BCE Emergis Reports Third Quarter Financial Results

Business Wire, Nov 2, 2004

The purchase price is subject to adjustments following the calculation, within 120 days from the closing date, of the amount of the working capital of the PPO operations as of the closing date: any shortfall from or excess from US$19.0 million will be paid by the Company or received by the Company on a dollar-for-dollar basis. In the three-month period ended June 30, 2004, the Company recorded working capital and disposal cost adjustments of $6.5 million and a final working capital adjustment of $2.8 million in the current period, which have been included in the income statement from discontinued operations.

The Company has provided an indemnification to the buyer in the stock purchase agreement regarding the business operations of BCE Emergis Corporation which covers principally any breach of representations and warranties and any covenants in excess of US$2.0 million to a maximum of US$53.3 million, except for tax liabilities and certain other representations for which there is no deductible and no maximum amount. The Company's representations and warranties exist for a period of no later than 18 months or 30 days after the issuance of the audited financial statements of BCE Emergis Corporation for the year ending December 31, 2004, except for tax and certain other representations which are in force until the expiry of the applicable statute of limitations. This indemnification has been reflected in Note 20 to the consolidated financial statements.

Following the completion of the sale, a subsidiary of the Company became the primary lessee under a lease which represents an obligation of US$18.3 million over the lease term. The Company has sublet, to third parties, a portion of this lease for periods up to 60 months. The remaining portion is currently being used for continuing operations.

5. Sale of eSecurity operations

On June 30, 2004, the Company sold its eSecurity operations for proceeds of $30.3 million, subject to certain closing adjustments. During the three-month period ended June 30, 2004, the Company recorded a gain on sale of the eSecurity operations of $15.4 million, which is included in income from discontinued operations.

6. Sale of intangible assets

On June 30, 2004, in conjunction with the early termination of the extended exclusive distribution agreement signed in 2001 with Bell Canada, the Company sold the intangible assets used to service this product for proceeds of $10.3 million. During the three-month period ended June 30, 2004, the Company recorded a gain on the sale of these assets in the amount of $10.3 million which is included in income from continuing operations.

7. Sale of BCE Emergis Systems Inc.

On May 28, 2004, the Company completed the sale of 100% of the issued and outstanding shares of BCE Emergis Systems Inc., a wholly owned US subsidiary of the Company, which carried on the legacy messaging and translation services as part of the messaging and collaboration operations, for a total cash consideration of US$0.8 million ($1.3 million). During the three-month period ended June 30, 2004, the Company recorded a gain on sale of $1.3 million which is included in income from continuing operations.