Company’s Subsidiaries relating to, or change in employee participation or coverage under, any Company Benefit Plan that could increase materially the expense to the Company and the Company’s Subsidiaries, taken as a whole, of maintaining such plan above the level of expense incurred in respect thereof for the most recent fiscal year ended prior to the date hereof. |
(k) | All Company Benefit Plans that are subject to Section 409A of the Code are in material compliance, in both form and operation, with the requirements of Section 409A of the Code and the Treasury regulations and guidance thereunder. |
(l) | The Company is not a party to nor does it have any obligation under any Company Benefit Plan to compensate, indemnify or reimburse any person for excise Taxes payable pursuant to Section 4999 of the Code or for additional Taxes payable pursuant to Section 409A of the Code. |
(m) | With respect to each Company Benefit Plan that is mandated by applicable Law or by a Governmental Entity outside of the United States or that is subject to the Laws of any jurisdiction outside of the United States (a “ Non-U.S. PlanNon-U.S. Plan under applicable Law and the terms of any such plan; (v) no material Taxes, penalties or fees are due by the Company or any Company Subsidiary with respect to any Non-U.S. Plan and (vi) no Non-U.S. Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA (whether or not the Non-U.S. Plan is subject to ERISA). |
(n) | The Company and its Subsidiaries are in material compliance with their obligations pursuant to all notification and bargaining obligations arising under any Company Labor Agreements. |
(o) | Except as would not reasonably be expected to result in, individually or in the aggregate, material liability to the Company and its Subsidiaries, taken as a whole as of the date of this Agreement, (i) there are no strikes or lockouts with respect to any employees of the Company or any of its Subsidiaries; (ii) to the Knowledge of the Company, there is no union organizing effort pending or threatened against the Company or any of its Subsidiaries; (iii) there is no labor dispute or labor arbitration Action pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries (other than, in each case, routine grievances, including those brought by unions or other collectively represented employees, to be heard by the applicable Governmental Entity); and (iv) there is no slowdown, or work stoppage in effect or, to the Knowledge of the Company, threatened with respect to employees of the Company or any of its Subsidiaries. |
(p) | Since December 31, 2018, the Company and its Subsidiaries have complied, in all material respects, with applicable Laws with respect to employment and employment practices (including all applicable |
Laws, rules and regulations regarding wage and hour requirements, employee and worker classification, immigration status, discrimination in employment, harassment, employee health and safety, and collective bargaining). |
(q) | The consent or consultation of, or the rendering of formal advice by, any labor or trade union, works council or similar organization is not required for the Company to enter into this Agreement or to consummate any of the transactions contemplated hereby other than any consent, consultation or formal advice, the failure of which to obtain or, in the case of consultation, engage in, would not delay or prevent the consummation of the transactions contemplated by this Agreement or otherwise reasonably be expected to result in, individually or in the aggregate, material liability to the Company and its Subsidiaries, taken as a whole as of the date of this Agreement. |
3.12 | Absence of Certain Changes or Events. |
(a) | Since December 31, 2020 (the “ Company Balance Sheet Date |
(b) | From the Company Balance Sheet Date, except for the transactions contemplated by this Agreement, the Company and its Subsidiaries have conducted their respective businesses in all material respects in the Ordinary Course of Business. |
3.13 | Investigations; Litigation. |
3.14 | Company Information. |
3.15 | Tax Matters. |
(a) | the Company and each of its Subsidiaries have prepared and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them under applicable Law with the appropriate Governmental Entity and all such Tax Returns are true, complete and accurate, in all material respects and were prepared in material compliance with applicable Law; |
(b) | the Company and each of its Subsidiaries have paid all material Taxes required to be paid under applicable Law to the appropriate Governmental Entity and have withheld or collected all material Taxes required to be withheld or collected by any of them (including in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, stockholder or other Person), except with respect to matters contested in good faith and for which reserves have been established in accordance with GAAP. All Taxes that have been withheld or collected by the Company or any if its Subsidiaries have been timely remitted to the applicable Governmental Entity in accordance with applicable Law; |
(c) | neither the Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the Ordinary Course of Business). Neither the Company nor any of its Subsidiaries has granted in writing any extension or waiver of the limitation period applicable to any material Tax or Tax Return that remains in effect (other than extension or waiver granted in the Ordinary Course of Business); |
(d) | there are no outstanding assessments for Taxes and there are no pending or, to the Knowledge of the Company, threatened assessments, audits, examinations, investigations or other proceedings in respect of any material Taxes or Tax Returns of the Company or any of its Subsidiaries, except with respect to matters contested in good faith and for which reserves have been established in accordance with GAAP. Neither the Company nor any of its Subsidiaries has received written notice of any claim made by a Governmental Entity in a jurisdiction where the Company or any of its Subsidiaries, as applicable, does not file a particular Tax Return or pay a particular Tax that indicates that the Company or such Subsidiary is or may be subject required to file such Tax Return or pay such Tax. There are no pending or proposed changes in the income Tax accounting methods of the Company or any of its Subsidiaries; |
(e) | there are no Liens for Taxes on any property of the Company or any of its Subsidiaries, except for Permitted Liens; |
(f) | neither the Company nor any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any distribution occurring during the two-year period ending on the date of this Agreement, or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, that was purported or intended to be governed by Section 355 of the Code; |
(g) | neither the Company nor any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2); |
(h) | neither the Company nor any of its Subsidiaries (i) is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement (A) exclusively between or among the Company and/or its Subsidiaries or (B) not primarily related to Taxes and entered into in the Ordinary Course of Business), (ii) has been a member of an affiliated, consolidated, unitary or combined group filing a consolidated federal income Tax Return (other than a group the common parent of which is or was the Company or any of its Subsidiaries), or (iii) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of federal, state, local or non- U.S. Law), as a transferee or successor; and |
(i) | neither the Company nor any of its Subsidiaries has taken or agreed to take any action or knows of any fact, agreement, plan or other circumstance that would reasonably be expected to (i) prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) cause the stockholders (other than any Excepted Stockholder) of the Company to recognize gain pursuant to Section 367(a)(1) of the Code or (iii) cause Parent to be treated as a “domestic corporation” pursuant to Section 7874(b) of the Code as a result of the Merger. |
3.16 | Intellectual Property; IT Assets; Privacy. |
(a) | Section 3.16(a) of the Company Disclosure Schedules sets forth a true, correct and complete list as of the date hereof of all material Registered Intellectual Property owned by the Company and its Subsidiaries (the “ Registered Company Intellectual Property Owned Company Intellectual Property |
(b) | The Company and its Subsidiaries (i) own or have a written, valid and enforceable right and license to use all material Intellectual Property used in or necessary for the operation of their respective businesses as currently conducted (the “ Company Intellectual Property |
(c) | Since December 31, 2018, to the Knowledge of the Company, the operation of the businesses of the Company and its Material Subsidiaries has not infringed, violated or otherwise misappropriated any Intellectual Property of any third Person. Since December 31, 2018, (i) to the Knowledge of the Company, no third Person has materially infringed, violated or otherwise misappropriated any Owned Company Intellectual Property and (ii) there has been no pending or asserted claim in writing asserting that the Company or any Material Subsidiary has infringed, violated or otherwise misappropriated, or is infringing, violating or otherwise misappropriating, any Intellectual Property of any third Person. |
(d) | The Company and its Subsidiaries have received from each Person (including current and former employees and contractors) who has created or developed any material Owned Company Intellectual Property for or on behalf of the Company or any of its Subsidiaries, a written present assignment of such material Owned Company Intellectual Property to the Company or its applicable Subsidiary. |
(e) | The Company and its Subsidiaries own all right, title and interest in and to the Company IT Assets, free and clear of any Liens other than Permitted Liens, except as would not reasonably be expected to be, individually or in the aggregate, material to the business of the Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries own or have a written valid and enforceable right to use all IT Assets, except as would not reasonably be expected to be, individually or in the aggregate, material to the business of the Company and its Subsidiaries, taken as a whole. Except as would not reasonably be expected to be, individually or in the aggregate, material to the business of the Company and its Subsidiaries, taken as a whole, the Company and each of its Subsidiaries have taken commercially reasonable steps and implemented commercially reasonable safeguards to protect the Company IT Assets from any unauthorized access, use or other security breach and free from any disabling codes or instructions, spyware, trojan horses, worms, viruses, or other software routines that permit or cause |
unauthorized access to, or disruption, impairment, disablement, or destruction of software, data or other materials, or any viruses, Trojan horses, spyware or other malicious code (“ Malicious Code |
(f) | The Company and its Subsidiaries have taken commercially reasonable measures to protect the confidentiality of the material trade secrets owned or purported to be owned by the Company and its Subsidiaries, and to the Knowledge of the Company, no such material trade secrets has been used or discovered by or disclosed to any Person except pursuant to non-disclosure agreements protecting the confidentiality thereof, which agreements, to the Knowledge of the Company, have not been materially breached by the receiving party. |
(g) | Since December 31, 2018, the Company and its Subsidiaries have complied with all Privacy Laws and with its and their privacy policies and other contractual commitments relating to privacy, security, collection, storage, transmission, transfer (including cross-border transfers), disclosure, use or processing of personal data (which, as used herein, includes similar terms used in Privacy Laws, such as personal information and personally identifiable information) in their possession or control (collectively, the “ Data Protection Requirements |
(h) | Since December 31, 2018, the Company and its Subsidiaries have not had any actual disclosure or loss of, or inability to access or account for, or any incident relating to unauthorized access to or acquisition of, any personal data (“ Security Incident |
(i) | To the Knowledge of the Company, neither the Company nor any of its Subsidiaries have any threatened or pending Actions, or events or circumstances that are reasonably likely to give rise to material Actions as a result of any Security Incident or material vulnerability. |
3.17 | Title to Assets; Backlog. |
(a) | The Company or one of its Subsidiaries has good and valid title to all material tangible assets owned by the Company or any of its Subsidiaries as of the date of this Agreement, free and clear of all Liens other than Permitted Liens, or good and valid leasehold interests in all material tangible assets leased or subleased by the Company or any of its Subsidiaries as of the date of this Agreement. Except as, individually or in the aggregate, would not reasonably be expected to have, a Company Material Adverse Effect, all items of equipment and other tangible assets (other than any Company equipment, |
machinery, fixtures or other tangible assets that is undergoing repairs or maintenance), owned by or leased to and necessary for the operation of the Company are: (i) suitable for the uses to which they are being put; (ii) in good operating condition and repair (ordinary wear and tear excepted) and have been maintained in accordance with standard industry practice; (iii) adequate for the continued conduct of the businesses of the Company in the manner in which such businesses are currently being conducted without need for replacement or repair, except in the Ordinary Course of Business; and (iv) conform in all material respects with all applicable Laws. |
(b) | The Company and its Subsidiaries either possess sufficient inventory of parts, materials and personnel to perform, in all material respects, the obligations within their scheduled delivery dates or such parts or materials have lead times such that the Company and its Subsidiaries can acquire such parts and materials in time to produce and ship or otherwise perform such unsatisfied performance obligations backlog in accordance with the scheduled performance dates. |
3.18 | Title to Properties. |
(a) | Except as would not reasonably be expected to result in material liability to the Company or any of its Material Subsidiaries, each Contract under which the Company or any of its Subsidiaries is the landlord, sublandlord, tenant, subtenant or occupant (a “ Company Real Property Lease Company Leased Real Property |
(b) | The Company or its Subsidiaries has good and valid title to all of the real property owned by the Company and its Subsidiaries (the “ Owned Real Property |
(c) | Neither the Company nor any of its Subsidiaries has received written notice of any condemnation proceeding or proposed action or agreement for taking in lieu of condemnation, nor is any such proceeding, action or agreement pending before a Governmental Entity or, to the Knowledge of the Company, threatened, with respect to any portion of any Owned Real Property. |
3.19 | Opinion of Financial Advisor. |
3.20 | Required Vote of the Company Stockholders. |
3.21 | Material Contracts. |
(a) | Except for this Agreement, agreements filed as exhibits to the Company SEC Documents or as set forth in Section 3.21 of the Company Disclosure Schedules, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or expressly bound by any Contract (excluding any Company Benefit Plan) that: |
(i) | would constitute a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the Securities Act); |
(ii) | contains a non-compete, non-solicit, exclusivity or similar restriction that materially restricts the conduct of any line of business by the Company or any of its Affiliates or the solicitation of any business from any third party or upon consummation of the Merger will materially restrict the ability of the Surviving Corporation or any of its Affiliates to engage in any line of business or in any geographic region or to solicit any business from any third party; |
(iii) | contains a non-solicit of the employees of any entity or similar restriction that materially restricts solicitation of management-level or professional prospective hires or upon consummation of the Merger will materially restrict the ability of the Surviving Corporation or any of its Affiliates to solicit the employment or services of any management-level or professional prospective hire (in each case, other than customary non-solicitation provisions included in non-disclosure agreements); |
(iv) | that is a settlement, consent or similar agreement that would require the Company or any of its Subsidiaries to pay consideration of more than $500,000 after the date of this Agreement or that contains any material continuing obligations of the Company or any of its Subsidiaries; |
(v) | that includes a material indemnification obligation of the Company or any of its Subsidiaries which was granted outside of the Ordinary Course of Business; |
(vi) | that contains a put, call or similar right pursuant to which the Company or any of its Subsidiary could be required to sell, as applicable, any equity interests of any person or material amount of assets; |
(vii) | that provides any current employees, officers or directors of the Company or any Company Subsidiary with annual base compensation in excess of $275,000, other than Contracts that are terminable without penalty or notice or employment Contracts entered into on standard Governmental Entity forms; |
(viii) | is a Contract that involves the payment or delivery of cash or other consideration or minimum purchase obligations (by or to the Company or any Company Subsidiary) in an amount or having a value in excess of $5,000,000 in the aggregate, or contemplates or involves the performance of services (by or for the Company or any Company Subsidiary) having a value in excess of $5,000,000 in the aggregate; |
(ix) | is a Company Real Property Lease pursuant to which the Company or any of its Subsidiaries leases real property that is material to the business of the Company or any of its Subsidiaries; |
(x) | is a Contract providing for the purchase of goods or services or the development or construction of, or additions or expansions to, any property or equipment under which the Company or any Company Subsidiary has, or expects to incur, costs or obligations in excess of $5,000,000 in the aggregate; |
(xi) | that is material and obligates the Company or any Company Subsidiary, or will obligate the Surviving Corporation, to provide a party with “most favored nation” or “most favored customer” status that, following the Merger, would apply to Parent and its Subsidiaries, including the Company and its Subsidiaries; |
(xii) | provides for the formation, creation, operation, management or control of any material joint venture, partnership, strategic alliance, collaboration or other similar arrangement with a third party; |
(xiii) | is a Contract relating to any material currency or other hedging arrangement; |
(xiv) | is an indenture, credit agreement, loan agreement, note, or other Contract providing for indebtedness for borrowed money of the Company or any if its Subsidiaries or any guaranty of such obligations or guarantee of obligations of any Person that is not the Company or a Subsidiary (other than indebtedness among the Company and/or any of its Subsidiaries), in each case in excess of $1,000,000 individually, or $5,000,000 in the aggregate; |
(xv) | provides for the acquisition or disposition by the Company or any of its Subsidiaries of any business (whether by merger, sale of stock, sale of assets or otherwise), or any real property, that would, in each case, reasonably be expected to result in the receipt or making by the Company or any Subsidiary of the Company of future payments (including “earnout” or other material contingent payment obligations) in excess of $1,000,000, in each case, except for purchases and sales of goods, services or inventory in the Ordinary Course of Business; |
(xvi) | obligates the Company or any Subsidiary of the Company to make any future capital investment or capital expenditure outside the Ordinary Course of Business and in excess of $500,000; |
(xvii) | limits or restricts the ability of the Company or any of its Subsidiaries to declare or pay dividends or make distributions in respect of their capital stock, partner interests, membership interests or other equity interests; |
(xviii) | pursuant to which the Company or any of the Company Subsidiaries receives from any third party a license or similar right to any Intellectual Property that is material to the Company, other than licenses with respect to software that is generally commercially available; |
(xix) | that is a Contract entered into outside of the Ordinary Course of Business, pursuant to which the Company or any of its Subsidiaries is a party, or is otherwise bound, and the contracting counterparty of which is a Governmental Entity; or |
(xx) | that is a Contract (or form thereof and a list of the parties thereto) between the Company or any Company Subsidiary, on the one hand, and any officer, director or affiliate (other than a wholly-owned Company Subsidiary) of the Company or any Company Subsidiary or any of their respective “associates” or “immediate family” members (as such terms are defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act), on the other hand (other than any Contract that is a Company Benefit Plan). |
(b) | Neither the Company nor any Subsidiary of the Company is in material breach of or material default under the terms of any Company Material Contract. To the Knowledge of the Company, as of the date of this Agreement, no other party to any Company Material Contract is in material breach of or material default under the terms of any Company Material Contract. Each Company Material Contract |
is a valid and binding obligation of the Company or the Subsidiary of the Company that is party thereto and to the Knowledge of the Company, of each other party thereto, and is in full force and effect, subject to the Enforceability Exceptions, except as would not or would not reasonably be expected to be material to the Company or any Material Subsidiary. |
3.22 | Suppliers and Customers. |
(a) | Section 3.22(a) of the Company Disclosure Schedules sets forth a correct and complete list of (i) the top ten (10) suppliers (each a “ Company Top Supplier Company Top Customer |
(b) | Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, since December 31, 2018 through the date of this Agreement, (i) there has been no termination of or a failure to renew the business relationship of the Company or its Subsidiaries with any Company Top Supplier or any Company Top Customer and (ii) no Company Top Supplier or Company Top Customer has notified the Company or any of its Subsidiaries that it intends to terminate or not renew its business. Neither the Company nor any Company Subsidiary has received any written notice, letter, complaint or other communication from any Company Top Supplier or Company Top Customer to the effect that it has materially changed, modified, amended or reduced, or is expected to materially change, modify, amend or reduce, its business relationship with the Company or the Company Subsidiaries in a manner that is materially adverse to the Company and its Subsidiaries, taken as a whole. |
3.23 | Canadian Assets and Revenues. |
3.24 | Insurance Policies. |
3.25 | Affiliate Party Transactions. |
3.26 | Finders or Brokers. |
3.27 | Takeover Laws. |
3.28 | Warranties; Products |
3.29 | No Other Representations or Warranties; No Reliance. |
4.1 | Qualification, Organization, Subsidiaries. |
(a) | Each of Parent and Merger Sub is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of incorporation, organization or formation, as applicable. Except as would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole, each of Parent’s Subsidiaries is a legal entity duly organized, validly existing and (where such concept is recognized) in good standing under the Laws of its respective jurisdiction of incorporation, organization or formation, as applicable. Each of Parent and Merger Sub and each of their respective Subsidiaries has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business. Each of Parent and Merger Sub and each of their respective Subsidiaries is in good standing in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except, in each case, as would not reasonably be expected to be material to the Parent and its Subsidiaries, taken as a whole. Parent has made available to the Company true, complete and correct copies of Parent and Merger Sub’s Organizational Documents, each as amended prior to the date of this Agreement, and each as made available to the Company is in full force and effect. |
(b) | All of the outstanding shares of capital stock or voting securities of, or other equity interests in, each of Parent’s wholly-owned Subsidiaries is owned directly or indirectly by Parent, have been validly issued and, where applicable, are fully paid and non-assessable and were issued free of pre-emptive rights, and are free and clear of all Liens other than restrictions imposed by applicable securities Laws or the Organizational Documents of any such Subsidiary or any Permitted Liens. No Parent Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of the Parent’s Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of the Parent’s Subsidiaries. |
(c) | Except for the capital stock and voting securities of, and other equity interests in, the Parent’s Subsidiaries, and except as set forth in Section 4.1(c) of the Parent’s Disclosure Schedules, none of Parent or the Parent’s Subsidiaries owns, directly or indirectly, any capital stock or voting securities of, or other equity interests in, or any interest convertible into or exchangeable or exercisable for, any capital stock or voting securities of, or other equity interests in, any Person. |
4.2 | Capitalization. |
(a) | The authorized share capital of Parent consists of an unlimited number of Parent Common Shares and unlimited number of Parent preferred shares. As of the Reference Time, there were (i) 89,678,845 |
Parent Common Shares issued and outstanding; (ii) no Parent preferred shares issued and outstanding, (iii) Parent Options to purchase an aggregate of 4,456,444 Parent Common Shares issued and outstanding. Except as set forth in Section 4.2(a) or as required by the terms of the Parent Benefit Plans, as of the date of this Agreement, (i) Parent does not have any shares issued or outstanding, other than Parent Common Shares that have become outstanding after the Reference Time, which were reserved for issuance as of the Reference Time, as set forth in Section 4.2(a). Except as set forth in Section 4.2(a) or as required by the terms of the Parent Benefit Plans, as of the date of this Agreement, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of shares in the capital of Parent to which Parent is a party obligating Parent to (i) issue, transfer or sell any shares in the capital of Parent or securities convertible into, exercisable for or exchangeable for such shares, (ii) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares. Parent does not have any outstanding bonds, debentures, notes or other similar obligations, the holders of which have the right to vote (or which are convertible into, exercisable for or exchangeable for securities having the right to vote) with the shareholders of Parent on any matter. All outstanding Parent Common Shares are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized and validly issued as fully paid and non-assessable, and are not subject to and were not issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. |
(b) | All outstanding Parent Common Shares have been duly authorized and validly issued as fully paid and non-assessable and listed and posted for trading on the TSX, and not subject to or issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. The Parent Common Shares to be issued in the Merger, when issued and delivered in accordance with the terms of this Agreement will be duly authorized and validly issued as fully paid and non-assessable, listed and posted for trading on the TSX and the NYSE or Nasdaq, as applicable, and not subject to or issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. The Parent Common Shares to be issued as part of the Merger Consideration shall not be treated as “restricted securities” within the meaning of Rule 144. The Parent Common Shares to be issued as part of the Merger Consideration shall not be subject to any resale restrictions under applicable Canadian Securities Laws provided 45-102 – Resale of Securities |
(c) | Except as set forth in Section 4.2(a) or as required by the terms of the Parent Benefit Plans, as of the date of this Agreement, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of shares in the capital of any of Parent’s Subsidiaries to which any of Parent’s Subsidiaries is a party obligating any of Parent’s Subsidiaries to (i) issue, transfer or sell any shares in the capital of any of Parent’s Subsidiaries or securities convertible into, exercisable for or exchangeable for such shares, (ii) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares. |
(d) | All outstanding shares of each Parent Subsidiary are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized and validly issued as fully paid and non-assessable, and are not subject to and were not issued in violation of any pre-emptive or similar right, purchase option, call or right of first refusal or similar right. All outstanding Parent Common Shares, all outstanding Parent Options, and all other outstanding shares of capital stock, voting securities have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws. All outstanding shares of stock of each Parent Subsidiary and all other outstanding shares of capital stock, voting securities of each Subsidiary have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws. |
(e) | No Parent Subsidiary has outstanding bonds, debentures, notes or other similar obligations, the holders of which have the right to vote (or which are convertible into, exercisable for or exchangeable for securities having the right to vote) with the shareholders of Parent or a Parent Subsidiary on any matter. |
(f) | No Subsidiary of Parent owns any capital stock of Parent. Except for its interests (i) in its Subsidiaries and (ii) in any Person in connection with any joint venture, partnership or other similar arrangement with a third party, Parent does not own, directly or indirectly, any capital stock of, or other equity interests in any Person. |
(g) | Except for the Parent Voting Agreements, there are no voting trusts or other agreements or understandings to which Parent or any of its Subsidiaries is a party with respect to the voting of the Parent Common Shares or other shares in the capital of Parent or any shares in the capital of any of Parent’s Subsidiaries. |
4.3 | Corporate Authority Relative to This Agreement; Consents and Approvals; No Violation. |
(a) | Each of Parent and Merger Sub has all requisite power and authority to enter into this Agreement and, subject to receipt of Parent Shareholder Approval, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Except for (i) the Parent Shareholder Approval, (ii) the adoption of this Agreement by Parent, as the sole stockholder of Merger Sub (which such adoption shall occur immediately following the execution of this Agreement), and (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub, and, assuming this Agreement constitutes a valid and binding agreement of the Company, constitutes the valid and binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Enforceability Exceptions. |
(b) | (i) The Parent Board at a duly called and held meeting has unanimously (A) determined that it is in the best interests of Parent to enter into this Agreement, (B) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger and the Debt Financing, and (C) resolved to recommend that the holders of Parent Common Shares approve the Parent Share Issuance (the “ Parent Recommendation |
(c) | The execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by Parent and Merger Sub do not and will not require Parent, Merger Sub or any of their Subsidiaries to procure, make or provide prior to the Closing Date any consent, approval, authorization or permit of, action by, filing with or notification to any Governmental Entity, other than (i) the filing of the Certificate of Merger, (ii) compliance with any applicable requirements of any U.S. or foreign Antitrust Laws, (iii) compliance with the applicable requirements of the Securities Act, the Exchange Act and the Canadian Securities Laws, including the filing with the SEC of the US Registration Statement (including the Proxy Statement/Prospectus) and the filing of the Management Information Circular with the Canadian Securities Administrators, (iv) compliance with the rules and regulations of the TSX, (v) compliance with any applicable foreign or state securities or blue sky Laws and (vi) the other consents, approvals or notices set forth on Section 4.3(c) of the Parent Disclosure Schedules (clauses |
(i) through (vi), collectively, the “ Parent Approvals |
(d) | Assuming compliance with the matters referenced in Section 4.3(c) and receipt of the Parent Approvals and the Parent Shareholder Approval, the execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, do not and will not (i) contravene or conflict with the Organizational Documents of (A) Parent or (B) any of its Subsidiaries, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding on or applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, (iii) require any consent, waiver or approval, result in any violation of, or default (with or without notice or lapse of time or both would become a default) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under any Contract, instrument, permit, concession, franchise, right or license binding on Parent or any of its Subsidiaries, or (iv) result in the creation of a Lien (other than Permitted Lien) other than, in the case of clauses (ii), (iii) and (iv), any such contravention, conflict, violation, default, termination, cancellation, acceleration, right, loss or Lien that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. |
4.4 | Reports and Financial Statements. |
(a) | Parent is a “reporting issuer” or the equivalent and not on the list of reporting issuers in default under applicable Canadian Securities Laws in each of the provinces and territories in Canada. Since December 31, 2018, (i) Parent has filed or furnished, on a timely basis, all forms, statements, certifications, documents, correspondence, registrations and reports required to be filed or furnished by it with the Canadian Securities Administrators prior to the date of this Agreement (the forms, statements, certifications, documents and reports so filed or furnished by Parent and those filed or furnished to the Canadian Securities Administrators subsequent to the date of this Agreement, including any amendments thereto, including exhibits, schedules thereto and all other information incorporated by reference, the “ Parent Public Documents |
(b) | Parent and each Parent Subsidiary has filed or furnished, on a timely basis (taking into account any relevant extensions), all material forms, statements, certifications, documents, correspondence, registrations, and reports required to be filed or furnished by it with any Governmental Entity since December 31, 2018 (the “ Parent Governmental Filings |
(c) | The Parent Common Shares are listed and posted for trading on the TSX. Parent is not in default of any material requirements of any applicable Canadian Securities Laws or the rules and regulations of the |
TSX. As of the date of this Agreement, Parent has not taken any action to cease to be a reporting issuer in any province or territory of Canada, nor has Parent received notification from any Canadian Securities Administrators seeking to revoke the reporting issuer status of Parent. As of the date of this Agreement, no delisting, suspension of trading or cease trade or other order or restriction with respect to any securities of Parent is pending or, to the Knowledge of Parent, threatened. |
(d) | No Governmental Entity has initiated or has pending any Action or, to the Knowledge of Parent, threatened investigation into the business or operations of Parent or any of the Parent Subsidiaries since December 31, 2018, except where such Actions would not reasonably be expected to have, either individually or in the aggregate, a Parent Material Adverse Effect. There (i) is no unresolved violation, criticism, or exception by any Governmental Entity with respect to any report or statement relating to any examinations or inspections of Parent or any of the Parent Subsidiaries and (ii) has been no formal or informal inquiries by, or disagreements or disputes with, any Governmental Entity with respect to the business, operations, policies or procedures of Parent or any of the Parent Subsidiaries since December 31, 2018, in each case, which would reasonably be expected to have, either individually or in the aggregate, a Parent Material Adverse Effect. No Parent Subsidiary is required as of the date of this Agreement, and after the date of this Agreement, except as required in connection with the transactions contemplated by this Agreement, to file or furnish any report, statement, schedule, form or other document with or make any other filing with or furnish any other material to the SEC. |
(e) | The consolidated financial statements (including all related notes and schedules) of Parent included in the Parent Public Documents (or, if any such Parent Public Document is amended or superseded by a filing prior to the date of this Agreement, such amended or superseding Parent Public Document) fairly presented in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto) and were prepared in all material respects in conformity with IFRS (except, in the case of the unaudited financial statements, as permitted by the Canadian Securities Administrators) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto). Since December 31, 2018, no independent public accounting firm of Parent has resigned (or informed Parent that it intends to resign) or been dismissed as independent public accountants of Parent as a result of or in connection with any disagreements with Parent on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. |
4.5 | Disclosure Controls and Internal Control over Financial Reporting . |
(a) | Parent has established and maintains a system of disclosure controls and procedures (as such term is defined in National Instrument 52-109 – Certification of Disclosure in Issuers ’ Annual and Interim Filings NI 52-109 |
(b) | Parent has established and maintains a system of internal control over financial reporting (as such term is defined in NI 52-109) that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and has otherwise complied with NI 52-109 and management of Parent has assessed the |
effectiveness of Parent’s internal control over financial reporting as at December 31, 2020, and has concluded that such internal control over financial reporting was effective as of such date. |
(c) | To the Knowledge of Parent, there is no material weakness (as such term is defined in NI 52-109) relating to the design, implementation or maintenance of its internal control over financial reporting, or fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting of Parent. |
(d) | To the Knowledge of Parent, as of the date of this Agreement: (i) there are no material weaknesses in, the internal controls over financial reporting of Parent that could reasonably be expected to adversely affect Parent’s ability to record, process, summarize and report financial information; and (ii) there is and has been no fraud, whether or not material, involving management or any other employees who have a significant role in the internal control over financial reporting of Parent. |
(e) | Since December 31, 2018, Parent has received no: (i) complaints from any source regarding accounting, internal accounting controls or auditing matters; or (i) expressions of concern from employees of Parent or any Parent Subsidiaries regarding questionable accounting or auditing matters. |
4.6 | No Undisclosed Liabilities. |
4.7 | Compliance with Law; Permits. |
(a) | Parent and its Subsidiaries are, and since December 31, 2018 have been, in compliance with and not in default under or in violation of any Law applicable to Parent and its Subsidiaries, except where such non-compliance, default or violation would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. |
(b) | Parent and its Subsidiaries are in possession of all Permits necessary for Parent and Parent’s Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (such Permits, the “ Parent Permits non-renewal, adverse modifications, administrative or judicial proceeding that would reasonably be expected to result in modification, termination or revocation thereof, and Parent and each of its Subsidiaries is in compliance with the terms and requirements of such Parent Permit, except where the failure to be in full force and effect or in compliance or where such proceeding would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. |
(c) | Since December 31, 2018, neither Parent nor any of its Subsidiaries has received any written notice that Parent or its Subsidiaries is in violation of any Law applicable to Parent or any of its Subsidiaries or any Permit, except for such violations that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. There are no Actions pending, threatened in writing or, to the Knowledge of Parent, otherwise threatened that would reasonably be expected to result in the |
revocation, withdrawal, suspension, non-renewal, termination, revocation, or adverse modification or limitation of any such Permit, except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. |
4.8 | Anti-Corruption; Anti-Bribery; Anti-Money Laundering. |
(a) | Parent, its Subsidiaries, and, to the Knowledge of Parent, each of their directors, officers, employees, agents and each other Person acting on behalf of Parent or its Subsidiaries are in all respects compliant with and for the past five (5) years, have complied with (i) the Corruption of Foreign Public Officials Act (Canada) (the “ CFPOA |
(b) | None of Parent, its Subsidiaries or, to the Knowledge of Parent, any of their directors, officers and employees and each other Person acting on behalf of Parent or its Subsidiaries has, in the past five (5) years, directly or indirectly, violated any, or been subject to actual or, to the Knowledge of Parent, pending or threatened Action alleging violations on the part of any of the foregoing Persons of the CFPOA or Anti-Corruption Laws or any terrorism financing Law. |
(c) | None of Parent, its Subsidiaries or, to the Knowledge of Parent, any of their directors, officers, employees or any other Person acting on behalf of Parent or its Subsidiaries has, in the past five (5) years: (i) directly or indirectly, paid, offered or promised to pay, or authorized or ratified the payment of any monies, gifts or anything of value (A) which would violate any applicable Anti-Corruption Law, including the CFPOA, applied for purposes hereof as it applies to domestic concerns, or (B) to any national, provincial, territorial, municipal or other Government Official or any political party or candidate for political office for the purpose of (x) influencing any act or decision of such official or of any Governmental Entity, (y) to obtain or retain business, or direct business to any Person or (z) to secure any other improper benefit or advantage; (ii) established or maintained any unlawful fund of monies or other assets of Parent or any of the Parent Subsidiaries, (iii) made any fraudulent entry on the books or records of Parent or any of the Parent Subsidiaries; (iv) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for Parent or any of the Parent Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for Parent or any of the Parent Subsidiaries; or (v) aided, abetted, caused (directly or indirectly), participated in, or otherwise conspired with, any Person to violate the terms of any Order or applicable Law. |
4.9 | Sanctions. |
(a) | Parent and each of its Subsidiaries are and, in the past five (5) years, have been, in all material respects in compliance with applicable Export and Sanctions Regulations. |
(b) | None of Parent or any of its Subsidiaries, or, to the Knowledge of Parent, any director, officer, agent, employee or other Person acting on behalf of any of Parent or its Subsidiaries, in their capacity as such, is currently, or has been for the past five (5) years: (i) a Sanctioned Person or (ii) engaging in any dealings or transactions with, or for the benefit of, any Sanctioned Person or in any Sanctioned Country, to the extent such activities would cause Parent to violate applicable Export and Sanctions Regulations. |
(c) | For the past five (5) years, Parent and its Subsidiaries have (i) instituted policies and procedures that are reasonably designed to ensure compliance in all material respects with the Export and Sanctions |
Regulations in each jurisdiction in which Parent and its Subsidiaries operate or are otherwise subject to jurisdiction and (ii) maintained such policies and procedures in full force and effect in all material respects. |
(d) | For the past five (5) years, neither Parent nor any of its Subsidiaries (i) has been found in violation of, charged with or convicted of, any Export and Sanctions Regulations, (ii) to the Knowledge of Parent, is under investigation by any Governmental Entity for possible violations of any Export and Sanctions Regulation, (iii) has been assessed civil penalties under any Export and Sanctions Regulations or (iv) has filed any voluntary disclosures with any Governmental Entity regarding possible violations of any Export and Sanctions Regulations. |
4.10 | Environmental Laws and Regulations. |
(a) | Except as would not reasonably be material to Parent or any of its Subsidiaries, taken as a whole, (i) Parent and its Subsidiaries have, for the past five (5) years, conducted their respective businesses in compliance in all material respects with all applicable Environmental Laws, (ii) for the past five (5) years, neither Parent nor any of its Subsidiaries has received any written notices, demand letters or written requests for information from any Governmental Entity alleging that Parent or any of its Subsidiaries is in violation of or has liability under any Environmental Law and there are no Actions pending, or to the Knowledge of Parent threatened in writing, against Parent or any of its Subsidiaries alleging any violation of or liability relating to any Environmental Law, in each case other than with respect to matters that have been fully resolved; (iii) there has been no treatment, storage, disposal, release or migration of any Hazardous Substance generated or used by Parent or its Subsidiaries for the past five (5) years, or, to the Knowledge of Parent, by any third party in violation of any applicable Environmental Law at, to or from any properties currently or formerly owned or leased or held under concession by Parent or any of its Subsidiaries or any predecessor; (iv) neither Parent nor any Subsidiary is subject to any agreement, Order, judgment, decree or agreement by or with any Governmental Entity or other third party imposing any liability or obligation relating to any Environmental Law and, to the Knowledge of Parent, there are no facts, conditions or circumstances that would reasonably be expected to form the basis for any such agreement, Order, judgment or decree; and (v) neither Parent nor any of its Subsidiaries has provided any indemnity regarding, or otherwise become subject to, any liability of any third party arising under Environmental Laws. |
4.11 | Employee Benefit Plans; Labor Matters. |
(a) | Section 4.11(a) of the Parent Disclosure Schedules lists all material Parent Benefit Plans. |
(b) | Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect each Parent Benefit Plan (including any related trusts) has been established, maintained, administered, funded and invested in compliance with its terms and with applicable Law, and all premiums required by contract or Law to be paid, all benefits, expenses and other amounts due and payable and all contributions, transfers or payments required to be made to or under the terms of any Parent Benefit Plan prior to the date hereof have been timely made, paid or accrued in accordance with GAAP or IFRS, as applicable, and are reflected, to the extent required, in the Parent’s financial statements. To the Knowledge of Parent, no fact, event or omission has occurred which would reasonably be expected to cause any Parent Benefit Plan to lose its qualification to provide Tax-favored benefits under applicable Law. |
(c) | No Parent Benefit Plan provides health or other welfare benefits after retirement or other termination of employment for current, former or future retired or terminated employees, their spouses, or their dependents (other than (i) continuation coverage required under applicable Law, (ii) coverage or benefits the full cost of which is borne by the employee or former employee (or any beneficiary of the employee or former employee), (iii) death benefits when termination occurs upon death or (iv) benefits provided during any applicable severance period). |
(d) | None of the Parent Benefit Plans is a (i) “registered pension plan” within the meaning of subsection 248(1) of the CITA that provides for defined benefits, (ii) a “salary deferral arrangement” for purposes of section 248 of the CITA, (iii) a “retirement compensation arrangement” for purposes of section 248 of the CITA or (iv) plan to which Parent or any of its Subsidiaries are required to contribute pursuant to a collective agreement, participation agreement, any other agreement or statute or municipal by-law and which is not maintained or administered by Parent or any of its Subsidiaries and none of Parent or its Subsidiaries have, at any time during the last six (6) years, contributed to, been obligated to contribute to or incurred any liability with respect to, any such plan. |
(e) | Except as provided in this Agreement, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not (i) result in any material payment (including, without limitation, bonus, golden parachute, retirement, severance, or other benefit or enhanced benefit) becoming due or payable to any of the employees (present or former) of Parent or its Subsidiaries; (ii) increase the compensation or benefits otherwise payable to any such employee (present or former), or (iii) result in the acceleration of the time of payment or vesting of any material benefits or entitlements otherwise available pursuant to any Parent Benefit Plan. |
(f) | There are no pending, threatened or, to the Knowledge of Parent, anticipated claims, including any audit or inquiry by the Canada Revenue Agency, Internal Revenue Service, the U.S. Department of Labor of the U.S. Pension Benefit Guaranty Corporation (other than claims for benefits in accordance with the terms of the Parent Benefit Plans) by, on behalf of or against any of the Parent Benefit Plans or any trusts related thereto and, to the Knowledge of Parent, no set of circumstances exists which may reasonably give rise to a valid claim or lawsuit against the Parent Benefit Plans, any fiduciaries thereof with respect to their duties to the Parent Benefit Plans or the assets of any of the trusts under any of the Parent Benefit Plans that would reasonably be expected to result in any material liability of Parent or any of its Subsidiaries, any participant in a Parent Benefit Plan, or any other Person. Neither Parent nor any of its Subsidiaries has taken any action to take corrective action or make a filing under any voluntary correction program of the Canada Revenue Agency or any other Governmental Entity with respect to any Parent Benefit Plan that remains unresolved, and to the Knowledge of Parent, no material plan defect including, any defect that would qualify for correction under any such program, exists. |
(g) | Except as provided in this Agreement or required by applicable Law, there has been no amendment to, written interpretation of or announcement (whether or not written) by Parent or any of its Subsidiaries relating to, or change in employee participation or coverage under, any Parent Benefit Plan that could increase materially the expense to Parent or any of its Subsidiaries, taken as a whole, of maintaining such plan above the level of expense incurred in respect thereof for the most recent fiscal year ended prior to the date hereof. |
(h) | None of Parent, its Subsidiaries or any of its ERISA Affiliates, or any other Person, including any fiduciary, has engaged in any “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) that would reasonably be expected to subject any of the Parent Benefit Plans or their related trusts, Parent, any of its Subsidiaries, any of its ERISA Affiliates or any Person to any material Tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA. |
(i) | Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect, all Parent Benefit Plans that are subject to Section 409A of the Code are in compliance, in both form and operation, with the requirements of Section 409A of the Code and the Treasury regulations and guidance thereunder. |
(j) | Parent and its Subsidiaries are in compliance with their obligations pursuant to all notification and bargaining obligations arising under any Parent Labor Agreements, except as would not have, individually or in the aggregate, a Parent Material Adverse Effect. |
(k) | Except as would not reasonably be expected to result in, individually or in the aggregate, material liability to Parent and its Subsidiaries, taken as a whole as of the date of this Agreement, (i) there are |
no strikes or lockouts with respect to any employees of Parent or any of its Subsidiaries; (ii) to the Knowledge of Parent, there is no union organizing effort pending or threatened against Parent or any of its Subsidiaries; (iii) there is no labor dispute or labor arbitration proceeding pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries (other than, in each case, routine grievances, including those brought by unions or other collectively represented employees, to be heard by the applicable Governmental Entity); and (iv) there is no slowdown, or work stoppage in effect or, to the Knowledge of Parent, threatened with respect to employees of Parent or any of its Subsidiaries. |
(l) | Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect, since December 31, 2018, Parent and its Subsidiaries have complied with all applicable Laws with respect to employment and employment practices (including all applicable Laws, rules and regulations regarding wage and hour requirements, employee and worker classification, immigration status, discrimination in employment, harassment, employee health and safety, and collective bargaining). |
(m) | The consent or consultation of, or the rendering of formal advice by, any labor or trade union, works council or similar organization is not required for Parent to enter into this Agreement or to consummate any of the transactions contemplated hereby other than any consent, consultation or formal advice, the failure of which to obtain or, in the case of consultation, engage in, would not delay or prevent the consummation of the transactions contemplated by this Agreement or otherwise reasonably be expected to result in, individually or in the aggregate, material liability to Parent and its Subsidiaries, taken as a whole as of the date of this Agreement. |
4.12 | Absence of Certain Changes or Events. |
(a) | Since December 31, 2020 (the “ Parent Balance Sheet Date |
(b) | From the Parent Balance Sheet Date, except for the transactions contemplated by this Agreement, Parent and its Subsidiaries have conducted their respective businesses in all material respects in the Ordinary Course of Business. |
4.13 | Investigations; Litigation. |
4.14 | Parent Information. |
(a) | Parent and each of its Subsidiaries have prepared and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them under applicable Law with the appropriate Governmental Entity. All such Tax Returns are true, complete and accurate in all material respects and were prepared in material compliance with applicable Law; |
(b) | Parent and each of its Subsidiaries have paid all material Taxes required to be paid under applicable Law to the appropriate Governmental Entity and have withheld or collected all material Taxes required to be withheld or collected by any of them (including in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, stockholder or other Person), except with respect to matters contested in good faith and for which reserves have been established in accordance with IFRS. All Taxes that have been withheld or collected by Parent or any if its Subsidiaries have been timely remitted to the applicable Governmental Entity in accordance with applicable Law; |
(c) | neither Parent nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the Ordinary Course of Business). Neither Parent nor any of its Subsidiaries has granted in writing any extension or waiver of the limitation period applicable to any material Tax or Tax Return that remains in effect (other than extension or waiver granted in the Ordinary Course of Business); |
(d) | there are no outstanding assessments for Taxes and there are no pending or, to the Knowledge of Parent, threatened assessments, audits, examinations, investigations or other proceedings in respect of any material Taxes or Tax Returns of Parent or any of its Subsidiaries, except with respect to matters contested in good faith and for which reserves have been established in accordance with IFRS. Neither Parent nor any of its Subsidiaries has received written notice of any claim made by a Governmental Entity in a jurisdiction where Parent or any of its Subsidiaries, as applicable, does not file a particular Tax Return or pay a particular Tax that indicates that Parent or such Subsidiary is or may be subject required to file such Tax Return or pay such Tax. There are no pending or proposed changes in the income Tax accounting methods of Parent or any of its Subsidiaries; |
(e) | there are no Liens for Taxes on any property of Parent or any of its Subsidiaries, except for Permitted Liens; |
(f) | neither Parent nor any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any distribution occurring during the two-year period ending on the date of this Agreement, or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, that was purported or intended to be governed by Section 355 of the Code; |
(g) | neither Parent nor any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2); |
(h) | neither Parent nor any of its Subsidiaries (i) is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement (A) exclusively between or among Parent and/or its Subsidiaries or (B) not primarily related to Taxes and entered into in the Ordinary Course of Business), (ii) has been a member of an affiliated, consolidated, unitary or combined group filing a consolidated federal income Tax Return (other than a group the common parent of which is or was Parent or any of its Subsidiaries), or (iii) has any liability for the Taxes of any Person (other than Parent or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of federal, state, local or non- U.S. Law), as a transferee or successor; and |
(i) | neither Parent nor any of its Subsidiaries has taken or agreed to take any action or knows of any fact, agreement, plan or other circumstance that would reasonably be expected to (i) prevent or impede the |
Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) cause the stockholders (other than any Excepted Stockholder) of the Company to recognize gain pursuant to Section 367(a)(1) of the Code, or (iii) cause Parent to be treated as a “domestic corporation” pursuant to Section 7874(b) of the Code as a result of the Merger. |
4.16 | Opinion of Financial Advisor. |
4.17 | Capitalization of Merger Sub. |
4.18 | Required Vote of Parent Shareholders. |
4.19 | Finders or Brokers. |
4.20 | Certain Arrangements; Related Party Transactions. |
(a) | Since December 31, 2018 through the date of this Agreement, there have been no Contracts, undertakings, commitments, agreements, obligations or understandings, whether written or oral, or any material transactions, between Parent, Merger Sub or any of their respective Affiliates, on the one hand, and any beneficial owner of five percent or more of the outstanding shares of Company Common Stock or any member of the Company’s management or the Company Board, on the other hand, relating in any way to the Company, the transactions contemplated by this Agreement or to the operations of the Surviving Corporation after the Effective Time. |
(b) | As of the date of this Agreement, there are no transactions or series of related Contracts, transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related Contracts, transactions, between Parent or any of the Parent Subsidiaries, on the one hand, and any related party of Parent or any of the Parent Subsidiaries, on the other hand, that would be considered to be a “related party transaction” for purposes of Canadian Securities Laws. |
4.21 | Ownership of Common Stock. |
4.22 | Suppliers and Customers. |
4.23 | Financing. |
(a) | On or prior to the date hereof, Parent has delivered to the Company true, accurate and complete copies of (i) the fully executed debt commitment letter, dated as of the date of this Agreement, by and among inter alia Initial Debt Commitment Letter Debt Commitment Letters Debt Financing |
(b) | As of the date of this Agreement, to the Knowledge of the Parent the commitments under the Debt Commitment Letters are in full force and effect and have not been withdrawn, rescinded, reduced or terminated, or otherwise amended or modified in any respect and, to the Knowledge of Parent, no termination, reduction, withdrawal, rescission, amendment or modification is contemplated (other than as expressly set forth therein and to add additional lenders, arrangers, bookrunners, syndication agents and similar entities who had not executed the Debt Commitment Letters as of the date of this Agreement), and the Debt Commitment Letters, in the form so delivered, constitute the legal, valid and binding obligations of, and are enforceable against, Parent, its Subsidiaries party thereto and, to the Knowledge of Parent, each of the other parties thereto, subject, in each case, to the Enforceability Exceptions. |
(c) | Parent has fully paid (or caused to be paid) any and all commitment fees or other fees required by the Debt Commitment Letters to be paid on or before the date of this Agreement, and will pay in full any |
such other amounts that are due and payable under the Debt Commitment Letters on or before the Closing Date as and when due and payable. Except as expressly set forth in the Debt Commitment Letters, there are no conditions precedent to the obligations of the Financing Parties party thereto to provide the Debt Financing or any contingencies that would permit the Financing Parties party thereto to reduce the aggregate principal amount of the Debt Financing. As of the date of this Agreement, other than the Debt Commitment Letters and a securities engagement letter (together with one or more fee and credit letters related thereto), there are no Contracts, agreements, “side letters” or other arrangements to which Parent or any of its Subsidiaries is a party relating to the Debt Commitment Letters or the Debt Financing. |
(d) | As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, constitutes, or would reasonably be expected to constitute, a default or breach or a failure to satisfy a condition precedent by Parent or its Subsidiaries or, to the Knowledge of Parent, any other party thereto, under the terms and conditions of the Initial Debt Commitment Letter or would result in any of the conditions in any of the Debt Commitment Letters not being satisfied on the Closing Date. Assuming the satisfaction of the conditions set forth in Section 6.3(a) and Section 6.3(b), the Debt Financing, when funded in accordance with the Initial Debt Commitment Letter and giving effect to any “flex” provision in or related to the Initial Debt Commitment Letter (including with respect to fees, expenses and original issue discount and similar premiums or charges and after giving effect to the maximum amount of flex (including original issue discount flex) provided under the Initial Debt Commitment Letter), together with cash and cash equivalents immediately available to Parent on the Closing Date, shall provide Parent with proceeds on the Closing Date sufficient for the satisfaction of all of Parent’s and its Affiliates’ obligations required to be satisfied on the Closing Date under this Agreement and the Initial Debt Commitment Letter (and the Definitive Agreements for the Debt Financing contemplated therein), including the payment of any fees, expenses and other amounts of or payable by Parent or Merger Sub or Parent’s other Affiliates on the Closing Date in connection with the Merger (as described in this Agreement) and the Debt Financing contemplated by the Initial Debt Commitment Letter and for any repayment or refinancing of the outstanding indebtedness of the Company, Parent and/or their respective Subsidiaries that is defined as the “Refinanced Indebtedness” in Exhibit A to the Initial Debt Commitment Letter (such amounts, collectively, the “ Financing Amounts |
(e) | Parent and Merger Sub expressly acknowledge and agree that their obligations under this Agreement to consummate the Merger or any of the other transactions contemplated by this Agreement, are not subject to, or conditioned on, the receipt or availability of any funds or financing (including, for the avoidance of doubt, the Debt Financing). |
4.24 | Solvency. |
4.25 | No Other Representations or Warranties; No Reliance. |
5.1 | Conduct of Business by the Company. |
(a) | From and after the date of this Agreement and prior to the earlier of the Effective Time and the date, if any, on which this Agreement is earlier terminated pursuant to Section 7.1 (the “ Termination Date provided |
(b) | From and after the date of this Agreement and prior to the earlier of the Effective Time and the Termination Date, except (w) as may be required by applicable Law, (x) as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), (y) as set forth in Section 5.1(b) of the Company Disclosure Schedules or (z) as may be expressly contemplated, required or expressly permitted by this Agreement, the Company: |
(i) | shall not, and shall not permit any of its Subsidiaries that is not wholly-owned to, authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (other than dividends, distributions, payments or return of capital made to the Company or a wholly owned Subsidiary by any of its Subsidiaries) or other equity interests (whether in cash, assets, shares, property or other securities or any combination thereof); |
(ii) | shall not, and shall not permit any of its Subsidiaries to, split, combine, redeem or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except for any such transaction by a wholly-owned Subsidiary of the Company that remains a wholly-owned Subsidiary after consummation of such transaction; |
(iii) | shall not, and shall not permit any of its Subsidiaries to (A) except in the Ordinary Course of Business, (1) hire any employee or engage any independent contractor who is a natural person, in each case with annual base salary, base wages or base compensation in excess of $100,000 (except where such employment is terminable on no more than 30 days’ prior notice without material cost or penalty) or (2) terminate the employment of any employee of the Company or any of its Subsidiaries at the vice president-level (or its equivalent) or above, (B) (1) increase the compensation or other benefits, or accelerate the vesting or payment of any compensation or other benefits, payable or provided, to the Company’s or any of its Subsidiaries’ directors or officers or (2) increase the compensation or other benefits, or accelerate the vesting or payment of any compensation or other benefits, payable or provided, to the Company’s or any of its Subsidiaries’ employees, which increases do not exceed (I) 10% of the aggregate annualized compensation paid to an employee during calendar year 2021 (any such increases over 6% to be limited to non-union employees) and, (II) in the aggregate, 4.5% of total compensation for all employees (except as required pursuant to the terms of any new or amended union Contract), or (C) except as required pursuant to the terms of any Company Benefit Plan in effect as of the date of this Agreement, (1) grant any transaction or retention bonuses, (2) grant any Company Equity Awards or other equity or long-term incentive compensation awards, or (3) enter into any employment, change of control, severance or retention agreement with any employee of the Company or any of its Subsidiaries; |
(iv) | shall not, and shall not permit any of its Subsidiaries to, change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by applicable Law, GAAP or SEC rule or policy; |
(v) | shall not adopt any amendments, modifications, waivers, rescissions or otherwise make changes to the Organizational Documents of the Company or any of its Subsidiaries; |
(vi) | shall not, and shall not permit any of its Subsidiaries to, issue, deliver, grant, sell, pledge, transfer, dispose, or otherwise encumber, or authorize or approve or agree to issue, grant, sell, pledge or otherwise encumber any shares of Company Common Stock or other securities of the Company or any of its Subsidiaries, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, shares of Company Common Stock or other securities of the Company or any of its Subsidiaries, including but not limited to the issue or award of any Company Equity Awards or any rights, warrants or options to acquire any such shares, voting securities or equity interest or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units, except vesting in the Ordinary Course of Business pursuant to awards under Company Benefit Plans in effect as of the date hereof or as disclosed on Section 5.1(b)(vi) of the Company Disclosure Schedules; |
(vii) | shall not, and shall not permit any of its Subsidiaries to, redeem, terminate early, unwind, repurchase, prepay, defease, create, suffer to exist, incur, enter into, assume, endorse, guarantee, or otherwise become liable for or modify or amend (including seeking or obtaining a waiver) in any material respects the terms of, any indebtedness for borrowed money, or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, any indebtedness or assume, guarantee, endorse or otherwise become liable or responsible for such obligations or the obligations of any other person, or make any loans or advances (directly, contingently or otherwise), except for (A) intercompany loans or advances in the Ordinary |
Course of Business among the Company and its direct or indirect 100% owned Subsidiaries and (B) incremental borrowings under the Company’s existing Credit Facility contemplated by the Company Budget which do not require any amendments or waivers to such Credit Facility; |
(viii) | shall not, and shall not permit any of its Subsidiaries to make any loans, advances, guarantees or capital contributions to or investments in any Person, except for (A) loans solely between or among the Company or any of its wholly-owned Subsidiaries, on the one hand, and any of the Company’s wholly-owned Subsidiaries, on the other hand, and (B) advances for reimbursable employee expenses in the Ordinary Course of Business; |
(ix) | shall not, and shall not permit any of its Subsidiaries to, sell, lease, license, transfer, exchange or swap, or subject to any Lien (other than Permitted Liens), or otherwise dispose of, any of its businesses, material properties or assets, whether voluntarily or by the failure to exercise a right or make a payment, except (A) dispositions of obsolete or worthless equipment, in the Ordinary Course of Business, (B) non-exclusive licenses or other non-exclusive grants of rights in, to or under Company Intellectual Property entered in the Ordinary Course of Business with customers of the Company or the Company Subsidiaries (C) sales of products or services in the Ordinary Course of Business that do not require the incurrence of indebtedness in breach of Section 5.1(b)(vii) or the extension of capital in breach Section 5.1(b)(xiii) and (D) for transactions solely among the Company and its wholly-owned Company Subsidiaries or solely among wholly-owned Company Subsidiaries; |
(x) | shall not, and shall not permit any of its Subsidiaries to (i) enter into any Contract that would have been a Company Material Contract under Section 3.21(a)(ii) or Section 3.21(a)(xi) had it been entered into prior to this Agreement, or amend or modify any Contract in a manner that would make it a Company Material Contract under Section 3.21(a)(ii) or Section 3.21(a)(xi), (ii) enter into any other Contract that would require aggregate expenditures by the Company or any Company Subsidiary in excess of the Company Budget, (iii) materially modify, materially amend, extend, accelerate, terminate, cancel, exercise or fail to exercise an expiring renewal option or terminate any Company Material Contract (in each case, in a manner adverse to the Company or its Subsidiaries and not including terminations or expirations due to the natural expiration or termination of such agreements) or (iv) waive, release or assign any material rights or claims thereunder (other than in the Ordinary Course of Business or as would not result in a breach of Section 5.1(b)(xii)); |
(xi) | shall not, and shall not permit any of its Subsidiaries to, acquire (including by merger, consolidation or acquisition of stock or assets or any other means) or authorize or announce an intention to so acquire, or enter into any agreements providing for any acquisitions of, directly or indirectly, any equity interests in or assets (including intangible assets) of any person or any business, division, securities, properties or interests thereof, or otherwise engage in any mergers, consolidations or business combinations (other than pursuant to any capital expenditures permitted by Section 5.1(b)(xiii)) from any other Person, other than (A) transactions solely between the Company and a wholly-owned Company Subsidiary or solely between wholly-owned Company Subsidiaries or acquisitions of supplies or equipment in the Ordinary Course of Business and (B) acquisitions of properties, assets, equipment or inventory in the Ordinary Course of Business and consistent with the Company Budget; |
(xii) | shall not, and shall not permit any of its Subsidiaries to, settle, pay, discharge or satisfy any Action, other than any Action that involves only the payment of monetary damages not in excess of $250,000 individually or $1,000,000 in the aggregate over the amount reflected or reserved against in the September 30, 2021 consolidated balance sheet of the Company for such specific Actions and would not result in (A) the imposition of any Order that would restrict the future activity or conduct of the Company or any of its Subsidiaries (excluding, for the avoidance of doubt, releases of claims, confidentiality and other de minimis |
(xiii) | shall not, and shall not permit any of its Subsidiaries to incur or commit to capital expenditures or development expenses or expenses relating to integration of its accounting or ERP systems, in each case, in excess of the amounts set forth in Section 5.1(b)(xiii) to the Company Disclosure Schedules (the “ Company Budget |
(xiv) | shall not, and shall not permit any of its Subsidiaries to, terminate or permit any material Company Permit to lapse, other than in accordance with the terms and regular expiration thereof, or fail to apply on a timely basis for any renewal of any renewable material Company Permit (excluding, in each case, any Company Permit that the Company, in its reasonable judgment, no longer believes to be material or necessary to the conduct of the business); |
(xv) | shall not, and shall not permit any of its Subsidiaries to, adopt any plan of merger, consolidation, reorganization, liquidation or dissolution, adopt resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization, file a petition in bankruptcy under any provisions of federal or state bankruptcy applicable Law on behalf of the Company or any of its Subsidiaries or consent to the filing of any bankruptcy petition against the Company or any of its Subsidiaries under applicable Law; |
(xvi) | shall not, and shall not permit any of its Subsidiaries to, enter into any new line of business that is not reasonably related to the existing business lines of the Company and its Subsidiaries, or abandon or discontinue any existing line of business of the Company or its Subsidiaries; |
(xvii) | except as required by applicable Law, shall not (A) make (other than in the Ordinary Course of Business), change or revoke any material Tax election (B) change any material method of Tax accounting or Tax accounting period, (C) file any amended Tax Return with respect to any material Tax, (D) settle or compromise any material Tax proceeding, (E) surrender any right to claim a material Tax refund, or (F) agree to an extension or waiver of the statute of limitations with respect to the assessment of any material Tax; |
(xviii) | shall not, and shall not permit any of its Subsidiaries to become a party to, establish, adopt, materially amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; |
(xix) | shall not, and shall not permit any of its Subsidiaries to enter into any consent decree or similar agreement that, individually or in the aggregate, is material to the Company and its Subsidiaries, taken as a whole; |
(xx) | shall not, and shall not permit any of its Subsidiaries to terminate or fail to exercise renewal rights with respect to any insurance policies of the Company and its Subsidiaries in a manner that would (after taking into account any replacement insurance policies) materially and adversely affect the insurance coverage of the Company or its Subsidiaries; |
(xxi) | shall not, and shall not permit any of its Subsidiaries to, sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest, or otherwise dispose of any material Company Intellectual Property (other than Permitted Liens), except for non-exclusive licenses of Company Intellectual Property granted in the Ordinary Course of Business; |
(xxii) | shall not, and shall not permit any of its Subsidiaries to abandon or otherwise allow to lapse or expire any Registered Company Intellectual Property, other than lapses or expirations of any Registered Company Intellectual Property that is at the end of its maximum statutory term (with renewals); |
(xxiii) | shall not, and shall not permit any of its Subsidiaries to engage in any transaction with, or enter into any agreement, arrangement or understanding with, any Affiliate of the Company or other Person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC; |
(xxiv) | shall not convene any special meeting (or any adjournment or postponement thereof) of the stockholders of the Company; |
(xxv) | shall not, and shall not permit any of its Subsidiaries to modify, amend or replace that certain lease Contract listed in Section 5.1(b)(xxv) of the Company Disclosure Schedules; and |
(xxvi) | shall not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions. |
(c) | Nothing contained in this Agreement shall give Parent or Merger Sub, directly or indirectly, the right to control or direct the Company’s or its Subsidiaries’ operations prior to the Closing Date. Prior to the Closing Date, the Company shall exercise, consistent with the terms and conditions of this Agreement and subject to applicable Law, complete control and supervision over its and its Subsidiaries’ operations. |
5.2 | Conduct of Business by Parent. |
(a) | From and after the date of this Agreement and prior to earlier of the Effective Time and the Termination Date, except (i) as may be required by applicable Law, (ii) as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), (iii) as may be expressly contemplated, required or expressly permitted by this Agreement or (iv) as set forth in Section 5.2(a) of the Parent Disclosure Schedules, Parent shall, and shall cause its Subsidiaries to, use its reasonable best efforts to (A) conduct its business in the Ordinary Course of Business and (B) preserve intact its business organization and maintain existing relationships and goodwill with Governmental Entities, customers, suppliers, licensors, licensees, creditors, lessors, distributors, employees, contractors and business associates, in each case, with whom it and they have material business relations; provided |
(b) | From and after the date of this Agreement and prior to the earlier of the Effective Time and the Termination Date, except (w) as may be required by applicable Law, (x) as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), (y) as may be expressly contemplated, required or expressly permitted by this Agreement or (z) as set forth in Section 5.2(b) of the Parent Disclosure Schedules, Parent: |
(i) | shall not, and shall not permit any of its Subsidiaries that is not wholly-owned to, authorize or pay any dividends on or make any distribution with respect to its outstanding shares (whether in cash, assets, shares or other securities of Parent or its Subsidiaries), except (A) regular quarterly cash dividends paid by Parent on the Parent Common Shares in the Ordinary Course of Business, appropriately adjusted to reflect any stock dividends, subdivisions, splits, combinations or other similar events relating to the Parent Common Shares, and (B) dividends and distributions paid by Subsidiaries of Parent to Parent or to any of Parent’s other wholly-owned Subsidiaries; |
(ii) | shall not, and shall not permit any of its Subsidiaries to, split, combine or reclassify any of its capital or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for its shares, except for any such transaction by a wholly-owned Subsidiary of Parent that remains a wholly-owned Subsidiary after consummation of such transaction; |
(iii) | shall not, and shall not permit any of its Subsidiaries to, issue, deliver, grant, sell, transfer, dispose, or otherwise encumber, or authorize or approve or agree to issue, grant, sell, pledge or otherwise encumber any Parent Common Shares or other equity securities of Parent, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, Parent Common Shares or other equity securities of Parent, including but not limited to the issue or award of any Parent Options or any rights, warrants or options to acquire any such shares, voting equity securities or equity interest or share based performance units, except (A) in the |
Ordinary Course of Business pursuant to awards under Parent Benefit Plans in effect as of the date hereof or as disclosed on Section 5.2(b)(iii) of the Parent Disclosure Schedules or (B) pledges or encumbrances required in connection with the Debt Financing (including for the repayment or refinancing of the “Refinanced Indebtedness” (as defined in the Initial Debt Commitment Letter) or any other repayment or refinancing contemplated thereby); |
(iv) | shall not, and shall not permit any of its Subsidiaries to, materially change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by IFRS or rule or policy of the Canadian Securities Administrators; |
(v) | shall not, and shall not permit any of its Subsidiaries to, redeem, terminate early, unwind, repurchase, prepay, defease, create, suffer to exist, incur, enter into, assume, endorse, guarantee or otherwise become liable for or modify in any material respects the terms of any indebtedness for borrowed money, or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities (directly, contingently or otherwise), except for (A) any indebtedness solely among Parent and its wholly-owned Parent Subsidiaries or solely among wholly-owned Parent Subsidiaries, (B) incremental borrowings under Parent’s existing credit facilities if either (1) contemplated by Section 5.2(b)(v) of the Parent Disclosure Schedules (the “ Parent Budget |
(vi) | shall not adopt any amendments to the Organizational Documents of Parent; |
(vii) | shall not, and shall not permit any of its Subsidiaries to, acquire (including by merger, consolidation or acquisition of stock or assets or any other means) or authorize or announce an intention to so acquire, or enter into any agreements providing for any acquisitions of, directly or indirectly, any equity interests in or assets (including intangible assets) of any person or any business, division, securities, properties or interests thereof, or otherwise engage in any mergers, consolidations or business combinations from any other Person, other than (A) transactions solely between Parent and a wholly-owned Parent Subsidiary or solely between wholly-owned Parent Subsidiaries or acquisitions of supplies or equipment in the Ordinary Course of Business, (B) acquisitions of properties, assets, equipment or inventory in the Ordinary Course of Business and (C) transactions that would not reasonably be expected to have a material adverse effect on the Parent’s ability to complete the Merger or the Financing; and |
(viii) | shall not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions. |
(a) | The Company agrees that, upon the request by Parent and Merger Sub, the Company shall use its reasonable best efforts to: (i) effect one or more reorganizations of the corporate structure, capital structure, business operations and assets of the Company or any of its wholly-owned Subsidiaries or such other transactions as Parent and Merger Sub may reasonably request, (each, a “ Pre- Closing Reorganization (ii) co-operate with Parent, Merger Sub and their advisors in order to determine the nature of the Pre-Closing Reorganizations that might be undertaken and the manner in which they might most effectively be undertaken and whether such reorganizations would require prior approval by a Governmental Entity; provided Pre-Closing Reorganizations are not prejudicial to |
the Company, any of its Subsidiaries or any of the Company stockholders in any material respect and will not, if the Merger is not consummated, adversely affect the Company, any of its Subsidiaries or any of the Company stockholders in any material manner; (B) the Pre-Closing Reorganizations do not impair the ability of the Company or Parent or Merger Sub to complete the Merger or materially delay completion of the Merger; (C) the Pre-Closing Reorganizations are effected as close as reasonably practicable to the Effective Time and do not require the approval of any of the Company stockholders; and (D) the Pre-Closing Reorganizations do not unreasonably and materially interfere with the ongoing operations of the Company and its Subsidiaries and do not result in any breach by the Company or any of its Subsidiaries of any Contract or any breach by the Company or any of its Subsidiaries of their respective Organizational Documents or Law. Parent waives any breach of a representation, warranty or covenant by the Company, where such breach is solely a result of an action taken or not taken by the Company or a Subsidiary pursuant to a request by Parent in accordance with this Section 5.3. Parent and Merger Sub shall provide written notice to the Company of any proposed Pre-Closing Reorganization at least ten (10) Business Days prior to the Effective Time. |
(b) | Parent shall reimburse and indemnify the Company (and each Subsidiary) for all out-of-pocket Pre-Closing Reorganization if the Merger is not completed as contemplated herein. |
(a) | Subject to compliance with applicable Laws and the terms of any existing Contracts, each of the Company and Parent shall (and each shall cause its Subsidiaries to): (i) afford to the other party and to its officers, employees, accountants, consultants, legal counsel, financial advisors and agents and other representatives (collectively, “ Representatives provided COVID-19 Measures). Solely for purposes of furthering the Merger and the other transactions contemplated hereby or integration planning relating thereto, following the date of this Agreement, the Company and its Subsidiaries shall use reasonable best efforts to make available to Parent true and accurate copies of all environmental site assessments, environmental investigation reports, environmental audit reports and other environmental reports and documents in their possession. |
(b) | Subject to compliance with applicable Laws, throughout the period from the Effective Time until the Closing Date, the Company shall (and shall cause its Subsidiaries and Representatives to) (i) afford to Parent and its Representatives reasonable access, for purposes of furthering the transactions contemplated hereby or integration planning relating thereto, during normal business hours, on reasonable advance notice (which shall be deemed reasonable if not less than two (2) Business Days), to the Company’s and its Subsidiaries’ businesses, properties, personnel, agents, accountants, Contracts, commitments, books and records, and (ii) promptly furnish Parent and its Representatives (A) such financial and operating data and other information concerning the Company and its Subsidiaries as may be reasonably requested and is necessary or advisable in connection with any filings contemplated pursuant to Section 5.7, (B) all reports or other information concerning the Company and its Subsidiaries provided to third parties pursuant to the terms of any outstanding |
indebtedness of the Company or any of its Subsidiaries and (C) all other information concerning the Company’s business, properties and personnel as may reasonably be requested by the other party; provided COVID-19 Measures). |
(c) | The foregoing provisions of this Section 5.3 notwithstanding, neither the Company nor Parent shall be required to afford such access or furnish such information if it would unreasonably disrupt the operations of such party or any of its Subsidiaries, would cause a violation of any agreement to which such party or any of its Subsidiaries is a party, would result in a loss of privilege or trade secret protection to such party or any of its Subsidiaries, would result in the disclosure of any information in connection with any litigation or similar dispute among the Parties hereto, would constitute a violation of any applicable Law or result in the disclosure of any personal information that would expose the such party to the risk of liability. In the event that Parent or the Company objects to any request submitted pursuant to and in accordance with this Section 5.3 and withholds information on the basis of the foregoing sentence, the Company or Parent, as applicable, shall inform the other party as to the general nature of what is being withheld and the Company and Parent shall use reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure that does not suffer from any of the foregoing impediments, including through the use of reasonable best efforts to (i) obtain the required consent or waiver of any third party required to provide such information and (ii) implement appropriate and mutually agreeable measures to permit the disclosure of such information in a manner to remove the basis for the objection, including by arrangement of appropriate clean room procedures, if the Parties determine that doing so would reasonably permit the disclosure of such information without violating applicable Law or jeopardizing such privilege. |
(d) | Notwithstanding anything to the contrary herein, no Party shall be permitted to conduct any testing, sampling or subsurface or invasive analysis (commonly known as a Phase II environmental assessment) at any property of the other Parties or of any Parent Subsidiary or Company Subsidiary, as applicable. |
(e) | Each of the Company and Parent hereby agrees that all information provided to it or any of its Representatives in connection with this Agreement and the consummation of the transactions contemplated hereby shall be deemed to be “Confidential Information,” as such term is used in, and shall be treated in accordance with, the non-disclosure agreement, dated October 3, 2021, between the Company and Parent (the “Confidentiality Agreement |
(f) | No investigation by any of the Parties or their respective Representatives shall affect or be deemed to modify or waive the representations and warranties of the other set forth herein. |
(a) | Subject to the provisions of this Section 5.5, from the date of this Agreement until the earlier of the Effective Time and the Termination Date, the Company agrees that it shall not, and shall cause its Subsidiaries, and its and their respective directors and officers not to, and shall use reasonable best efforts to cause its and its Subsidiaries other Representatives not to, directly or indirectly, (i) solicit, initiate or knowingly encourage or knowingly facilitate any inquiry regarding, or the making or submission of any proposal, offer or indication of interest that constitutes, or would reasonably be expected to lead to, or result in, a Company Alternative Proposal, (ii) engage in, knowingly encourage, continue or otherwise participate in any discussions or negotiations with any Person regarding a Company Alternative Proposal, or any communications regarding or any inquiry, proposal or offer that would reasonably be expected to lead to, or result in, a Company Alternative Proposal (except to notify such Person that the provisions of this Section 5.5 prohibit any such discussions or negotiations), (iii) furnish any nonpublic information relating to the Company or its Subsidiaries in connection with or for the purpose of facilitating a Company Alternative Proposal or any inquiry, proposal, offer or indication of interest that would reasonably be expected to lead to, or result in, a Company Alternative Proposal |
and request the prompt return or destruction of any confidential information provided to any third party in connection with any Company Alternative Proposal; (iv) recommend or enter into any other letter of intent, memorandum of understandings, agreement in principle, option agreement, acquisition agreement, merger agreement, joint venture agreement, partnership agreement or other similar agreement with respect to a Company Alternative Proposal (except for confidentiality agreements permitted under Section 5.5(b)); (v) approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL; or (vi) adopt, approve, endorse, authorize, agree or publicly propose to adopt, approve, endorse or authorize to do any of the foregoing or otherwise knowingly facilitate any effort or attempt to make a Company Alternative Proposal. |
(b) | Notwithstanding anything in this Section 5.5 to the contrary, at any time prior to, but not after, obtaining the Company Stockholder Approval, if the Company receives a bona fide non-public information is provided or made available to such third party, any non-public information furnished to such third party that was not previously furnished to Parent; provided however non-public information to such third party in connection with any actions permitted by this Section 5.5(b) other than in accordance with customary “clean room” or other similar procedures designed to limit the disclosure of competitively sensitive information, and (ii) engage in discussions or negotiations with the third party (including its Representatives) with respect to the Company Alternative Proposal. The Company shall promptly (and in any event within 24 hours) notify Parent in writing if: (i) any inquiries, proposals or offers with respect to a Company Alternative Proposal are received by the Company or any of its Representatives or (ii) any information is requested from the Company or any of its Representatives that, to the Knowledge of the Company, has been or is reasonably likely to have been made in connection with any Company Alternative Proposal, which notice shall identify the material terms and conditions thereof (including the name of the applicable third party and complete copies of any written requests, proposals or offers and any other material documents, including proposed agreements). It is understood and agreed that any contacts, disclosures, discussions or negotiations permitted under this Section 5.5(b), including any public announcement that the Company or the Company Board has made any determination contemplated under this Section 5.5(b) to take or engage in any such actions, shall not constitute a Company Change of Recommendation or otherwise constitute a basis for Parent to terminate this Agreement pursuant to Section 7.1(d)(ii) The Company shall keep Parent fully informed on a current basis of any material developments regarding any Company Alternative Proposals or any material change to the terms of any such Company Alternative Proposal and any material change to the status of any such discussions or negotiations with respect thereto. |
(c) | Except as expressly permitted by Section 5.5(d), the Company Board, including any committee thereof, shall not (i) withdraw, withhold, qualify or modify, or propose publicly to withdraw, withhold, qualify or modify, the Company Recommendation, (ii) fail to include the Company Recommendation in the Proxy Statement/Prospectus that is mailed by the Company to the stockholders of the Company; (iii) if any Company Alternative Proposal that is structured as a tender offer or exchange offer for the outstanding shares of Company Common Stock is commenced pursuant to Rule 14d-2 under the Exchange Act (other than by Parent or an Affiliate of Parent), fail to recommend and publicly announce, within ten (10) Business Days after such commencement, against acceptance of such tender offer or exchange offer by its stockholders; (iv) approve, adopt, recommend or declare advisable any Company Alternative Proposal or publicly propose to approve, adopt or recommend, or declare advisable any Company Alternative Proposal; (v) fail to publicly reaffirm the Company Recommendation, within ten (10) Business Days after a Company Alternative Proposal (or material modification thereto) is first publicly announced by the Company or the person making such Company Alternative Proposal (or, with respect to any material amendments, revisions or changes to the terms of any such previously publicly disclosed Company Alternative Proposal that are publicly disclosed within the last five (5) Business Days prior to the Effective Time, fail to take the actions referred to in this clause (v), with references to the applicable ten (10) Business Day period being replaced with three (3) Business Days); (vi) approve, adopt or recommend, or declare advisable or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (other than a confidentiality agreement referred to in and entered into compliance with Section 5.5(b)) with respect to any Company Alternative Proposal; (vii) exempt any person other than Parent or Merger Sub from any Takeover Statute or approve or authorize, or cause or permit the Company or any of its Subsidiaries to enter into, a Company Acquisition Agreement, or (viii) resolve or publicly propose to take any action described in the foregoing clauses (i) through (vii) (any such action set forth in the foregoing clauses (i) through (viii), a “Company Change of Recommendation |
(d) | Notwithstanding anything to the contrary set forth in this Agreement, but subject to Section 5.5(e), prior to obtaining the Company Stockholder Approval (i) the Company Board may make a Company Change of Recommendation in response to a Company Intervening Event if the Company Board has determined, in good faith after consultation with the Company’s outside legal counsel, that the failure to take such action would breach or would reasonably be expected to breach the Company Board’s fiduciary duties to the Company’s stockholders under applicable Law, or (ii) the Company Board may, in response to a Company Superior Proposal (A) make a Company Change of Recommendation and/or (B) cause the Company to terminate this Agreement pursuant to Section 7.1(c)(ii) in order to enter into a Company Acquisition Agreement that did not result from a breach of this Section 5.5 which Company Acquisition Agreement the Company Board determines, in good faith after consultation with the Company’s outside legal counsel and financial advisors, is a Company Superior Proposal, but only if the Company Board has determined in good faith after consultation with the Company’s outside legal counsel, that the failure to make such a Company Change of Recommendation and / or terminate this Agreement to enter into such Company Acquisition Agreement providing for such Company Superior Proposal would breach or would reasonably be expected to breach the Company Board’s fiduciary duties to the Company’s stockholders under applicable Law. |
(e) | Prior to the Company taking any action permitted (i) under Section 5.5(d)(i) in response to a Company Intervening Event, the Company shall provide Parent with ten (10) Business Days’ prior written notice advising Parent it intends to effect a Company Change of Recommendation and specifying, in reasonable detail, the reasons therefor, and during such ten (10) Business Day period, the Company shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent Parent desires to negotiate) any proposal by Parent to amend the terms and conditions of this Agreement in a manner that would obviate the need to effect a Company Change of Recommendation and at the end of such ten (10) Business Day period the Company Board again makes the fiduciary determination under Section 5.5(d)(i) (after in good faith taking into account any |
amendments to this Agreement proposed by Parent), or (ii) under Section 5.5(d)(ii) in response to a Company Superior Proposal, (A) the Company shall provide Parent with five (5) Business Days’ prior written notice (a “ Company Superior Proposal Notice |
(f) | Nothing contained in this Agreement shall prohibit the Company or the Company Board or any committee thereof from complying with its disclosure obligations under applicable Law or rules and policies of the NYSE, including taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act (or any similar communication to stockholders) or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder. For the avoidance of doubt, this Section 5.5(f) shall not permit the Company Board to make (or otherwise modify the definition of) a Company Change of Recommendation except to the extent expressly permitted by Section 5.5(d). |
(g) | Further to Section 5.5(a), the Company shall (and shall cause its Subsidiaries and its and their respective directors and officers and shall use its reasonable best efforts to cause its other Representatives to) promptly terminate any existing discussions and negotiations conducted heretofore with any Person (other than Parent, the Company or any of their respective Affiliates or Representatives) with respect to any Company Alternative Proposal, or proposal or transaction that could reasonably be expected to lead to or result in a Company Alternative Proposal. Further, the Company shall promptly terminate all physical and electronic data access previously granted to such Persons and request that any such Persons promptly return or destroy all confidential information concerning the Company and any of its Subsidiaries and provide prompt written confirmation thereof. |
(h) | “ Company Acquisition Agreement provided, that |
(i) | “ Company Alternative Proposal |
(iii) the direct or indirect acquisition by any Person of more than 20% of the outstanding shares of Company Common Stock. |
(j) | “ Company Intervening Event provided however |
(k) | “ Company Superior Proposal bona fide |
(a) | Subject to the provisions of this Section 5.6, from the date of this Agreement until the earlier of the Effective Time and the Termination Date, Parent agrees that it shall not, and shall cause its Subsidiaries |
and its and their respective directors and officers not to, and shall use reasonable best efforts to cause its and its Subsidiaries’ other Representatives not to, directly or indirectly, (i) solicit, initiate or knowingly encourage or knowingly facilitate any inquiry regarding, or the making or submission of any proposal, offer or indication of interest that constitutes, or would reasonably be expected to lead to, or result in, a Parent Alternative Proposal, (ii) engage in, knowingly encourage, continue or otherwise participate in any discussions or negotiations with any Person regarding Parent Alternative Proposal, or any communications regarding or any inquiry, proposal or offer that would reasonably be expected to lead to, or result in, a Parent Alternative Proposal (except to notify such Person that the provisions of this Section 5.6 prohibit any such discussions or negotiations), (iii) furnish any non-public information relating to Parent or its Subsidiaries in connection with or for the purpose of facilitating a Parent Alternative Proposal or any inquiry, proposal, offer or indication of interest that would reasonably be expected to lead to, or result in, a Parent Alternative Proposal and request the prompt return or destruction of any confidential information provided to any third party in connection with any Parent Alternative Proposal; (iv) recommend or enter into any other letter of intent, memorandum of understandings, agreement in principle, option agreement, acquisition agreement, merger agreement, arrangement agreement, amalgamation agreement, joint venture agreement, partnership agreement or other similar agreement with respect to a Parent Alternative Proposal (except for confidentiality agreements permitted under Section 5.6(b)); (v) approve any transaction under, or any third party becoming an “interested stockholder” under Section 203 of the DGCL (or similar Takeover Statute applicable to Parent under Canadian Law); or (vi) adopt, approve, endorse, authorize agree or publicly propose to adopt, approve, endorse or authorize to do any of the foregoing or otherwise knowingly facilitate any effort or attempt to make a Parent Alternative Proposal. |
(b) | Notwithstanding anything in this Section 5.6 to the contrary, at any time prior to, but not after, obtaining the Parent Shareholder Approval, if Parent receives a bona fide, unsolicited Parent Alternative Proposal in writing that did not result from a breach of this Section 5.6 (which Parent Alternative Proposal is not withdrawn), Parent and its Representatives may contact the third party making such Parent Alternative Proposal to clarify the terms and conditions thereof. If the Parent Board determines in good faith after consultation with Parent’s outside legal counsel and financial advisors that such Parent Alternative Proposal constitutes a Parent Superior Proposal or would reasonably be expected to result in a Parent Superior Proposal, then Parent may take the following actions: (i) furnish nonpublic information to the third party making such Parent Alternative Proposal (including its Representatives, including its equity and debt financing sources) in response to a request therefor, if, and only if, (A) prior to so furnishing such information the third party has executed a confidentiality agreement with Parent (a copy of which shall be provided to the Company within 24 hours of execution) having confidentiality and use provisions that, in each case, are not less restrictive to such third party than the provisions in the Confidentiality Agreement are to the Company (it being understood that such confidentiality agreement need not contain any “standstill” or similar provisions or otherwise prohibit the making or amendment of any Parent Alternative Proposal, but such confidentiality agreement shall not grant such third party the exclusive right to negotiate with Parent), and (B) Parent also provides to the Company, prior to or substantially concurrently with the time such non-public information is provided or made available to such third party, any non-public information furnished to such third party that was not previously furnished to the Company; provided however non-public information to such third party in connection with any actions permitted by this Section 5.6(b) other than in accordance with customary “clean room” or other similar procedures designed to limit the disclosure of competitively sensitive information, and (ii) engage in discussions or negotiations with the third party (including its Representatives) with respect to the Parent Alternative Proposal. Parent shall promptly (and in any event within 24 hours) notify the Company in writing if: (i) any inquiries, proposals or offers with respect to a Parent Alternative Proposal are received by Parent or any of its Representatives or (ii) any information is requested from Parent or any of its Representatives that, to the Knowledge of Parent, has |
been or is reasonably likely to have been made in connection with any Parent Alternative Proposal, which notice shall identify the material terms and conditions thereof (including the name of the applicable third party and, complete copies of any written requests, proposals or offers and any other material documents, including proposed agreements). It is understood and agreed that any contacts, disclosures, discussions or negotiations permitted under this Section 5.6(b), including any public announcement that Parent or the Parent Board has made any determination contemplated under this Section 5.6(b) to take or engage in any such actions, shall not constitute a Parent Change of Recommendation or otherwise constitute a basis for the Company to terminate this Agreement pursuant to Section 7.1. Parent shall keep the Company fully informed on a current basis of any material developments regarding any Parent Alternative Proposals or any material change to the terms of any such Parent Alternative Proposal and any material change to the status of any such discussions or negotiations with respect thereto. |
(c) | Except as expressly permitted by Section 5.6(d), the Parent Board, including any committee thereof, shall not (i) withdraw, withhold, qualify or modify, or propose publicly to withdraw, withhold, qualify or modify, the Parent Recommendation; (ii) fail to include the Parent Recommendation in the Management Information Circular that is mailed by Parent to the shareholders of Parent; (iii) if any Parent Alternative Proposal that is structured as a tender offer or exchange offer for the outstanding Parent Common Shares is commenced (other than by the Company or an Affiliate of the Company), fail to recommend and publicly announce, within ten (10) Business Days after such commencement, against acceptance of such tender offer or exchange offer by its shareholders; (iv) approve, adopt, recommend or declare advisable any Parent Alternative Proposal or publicly propose to approve, adopt or recommend, or declare advisable any Parent Alternative Proposal; (v) fail to publicly reaffirm the Parent Recommendation, within ten (10) Business Days after a Parent Alternative Proposal (or material modification thereto) is first publicly announced by Parent or the person making such Parent Alternative Proposal (or, with respect to any material amendments, revisions or changes to the terms of any such previously publicly disclosed Parent Alternative Proposal that are publicly disclosed within the last five (5) Business Days prior to the Effective Time, fail to take the actions referred to in this clause (v), with references to the applicable ten (10) Business Day period being replaced with three (3) Business Days); (vi) approve, adopt or recommend, or declare advisable or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (other than a confidentiality agreement referred to in and entered into compliance with Section 5.6(b)) with respect to any Parent Alternative Proposal; (vii) exempt any person other than the Company from any Takeover Statute or approve or authorize, or cause or permit Parent any of its Subsidiaries to enter into a Parent Acquisition Agreement, or (viii) resolve or publicly propose to take any action described in the foregoing clauses (i) through (vii) (any such action set forth in the foregoing clauses (i) through (ix), a “ Parent Change of Recommendation |
(d) | Notwithstanding anything to the contrary set forth in this Agreement, but subject to Section 5.6(e), prior to obtaining the Parent Shareholder Approval, (i) the Parent Board may make a Parent Change of Recommendation in response to a Parent Intervening Event if the Parent Board has determined, in good faith after consultation with the Parent’s outside legal counsel, that the failure to take such action would breach or would reasonably be expected to breach the Parent Board’s fiduciary duties to the Parent’s stockholders under applicable Law, or (ii) the Parent Board may, in response to a Parent Superior Proposal, (i) make a Parent Change of Recommendation and/or (ii) cause Parent to terminate this Agreement pursuant to Section 7.1(d)(ii) in order to enter into a Parent Acquisition Agreement that did not result from a breach of this Section 5.6 which Parent Acquisition Agreement the Parent Board determines, in good faith after consultation with Parent’s outside legal counsel and financial advisors, is a Parent Superior Proposal, but only if the Parent Board has determined in good faith after consultation with Parent’s outside legal counsel, that the failure make such a Parent Change of Recommendation and / or terminate this Agreement to enter into a Parent Acquisition Agreement |
providing for a Parent Superior Proposal would breach or would reasonably be expected to breach the Parent Board’s fiduciary duties to Parent’s shareholders under applicable Law. |
(e) | Prior to Parent taking any action permitted under (i) Section 5.6(d)(i) in response to a Parent Intervening Event, the Parent shall provide Company with ten (10) Business Days’ prior written notice advising Company it intends to effect a Parent Change of Recommendation and specifying, in reasonable detail, the reasons therefor, and during such ten (10) Business Day period, the Parent shall cause its Representatives (including its executive officers) to be available to negotiate in good faith (to the extent Company desires to negotiate) any proposal by Company to amend the terms and conditions of this Agreement in a manner that would obviate the need to effect a Parent Change of Recommendation and at the end of such ten (10) Business Day period the Parent Board again makes the fiduciary determination under Section 5.6(d)(i) (after in good faith taking into account any amendments to this Agreement proposed by Company), or (ii) Section 5.6(d)(ii) in response to a Parent Superior Proposal, (A) Parent shall provide the Company with five (5) Business Days’ prior written notice (a “ Parent Superior Proposal Notice |
(f) | Nothing contained in this Agreement shall prohibit Parent or the Parent Board or any committee thereof from (i) complying with its disclosure obligations under applicable Law or rules and policies of the TSX, including taking and disclosing to its shareholders a position a “stop, look and listen” statement pending disclosure of its position thereunder, or (ii) complying with Part 2 – Division 1 of National Instrument 62-104 – Take-Over Bids and Issuer Bids |
(g) | Further to Section 5.6(a), Parent shall (and shall cause its Subsidiaries and its and their respective directors and officers and shall use its reasonable best efforts to cause its other Representatives to) promptly terminate any existing discussions and negotiations conducted heretofore with any Person (other than the Company, Parent or any of their respective Affiliates or Representatives) with respect to any Parent Alternative Proposal, or proposal or transaction that could reasonably be expected to lead to or result in a Parent Alternative Proposal. Further, Parent shall promptly terminate all physical and electronic data access previously granted to such Persons and request that any such Persons promptly return or destroy all confidential information concerning Parent and any of its Subsidiaries and provide prompt written confirmation thereof. |
(h) | “ Parent Acquisition Agreement |
provided, that |
(i) | “ Parent Alternative Proposal |
(j) | “ Parent Intervening Event provided however |
(k) | “ Parent Superior Proposal |
contemplated by this Agreement proposed by Company during the notice period, would, if consummated, result in a transaction (i) that is more favorable to Parent’s shareholders from a financial point of view than the transactions contemplated by this Agreement and (ii) that is reasonably likely to be completed, taking into account any regulatory, financing or approval requirements and any other aspects considered relevant by the Parent Board. For purposes of the reference to a “Parent Alternative Proposal” in this definition, all references to (x) “20%” in the definition of “Parent Alternative Proposal” will be deemed to be references to “80%” and (y) “80%” in the definition of “Parent Alternative Proposal” will be deemed to be references to “20%”. |
5.7 | Preparation of Registration Statement and Management Information Circular; Shareholders Meetings; Regulatory Filings; Other Actions. |
(a) | (i) As promptly as reasonably practicable after the date of this Agreement and, the Parties will use their respective reasonable best efforts to complete within forty-five (45) days following the date hereof, the Company and Parent shall prepare and file with the SEC the preliminary US Registration Statement (including the Proxy Statement/Prospectus with respect to the Company Stockholder Meeting) and (ii) Parent shall prepare and file with the TSX the draft Management Information Circular with respect to the Parent Shareholder Meeting. Each of the Company and Parent shall use its reasonable best efforts to (A) have the US Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and (B) keep the US Registration Statement effective for so long as necessary to complete the Merger. Each of the Company and Parent shall furnish all information concerning itself, its Affiliates and the holders of its shares to the other and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of the Proxy Statement/Prospectus, the Management Information Circular and the US Registration Statement. Each of the Company and Parent shall provide the other Party with a reasonable period of time to review the Proxy Statement/Prospectus and the Management Information Circular and any amendments thereto prior to filing and shall reasonably consider any comments from the other Party. Each of the Company and Parent shall respond promptly to any comments from the SEC or the staff of the SEC, any of the Canadian Securities Administrators, or the TSX, as applicable. Each of the Company and Parent shall notify the other Party promptly of the receipt of any comments (whether written or oral) from the SEC or the staff of the SEC, any of the Canadian Securities Administrators, or the TSX and of any request by the SEC or the staff of the SEC or the TSX for amendments or supplements to the Proxy Statement/Prospectus, the Management Information Circular or US Registration Statement or for additional information and shall supply the other Party with copies of all correspondence between it and any of its Representatives, on the one hand, and the SEC or the staff of the SEC or the TSX, on the other hand, with respect to the Proxy Statement/Prospectus, the Management Information Circular or US Registration Statement or the transactions contemplated by this Agreement within 24 hours of the receipt thereof. The Proxy Statement/Prospectus, the Management Information Circular and US Registration Statement shall comply as to form in all material respects with the applicable requirements of the Exchange Act, the Securities Act and applicable Canadian Securities Laws and corporate Laws, as applicable, and, without limiting the foregoing, Parent shall ensure that the Management Information Circular shall provide shareholders of Parent with information in sufficient detail to permit them to form a reasoned judgment concerning the matters to be placed before them at the Parent Shareholder Meeting. If at any time prior to the Company Stockholder Meeting or the Parent Shareholder Meeting (or any adjournment or postponement of the Company Stockholder Meeting or the Parent Shareholder Meeting) any information relating to Parent or the Company, or any of their respective Affiliates, officers or directors, is discovered by Parent or the Company that should be set forth in an amendment or supplement to the Proxy Statement/Prospectus, the Management Information Circular and/or US Registration Statement, so that the Proxy Statement/Prospectus, the Management Information Circular and/or US Registration Statement would not include a misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which |
they were made, not misleading, the Party that discovers such information shall promptly notify the other Parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed by the Company and/or Parent with the SEC, the Canadian Securities Administrators and/or the TSX, as applicable, and, to the extent required by applicable Law, disseminated to the stockholders of the Company and the shareholders of Parent. The Company shall cause the Proxy Statement/Prospectus and US Registration Statement to be mailed to the Company’s stockholders as promptly as reasonably practicable after the US Registration Statement is declared effective under the Securities Act (such effectiveness date, the “ Clearance Date |
(b) | Each of Parent and the Company shall provide the other Party and its legal counsel with a reasonable opportunity to review and comment on drafts of the Proxy Statement/Prospectus, the Management Information Circular, the US Registration Statement and other documents related to the Company Stockholder Meeting, the Parent Shareholder Meeting or the issuance of the Parent Common Shares (and any amendments thereto) in connection with the Merger, prior to filing such documents with the applicable Governmental Entity and mailing such documents to the Company’s stockholders or Parent’s shareholders, as applicable. Each Party hereto shall consider in good faith in the Proxy Statement/Prospectus, the Management Information Circular, the US Registration Statement and such other documents related to the Company Stockholder Meeting, the Parent Shareholder Meeting or the issuance of Parent Common Shares in connection with the Merger, all comments reasonably and promptly proposed by the other Party or its legal counsel. Subject to applicable Law, the information contained in the Management Information Circular shall be consistent in all material respects with the substantive information contained in the Proxy Statement/Prospectus; provided |
(c) | Subject to Section 5.4(e), Section 5.7(d) and Section 5.7(g), the Company shall take all action necessary in accordance with applicable Law and the certificate of incorporation and bylaws of the Company to set a record date for, duly give notice of, convene and hold a special meeting of its stockholders following the mailing of the Proxy Statement/Prospectus for the purpose of obtaining the Company Stockholder Approval (the “ Company Stockholder Meeting |
(d) | The Company shall cooperate with and keep Parent informed on a reasonably current basis regarding its solicitation efforts and voting results following the dissemination of the Proxy Statement/Prospectus to its shareholders. The Company (i) shall adjourn or postpone the Company Stockholder Meeting (A) to allow time for the filing and dissemination of any supplemental or amended disclosure document that the Company Board has determined in good faith (after consultation with its outside legal counsel) is required to be filed and disseminated under applicable Law or (B) if as of the time that the Company Stockholder Meeting is originally scheduled (as set forth in the Proxy Statement/Prospectus) there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholder Meeting and (ii) may, and at Parent’s request shall, adjourn or postpone the Company Stockholder Meeting to allow reasonable additional time to solicit additional proxies necessary to obtain the Company Stockholder Approval; provided, however |
Company Stockholder Meeting shall not be adjourned or postponed to a date that is more than twenty (20) Business Days after the date for which the Company Stockholder Meeting was previously scheduled; provided further |
(e) | Subject to Section 5.6, Section 5.7(f) and Section 5.7(g), Parent shall take all action necessary in accordance with applicable Law and the articles of incorporation and bylaws of Parent to set a record date for, duly give notice of, convene and hold a meeting of its shareholders following the mailing of the Proxy Statement/Prospectus for the purpose of obtaining the Parent Shareholder Approval (the “ Parent Shareholder Meeting |
(f) | Parent shall cooperate with and keep the Company informed on a reasonably current basis regarding its solicitation efforts and voting results following the dissemination of the Management Information Circular to its shareholders. Parent (i) shall adjourn or postpone the Parent Shareholder Meeting (A) to allow time for the filing and dissemination of any supplemental or amended disclosure document that the Parent Board has determined in good faith (after consultation with its outside legal counsel) is required to be filed and disseminated under applicable Law or (B) if as of the time that the Parent Shareholder Meeting is originally scheduled (as set forth in the Management Information Circular) there are insufficient Parent Common Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Parent Shareholder Meeting and (ii) may, and at the Company’s request shall, adjourn or postpone the Parent Shareholder Meeting to allow reasonable additional time to solicit additional proxies necessary to obtain the Parent Shareholder Approval; provided, however provided further |
(g) | Subject to applicable Law, each of the Parties shall reasonably cooperate and use their reasonable best efforts to cause the record dates and date and time of the Company Stockholder Meeting and the Parent Shareholder Meeting to be coordinated such that they occur on the same calendar day (and in any event as close in time as possible). |
(h) | Without limiting the generality of the foregoing, the Company agrees that its obligations to hold the Company Stockholder Meeting pursuant to this Section 5.7 shall not be affected solely by the making of a Company Change of Recommendation, and Parent agrees that its obligations to hold the Parent Shareholder Meeting pursuant to this Section 5.7 shall not be affected solely by the making of a Parent Change of Recommendation. The Company agrees that notwithstanding any Company Change of |
Recommendation, this Agreement shall be submitted to the holders of the Company Common Stock at the Company Stockholder Meeting for the purpose of voting on the adoption of this Agreement and the approval of the Merger, and its obligations pursuant to this Section 5.7 shall not be affected by the Company Change of Recommendation, unless the Company terminates this Agreement in accordance with its terms prior to the Company Stockholder Meeting. Parent agrees that notwithstanding any Parent Change of Recommendation, the approval of the Parent Share Issuance in connection with the Merger shall be submitted to the holders of the Parent Common Shares at the Parent Shareholder Meeting, and its obligations pursuant to this Section 5.7 shall not be affected by the Parent Change of Recommendation, unless Parent terminates this Agreement in accordance with its terms prior to the Parent Shareholder Meeting. |
(i) | Subject to the terms and conditions herein provided, each of Parent and the Company shall (and shall cause their Subsidiaries to) use their respective reasonable best efforts to promptly take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under this Agreement and applicable Laws to cause the conditions to Closing set forth in Article 6 of this Agreement to be satisfied and to consummate, and make effective as promptly as practicable after the date hereof, the Merger and the other transactions contemplated by this Agreement as promptly as practicable after the date of this Agreement and in any event prior to the End Date, including by preparing and filing with all Governmental Entities as promptly as practicable after the date of this Agreement all applications, notices, petitions, filings, ruling requests, and other documents necessary to consummate the Merger, and to obtain as promptly as practicable after the date of this Agreement all permits, consents, waivers, approvals, clearances, authorizations and expirations or terminations of waiting periods necessary to be obtained from the Antitrust Authorities and any other Governmental Entity in order to consummate the Merger (collectively, the “ Governmental Approvals non-U.S. jurisdictions of the Antitrust Authorities, if required to have a waiting period, or enter into any agreement with the Antitrust Authorities or any other Governmental Entity not to consummate the Merger, without consulting with the other Party in good faith. Parent and the Company shall supply as promptly as practicable any additional information or documentation that may be requested by the Antitrust Authorities and use their respective reasonable best efforts to take all other actions necessary, proper or advisable to obtain the Required Antitrust Approvals or to cause the expiration or termination of the applicable waiting periods under the HSR Act and any other Antitrust Law as soon as practicable (including complying with any “second request” for information or similar request from a Governmental Entity pursuant to other regulatory Laws). In connection with the actions referenced in Section 5.7(i) to obtain all Governmental Approvals for the Merger under the Antitrust Laws, each of Parent and the Company shall: (A) cooperate in all respects with each other in connection with any material communication, filing or submission and in connection with any investigation or other inquiry, including any Action initiated by a private party; (B) keep the other Party and its counsel promptly informed of any material communication received by such Party from, or given by such Party to, the Antitrust Authorities or other Governmental Entity and of any material communication received or given in connection with any Action by a private party, in each case regarding any of the Merger; (C) consult with each other in advance of any meeting or conference with the Antitrust Authorities or any other Governmental Entity or, in connection with any Action by a private party, with any other person, and to the extent permitted by the Antitrust Authorities or such other Governmental Entity or other person, give the other Party or its counsel the opportunity to attend and participate in such meetings and conferences; and (D) permit the other Party and its counsel to review in advance any submission, filing or material communication (and documents submitted therewith) intended to be given by it to the Antitrust Authorities or any other Governmental Entity; provided |
be redacted to remove business secrets and other confidential material so long as the disclosing Party acts reasonably in identifying such material for redaction. Parent and the Company may, as each deems advisable and necessary, reasonably designate any competitively sensitive material to be provided to the other under this Section 5.7(i) as “Antitrust Counsel Only Material.” Such materials and the information contained therein shall be given only to the outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials (Parent or the Company, as the case may be) or its legal counsel. In furtherance and not in limitation of the other covenants of the Parties in this Agreement, if Parent determines, in its sole discretion, to defend through litigation on the merits any claim asserted in any court or other governmental body with respect to the Merger by the FTC, DOJ or any other applicable Governmental Entity, the Company shall use its reasonable best efforts to cooperate with and support the Parent’s efforts. Without limiting the generality of the foregoing and notwithstanding anything in this Agreement to the contrary, in furtherance of the Parties reasonable best efforts, each of Parent and the Parent Subsidiaries, on the one hand, and each of the Company and the Company Subsidiaries, on the other hand, to the extent required to obtain Required Antitrust Approvals or any necessary Governmental Approvals, shall (x) propose, negotiate or offer to effect, or consent or commit to, any sale, leasing, licensing, transfer, disposal, divestiture or other encumbrance, or holding separate, of any assets, licenses, operations, rights, product lines, businesses or interest therein (collectively, a “ Divestiture Remedy provided provided further |
(j) | Parent shall not, and shall cause the Parent Subsidiaries not to, and the Company shall not, and shall cause the Company Subsidiaries not to, acquire or agree to acquire, by merging with or into or consolidating with, or by purchasing a portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, |
or otherwise acquire or agree to acquire any assets, or take any other action, if the entering into of a definitive agreement relating to, or the consummation of such acquisition, merger or consolidation, or the taking of any other action, would reasonably be expected to (i) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any authorizations, consents, orders, clearances or approvals of any Governmental Entity necessary to consummate the transactions contemplated hereby or the expiration or termination of any applicable waiting period; (ii) increase, in any material respect, the risk of any Governmental Entity entering an Order prohibiting the consummation of the transactions contemplated hereby; (iii) increase the risk, in any material respect, of not being able to remove any such Order on appeal or otherwise; or (iv) prevent or materially delay the consummation of the transactions contemplated hereby. |
5.8 | Employee Matters . |
(a) | During the period commencing at the Effective Time and ending on December 31, 2022 (the “ Continuation Period Company Continuing Employees pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to such Company Continuing Employees, to the extent such pre-existing conditions, exclusions or waiting periods were satisfied under the similar Company Benefit Plan in effect immediately prior to the Effective Time; and (y) provide each such Company Continuing Employee with credit for any co-payments and deductibles paid (to the same extent such credit was given for the year under the similar Company Benefit Plan in effect immediately prior to the Effective Time) in satisfying any applicable deductible or out-of-pocket |
(b) | With respect to any Parent Benefit Plan, excluding any retiree health plans or programs maintained by Parent or any of its Subsidiaries, if any, any defined benefit retirement plans or programs maintained by Parent or any of its Subsidiaries, if any, and any equity compensation arrangements maintained by Parent or any of its Subsidiaries, (collectively, the “ Applicable Parent Benefit Plans provided |
(c) | The Company shall terminate the Company Non-Qualified Deferred Compensation Plan effective no later than the day immediately prior to the Closing Date. The Parent has its own 401(k) plan, therefore, |
effective as of no later than the day immediately prior to the Closing Date, the Company will, if requested by Parent in its sole discretion, freeze and terminate the Company’s 401(k) Plan with Fidelity Investments. Effective no later than the day immediately preceding the Closing Date, the Company shall terminate any Company employee plans maintained by the Company or its Subsidiaries that Parent has requested to be terminated by providing a written notice to the Company at least five (5) days prior to the Closing Date, provided |
(d) | Without limiting the generality of Section 8.10, the provisions of this Section 5.8 are solely for the benefit of the Parties to this Agreement, and no current or former director, employee or consultant or any other person shall be a third-party beneficiary of this Agreement, and nothing herein shall prevent Parent, the Surviving Corporation or any of their Affiliates from terminating the employment of any Company Continuing Employee. |
(e) | Parent, Merger Sub and Company acknowledge and agree that (i) the Merger will constitute a “Change in Control” (or concept of similar import) under the Company Benefit Plans identified in Section 5.8(e) of the Company Disclosure Schedules and (ii) as a result of the Merger, the individuals identified in Section 5.8(e) of the Company Disclosure Schedules will be deemed to have experienced a “Good Reason” event (or concept of similar import), as applicable, as defined under such Company Benefit Plans. |
(f) | With respect to matters described in this Section 5.8, the Company will not send any written notices or other written communication materials to Company employees without the prior written consent of Parent. The Company will cooperate and collaborate with the Parent on any such notices or communications. |
5.9 | Company Material Contracts; Consents. |
(a) | The Company shall use reasonable best efforts to provide true and correct copies of all Company Material Contracts (subject to the redaction of any commercially sensitive information) to Parent promptly following the date of this Agreement. |
(b) | The Company shall give any notices to third parties required under the Company Material Contracts and shall use, and cause each of its respective Subsidiaries to use, its and their reasonable best efforts to obtain any third party consents with respect to such Company Material Contracts that are necessary, proper or advisable to consummate the transactions, including the Merger. |
(c) | Neither the failure of the Company to provide copies of all Company Material Contracts nor the Company’s failure to receive any required third party consents with respect to such Company Material Contract following the Company’s reasonable best efforts to obtain such consents shall be a breach of this Section 5.9. |
5.10 | Legal Conditions to the Merger. |
5.11 | Takeover Statute. |
5.12 | Public Announcements. |
5.13 | Indemnification and Insurance. |
(a) | Parent, Merger Sub and the Company agree that all rights to indemnification and related rights to expense reimbursement, if any, (in each case, solely with respect to claims arising from actions taken or not taken, in each case, in good faith within the scope of their employment or service with the Company or its Subsidiaries prior to Closing) existing in favor of the present directors, officers and employees of the Company or any of its Subsidiaries (each such present director, officer or employee of the Company or any of its Subsidiaries (in each case, solely with respect to such claims when acting in such capacity and scope) being herein referred to as an “ Indemnified Party Indemnified Parties |
(b) | Prior to the Effective Time, notwithstanding any other provision hereof, the Company may purchase prepaid non-cancellable runoff directors’ and officers’ liability insurance providing equivalent coverage and amounts for a period of six (6) years from the Closing Date with respect to claims arising from or related to facts or events which occur on or prior to the Closing Date, provided that the total cost of such run-off directors’ and officers’ liability insurance shall not exceed 300% of the current annual aggregate premium for directors’ and officers’ liability insurance currently maintained by the Company, as set forth in Section 5.13(a) of the Company Disclosure Schedules. |
(c) | The provisions of this Section 5.13 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs. If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person |
and is not the continuing or surviving entity of such consolidation or merger, or (ii) transfers all or substantially all of its assets to any other Person or engages in any similar transaction, then in each such case, the Surviving Corporation will cause proper provision to be made so that the successors and assigns of the Surviving Corporation will expressly assume the obligations set forth in this Section 5.13. |
5.14 | Stock Exchange De-listing ; 1934 Act Deregistration; US Stock Exchange Listing. |
(a) | The Company shall cooperate with Parent and use its reasonable best efforts to take, or cause to be taken, all actions reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies of the NYSE and the SEC to enable the delisting by the Surviving Corporation of the Company Common Stock from the NYSE and the deregistration of the Company Common Stock under the Exchange Act as promptly as practicable after the Effective Time. |
(b) | Parent shall use its reasonable best efforts to cause the Parent Common Shares to be issued in the Merger to be approved for listing on the NYSE or NASDAQ, subject to official notice of issuance, and the TSX, subject to customary listing conditions prior to the Effective Time. |
5.15 | Rule 16b- 3 . |
5.16 | Stockholder Litigation. |
5.17 | Certain Tax Matters. |
(a) | Each of Parent and the Company (i) shall use its reasonable best efforts to cause the Merger to qualify (A) as a “reorganization” within the meaning of Section 368(a) of the Code and (B) for an exception to the general rule of Section 367(a)(1) of the Code and (ii) shall not take or knowingly fail to take (and shall cause its Affiliates not to take or knowingly fail to take) any action that would reasonably be expected to (A) prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (B) cause stockholders of the Company (other than any Excepted Stockholder) to recognize gain pursuant to Section 367(a)(1) of the Code, (C) prevent or impede the Company from being able to deliver one or more executed representation letters pursuant to Section 5.17(b), or (D) prevent or impede Parent from being able to deliver one or more executed representation letters pursuant to Section 5.17(b). |
(b) | Each of Parent and the Company shall use its reasonable best efforts and shall cooperate with one another to obtain the opinion(s) of counsel and any similar opinions required to be delivered in |
connection with the effectiveness of the US Registration Statement or the Proxy Statement/Prospectus. In connection with the foregoing, Parent shall use its reasonable best efforts to deliver to the Tax counsel of the Company and the Parent, one or more representation letters (in form and substance reasonably satisfactory to such applicable counsel) dated as of the Closing Date (and, if requested, dated as of the date the US Registration Statement shall have been declared effective by the SEC or such other date(s) as determined necessary by counsel in connection with the filing of the US Registration Statement, the Proxy Statement/Prospectus or their respective exhibits) and signed by an officer of Parent, and the Company shall use its reasonable best efforts to deliver to Tax counsel of the Company and the Parent one or more representation letters (in form and substance reasonably satisfactory to such applicable Tax counsel) dated as of the Closing Date (and, if requested, dated as of the date the US Registration Statement shall have been declared effective by the SEC or such other date(s) as determined necessary by counsel in connection with the filing of the US Registration Statement, Proxy Statement Prospectus or their respective exhibits) and signed by an officer of the Company. |
5.18 | Merger Sub Stockholder Approvals. |
5.19 | Governance. |
5.20 | Advice of Changes. |
5.21 | Financing Cooperation. |
(a) | The Company shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, and each of them shall use their reasonable best efforts to cause their respective Representatives to use their reasonable best efforts, to provide customary, reasonable and timely cooperation to the Parent and Merger Sub and their respective Representatives, to the extent reasonably requested by Parent, in connection with the offering, arrangement, syndication, marketing, consummation, issuance or sale of any Debt Financing (including, for greater certainty, any potential Alternative Financing ) ( provided |
(i) | as promptly as reasonably practical, furnish Parent, Merger Sub and the Financing Parties (and their respective Representatives, as applicable) with the Required Financing Information and such further information as may be reasonably necessary for the Required Financing Information to remain Compliant and such other customary financial and other information regarding the Company and its Subsidiaries as may reasonably be requested by, and is necessary for, Parent or Merger Sub to fulfill the conditions and obligations applicable to it under the Debt Commitment Letters; |
(ii) | provide reasonable and customary assistance to Parent, Merger Sub and the Financing Parties (and their respective Representatives, agents and advisors, as applicable) in their preparation of (A) offering documents, offering memoranda, offering circulars, private placement memoranda, registration statements, prospectuses, syndication documents and other syndication materials, including information memoranda, lender and investor presentations, bank books and other marketing documents, and similar documents to be used in connection with any portion of the Debt Financing and (B) materials for rating agency presentations, including (but subject to Section 5.21(b)), by providing any financial information and other data required to prepare any pro forma financial statements that are required under applicable securities Laws to be included in, or as may otherwise be reasonably required for and are customarily included in the foregoing financing materials; |
(iii) | make senior management of the Company available, at reasonable times and locations and upon reasonable prior notice, to participate in meetings (including one-on-one provided |
(iv) | cause the Company’s independent registered accounting firm to provide customary assistance, including by using reasonable best efforts to cause the Company’s independent registered accounting firm (A) to provide customary comfort letters (including “negative assurance” comfort) in connection with any capital markets transaction comprising a part of the Debt Financing to the applicable Financing Parties, (B) to provide any necessary consent to the inclusion of its audit report in respect of any financial statements of the Company included or incorporated in any of the applicable financing materials referred to in Section 5.21(a)(ii), and (C) to participate in a reasonable number of due diligence sessions at reasonable times and locations and upon reasonable prior notice; provided |
(v) | provide customary authorization letters authorizing the distribution of Company information to prospective lenders in connection with a syndicated bank financing; |
(vi) | assist Parent, Merger Sub and the Financing Parties in obtaining or updating corporate, facility and issue credit ratings; |
(vii) | assist in the negotiation, preparation and (contingent upon the Closing) execution and delivery of any credit agreement, indenture, note, debenture or other debt security, purchase, underwriting or agency agreement, guarantees, security documents, including any required information schedules or disclosures thereto, cash management agreements, hedging agreements, other supporting documents and customary closing certificates, and any other definitive and ancillary documentation for the Debt Financing as may be reasonably requested by Parent, in each case as contemplated in connection with the Debt Financing; |
(viii) | make introductions of Parent to the Company’s existing lenders and facilitate relevant coordination between Parent and such lenders; |
(ix) | cooperate with the due diligence of Financing Parties and their Representatives in connection with the Debt Financing, to the extent customary and reasonable, including the provision of all such information requested with respect to the property and assets of the Company and its Subsidiaries and by providing to internal and external counsel of Parent, Merger Sub and the Financing Parties, as applicable, customary back-up certificates and factual information to support any legal opinion that such counsel may be required to deliver in connection with the Debt Financing; provided |
(x) | deliver, at least seven (7) Business Days prior to Closing, to the extent reasonably requested in writing at least ten (10) Business Days prior to Closing, all documentation and other information regarding the Company and its Subsidiaries that any Financing Party reasonably determines is required by domestic and foreign regulatory authorities under applicable “know your customer” and domestic and foreign anti-money laundering rules and regulations, including the USA Patriot Act of 2001, and, to the extent required by any Financing Party, a beneficial ownership certificate (substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of Legal Entity Customers published jointly, in May 2018, by the Loan Syndications and Trading Association and Securities Industry and Financial Markets Association) in respect of any of the Company or any of its Subsidiaries that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation (31 C.F.R. § 1010.230); |
(xi) | cooperate with and use reasonable best efforts to provide all reasonable assistance to Parent in connection with any steps Parent may determine are necessary or desirable to take to prepay some or all amounts outstanding under the Company’s existing Credit Facility, including (A) preparing and submitting customary notices in respect of any such prepayment; provided |
(xii) | to the extent requested by Parent, provide guarantees and facilitate the pledging of collateral and granting of security interests in connection with the Debt Financing (which discharges, releases, guarantees and security interests, for the avoidance of doubt, shall not be required to take effect before the Closing): |
(xiii) | as soon as reasonably practical following the receipt of a written request of Parent, as determined by Parent in its sole discretion, (A) commence one or more consent solicitations to the holders of the Company’s Senior Notes, to waive, amend or remove any applicable change of control provisions, defaults or other covenants that would apply in connection with, or otherwise restrict the ability of the parties to consummate, the Merger or the Debt Financing as contemplated in this |
Agreement or the Debt Commitment Letters, as applicable (the “ Consent Solicitations Debt Offers Debt Redemptions Debt Discharge Debt Transactions provided provided |
(xiv) | consent to the use of its and its Subsidiaries’ trademarks, trade names and logos in connection with the Debt Financing; provided |
(b) | Notwithstanding the foregoing, none of the Company nor any of its Affiliates shall be required to take or permit the taking of any action pursuant to Section 5.21 that would: (i) require the Company or its Subsidiaries or any of their respective Affiliates or any persons who are officers or directors of such entities to pass resolutions or consents to approve or authorize the execution of the Debt Financing or enter into, execute or deliver any certificate, document, instrument or agreement or agree to any change or modification of any existing certificate, document, instrument or agreement (except for the authorization letters contemplated by Section 5.21(a)(v)) in each case, which are not contingent on Closing, (ii) cause any representation, warranty or other provision in this Agreement to be breached by the Company or any of its Affiliates, (iii) require the Company or any of its Affiliates to (x) pay any commitment or other similar fee or (y) incur any other expense, liability or obligation which expense, liability or obligation is not reimbursed or indemnified hereunder in connection with the Debt Financing prior to the Closing, or (z) have any obligation of the Company or any of its Affiliates under any agreement, certificate, document or instrument be effective until the Closing, (iv) cause any director, officer, employee or stockholder of the Company or any of its Affiliates to incur any personal liability, (v) conflict with the Organizational Documents of the Company or any of its Affiliates or any Laws, (vi) reasonably be expected to result in a material violation or material breach of, or a default (with or without notice, lapse of time, or both) under, any Contract to which the Company or any of its Affiliates is a party, (vii) provide access to or disclose information to the extent that the Company or any of its Affiliates determines in good faith would jeopardize any attorney-client privilege or other similar privilege or protection of the Company or any of its Affiliates in respect of such information, or (viii) require the Company to prepare any financial statements or information (other than the Required Financing Information) that are not available to it and prepared in the Ordinary Course of Business consistent with its historic financial reporting practice, with it being further understood that Parent (and not the Company or any of its Affiliates) shall be responsible for the preparation of any pro forma financial statements for the Debt Financing (including, for the avoidance of doubt, any Alternative Financing), including the preparation of any pro forma calculations, any post-Closing or other pro forma cost savings synergies, capitalization, ownership or other pro forma adjustments that may be included therein. Nothing contained in this Section 5.21 or otherwise shall require the Company or any of its Affiliates, prior to the Closing, to be an issuer or other obligor with respect to the Debt Financing. Parent shall, promptly on request by the Company, reimburse the Company and its Affiliates for all reasonable and documented out-of-pocket |
Affiliates and their respective Representatives from and against any and all losses suffered or incurred by them in connection with the arrangement of the Debt Financing, any action taken by them at the request of Parent or its Representatives pursuant to this Section 5.21 and any information used in connection therewith (other than information provided by or on behalf of the Company expressly for use in connection therewith). |
(c) | The Parties hereto acknowledge and agree that the provisions contained in this Section 5.21 represent the sole obligation of the Company and its Subsidiaries with respect to cooperation in connection with the arrangement of any financing (including the Debt Financing) to be obtained by Parent with respect to the transactions contemplated by this Agreement, and no other provision of this Agreement shall be deemed to expand or modify such obligations. In no event shall the receipt or availability of any funds or financing (including the Debt Financing) by Parent any of its Affiliates or any other financing or other transactions be a condition to any of Parent’s obligations under this Agreement. Notwithstanding anything to the contrary in this Agreement, the Company’s breach of any of the covenants required to be performed by it under this Section 5.21 shall not be considered in determining the satisfaction of the condition set forth in Section 6.3(b), unless such breach is the primary cause of Parent being unable to consummate, and obtain the proceeds of, the Debt Financing at or prior to Closing. |
(d) | All non-public or otherwise confidential information regarding the Company or any of its Affiliates obtained by Parent or its Representatives pursuant to this Section 5.21 shall be kept confidential in accordance with the Confidentiality Agreement; provided |
5.22 | Debt Financing. |
(a) | Parent shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, to take, or cause to be taken, all actions, and do, or cause to be done, all things necessary to obtain the Debt Financing on the conditions described in the Debt Commitment Letters, including by (i) maintaining in effect the Debt Commitment Letters (subject to any amendment, replacement, supplement, termination modification or waiver permitted elsewhere under this Section 5.22), (ii) negotiating and entering into (on or prior to the Closing Date) definitive agreements with respect to the Debt Financing including any joinder agreements, indentures, or credit agreements entered into in connection therewith (the “ Definitive Agreements provided |
(b) | In the event (x) any portion of the Debt Financing contemplated by the Debt Commitment Letters that is required to fund the Financing Amounts becomes unavailable (including pursuant to the “flex” terms within the Debt Commitment Letters) regardless of the reason therefor, Parent shall promptly notify the Company in writing of such unavailability and shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use their reasonable best efforts, to obtain as promptly as practicable following the occurrence of such event, alternative debt or other financing for any such unavailable portion from alternative sources or (y) Parent decides, in its sole discretion, to replace all or any portion of the Debt Financing with alternative debt or other financing (in each case, an “ Alternative Financing mutatis mutandis |
(c) | Parent and its Subsidiaries shall have the right from time to time to amend, replace, restate, supplement, terminate, or otherwise modify, or waive any right or provision under, any Debt Commitment Letter or Definitive Agreement, including to reduce available funding under or to terminate any such Debt Commitment Letter or Definitive Agreement in order to obtain alternative sources of financing in lieu of all or a portion of the Debt Financing, including by way of one or more offerings of debt or other securities; provided provided |
amendment, replacement, supplement, termination, modification or waiver (1) decreases (or has the effect of decreasing) the aggregate amount of the Debt Financing (including, for greater certainty, any Alternative Financing) to an amount that, when taken together with cash or cash equivalents immediately available to Parent and the Company on the Closing Date, would be less than the amount that would be required to pay the Financing Amounts, (2) would reasonably be expected to prevent, materially delay or materially impede the consummation of the Merger or prevent or materially impede the repayment or refinancing of a material portion of any indebtedness of the Company that constitutes “Refinanced Indebtedness” (as defined in the Initial Debt Commitment Letter), in each case, as contemplated by this Agreement, (3) materially adversely impacts the ability of Parent to enforce its rights against the other parties to the Debt Commitment Letters or the Definitive Agreements as so amended, replaced, supplemented or otherwise modified, (4) imposes material obligations on the Company or any of its Subsidiaries that would be effective prior to Closing, or (5) adds new (or adversely modifies in any material respect any existing) conditions precedent to the consummation of all or any portion of the Debt Financing (except any customary conditions for a bridge facility or a bond financing that (taken as a whole) are not (in the reasonable judgment of Parent) materially less favorable to Parent than the conditions (taken as a whole) contained in the Debt Commitment Letters); provided Debt Commitment Letters Definitive Agreements Debt Financing Debt Financing Financing Debt Commitment Letters Definitive Agreements |
6.1 | Conditions to Obligation of Each Party to Effect the Merger. |
(a) | The Company Stockholder Approval shall have been obtained. |
(b) | The Parent Shareholder Approval shall have been obtained. |
(c) | The US Registration Statement shall have become effective in accordance with the provisions of the Securities Act and no stop order suspending the effectiveness of the US Registration Statement shall have been issued by the SEC and remain in effect and no Action to that effect shall have been commenced by the SEC, unless subsequently withdrawn. |
(d) | No Governmental Entity of competent jurisdiction shall have enacted, issued or promulgated any Law that remains in effect that prohibits or makes illegal the consummation of the Merger. |
(e) | The approvals by the Antitrust Authorities under the Antitrust Laws set forth in Schedule A Required Antitrust Approvals |
(f) | The Parent Common Shares to be issued to the Company stockholders in accordance with this Agreement shall have been conditionally approved for listing on the NYSE or Nasdaq, subject to official notice of issuance, and the TSX, subject to customary listing requirements. |
6.2 | Conditions to Obligation of the Company to Effect the Merger. |
(a) | (i) the representations and warranties of Parent and Merger Sub set forth in Section 4.12(a) (after giving effect to the lead-in in Article 4) shall be true and correct in all respects at and as of the date of this Agreement and at and as of Closing, as if made at and as of such time; |
(b) | Parent and Merger Sub shall have performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by them prior to the Closing. |
(c) | Since the date of this Agreement, there shall not have occurred any event, change, occurrence, effect or development that has had, or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. |
(d) | Parent shall have delivered to the Company a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or another senior officer, certifying to the effect that the conditions set forth in Section 6.2(a), Section 6.2(b) and Section 6.2(c) have been satisfied. |
(a) | (i) the representations and warranties of the Company set forth in Section 3.12(a) (after giving effect to the lead-in in Article 3) shall be true and correct in all respects at and as of the date of this Agreement and at and as of Closing, as if made at and as of such time; |
(b) | The Company shall have performed in all material respects all obligations and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it prior to the Closing. |
(c) | Since the date of this Agreement, there shall not have occurred any event, change, occurrence, effect or development that has had, or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. |
(d) | The Company shall have delivered to Parent a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or another senior officer, certifying to the effect that the conditions set forth in Section 6.3(a), Section 6.3(b) and Section 6.3(c) have been satisfied. |
6.4 | Frustration of Closing Conditions. |
7.1 | Termination or Abandonment. |
(a) | by the mutual written consent of the Company and Parent; |
(b) | by either the Company or Parent, if: |
(i) | (A) the Effective Time shall not have occurred on or before October 24, 2022 (the “ End Date provided provided further provided further |
(ii) | any court or Governmental Entity of competent jurisdiction that must grant a Required Antitrust Approval has denied approval of the Merger and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable Order permanently enjoining or otherwise prohibiting or making illegal the consummation of the Merger, unless the failure to obtain a Required Antitrust Approval is due to the failure of the Party seeking to terminate this Agreement to perform or observe the obligations, covenants and agreements of such Party set forth herein; |
(iii) | the Company Stockholder Meeting (including any adjournments or postponements thereof) shall have been held and been concluded and the Company Stockholder Approval shall not have been obtained; or |
(iv) | the Parent Shareholder Meeting (including any adjournments or postponements thereof) shall have been held and been concluded and the Parent Shareholder Approval shall not have been obtained; |
(c) | by the Company: |
(i) | if Parent or Merger Sub shall have breached or failed to perform in any material respect any of their representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would result in a failure of a condition set forth in Section 6.1 or Section 6.2 and (B) cannot be cured by the End Date or, if curable, is not cured within twenty (20) Business Days following the Company’s delivery of written notice to Parent stating the Company’s intention to terminate this Agreement pursuant to this Section 7.1(c)(i) and the basis for such termination; provided |
(ii) | prior to receipt of the Company Stockholder Approval, in order to enter into a definitive agreement providing for a Company Superior Proposal to the extent permitted by and subject to compliance with the applicable terms and conditions of this Agreement that did not result from a breach of Section 5.5; provided 7.3(a)(i); |
(iii) | prior to receipt of the Parent Shareholder Approval, if (A) the Parent Board shall have effected a Parent Change of Recommendation or (B) Section 5.6 is materially breached; or |
(iv) | if (A) all of the conditions set forth in Article 6 have been satisfied (other than (x) conditions which by their nature cannot be satisfied until Closing, but subject to the satisfaction of those conditions at Closing and (y) any conditions set forth in Section 6.2 that have been waived by the Company), (B) Parent and Merger Sub fail to consummate the Closing on the day that the Closing should have been consummated pursuant to Section 1.2 due to the failure of all, or any portion of, the Debt Financing to be funded at Closing for any reason, (C) the Company shall have delivered to Parent an irrevocable written notice confirming that (x) all of the conditions set forth in Article 6 have been satisfied or, with respect to the conditions set forth in Section 6.2, waived and (y) the Company stands ready, willing and able to consummate the Closing, and (D) Parent and Merger Sub fail to consummate the Closing within five (5) Business Days following the later of (x) the date the Closing should have occurred pursuant to Section 1.2 and (y) receipt of the written notice set forth in clause (C); |
(d) | by Parent: |
(i) | if the Company shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would result in a failure of a condition set forth in Section 6.1 or Section 6.3 and (B) cannot be cured by the End Date or, if curable, is not cured within twenty (20) Business Days following Parent’s delivery of written notice to the Company stating Parent’s intention to terminate this Agreement pursuant to this Section 7.1(d)(i) and the basis for such termination; provided |
(ii) | prior to receipt of the Parent Shareholder Approval, in order to enter into a definitive agreement providing for a Parent Superior Proposal to the extent permitted by and subject to compliance with the applicable terms and conditions of this Agreement that did not result from a breach of Section 5.6; provided |
(iii) | prior to receipt of the Company Stockholder Approval, if (A) the Company Board shall have effected a Company Change of Recommendation or (B) Section 5.5 is materially breached. |
7.2 | Notice of Termination; Effect of Termination. |
7.3 | Termination Fees. |
(a) | Company Termination Fee. |
(i) | If this Agreement is terminated by the Company pursuant to Section 7.1(c)(ii), then the Company shall pay to Parent in consideration of Parent disposing of its rights hereunder (other than those rights set out in Section 7.2), by wire transfer of immediately available funds to an account designated in writing by Parent, a fee of $10,000,000 in cash (the “ Company Termination Fee |
(ii) | If this Agreement is terminated by Parent pursuant to Section 7.1(d)(iii), then the Company shall pay to Parent in consideration of Parent disposing of its rights hereunder (other than those rights set out in Section 7.2), by wire transfer of immediately available funds to an account designated in writing by Parent, the Company Termination Fee, less any amounts required to be withheld or deducted on account of Taxes, such payment to be made concurrently with such termination. |
(iii) | If (A) after the date of this Agreement, a Company Alternative Proposal (substituting in the definition thereof “50%” for “20%” and for “80%” in each place each such phrase appears) is publicly proposed or publicly disclosed prior to, and is not publicly withdrawn at least two (2) Business Days prior to, the Company Stockholder Meeting (a “ Company Qualifying Transaction |
(iv) | Notwithstanding anything to the contrary herein, but without limiting the right of any party to recover liabilities or damages to the extent permitted herein, in no event shall the Company be required to pay the Company Termination Fee more than once. |
(b) | Parent Termination Fee; Financing Termination Fee |
(i) | If this Agreement is terminated by Parent pursuant to Section 7.1(d)(ii), then Parent shall pay or cause to be paid to the Company in consideration of the Company disposing of its rights hereunder (other than those rights set out in Section 7.2), a fee of $20,000,000 (the “ Parent Termination Fee |
(ii) | If this Agreement is terminated by the Company pursuant to Section 7.1(c)(iii), then Parent shall pay or cause to be paid to the Company in consideration of the Company disposing of its rights hereunder (other than those rights set out in Section 7.2), the Parent Termination Fee, less any amounts required to be withheld or deducted on account of Taxes, such payment to be made within three (3) Business Days after such termination. |
(iii) | If (A) after the date of this Agreement, a Parent Alternative Proposal (substituting in the definition thereof “50%” for “20%” and for “80%” in each place each such phrase appears) is publicly proposed or publicly disclosed prior to, and is not publicly withdrawn at least two (2) Business Days prior to, the Parent Shareholder Meeting (a “ Parent Qualifying Transaction |
termination, Parent (1) consummates a Parent Qualifying Transaction or (2) enters into a definitive agreement providing for a Parent Qualifying Transaction and later consummates such Parent Qualifying Transaction, then Parent shall pay or cause to be paid to the Company in consideration of the Company disposing of its rights hereunder (other than those rights set out in Section 7.2), the Parent Termination Fee, less any amounts required to be withheld or deducted on account of Taxes, such payment to be made after the consummation of such Parent Qualifying Transaction. |
(iv) | If this Agreement is terminated by the Company pursuant to Section 7.1(c)(iv), then Parent shall pay or cause to be paid to the Company in consideration of the Company disposing of its rights hereunder (other than those rights set out in Section 7.2), a fee of $30,000,000 (the “ Financing Termination Fee |
(v) | Notwithstanding anything to the contrary herein, but without limiting the right of any Party to recover liabilities or damages to the extent permitted herein, in no event shall Parent be required to pay the Parent Termination Fee or Financing Termination Fee more than once or to pay both the Parent Termination Fee and the Financing Termination Fee. |
(c) | Acknowledgements. Wall Street Journal |
(y) upon the Company’s receipt of the full Parent Termination Fee or Financing Termination Fee, as applicable (and any other amounts contemplated by this Agreement), pursuant to this Section 7.3 in circumstances in which the Parent Termination Fee or Financing Termination Fee is payable, none of Parent, any Subsidiary of Parent (including the Merger Sub) or any of their respective former, current or future officers, directors, partners, stockholders, managers, members, Affiliates or agents shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby, except for Willful and Material Breach by Parent or fraud. |
8.1 | No Survival of Representations and Warranties. |
8.2 | Expenses. |
8.3 | Counterparts; Effectiveness. |
(a) | The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Each Party agrees that, in the event of any breach or threatened breach by any other Party of any covenant or obligation contained in this Agreement, the non-breaching Party shall be entitled (in addition to any other remedy that may be available to it whether in law or equity, including monetary damages) to obtain (i) a decree or Order of specific performance to enforce the observance and performance of such covenant or obligation and (ii) an injunction restraining such breach or threatened breach. |
(b) | While the Company may pursue both a grant of specific performance under this Section 8.5 and the payment of the Financing Termination Fee under Section 7.3(b)(iv), under no circumstances shall the Company be permitted or entitled to receive both (i) a grant of specific performance that permits the consummation of the transactions contemplated by this Agreement, including the Merger, in accordance with the terms of this Agreement and |
(ii) | monetary damages in connection with this Agreement or any termination of this Agreement, including all or any portion of the Financing Termination Fee. |
(c) | Each Party further agrees that no Party or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 8.5, and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. |
8.6 | WAIVER OF JURY TRIAL. |
8.7 | Notices. |
8.8 | Assignment; Binding Effect. |
8.9 | Severability. |
8.10 | Entire Agreement; No Third-Party Beneficiaries. |
8.11 | Amendments; Waivers. |
8.12 | Headings. |
8.13 | Interpretation. |
8.14 | Obligations of Merger Sub and Subsidiaries. |
8.15 | Financing Provisions. |
Term |
Section |
|||
Agreement |
Preamble | |||
Alternative Financing |
5.22(b) | |||
Anti-Corruption Laws |
3.8(a) | |||
Book-Entry Shares |
2.1(a)(i) | |||
Chosen Courts |
8.4 | |||
Certificate |
2.1(a)(i) | |||
Certificate of Merger |
1.3 | |||
CFPOA |
4.8(a) | |||
Chosen Courts |
8.4 | |||
Clearance Date |
5.7(a) | |||
Closing |
1.2 | |||
Closing Date |
1.2 | |||
Code |
2.2(b)(iii) | |||
Company |
Preamble | |||
Company Acquisition Agreement |
5.5(h) | |||
Company Alternative Proposal |
5.5(i) | |||
Company Approvals |
3.3(c) | |||
Company Balance Sheet Date |
3.12(a) | |||
Company Board |
Recitals | |||
Company Budget |
5.1(b)(xiii) | |||
Company Change of Recommendation |
5.5(c) | |||
Company Continuing Employees |
5.8(a) | |||
Company Designee |
5.19 | |||
Company Disclosure Schedules |
Article 3 | |||
Company Governmental Filings |
3.4(b) | |||
Company Intellectual Property |
3.16(b) | |||
Company Intervening Event |
5.5(j) | |||
Company Leased Real Property |
3.18(a) | |||
Company Material Contract |
3.21(a) | |||
Company Performance Share Award |
2.3(c) | |||
Company Permits |
3.7(b) | |||
Company Qualifying Transaction |
7.3(a)(iii) | |||
Company Real Property Lease |
3.18(a) | |||
Company Recommendation |
3.4(b) | |||
Company Restricted Share Award |
2.3(a) | |||
Company RSU Award |
2.3(b) | |||
Company SEC Documents |
3.4(a) | |||
Company Stockholder Approval |
3.20 | |||
Company Stockholder Meeting |
5.7(c) | |||
Company Superior Proposal |
5.5(k) | |||
Company Superior Proposal Notice |
5.5(e) |
Company Tax Counsel |
5.17(b) | |||
Company Termination Fee |
7.3(a)(i) | |||
Company Top Customer |
3.22(a) | |||
Company Top Supplier |
3.22(a) | |||
Company Voting Agreements |
Recitals | |||
Confidentiality Agreement |
5.4(e) | |||
Consent Solicitations |
5.21(a)(xiii) | |||
Continuation Period |
5.8(a) | |||
Data Protection Requirements |
3.16(g) | |||
Debt Commitment Letters |
4.23(a) | |||
Debt Discharge |
5.21(a)(xiii) | |||
Debt Financing |
4.23(a) | |||
Debt Offers |
5.21(a)(xiii) | |||
Debt Redemptions |
5.21(a)(xiii) | |||
Debt Transactions |
5.21(a)(xiii) | |||
Definitive Agreements |
5.22(a) | |||
DGCL |
Recitals | |||
Divestiture |
5.7(i) | |||
Effective Time |
1.3 | |||
End Date |
7.1(b)(i) | |||
Enforceability Exceptions |
3.3(a) | |||
Exchange Agent |
2.2(a) | |||
Exchange Fund |
2.2(a) | |||
Excluded Shares |
2.1(a)(ii) | |||
Export and Sanctions Regulations |
3.9(a) | |||
FCPA |
3.8(a) | |||
Financing Amounts |
4.23(d) | |||
Financing Termination Fee |
7.3(b)(iv) | |||
Fractional Share Cash Amount |
2.1(d)(i) | |||
Governmental Approvals |
5.7(i) | |||
Governmental Entity |
3.3(c) | |||
Indemnified Party or Indemnified Parties |
5.13(a) | |||
Law or Laws |
3.7(a) | |||
Malicious Code |
3.16(e) | |||
Management Information Circular |
3.14 | |||
Merger |
Recitals | |||
Merger Consideration |
2.1(a)(i) | |||
Merger Sub |
Preamble | |||
New Plans |
5.8(a) | |||
NI 52-109 |
4.5(a) | |||
Non-U.S. Plan |
3.11(m) | |||
Old Plans |
5.8(a) | |||
Owned Company Intellectual Property |
3.16(a) | |||
Owned Real Property |
3.18(b) | |||
Parent |
Preamble | |||
Parent Acquisition Agreement |
5.6(h) | |||
Parent Alternative Proposal |
5.6(i) | |||
Parent Approvals |
4.3(c) | |||
Parent Balance Sheet Date |
4.12(a) | |||
Parent Board |
Recitals | |||
Parent Budget |
5.2(b)(v) |
Parent Canadian Pension Plan |
4.11(c) | |||
Parent Change of Recommendation |
5.6(c) | |||
Parent Disclosure Schedules |
Article 4 | |||
Parent Governmental Filings |
4.4(b) | |||
Parent Intervening Event |
5.6(j) | |||
Parent Permits |
4.7(b) | |||
Parent Public Documents |
4.4(a) | |||
Parent Qualifying Transaction |
7.3(b)(iii) | |||
Parent Recommendation |
4.3(b) | |||
Parent Restricted Share Award |
2.3(a) | |||
Parent RSU Award |
2.3(b) | |||
Parent Share Issuance |
Recitals | |||
Parent Shareholder Approval |
4.18 | |||
Parent Shareholder Meeting |
5.7(e) | |||
Parent Superior Proposal |
5.6(k) | |||
Parent Superior Proposal Notice |
5.6(e) | |||
Parent Termination Fee |
7.3(b)(i) | |||
Parent Voting Agreements |
Recitals | |||
Party or Parties |
Preamble | |||
Permits |
3.7(b) | |||
Pre-Closing Reorganization |
5.3 | |||
Proxy Statement/Prospectus |
3.14 | |||
Reference Time |
3.2(a) | |||
Registered Company Intellectual Property |
3.16(a) | |||
Remedy |
5.7(i) | |||
Representatives |
5.4(a) | |||
Required Antitrust Approvals |
6.1(e) | |||
Securities Engagement Letter |
4.23(a) | |||
Security Incident |
3.16(h) | |||
Surviving Corporation |
1.1 | |||
Takeover Statutes |
3.27 | |||
Termination Date |
5.1(a) | |||
US Registration Statement |
3.14 |
ENERFLEX LTD. | ||
Per: | /s/ Marc E. Rossiter | |
Name: Marc. E. Rossiter | ||
Title: President and Chief Executive Officer | ||
ENERFLEX US HOLDINGS INC. | ||
Per: | /s/ Sanjay Bishnoi | |
Name: Sanjay Bishnoi | ||
Title: Treasurer | ||
EXTERRAN CORPORATION | ||
Per: | /s/ Andrew J. Way | |
Name: Andrew J. Way | ||
Title: President and Chief Executive Officer |
• | reviewed a draft, dated January 21, 2022, of the Agreement; |
• | reviewed certain publicly available business and financial information relating to the Company and the Acquiror and the industries in which they operate; |
• | compared the financial and operating performance of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant, and compared current and historic market prices of the Company Common Stock and the Acquiror Common Stock with similar data for such other companies; |
• | compared the proposed financial terms of the Transaction with the publicly available financial terms of certain other business combinations that we deemed relevant; |
• | reviewed certain internal financial analyses and forecasts for the Company (the “Company Projections”) and the Acquiror (the “Acquiror Projections”) prepared by the managements of the Company and the Acquiror; |
• | reviewed certain estimates prepared by the managements of the Company and the Acquiror as to the potential cost savings and synergies expected by such managements to be achieved as a result of the Transaction (the “Synergies”); |
• | discussed with the managements of the Company and the Acquiror regarding certain aspects of the Transaction, the business, financial condition and prospects of the Company and the Acquiror, respectively, the effect of the Transaction on the business, financial condition and prospects of the Company and the Acquiror, respectively, and certain other matters that we deemed relevant; and |
• | considered such other financial analyses and investigations and such other information that we deemed relevant. |
Very truly yours, |
/s/ Wells Fargo Securities, LLC |
WELLS FARGO SECURITIES, LLC |
Attention: | Brian P. Fenske | |
Telephone: | [REDACTED TEXT] | |
E-mail: |
[REDACTED TEXT] |
ENERFLEX LTD. | ||
By | /s/ Marc E. Rossiter | |
Name: |
Marc E. Rossiter | |
Title: |
President and Chief Executive Officer |
Stockholder Name: |
EGI-Fund (05-07) Investors, |
By: | /s/ Joseph Miron | |
Name: |
Joseph Miron | |
Title: |
Vice President | |
Stockholder Name: EGI-Fund (08-10) Investors, L.L.C. | ||
By: | /s/ Joseph Miron | |
Name: |
Joseph Miron | |
Title: |
Vice President |
Stockholder Name: |
EGI-Fund (11-13) Investors, L.L.C. |
By: | /s/ Joseph Miron | |
Name: |
Joseph Miron | |
Title: |
Vice President |
Stockholder Name: |
EGI-Fund B, L.L.C. |
By: | /s/ Joseph Miron | |
Name: |
Joseph Miron | |
Title: |
Vice President |
Stockholder Name: |
EGI-Fund C, L.L.C. |
By: | /s/ Joseph Miron | |
Name: |
Joseph Miron | |
Title: |
Vice President |
Name |
Original Shares |
Options |
Address |
Shares Subject to Pledge Agreement 1 | ||||
EGI-Fund (05-07) Investors LLC |
447,567 | 0 | 2 N. Riverside Plaza Suite 600 Chicago, IL 60606 Email: jmiron@egii.com |
0 | ||||
EGI-Fund (08-10) Investors LLC |
332,327 | 0 | 2 N. Riverside Plaza Suite 600 Chicago, IL 60606 Email: jmiron@egii.com |
0 | ||||
EGI-Fund (11-13) Investors LLC |
908,742 | 0 | 2 N. Riverside Plaza Suite 600 Chicago, IL 60606 Email: jmiron@egii.com |
908,742 | ||||
EGI-Fund B LLC |
1,849,806 | 0 | 2 N. Riverside Plaza Suite 600 Chicago, IL 60606 Email: jmiron@egii.com |
849,806 | ||||
EGI-Fund C LLC |
4,618,973 | 0 | 2 N. Riverside Plaza Suite 600 Chicago, IL 60606 Email: jmiron@egii.com |
850,000 |
ENERFLEX LTD. | ||||
By | /s/ Marc E. Rossiter | |||
Name: | Marc E. Rossiter | |||
Title: | President and Chief Executive Officer |
By: |
/s/ Andrew J. Way | |
Name: |
Andrew J. Way | |
Title: |
President and Chief Executive Officer | |
Address for Notice: | ||
| ||
| ||
Email: |
|
By: |
/s/ David A. Barta | |
Name: |
David A. Barta | |
Title: |
Senior Vice President, Chief Financial Officer and Chief Accounting Officer | |
Address for Notice: | ||
| ||
| ||
Email: |
|
By: |
/s/ Roger George | |
Name: |
Roger George | |
Title: |
President Exterran Water Solutions | |
Address for Notice: | ||
| ||
| ||
Email: |
|
By: |
/s/ Mark R. Sotir | |
Name: |
Mark R. Sotir | |
Title: |
Executive Chairman | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ William M. Goodyear | |
Name: |
William M. Goodyear | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ James C. Gouin | |
Name: |
James C. Gouin | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ John P. Ryan | |
Name: |
John P. Ryan | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Christopher T. Seaver | |
Name: |
Christopher T. Seaver | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Hatem Soliman | |
Name: |
Hatem Soliman | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Ieda Gomes Yell | |
Name: |
Ieda Gomes Yell | |
Title: |
Director | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Kelly M. Battle | |
Name: |
Kelly M. Battle | |
Title: |
Vice President, General Counsel & Corporate Secretary | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Kerric Peyton | |
Name: |
Kerric Peyton | |
Title: |
Senior Vice President, Health, Safety, Security & Environment | |
Address for Notice: | ||
| ||
Email: |
|
By: |
/s/ Tara Wineinger | |
Name: |
Tara Wineinger | |
Title: |
Vice President and Chief Human Resources Officer | |
Address for Notice: | ||
| ||
Email: |
|
(A) | The undersigned registrant hereby undertakes: |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | To include any prospectus required by section 10(a)(3) of the U.S. Securities Act; |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the U.S. Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(4) | To file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F” at the start of any delayed offering or throughout a continuous offering. |
(5) | That, for the purpose of determining liability under the US. Securities Act to any purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(6) | That, for the purpose of determining liability of the registrant under the U.S. Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) | Any free-writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) | The portion of any other free-writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(B) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the U.S. Securities Act, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the U.S. Securities Exchange Act of 1934, as amended, or the U.S. Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the U.S. Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide |
(C) | The undersigned registrant hereby undertakes as follows: |
(1) | That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. |
(2) | That every prospectus (i) that is filed pursuant to the immediately preceding paragraph, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the U.S. Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide |
(D) | Insofar as indemnification for liabilities arising under the U.S. Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the U.S. Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the U.S Securities Act and will be governed by the final adjudication of such issue. |
(E) | The undersigned registrant hereby undertakes: (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means, and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
(F) | The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
* | Previously filed. |
** | Filed herewith. |
+ | Indicates a management contract or compensatory plan or arrangement. |
ENERFLEX LTD. | ||
By: | /s/ Marc E. Rossiter | |
Name: | Marc E. Rossiter | |
Title: | President and Chief Executive Officer |
Signature |
Title |
Date | ||
* Marc E. Rossiter |
President, Chief Executive Officer and Director (Principal Executive Officer) | July 18, 2022 | ||
* Sanjay Bishnoi |
Senior Vice-President and Chief Financial Officer (Principal Financial Officer) | July 18, 2022 | ||
* Fernando Assing |
Director | July 18, 2022 | ||
* Maureen Cormier Jackson |
Director | July 18, 2022 | ||
* W. Byron Dunn |
Director | July 18, 2022 | ||
* Mona Hale |
Director | July 18, 2022 |
Signature |
Title |
Date | ||
* H. Stanley Marshall |
Director | July 18, 2022 | ||
* Kevin J. Reinhart |
Director | July 18, 2022 | ||
* Juan Carlos Villegas |
Director | July 18, 2022 | ||
* Michael A. Weill |
Director | July 18, 2022 |
*By: | /s/ Marc E. Rossiter | |
Name: Marc E. Rossiter Title: Attorney-in-fact |
Authorized U.S. Representative | ||
Enerflex Energy Systems Inc. | ||
By: | /s/ Marc E. Rossiter | |
Name: | Marc E. Rossiter | |
Title: | Director and Chief Executive Officer |