EXHIBIT 10.4
SHARE PURCHASE AGREEMENT
Among
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ HOLDINGS INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇ HOLDINGS INC.
HUNTER HOLDINGS INC.
373062 ONTARIO LIMITED
HUNTER DRUMS LIMITED
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ HOLDINGS, INC.
and
HDL ACQUISITION, INC.
dated as of
October 24, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE OF SHARES..........................1
1.1 Transfer by Sellers of Shares.........................................1
1.2 Consideration.........................................................1
1.3 The Closing...........................................................2
1.4 Closing Adjustment....................................................3
1.5 Amalgamation..........................................................5
1.6 Further Assurances....................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS...................5
2.1 Corporate Organization................................................6
2.2 Capitalization........................................................6
2.3 Ownership of Shares...................................................6
2.4 Authorization, Etc....................................................7
2.5 Financial Statements..................................................7
2.6 No Undisclosed Liabilities............................................7
2.7 No Approvals or Conflicts.............................................8
2.8 Compliance with Law; Governmental Authorizations......................8
2.9 Litigation............................................................8
2.10 Assets................................................................9
2.11 Absence of Certain Changes............................................9
2.12 Tax Matters..........................................................10
2.13 Employee Benefits....................................................11
2.14 Labor Relations......................................................14
2.15 Patents, Trademarks, Trade Names, Etc................................15
2.16 Contracts............................................................15
2.17 Environmental Matters................................................16
2.18 Insurance............................................................17
2.19 Transactions with Affiliates.........................................18
2.20 Material Customers and Suppliers.....................................18
2.21 Real Property........................................................18
2.22 Real Property Leases.................................................19
2.23 Product Liability....................................................20
2.24 Books and Records....................................................20
2.25 No Brokers' or Other Fees............................................20
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PAGE
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER................20
3.1 Organization......................................................20
3.2 Authorization Etc.................................................21
3.3 No Approvals or Conflicts.........................................21
3.4 Financing.........................................................22
3.5 Capitalization....................................................22
3.6 No Brokers' or Other Fees.........................................22
3.7 Financial Statements..............................................22
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS...................22
4.1 Representations and Warranties....................................22
4.2 Performance.......................................................23
4.3 Officer's Certificate.............................................23
4.4 Injunctions.......................................................23
4.5 Consents..........................................................23
4.6 Employment and Stay-Pay Agreements................................23
4.7 Equity Agreements.................................................23
4.8 Mutual Release....................................................23
4.9 Exchangeable Share Agreements.....................................23
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION....................24
5.1 Representations and Warranties....................................24
5.2 Performance.......................................................24
5.3 Officer's Certificate.............................................24
5.4 Resignations......................................................24
5.5 Injunctions.......................................................24
5.6 Consents..........................................................24
5.7 Affiliate Agreements..............................................24
5.8 Existing Indebtedness.............................................25
5.9 Financing.........................................................25
5.10 Employment and Stay-Pay Agreements................................25
5.11 Equity Agreements.................................................25
5.12 Mutual Release....................................................25
5.13 Shareholder Consent...............................................25
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PAGE
ARTICLE VI
COVENANTS AND AGREEMENTS........................25
6.1 Conduct of Business by Company....................................25
6.2 Access to Books and Records; Cooperation..........................27
6.3 Filings and Consents..............................................28
6.4 Tax Matters.......................................................28
6.5 No Negotiation....................................................31
6.6 Covenant to Satisfy Conditions....................................32
6.7 Nondisclosure of Confidential Information; Non-Competition.......32
6.8 Certain Payments..................................................34
ARTICLE VII
TERMINATION..............................35
7.1 Termination.......................................................35
7.2 Procedure and Effect of Termination...............................35
ARTICLE VIII
INDEMNIFICATION............................35
8.1 Indemnification...................................................35
ARTICLE IX
MISCELLANEOUS.............................39
9.1 Fees and Expenses.................................................39
9.2 Governing Law.....................................................39
9.3 Amendment.........................................................39
9.4 No Assignment.....................................................39
9.5 Waiver............................................................39
9.6 Notices...........................................................39
9.7 Complete Agreement................................................41
9.8 Counterparts......................................................41
9.9 Publicity.........................................................41
9.10 Headings..........................................................42
9.11 Severability......................................................42
9.12 Third Parties.....................................................42
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS....................42
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PAGE
9.14 WAIVER OF JURY TRIAL..............................................42
9.15 Sellers' Representative...........................................43
9.16 Obligations Guarantee.............................................43
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "AGREEMENT"), dated as of
October 24, 1997, is entered into by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Holdings Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇ Holdings Inc., Hunter
Holdings Inc. and 373062 Ontario Limited (each such individual and entity is
referred to herein as a "SELLER" and all such individuals and entities are
referred to herein collectively as the "SELLERS"), Hunter Drums Limited, an
Ontario corporation (the "COMPANY"), ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Holdings, Inc., a Delaware
corporation ("▇▇▇▇▇▇▇-▇▇▇▇▇▇▇"), and HDL Acquisition, Inc., an Ontario
corporation and a wholly-owned subsidiary of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ (the "BUYER").
WHEREAS, the Sellers now collectively own, beneficially and
of record, all of the issued and outstanding equity securities of the Company;
WHEREAS, the Sellers collectively own, beneficially and of
record, an aggregate of 900 Class A Common Shares, 8,800 Class A Special Shares,
9,000 Class B Common Shares, 200 Class B Special Shares and 1,200 Class C
Special Shares of the Company (all such shares, collectively, the "SHARES"),
which constitute all of the issued and outstanding equity securities of the
Company;
WHEREAS, the Buyer desires to purchase from the Sellers, and
the Sellers desire to sell to the Buyer, all of the Shares (other than 285 Class
A Common Shares of the Company to be retained by each of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ subject to Section 1.5 hereof (the "RETAINED SHARES")) upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 TRANSFER BY SELLERS OF SHARES. On the Closing Date (as
defined in Section 1.3) and subject to the terms and conditions set forth in
this Agreement, the Sellers will sell, assign, transfer and deliver to the Buyer
the Shares (other than the Retained Shares), free and clear of all options,
pledges, mortgages, security interests, liens, restrictions on voting or
transfer or other encumbrances of any nature ("ENCUMBRANCES"), other than the
restrictions imposed by provincial securities laws and the restrictions on the
transfer of the Shares imposed by the Letters Patent of the Company.
1.2 CONSIDERATION. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Shares (other than the Retained Shares), the Buyer will pay the
consideration set forth in Section 1.3(b) hereof, as adjusted pursuant to
Section 1.4 hereof (the "PURCHASE PRICE").
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1.3 THE CLOSING. Unless this Agreement shall have been
terminated and the transactions contemplated herein shall have been abandoned
pursuant to Article VII, subject to Articles IV and V, the completion of the
transactions contemplated by this Agreement (the "CLOSING") shall take place at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇,, at 10:00 a.m. (New York time) on the later of October 30, 1997 and
that Business Day on or after the date of satisfaction or waiver of all of the
conditions required to be satisfied in Articles IV and V hereof (the "CLOSING
DATE"), which Closing shall be effective 11:59 p.m. on the Business Day
preceding the Closing Date, or at such other place and time as may be agreed
upon by the Sellers' Representative (as defined in Section 9.15) and the Buyer.
For the purposes of this Agreement, "BUSINESS DAY" means any day of the year,
other than a Saturday, Sunday or any day on which banks are required or
authorized to close in Toronto, Ontario or New York City.
(a) DELIVERIES BY SELLERS. At or prior to the
Closing, the Sellers shall deliver or cause to be delivered to the
Buyer the following:
(i) certificates evidencing the Shares (other
than the Retained Shares), which certificates shall be
properly endorsed for transfer or accompanied by duly executed
stock powers, in either case executed in blank or in favor of
the Buyer, and otherwise in a form acceptable for transfer on
the books of the Company;
(ii) resignations of directors of the Company
as contemplated by Section 5.4 hereof; and
(iii) all other previously undelivered
documents required by this Agreement to be delivered by the
Sellers to the Buyer at or prior to the Closing Date in
connection with the transactions contemplated hereby.
(b) DELIVERIES BY THE BUYER. At or prior to the
Closing, the Buyer shall deliver or cause to be delivered to or for the
benefit of the Sellers the following:
(i) to the Sellers, an aggregate amount equal
to Cdn $33,300,000 MINUS the Estimated Adjustment Amount (as
defined in Section 1.3(c)), by wire transfer of immediately
available funds to the accounts designated by the Sellers in
writing at least five Business Days prior to the Closing Date
or, if no such account has been designated, by bank check,
drawn on a Canadian bank in immediately available funds, which
amount shall be allocated among the Sellers and their
respective designated accounts in accordance with Exhibit
1.3(b)(i) hereto; and
(ii) all other previously undelivered documents
required by this Agreement to be delivered by the Buyer to the
Sellers at or prior to the Closing Date in connection with the
transactions contemplated hereby.
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(c) Prior to Closing, the Company shall deliver to
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ its good faith estimate of the Adjustment Amount (as
defined in Section 1.4) (such estimated amount, the "ESTIMATED
ADJUSTMENT AMOUNT"). The Estimated Adjustment Amount shall be prepared
as far in advance of the Closing Date as practicable in consultation
with ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its representatives. The parties shall use
their reasonable best efforts to resolve in good faith any disagreement
between them concerning the computation of the Estimated Adjustment
Amount; provided, however that, if the parties are unable to resolve
any such disagreement, the Estimated Adjustment Amount shall be the
estimate prepared by the Company.
(d) All instruments and documents executed and
delivered to the Buyer pursuant hereto shall be in form and substance,
and shall be executed in a manner, reasonably satisfactory to the
Buyer. All instruments and documents executed and delivered to the
Sellers pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to the Sellers.
1.4 CLOSING ADJUSTMENT. (a) As used in this Agreement,
"ADJUSTMENT AMOUNT" shall mean the amount equal to the sum of (i) the excess, if
any, of (1) Cdn $5,000,000 over (2) the Company's and the Subsidiaries' (as
defined in Section 2.1) shareholders' equity as of the close of business on the
Business Day immediately preceding the Closing Date as determined from the Final
Statements, PLUS (ii) the aggregate amount of any liabilities for salaries,
bonuses, expenses, dividends or other payments owed by the Company and the
Subsidiaries to (or on behalf of) any Seller or any family member of any Seller
as of the close of business on the Business Day immediately preceding the
Closing Date (excluding amounts owed in the ordinary course of business to or on
behalf of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for salary and benefits which would otherwise be
payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ under the Employment Agreement had the Employment
Agreement then been in effect), PLUS (iii) any indebtedness for borrowed money
(including interest, prepayment penalties or premiums, and any other obligations
with respect thereto, but excluding any outstanding checks) of the Company and
the Subsidiaries as of the close of business on the Business Day immediately
preceding the Closing Date, PLUS (iv) any capitalized lease obligations of the
Company and the Subsidiaries (excluding leases listed on Exhibit 1.4(a) hereto)
as of the close of business on the Business Day immediately preceding the
Closing Date.
(b) Within 60 days following the Closing Date, the
Buyer shall cause the Company to prepare on a consolidated basis and deliver to
the Sellers' Representative (i) draft financial statements of the Company and
the Subsidiaries consisting of a balance sheet, a statement of operations and
retained earnings and a statement of changes in financial position for the
period from (and including) January 1, 1997 to (and including) and as of the
close of business on the Business Day immediately preceding the Closing Date
(collectively, the "CLOSING DATE STATEMENTS") (such financial statements shall
be prepared in accordance with Canadian generally accepted accounting principles
("GAAP") consistently applied with the 1996 Financial Statements (as defined in
Section 2.5), except that the Closing Date Statements shall be consolidated but
shall not include footnotes); and (ii) a draft statement of calculation of the
Adjustment Amount, which calculation shall be based on the Closing Date
Statements (the "Calculation").
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(c) The Sellers' Representative shall have 30 days
to review the Closing Date Statements and the Calculation after receipt thereof.
The Sellers' Representative shall have the right, if he disputes either the
Closing Date Statements or the Calculation provided to the Sellers'
Representative to review the relevant financial records of the Company and the
Subsidiaries. Unless the Sellers' Representative delivers written notice to
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ on or prior to the 30th day after its receipt of the Closing
Date Statements and the Calculation of its objection to the Closing Date
Statements or the Calculation and specifying in reasonable detail all disputed
items and the reason therefor, the Sellers shall be deemed to have accepted and
agreed to the Closing Date Statements and the Calculation. If the Sellers'
Representative so notifies ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ of its objection to either the
Closing Date Statements or the Calculation, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Sellers'
Representative shall, within 30 days of such notice (the "RESOLUTION PERIOD"),
attempt to resolve their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
(d) If, at the conclusion of the Resolution Period,
any amounts remain in dispute, then all such amounts remaining in dispute shall
be submitted to one of the "big six" accounting firms which shall be mutually
agreeable to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Sellers' Representative and, failing such
agreement within a period of five Business Days after the conclusion of the
Resolution Period, such firm shall be Ernst & Young (Canada) or if it is unable
to act it shall be KPMG Peat Marwick (Canada) (the "NEUTRAL AUDITOR"). Each
party agrees to execute, if requested by the Neutral Auditor, a reasonable
engagement letter. All fees and expenses relating to the work to be performed by
the Neutral Auditor shall be borne 50% by the Sellers and 50% by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇. The Neutral Auditor shall act as an expert and not an
arbitrator to determine, based solely on presentations by or on behalf of the
Sellers' Representative and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, and not by independent review, only
those issues still in dispute. The presentation by or on behalf of the Sellers'
Representative shall be submitted to the Neutral Auditor (with a copy to
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇) within 20 Business Days of the appointment of the Neutral
Auditor and the presentation by or on behalf of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall be
submitted to the Neutral Auditor (with a copy to the Sellers' Representative)
within 15 Business Days of receipt by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ of the presentation
submitted by or on behalf of the Sellers' Representative or, if no such
presentation is submitted, within 35 Business Days of the appointment of the
Neutral Auditor. The Sellers' Representative shall have the right to submit
another presentation within 5 Business Days of its receipt of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇'▇
presentation for the sole purpose of rebutting any of the arguments made by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ in its presentation, and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall subsequently have
the right to submit another presentation within 5 Business Days of its receipt
of such rebuttal presentation for the sole purpose of rebutting any of the
arguments made by Sellers' Representative in its rebuttal presentation. The
Neutral Auditor's determination shall be made within 30 days of the final
submission as provided above; provided that, if only one party submits a
presentation to the Neutral Auditor, the presentation of such party shall be
accepted without opposition and the determination of the Neutral Auditor shall
be based on that presentation alone, and if both parties fail to provide
presentations to the Neutral Auditor, the Closing Date Statements and the
Calculation as delivered to the Sellers' Representative shall be deemed to be
accepted and agreed. The determination shall be set forth in a written statement
delivered to the Sellers' Representative and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and shall be final,
binding and conclusive. The term "Final Statements" shall mean the definitive
Closing Date Statements and the term "Final Calculation" shall mean the
definitive Calculation, in each case deemed to be accepted and agreed by the
Sellers or agreed
5
to by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Sellers' Representative in accordance with Section
1.4(c) or the definitive Closing Date Statements or the definitive Calculation
resulting from the determinations made by the Neutral Auditor in accordance with
Section 1.4(d) (in addition to those items theretofore agreed to by the Sellers'
Representative and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇).
(e) If the Adjustment Amount as reflected on the Final
Calculation exceeds the Estimated Adjustment Amount, the Sellers shall pay the
Buyer the amount of such excess. The obligation of the Sellers to make such
payment shall be joint and several. If the Estimated Adjustment Amount exceeds
the Adjustment Amount as reflected on the Final Calculation, the Buyer shall pay
the Sellers an amount (allocated in accordance with Exhibit 1.3(b)(i)) equal to
the lesser of (i) the amount of such excess and (ii) the Estimated Adjustment
Amount. Any payments pursuant to this Section 1.4(e) shall be made within five
Business Days after the Final Statements and the Final Calculation become
available by wire transfer of immediately available funds to the account(s)
designated by the applicable payee in writing at least two Business Days prior
to the date of payment or, if payable to the Sellers and no such account has
been designated, by bank check drawn on a Canadian bank in immediately available
funds.
1.5 AMALGAMATION. Immediately after the Closing, the Buyer
shall be amalgamated with the Company, and the Retained Shares shall be
converted in such amalgamation into 27,778 Class B non-voting shares of the
amalgamated company (the "CLASS B SHARES") having the rights, privileges, terms
and conditions set forth in Exhibit 1.5(a) hereto. Immediately following the
amalgamation, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall cause the amalgamated company to file
articles of amendment providing for the exchange of each Class B Share for one
exchangeable non-voting share of the amalgamated company having the rights,
privileges, terms and conditions set forth in Exhibit 1.5(b) hereto (the
"EXCHANGEABLE SHARE").
1.6 FURTHER ASSURANCES. After the Closing, each party hereto
shall from time to time, at the request of any other party and without further
cost or expense to such other party, execute and deliver such other instruments
of conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in the Buyer good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, hereby represent and
warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION. (a) The Company is a corporation
duly organized and validly existing under the laws of the Province of Ontario.
The Company has full corporate power and authority to own its assets and to
carry on its business as now being conducted and is duly qualified or licensed
to do business as a foreign corporation in good standing in the jurisdictions in
which the ownership of its property or the conduct of its business requires such
qualification or license, except jurisdictions in which the failure to be so
qualified or licensed would not, individually or in the aggregate, reasonably be
expected to cause the Company to
6
suffer a loss or pay a claim in excess of Cdn $100,000 (hereinafter referred to
as a "MATERIAL ADVERSE EFFECT"). The Sellers have delivered to the Buyer
complete and correct copies of the Letters Patent and all amendments thereto,
the Bylaws as presently in effect and the minute books and share transfer
records of the Company. Other than Hunter Industrial Group, Inc., a Delaware
corporation ("HIGI"), and Hunter Drums, Inc., an Illinois corporation ("HDI";
together with HIGI, the "SUBSIDIARIES"), the Company does not own or have any
option or right to acquire, directly or indirectly, any capital stock or other
equity securities of, or have any direct or indirect equity or ownership
interest or debt investment in, any corporation, association, partnership, joint
venture or other business. Neither Subsidiary has (i) any shareholders other
than the Company, (ii) conducted any business since the date of its
incorporation or (iii) any assets or liabilities; other than, in the case of
clauses (ii) and (iii), as specifically set forth on Section 2.1 of the
Disclosure Schedule.
2.2 CAPITALIZATION. The authorized share capital of the
Company consists of an unlimited number of Class A Common Shares, an unlimited
number of Class A Special Shares, an unlimited number of Class B Common Shares,
200 Class B Special Shares and an unlimited number of Class C Special Shares. Of
such authorized shares, only the Shares are issued and outstanding and no other
shares (of any other class or series) of the Company or securities exercisable
or convertible into or exchangeable for shares of the Company ("CAPITAL STOCK
EQUIVALENTS") are authorized, issued or outstanding. Except as set forth in
Section 2.2 of the Disclosure Schedule, there are no subscriptions, options,
warrants, calls, rights, contracts, commitments, understandings, restrictions or
arrangements relating to the issuance, sale, transfer or voting of any shares,
whether issued or unissued, of the Company or Capital Stock Equivalents,
including any rights of issuance, conversion or exchange under any outstanding
securities or other instruments, other than restrictions imposed by provincial
securities laws and the restrictions on the transfer of the Shares imposed by
the Letters Patent of the Company. All of the Shares have been validly issued
and are outstanding and fully paid, nonassessable and free of preemptive rights.
The Company does not have any outstanding debt securities or other indebtedness
for borrowed money or guarantees, except as specifically disclosed in the 1996
Financial Statements (as defined in Section 2.5(a)) or in Section 2.2 of the
Disclosure Schedule.
2.3 OWNERSHIP OF SHARES. Each Seller is the record and
beneficial owner of the number and class of Shares set forth opposite such
Seller's name in Section 2.3 of the Disclosure Schedule. The Shares are owned
free and clear of all Encumbrances, other than the restrictions imposed by
provincial securities laws and the restrictions on the transfer of the Shares
imposed by the Letters Patent of the Company. Upon the consummation of the
transactions contemplated hereby, the Buyer will acquire title to the Shares
(other than the Retained Shares) free and clear of all Encumbrances, other than
the restrictions imposed by provincial securities laws, restrictions on the
transfer of the Shares imposed by the Letters Patent of the Company and
Encumbrances arising as a result of any action taken by, or failure to act of,
the Buyer or any of its affiliates ("AFFILIATES") as defined in Rule 12b-2 of
the regulations promulgated pursuant to the U.S. Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT").
2.4 AUTHORIZATION, ETC. Each of the Sellers and the Company
has full power and authority to execute and deliver this Agreement and to carry
out the transactions contemplated hereby. The execution and delivery by the
Sellers and the Company of this Agreement and the
7
consummation by the Sellers and the Company of the transactions contemplated
hereby have been duly approved and authorized by all necessary corporate action
on the part of the Sellers which are corporations and the Company, and no other
proceedings on the part of the Sellers and the Company are necessary to approve
and authorize the execution and delivery by the Sellers and the Company of this
Agreement and the consummation by the Sellers and the Company of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each of the Sellers and the Company and, assuming this Agreement
constitutes the legal, valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of such party, enforceable
against such party in accordance with its terms, except that (i) the enforcement
hereof may be limited by bankruptcy, insolvency, arrangement or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy 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.
2.5 FINANCIAL STATEMENTS. The Sellers have previously
delivered to the Buyer (i) the audited balance sheet of the Company as of
December 31, 1996 and the related audited statements of operations and retained
earnings and changes in financial position for the fiscal year then ended, and
the notes thereto and (ii) the unaudited balance sheets of each Subsidiary as of
December 31, 1996 and the related unaudited statement of income and retained
earnings for the fiscal year then ended for HDI, and the notes thereto
(collectively, the "1996 FINANCIAL STATEMENTS"). The 1996 Financial Statements
present fairly in all material respects the financial position of each of the
Company and each Subsidiary as at December 31, 1996 and the results of its
operations and the changes in its financial position for the year then ended and
have been prepared in accordance with GAAP consistently applied, except that (x)
no statement of income and retained earnings for HIGI is included in the 1996
Financial Statements and (y) the 1996 Financial Statements referred to in clause
(i) above do not cover the Company and its Subsidiaries on a consolidated basis.
2.6 NO UNDISCLOSED LIABILITIES. Except as disclosed in
Section 2.6 of the Disclosure Schedule, the Company and the Subsidiaries have no
liabilities or obligations, whether accrued, absolute, contingent, matured or
unmatured, including, without limitation, such liabilities or obligations under
Environmental Laws (as defined in Section 2.17), that are required to be
reflected, accrued or reserved for in an audited balance sheet of the Company or
the notes thereto prepared in accordance with GAAP, other than (i) liabilities
and obligations that are reflected, accrued or reserved for in the balance
sheets and notes thereto included in the 1996 Financial Statements (the "1996
BALANCE SHEET"), (ii) liabilities and obligations incurred in the ordinary
course of business and consistent with past practice since the date of the 1996
Balance Sheet and (iii) liabilities and obligations which in the aggregate would
not have a Material Adverse Effect.
2.7 NO APPROVALS OR CONFLICTS. Except as set forth in Section
2.7 of the Disclosure Schedule, the execution, delivery and performance by the
Sellers of this Agreement and the consummation by the Sellers of the
transactions contemplated hereby will not (i) violate, conflict with or result
in a breach
8
by the Sellers or the Company of any provision of the Letters Patent, as
amended, or Bylaws of the Company, (ii) violate, conflict with or result in a
breach of any provision of, or constitute a default by the Sellers or the
Company (or an event which, with notice or lapse of time or both, would
constitute a default) or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any Encumbrance upon any of the
properties of the Company or the Subsidiaries or on the Sellers' interest in the
Shares under, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which any
of the Sellers, the Company, the Subsidiaries or any of their respective
properties may be bound, (iii) violate or result in a breach of any order,
injunction, judgment, ruling, law or regulation of any Governmental Authority
(as defined in Section 2.12) applicable to any of the Sellers, the Company, the
Subsidiaries or any of their respective properties or (iv) require the Sellers
or the Company or any Subsidiary to obtain or make any order, consent, approval
or authorization of, or notice to, or declaration, filing, application,
qualification or registration with, any Governmental Authority, excluding from
the foregoing clauses (ii) and (iii) above, such violations, conflicts,
breaches, defaults, rights of termination, cancellation or acceleration or
creation of Encumbrances, which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
2.8 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Except
as set forth in Section 2.8 of the Disclosure Schedule, the Company and the
Subsidiaries are not, and have not been, in any material respect in violation of
any order, injunction, judgment, ruling, law or regulation of any Governmental
Authority applicable to the property or business of the Company and the
Subsidiaries. Except as set forth in Section 2.8 of the Disclosure Schedule, the
Company and the Subsidiaries have and are in material compliance with all
material licenses, permits and other governmental authorizations reasonably
necessary to conduct its business as currently conducted (including, without
limitation, any such material licenses, permits and authorizations under
Environmental Laws) and such material licenses, permits and authorizations are
valid and in full force and effect in all material respects.
2.9 LITIGATION. Except as set forth in Section 2.9 of the
Disclosure Schedule, as of the date hereof, there are no suits, actions,
proceedings or investigations that have been commenced or, to the best knowledge
of the Sellers and the Senior Managers, threatened against the Company, the
Subsidiaries or the transactions contemplated by this Agreement before any
arbitrator, court or governmental or regulatory authority or body, which, if
decided unfavorably to the Company or the Subsidiaries, would have a Material
Adverse Effect. Except as set forth in Section 2.9 of the Disclosure Schedule,
neither the Sellers nor the Senior Managers have received any notice that the
Company, any Subsidiary or any of their assets is subject to any decree, order
or judgment which would have a Material Adverse Effect. As used in this
Agreement, "SENIOR MANAGERS" means ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇. For purposes of this Agreement, "to the best
knowledge of the Sellers and the Senior Managers" means the actual knowledge of
the Sellers and the Senior Managers without any additional inquiry.
2.10 ASSETS. Except as set forth in Section 2.10 of the
Disclosure Schedule and except with respect to the Owned Property and the Real
Property Leases, on December 31, 1996, the Company and the Subsidiaries had and,
except with respect to assets disposed of or acquired in the ordinary course of
business and consistent with past practice since such date, the Company and the
Subsidiaries now have, good and valid title to, or hold by valid and existing
lease or
9
license, all the assets reflected as assets of the Company or the Subsidiaries
on the 1996 Balance Sheet or which would have been reflected on the 1996 Balance
Sheet if acquired prior to such date, free and clear of all Encumbrances of any
nature except for: (i) Encumbrances which secure indebtedness or obligations
which are properly reflected on the 1996 Balance Sheet; (ii) liens for Taxes (as
defined in Section 2.12) not yet payable or being contested in good faith; (iii)
liens arising as a matter of law in the ordinary course of business, provided
that the obligations secured by such liens are not delinquent or are being
contested in good faith; and (iv) such imperfections of title and Encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect. Except as set forth in Section 2.10 of the Disclosure Schedule, the
Company owns, or has valid leasehold interests in, all material tangible assets
necessary for the operation or conduct of the Company's business as currently
conducted and all such material tangible assets are, in the reasonable judgment
of the Sellers, in reasonable good operating condition in all material respects,
normal wear and tear excepted, other than machinery and equipment under repair
or out of service in the ordinary course of the Company's business.
2.11 ABSENCE OF CERTAIN CHANGES. (a) Except as set forth in
Section 2.11 (a) of the Disclosure Schedule and as otherwise provided herein,
since December 31, 1996, (i) the business of the Company has been conducted only
in the ordinary course and consistent with past practice in all material
respects; (ii) there has not been any event or development prior to the date
hereof which, if it had occurred or existed after the date hereof, would be a
violation of Section 6.1(d); and (iii) there has not been any event or
development with respect to the business, financial condition or results of
operations of the Company and the Subsidiaries which, individually or in the
aggregate, has had a Material Adverse Effect and which has not been reflected in
the Adjustment Amount. The parties hereto hereby agree that, in determining
whether the loss of one or more customers has had a Material Adverse Effect, the
addition of any new customers shall be considered in the aggregate with such
loss of customers.
(b) Except as set forth in Section 2.11(b) of the Disclosure
Schedule, since September 17, 1997, neither the Company nor any Subsidiary has
declared, set aside or paid any dividend or other distribution or made any other
payment, in cash or other property, to any of the Company's shareholders or any
family member thereof, other than salary and benefits paid in the ordinary
course of business to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ which would otherwise be payable to ▇▇▇▇▇▇▇
▇▇▇▇▇▇ under the Employment Agreement had the Employment Agreement then been in
effect.
2.12 TAX MATTERS. (a) Except as set forth in Section 2.12(a)
of the Disclosure Schedule, the Company and the Subsidiaries have duly and
timely filed all Tax Returns that are required to be filed in all jurisdictions
where such entities are required to file with the appropriate Governmental
Authority and have duly, completely and correctly reported all income and all
other amounts and information required to be reported thereon and no material
fact has been omitted therefrom.
(b) Except as set forth in Section 2.12(b) of the Disclosure
Schedule, the Company and the Subsidiaries have duly and timely paid all Taxes,
including all installments on account of Taxes for the current year, that are
due and payable by them and the Company and the Subsidiaries have established
reserves or made adequate provisions in accordance with GAAP (except for normal
year-end adjustments with respect to periods after January 1, 1997) on the
10
financial books and records of the Company and its Subsidiaries that will be
adequate for the payment by the Company and the Subsidiaries of all Taxes that
are not yet due and payable or that are being contested, and that relate to
periods ending on or prior to the last month's end for which financial
statements have been prepared, which, as of the date hereof, is August 31, 1997.
(c) The Company and the Subsidiaries have not requested, or
entered into any agreement or other arrangement or executed any waiver providing
for, any extension of time within which (i) to file any Tax Return covering any
Taxes for which they are or may be liable; (ii) to file any elections,
designations or similar things relating to Taxes for which they are or may be
liable; (iii) they are required to pay or remit any Taxes or amounts on account
of Taxes; or (iv) any Governmental Authority may assess or collect Taxes for
which they are or may be liable.
(d) The Canadian federal and provincial income and capital
tax liabilities of the Company and the Subsidiaries have been assessed by the
relevant taxing authorities and notices of assessment have been issued to each
such entity by the relevant taxing authorities for all taxation years prior to
and including the taxation year ended 1995.
(e) As of the date hereof, there are no actions, suits,
proceedings, investigations, audits or claims that have been commenced or, to
the best knowledge of the Sellers and the Senior Managers, threatened, against
the Company or any Subsidiary in respect of any Taxes and there are no matters
under discussion, audit or appeal with any Governmental Authority relating to
Taxes, except as set forth in Section 2.12(e) of the Disclosure Schedule.
(f) There are no liens for Taxes on any of the assets of the
Company or any Subsidiary other than liens for current Taxes which are not yet
due and payable.
(g) The Company and the Subsidiaries have duly and timely
withheld from any amount paid or credited by it to or for the account or benefit
of any person, including any of its employees, officers and directors and any
non-resident person, the amount of all Taxes and other deductions required by
any applicable law, rule or regulation to be withheld from any such amount and
has duly and timely remitted the same to the appropriate Governmental Authority.
The Company and the Subsidiaries have charged, collected and remitted on a
timely basis all Taxes as required under applicable legislation on any sale,
supply or delivery whatsoever, made by the Company and the Subsidiaries.
(h) Except as specifically disclosed in writing to the Buyer,
for purposes of the Income Tax Act (Canada) or any applicable provincial or
municipal taxing statute, no person or group of persons has, during the period
of seven years immediately prior to the Closing Date, acquired or had the right
to acquire control of the Company.
(i) None of the Sellers is a non-resident of Canada for
purposes of section 116 of the Income Tax Act (Canada).
11
(j) For purposes of this Agreement, "Tax Returns" includes,
without limitation, all returns, reports, declarations, elections, notices,
filings, information returns and statements filed in respect of Taxes.
(k) For purposes of this Agreement, "Taxes" includes, without
limitation, all taxes, duties, fees, premiums, assessments, imposts, levies and
other charges of any kind whatsoever imposed by any Governmental Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use, value-added, excise,
stamp, withholding, business, franchising, property, payroll, employment,
health, social services, education and social security taxes, all surtaxes, all
customs duties and import and export taxes, all license, franchise and
registration fees and all unemployment insurance, health insurance and Canada,
Quebec and other government pension plan premiums.
(l) For purposes of this Agreement, "Governmental Authority"
means any government, regulatory authority, governmental department, agency,
commission, board, tribunal, crown corporation, or court or other law, rule or
regulation-making entity having or purporting to have jurisdiction on behalf of
any nation, or province or state or other subdivision thereof or any
municipality, district or other subdivision thereof.
2.13 EMPLOYEE BENEFITS. (a) Section 2.13 of the Disclosure
Schedule contains a true and complete list of all bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation,
phantom stock, savings, profit sharing, severance or termination pay, health or
other medical, dental, life, disability or other insurance (whether insured or
self-insured), supplementary unemployment or employment benefit, pension,
retirement, registered retirement savings, supplementary retirement, employment,
consulting, collective bargaining, change in control and any other benefit or
compensation plan, program, agreement, arrangement, policy or practice
(including any funding mechanism therefor which is now in effect or which will
be required in the future as a result of the transactions contemplated by this
Agreement), whether formal or informal, funded or unfunded, registered or
unregistered, oral or written, which are maintained or contributed to or are
required to be maintained, contributed to or provided by any of the Company and
the Subsidiaries, under which any employee, former employee or independent
contractor (or any dependent of any such persons) in relation to the Company or
any Subsidiary has any present or future right to benefits or compensation or
under which the Company or any Subsidiary has any present or future liability or
obligation. All such plans, programs, agreements, arrangements, policies or
practices shall be collectively referred to as the "Company Plans" and
individually as a "Company Plan".
(b) The Sellers have provided to the Buyer current, accurate
and complete copies of each written Company Plan or, where oral, a written
description of the terms thereof, as amended to date (except that in respect of
oral Company Plans which relate to employment the Sellers have provided the
Buyer the information under the headings in Section 2.13 of the Disclosure
Schedule on a current, accurate and complete basis), together with the most
current funding agreements and summary plan descriptions relating to each such
Company Plan
12
including, without limiting the generality of the foregoing, the following
documents (where applicable):
(i) all actuarial reports and financial statements for each
Company Plan,
(ii) evidence of registration of each Company Plan (where
registration of any such Company Plan is required under applicable laws),
(iii) the most current copies of any insurance contracts,
investment management agreements or investment reports with respect to each
Company Plan,
(iv) all reports, returns, filings made with any regulatory
authority in respect of any Company Plan within the last six years,
(v) the most current copies of booklets or manuals prepared
for or circulated to employees with respect to any of the Company Plans,
(vi) all material correspondence with any regulatory
authority respecting each Company Plan within the last six years, and
(vii) any and all written legal or actuarial opinions,
memorandums or advice prepared for, or provided to the Company with respect to
the Company Plans prepared within the last six years.
(c) Except as disclosed in Section 2.13 of the Disclosure
Schedule, no promises or commitments have been made by any of the Sellers, the
Company or any Subsidiary or any of their employees, directors or officers to
amend any Company Plan or to provide increased benefits thereunder to any of the
current or former employees of the Company or any Subsidiary or any independent
contractor of the Company or any Subsidiary (collectively referred to as
"Employees"), except as may be required by applicable laws. The Sellers have
delivered to the Buyer a summary description of any other material terms or
conditions of employment (to the extent not disclosed pursuant to the above
provisions) of all Employees for which any of the Company and the Subsidiaries
has or may have obligations.
(d) Each Company Plan is and has been administered in all
material respects in accordance with the terms thereof, any collective
agreements and applicable laws, including registration with the relevant
provincial authorities and federal taxation authorities where such registration
is required to qualify for tax exemption or other beneficial tax status. All
obligations under the Company Plans have been satisfied, to the extent required
by the terms of the relevant Company Plan or applicable laws.
(e) Each Company Plan is in good standing under and in
compliance with all applicable laws and there are no outstanding material
defaults or violations by the Company in connection with any Company Plan, and
no order has been made or notice given pursuant to any
13
applicable legislation requiring (or proposing to require) the Company or any
others to take or refrain from taking any action in respect of any Company Plan.
All material returns, filings reports and disclosures relating to the Company
Plans required pursuant to the terms of the Company Plans or applicable laws
have been made, filed or distributed in accordance with all such requirements
and all filing fees and levies imposed on the Company Plans by any regulatory
authorities or applicable laws have been made or remitted on a timely basis.
(f) Each investment held in respect of a Company Plan is a
qualified or eligible investment and no investment held under or in respect of a
Company Plan is a prohibited investment under the terms of the Company Plan, all
documents related thereto (including any statement of investment policies and
goals) or under applicable laws.
(g) There have been no withdrawals of surplus assets or other
amounts from any of the Company Plans and any employer contribution holidays
taken under the Company Plans have been permitted by the terms of the Company
Plans and have been in accordance with applicable laws.
(h) No step has been taken, no event has occurred and no
condition or circumstance exists that has resulted in or could reasonably be
expected to result in any Company Plan being ordered or required to be
terminated or wound up in whole or in part or having its registration under
applicable legislation refused or revoked, or being placed under the
administration of any trustee or receiver or regulatory authority or being
required to pay any material taxes, fees, penalties or levies under applicable
laws. Each Company Plan may be amended or terminated in accordance with the
terms thereof.
(i) As of the date hereof, no actions, suits, claims (other
than routine claims for payment of benefits in the ordinary course), trials,
demands, investigations, arbitrations or other proceedings have been commenced
or, to the best knowledge of the Sellers and the Senior Managers, threatened in
respect of any of the Company Plans or its assets.
(j) All premium payments and contributions relating to
Employees' benefit accruals or periods of service prior to the Closing Date
(including any and all current service costs and any special payments required
to be made) to the extent required to have been paid or remitted under the terms
of the Company Plans or applicable laws have been so paid or remitted and the
Company Plans have been funded in accordance with the terms thereof and
applicable laws. None of the Company Plans is a "defined benefit pension plan"
(as defined in the Pension Benefits Act (Ontario) or other equivalent provincial
pension legislation) and neither the Company nor any of its Subsidiaries have
sponsored, contributed to, or participated in any defined benefit pension plan.
(k) All contributions to each of the Company Plans in respect
of periods of service or benefits on or prior to September 30, 1997 have been or
will be accrued or paid prior to the Closing Date on the books and records of
the Company, notwithstanding that such contributions may not be due and owing
until after the Closing Date.
14
(l) None of the Company Plans is a multi-employer pension
plan or multi-employer benefit plan.
(m) All vacation pay for Employees accrued up to the Closing
Date has been reflected and accrued in the Closing Date Statement, except for
accrued vacation pay for salaried employees not in excess of $10,000 in the
aggregate.
(n) Except as set forth in Section 2.13 of the Disclosure
Schedule, none of the Company Plans provides benefits to Employees following
their retirement, other than any registered pension plan or group retirement
savings plan disclosed in accordance with the foregoing provisions of this
Section 2.13.
(o) Except as set forth in Section 2.13 of the Disclosure
Schedule, no Company Plan exists that could result in (i) the payment to any
Employee of any money, benefits or other property, (ii) accelerated or increased
funding requirements for any Company Plan or (iii) the acceleration or provision
of any other increased rights or benefits to any Employee as a result of the
transactions contemplated by this Agreement.
2.14 LABOR RELATIONS. Except as set forth in Section 2.14 of
the Disclosure Schedule, (i) the Company is not a party to any collective
bargaining agreement applicable to employees of the Company, nor is any such
contract or agreement presently being negotiated; (ii) the Company is not a
party to any employment agreement or consulting agreement with any person or
entity obligating the Company to make payments in excess of Cdn $100,000 per
year, nor is any such contract or agreement presently being negotiated; (iii)
there is no unfair labor practice charge or complaint pending or, to the best
knowledge of the Sellers and the Senior Managers, threatened against or
otherwise affecting the Company which, if adversely determined, would reasonably
be likely to result in a liability having a Material Adverse Effect; (iv) there
is no labor strike, slowdown, work stoppage, or lockout in effect, or, to the
best knowledge of the Sellers and the Senior Managers, save in the course of the
negotiation of labor contracts or collective bargaining agreements or in the
resolution of grievances that may arise from time to time, threatened against or
otherwise affecting the Company, and the Company has not experienced any labor
strike, slowdown, work stoppage or lockout within the past three years; (v) the
Company is not a party to, or otherwise bound by, any consent order with, or
order by, any Governmental Authority relating to employees or employment
practices, except for any such order issued after the date hereof which is not
reasonably likely to result in liability having a Material Adverse Effect; (vi)
the Company will not have any material liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable law or otherwise, as a result of
the transactions contemplated hereunder; and (vii) the Company is in compliance
with its obligations pursuant to all notification and bargaining obligations
arising under any collective bargaining agreement, statute or otherwise. To the
best knowledge of the Sellers and the Senior Managers, there is no effort to
organize employees of the Company which is pending or threatened.
2.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 2.15 of
the Disclosure Schedule contains a true and complete list of all patents,
trademarks, trade names and copyrights which are either registered or in respect
of which there are pending applications therefor
15
(collectively, the "INTELLECTUAL PROPERTY") used or owned by the Company and a
list of all licenses and other agreements (collectively, the "LICENSE
AGREEMENTS") relating thereto. Except as set forth in Section 2.15 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Intellectual
Property owned by the Company or the License Agreements, (ii) all Intellectual
Property and License Agreements which relate to the interests of the Company in
the Intellectual Property and the License Agreements are valid, in good standing
and free and clear of liens or other security interests, and (iii) the Company
has not received written or, to the best knowledge of the Sellers and the Senior
Managers, oral, notice of any claims by any person to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such License Agreement.
2.16 CONTRACTS. Subject to the exceptions provided for in the
next sentence, the contracts and agreements listed in Section 2.16 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of the Company (the
"CONTRACTS"). Complete copies (or, if oral, written summaries, except as set
forth in Section 2.16 of the Disclosure Schedule) of each Contract have been
made available to the Buyer, including all of the following Contracts: (i) any
indenture, note, mortgage, installment obligation, or other instrument for or
relating to any borrowing of money; (ii) any guaranty of any obligation; (iii)
any agreement, contract, commitment or arrangement containing any covenant
limiting the ability of the Company to engage in any line of business or to
compete with any business or person; (iv) as of the date hereof, any agreement,
contract, commitment or arrangement relating to capital expenditures with
respect to the Company and involving future payments which exceed Cdn $100,000
in any 12-month period; (v) other than this Agreement, any agreement, contract,
commitment or arrangement relating to the acquisition or disposition of assets
or any capital stock of any business enterprise other than those relating to the
acquisition or disposition of assets entered in the ordinary course of business
consistent with past practice; (vi) any real property or personal property
lease; (vii) as of the date hereof, any contract, commitment, agreement or
arrangement which requires future payments in excess of Cdn $100,000 in any
12-month period, to the extent such contract, commitment, agreement or
arrangement is not terminable within 30 days without payment of premium or
penalty; and (viii) any contract, commitment, agreement or arrangement with any
director, shareholder or affiliate of the Company except this Agreement and the
agreements contemplated hereunder. Except as set forth in Section 2.16 of the
Disclosure Schedule, each Contract is in full force and effect, and is a legal,
valid and binding obligation of the Company and, to the best knowledge of the
Sellers and the Senior Managers, each of the other parties thereto, enforceable
in accordance with its terms, except that (x) enforcement may be limited by
bankruptcy, insolvency, arrangement or other similar laws now or hereafter in
effect relating to creditors' rights generally, (y) the remedy 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 and (z) the Currency Act (Canada) precludes a
court in Canada from giving judgment in any currency other than Canadian
currency. Except as set forth in Section 2.16 of the Disclosure Schedule, no
condition exists or event has occurred which (whether with or without notice or
lapse of time or both, or the happening or occurrence of any other event) would
constitute a default by the Company or, to the best knowledge of the Sellers and
the Senior Managers as of the date hereof, any other party thereto under, or
result in a right in termination of, any Contract,
16
by any other party thereto. Except as set forth in Section 2.16 of the
Disclosure Schedule, to the best knowledge of the Sellers and the Senior
Managers as of the date hereof, no party to any Contract intends (x) to
terminate such Contract or materially amend the terms thereof, (y) to refuse to
renew such Contract upon expiration thereof or (z) to renew such Contract upon
expiration thereof on terms and conditions which are materially more onerous to
the Company than those pertaining to such existing Contract.
2.17 ENVIRONMENTAL MATTERS. Except as set forth in Section
2.17 of the Disclosure Schedule, (i) the Company has not, as of the date hereof,
received any notice, complaint, direction or order alleging the material
violation of, or any material actual or potential liability relating to, any
applicable statutes, laws, regulations, rules, decrees, orders or judgments of
any Governmental Authority or any municipality, district or other subdivision
thereof related to the protection of human health or the environment or the
receipt, manufacture, processing, generation, presence, distribution, use,
treatment, storage, disposal, clean-up, transport, release, discharge,
migration, removal or handling of any Hazardous Materials (as defined below),
including, without limitation, the Canadian Environmental Protection Act, the
Fisheries Act, the Environmental Protection Act (Ontario), the Ontario Water
Resources Act, and the Occupational Health and Safety Act (Ontario), each as
amended and supplemented, and any regulations promulgated pursuant to such laws,
and any other similar federal, provincial, state or local statutes or
regulations ("ENVIRONMENTAL LAWS"), and any policies or guidelines of any
Governmental Authority, which violation or liability has not been resolved and,
to the best knowledge of the Sellers and the Senior Managers, no such notice,
complaint, direction or order is threatened or otherwise expected, and, to the
best knowledge of the Sellers and the Senior Managers, there are no
circumstances which could result in the issuance of any such notice, complaint,
direction or order, (ii) the Company and all operations of the Company on the
Leased Property (as defined below) or any real property formerly owned or leased
by the Company or over which the Company has or had charge, management or
control are and, during the time such real property was owned or leased by the
Company or was under its charge, management or control, were in material
compliance with all applicable Environmental Laws and, to the best knowledge of
the Sellers and the Senior Managers, there is no condition that could prevent or
materially interfere with such compliance in the future, (iii) there have been
and are no proceedings commenced or, to the knowledge of the Sellers and the
Senior Managers, threatened to revoke or amend any material environmental
permits, registrations and authorizations, (iv) no hazardous waste, substance,
material, chemical, pollutant or contaminant, or toxic substance or dangerous
good as defined, or identified in any Environmental Law, including, without
limitation, petroleum and petroleum products, asbestos and any other material
regulated under, or that can result in liability under, applicable Environmental
Laws ("HAZARDOUS MATERIALS"), has been transported, generated, handled, used,
stored, treated or disposed of by the Company on the real estate owned, operated
or otherwise used by or under the charge, management or control of the Company
or at any other location, except as would not result in a Material Adverse
Effect, (vi) the Company has not entered into, agreed to, been convicted or
found liable under or is subject to any judgment, decree, material order or
other similar requirement of any Governmental Authority under any Environmental
Laws, (vii) there are no (v) PCBs or equipment, PCB wastes, or other materials
containing PCBs, (w) underground or aboveground storage tanks, (x) surface
impoundments, (y) landfills or (z) sewer or septic systems currently or formerly
present at or about any of the properties or facilities currently or, to the
best knowledge of the Sellers and the
17
Senior Managers, formerly owned, operated or otherwise used by or under the
charge, management or control of the Company that is reasonably likely to result
in material liability to the Company under any applicable Environmental Laws,
(viii) there are no actions, activities, events, conditions or circumstances
occurring or existing during the time of the Company's operations at or
ownership of the Leased Property or any property formerly owned or leased or
over which the Company has or had charge, management or control or, to the best
knowledge of the Sellers and the Senior Managers, prior to or following such
time, including without limitation the release, threatened release, emission,
discharge, spill, leak, pumping, pouring, emptying, injection, escape, leaching,
disposal, dumping, depositing, spraying, burial, abandonment, incineration,
seepage, placement, generation, treatment, storage or disposal of Hazardous
Materials, that is reasonably likely to result in a Material Adverse Effect;
(ix) to the best knowledge of the Sellers and the Senior Managers, except in
material compliance with applicable Environmental Laws or at levels which do not
exceed applicable criteria under any policies or guidelines of any Governmental
Authority under or relating to Environmental Law, there are no Hazardous
Materials in, on or under the Leased Property or any property formerly owned or
leased by the Company or over which the Company has or had charge, management or
control and there are no Hazardous Materials originating from any property
neighboring or adjoining such properties which has migrated onto, or is
migrating towards any such properties; and (x) all material environmental data
and studies (including the results of any environmental audit) relating to the
Company and in the Company's possession have been delivered or made available to
the Buyer.
2.18 INSURANCE. Section 2.18 of the Disclosure Schedule lists
all insurance policies of the Company covering the assets, employees and
operations of the Company and the Subsidiaries as of the date hereof. All such
policies are in full force and effect, all premiums due thereon have been paid
by the Company and the Company and the Subsidiaries have complied in all
material respects with the provisions of such policies and have not received any
notice from any of its insurance brokers or carriers that such broker or carrier
will not be willing or able to renew their existing coverage.
2.19 TRANSACTIONS WITH AFFILIATES. Except for this Agreement
and the agreements and transactions contemplated hereunder and except as
disclosed in Section 2.19 of the Disclosure Schedule, there are no Contracts,
agreements or arrangements between the Company (or any Subsidiary) and any
Seller (or any affiliate of a Seller).
2.20 MATERIAL CUSTOMERS AND SUPPLIERS. Section 2.20 of the
Disclosure Schedule sets forth the names of the ten suppliers of the Company to
whom the Company paid the greatest sum of money in respect of products and
materials sold to the Company and the ten customers of the Company from whom the
Company received the greatest sum of money in respect of products or services
provided by the Company between January 1, 1996 and July 31, 1997.
2.21 REAL PROPERTY. (a) Section 2.21(a) of the Disclosure
Schedule sets forth the municipal address of all of the real property owned by
the Company (the "OWNED PROPERTY").
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(b) The Company is the beneficial owner of the Owned
Property, together with all plants, buildings, structures, erections,
improvements, appurtenances and fixtures situate on or forming part thereof, in
fee simple.
(c) To the best knowledge of the Sellers and the Senior
Managers, there are no agreements, undertakings or other documents which affect
or relate to the title to, or ownership of such Owned Property, except as
registered against title to such Owned Property.
(d) Except (x) as disclosed by the registered title of the
Owned Property or (y) as disclosed or provided for in this Agreement or in
Section 2.21(d) of the Disclosure Schedule, no Person has any right to purchase
any of the Owned Property, and no Person other than the Company is using or has
any right to use, as tenant, or is in possession or occupancy of, any part of
such Owned Property.
(e) The Company has not granted any option, right of first
refusal or other contractual rights with respect to any of the Owned Property
other than to the Buyer pursuant to this Agreement.
(f) Except as disclosed by the registered title of the Owned
Property, the Company has not entered into any agreement to sell, transfer,
encumber, or otherwise dispose of or impair the Company's right, title and
interest in and to the Owned Property or the air, density and easement rights
relating to the Owned Property other than as listed in Section 2.21(f) of the
Disclosure Schedule.
(g) To the best knowledge of the Sellers and the Senior
Managers, Section 2.21(g) of the Disclosure Schedule provides details on the
most up-to-date surveys, prepared by registered land surveyors, relating to the
Owned Property which are available, and such surveys have been delivered or made
available to the Buyer.
(h) The Company has not received any notification of and the
Seller has no knowledge of, any outstanding or incomplete work orders in respect
of any of the buildings, improvements or other structures constructed on the
Owned Property or of any current non-compliance with applicable statutes and
regulations or building and zoning by-laws and regulations, but no independent
investigation has been conducted with respect to these matters.
(i) Except as disclosed in Section 2.21(i) of the Disclosure
Schedule, all accounts for work and services performed or materials placed or
furnished upon or in respect of the construction and completion of any of the
buildings, improvements or other structures constructed on the Owned Property
have been fully paid and no one is entitled to claim a lien under the
Construction Lien Act (Ontario) or other similar legislation for such work
performed by or on behalf of the Company.
(j) The Company has not made application for a rezoning of
any of the Owned Property and the Seller has no knowledge of any proposed or
pending change to any zoning affecting the Owned Property.
19
(k) The Sellers and the Senior Managers have no knowledge of
any expropriation or condemnation or similar proceeding pending or threatened
against the Owned Property or any part of the Owned Property.
(l) Except as may be disclosed by the registered title of the
Owned Property and to the best knowledge of the Sellers and the Senior Managers,
there are no matters affecting the right, title and interest of the Company in
and to the Owned Property, which in the aggregate, would materially and
adversely affect the ability of the Company to carry on its business upon the
Owned Property.
2.22 REAL PROPERTY LEASES. (a) Section 2.22(a) of the
Disclosure Schedule sets forth a complete list of all leases and subleases of
real property relating to real property used or occupied by the Company (the
"Real Property Leases").
(b) Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, all interests held by the Company as lessee under the Real Property
Leases are free and clear of all Encumbrances of any nature and kind whatsoever.
(c) All payments due and owing by the Company pursuant to the
Real Property Leases have been duly paid and the Company is not otherwise in
default in meeting its obligations under any of the Real Property Leases.
(d) To the best knowledge of the Sellers and the Senior
Managers, none of the landlords under each of the Real Property Leases is in
default in meeting any of its material obligations under its respective Real
Property Leases.
(e) Except as disclosed in the Real Property Leases and
Section 2.22(e) of the Disclosure Schedule, the Company has no option, right of
first refusal or other contractual right relating to the Leased Premises.
(f) To the best knowledge of the Sellers and the Senior
Managers, no event exists which, but for the passing of time or the giving of
notice, or both, would constitute a default by either party to any of the Real
Property Leases and no party to any Real Property Lease is claiming any such
default or taking any action purportedly based upon any such default.
(g) The Company has not waived, or omitted to take any action
in respect of, any substantial rights under any of the Real Property Leases
where the loss of such right would have a Material Adverse Effect on the
Company.
(h) The Company is not a party to any Real Property Lease as
Lessor.
(i) Except as set forth in Section 2.22(i) of the Disclosure
Schedule, no third party consent or approval under any Real Property Lease is
required for the consummation of the transactions contemplated herein.
20
2.23 PRODUCT LIABILITY. Except as set forth in Section 2.23
of the Disclosure Schedule and except where a claim or threatened claim would
not have a Material Adverse Effect on the Company, the Company has not received
written notice of any claim or threatened claim against the Company for product
liability, nor, to the best knowledge of the Sellers and the Senior Managers,
has the Company received oral notice of any claim or threatened claim against
the Company for product liability.
2.24 BOOKS AND RECORDS. The financial books and records
pertaining to the business of the Company and the Subsidiaries are complete and
correct in all material respects (except for normal year-end adjustments with
respect to periods after January 1, 1997), have been maintained in accordance
with good business practice, and reflect the basis for the financial condition
and results of operations of the Company and the Subsidiaries set forth in the
financial statements referred to in Section 2.5 hereto.
2.25 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Sellers as
follows:
3.1 ORGANIZATION. The Buyer is a corporation duly organized
and validly existing under the laws of the Province of Ontario. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
is a corporation duly organized and validly existing under the laws of the State
of Delaware. Each of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer have delivered to the Sellers
complete and correct copies of their Articles of Incorporation and all
amendments thereto and By-laws as in effect on the date hereof. The Buyer has
been formed solely for the purpose of engaging in the acquisition of the Shares
and all of the issued and outstanding shares of capital stock of the Buyer are
legally and beneficially owned by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ directly.
3.2 AUTHORIZATION ETC. Each of the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
has full corporate power and authority to execute and deliver this Agreement and
to carry out the transactions contemplated hereby to be carried out by it. The
execution and delivery by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer of this Agreement and
the consummation by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer of the transactions
contemplated hereby have been duly approved and authorized by all necessary
corporate action on the part of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer, and no other
proceedings on the part of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer are necessary to
approve and authorize the execution and delivery by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the
Buyer of this Agreement and the consummation by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer of
the transactions contemplated hereby. This Agreement has been duly and validly
executed by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer and, assuming this Agreement
constitutes the legal, valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the
Buyer, enforceable against ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer in accordance with its
terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, arrangement or other similar laws now or hereafter in effect
relating to
21
creditors' rights generally and (ii) the remedy 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.
3.3 NO APPROVALS OR CONFLICTS. Except as set forth in Section
3.3 of the Disclosure Schedule, the execution, delivery and performance by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer of this Agreement and the consummation by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer of the transactions contemplated hereby to be
consummated by it will not (i) violate, conflict with or result in a breach by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer of any provision of the Articles of Incorporation
or By-laws of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer, (ii) violate, conflict with or
result in a breach of any provision of, or constitute a default by
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer (or an event which, with notice or lapse of time or
both, would constitute a default) or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇'▇ or the
Buyer's properties under, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, lease, contract, agreement or other instrument to
which ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer or any of its properties may be bound, (iii)
violate or result in a breach of any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
or the Buyer or any of their respective properties, or (iv) except for
applicable requirements of the Investment Canada Act, require any order,
consent, approval or authorization of, or notice to, or declaration, filing,
application, qualification or registration with, any governmental or regulatory
authority, excluding from the foregoing clauses (ii) and (iii) above, such
violations, conflicts and breaches which, individually or in the aggregate,
would not reasonably be likely to adversely affect the ability of
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer to consummate the transactions contemplated hereby
to be consummated by it or cause ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer to suffer a loss
or pay a claim in excess of Cdn $100,000.
3.4 FINANCING. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ has obtained written binding
commitments to provide the financing required to pay the cash Purchase Price and
all contemplated fees and expenses of the Buyer related to the transactions
contemplated hereby. The Buyer has provided the Sellers' Representative with
true and complete copies of such written commitments. As of the date hereof, the
Buyer is not in default under any of the terms and conditions of the written
commitments.
3.5 CAPITALIZATION. As of the date hereof, the authorized
capital stock of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ consists of 3,000,000 shares of common stock,
par value $.01 per share ("RS COMMON SHARES"), of which 1,774,964 shares are
outstanding. As of the date hereof, except as contemplated by this Agreement and
except for options to purchase an aggregate of 148,149 RS Common Shares, no
securities exercisable or convertible into or exchangeable for RS Common Shares
("RS COMMON SHARES EQUIVALENTS") are authorized, issued or outstanding. The RS
Common Shares to be issued pursuant to the terms of the Exchangeable Shares will
be validly issued, fully paid and nonassessable and free of preemptive rights
under the Delaware General Corporation Law. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ has not issued any
RS Common Shares within the past six months for consideration with a fair market
value less than US $45 per share, other than RS Common Shares issued upon
exercise of RS Common Shares Equivalents.
22
3.6 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker (other than Vestar Capital Partners) is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Buyer.
3.7 FINANCIAL STATEMENTS. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ has previously
delivered to Sellers the audited consolidated balance sheets of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
Corp. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, redeemable preferred stock and shareholders'
deficit, and cash flows for each of the years ended December 31, 1996, 1995 and
1994 and the notes thereto and the report thereon of Deloitte & Touche LLP. ("RS
FINANCIAL STATEMENTS"). The RS Financial Statements present fairly in all
material respects the financial position of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp. as at December
31, 1996 and the results of operations and cash flows for the year then ended
and have been prepared in accordance with generally accepted accounting
principles in the United States consistently applied.
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of the Sellers to effect the Closing under
this Agreement are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, unless validly waived in writing by the
Sellers' Representative.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement (i) in the case of any thereof
that are expressly qualified by any materiality qualification, shall be true and
correct, subject to such materiality qualification, and (ii) in the case of all
other representations and warranties, shall be true and correct in all material
respects, in each case on and as of the Closing Date as though such
representations and warranties were made on such date, except that any
representations and warranties that are made as of a specified date shall be
true as of such date.
4.2 PERFORMANCE. The Buyer shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by it prior to the Closing.
4.3 OFFICER'S CERTIFICATE. The Buyer shall have delivered to
the Sellers a certificate, dated as of the Closing Date and executed by the
President or a Senior Vice President of the Buyer, certifying to the fulfillment
of the conditions specified in Sections 4.1 and 4.2 hereof.
4.4 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a federal or provincial court or governmental authority of
competent jurisdiction directing that the transactions provided for herein not
be consummated as provided herein.
23
4.5 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 3.3 of the Disclosure Schedule and necessary
to effect the Closing shall have been obtained.
4.6 EMPLOYMENT AND STAY-PAY AGREEMENTS. The Company shall
have executed and delivered to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (a) the Employment Agreement in
substantially the form of Exhibit 4.6(a) hereto and (b) the Stay-Pay Agreement
in substantially the form of Exhibit 4.6(b) hereto.
4.7 EQUITY AGREEMENTS. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall have executed
and delivered to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ the HDL Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.7(a), 4.7(b), 4.7(c) and
4.7(d) hereto.
4.8 MUTUAL RELEASE. The Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall have
executed and delivered to each of the Sellers the Mutual Release in
substantially the form of Exhibit 4.8 hereto.
4.9 EXCHANGEABLE SHARE AGREEMENTS. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ shall have
executed and delivered to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ the Support
Agreement and the Exchange Agreement in substantially the forms of Exhibits
4.9(a) and 4.9(b) hereto.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION
The obligation of the Buyer to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by the Buyer.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Sellers in this Agreement (without giving effect to any
materiality qualification set forth in Article II) shall be true and correct on
and as of the Closing Date as though such representations and warranties were
made on such date (except that any representations and warranties that are made
as of a specified date shall be true and correct as of such date), except for
breaches which would not, individually or in the aggregate, reasonably be
expected to cause the Company to suffer a loss or pay a claim in excess of Cdn
$1,000,000 or to have a material adverse effect on the business, financial
condition or results of operations of the Company and the Subsidiaries taken as
a whole.
5.2 PERFORMANCE. The Sellers shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be so performed or complied with by the Sellers prior to
the Closing.
24
5.3 OFFICER'S CERTIFICATE. The Sellers shall have delivered
to the Buyer a certificate, dated as of the Closing Date and executed by the
President of the Company and by the Sellers' Representative, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 hereof.
5.4 RESIGNATIONS. The Sellers shall have delivered to the
Buyer the written resignations of all directors of the Company other than
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the written resignation of ▇▇▇▇ ▇. ▇▇▇▇▇▇ as Executive
Vice President of the Company, in each case effective as of the Closing Date.
5.5 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
5.6 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 5.6 of the Disclosure Schedule shall have
been obtained.
5.7 AFFILIATE AGREEMENTS. The Buyer shall have received
evidence satisfactory to it that all agreements between the Company, on the one
hand, and any affiliate of the Company, on the other hand, have been terminated
without any penalty to the Company, except as disclosed in Section 5.7 of the
Disclosure Schedule.
5.8 EXISTING INDEBTEDNESS. If the Buyer has elected to
discharge any outstanding indebtedness for borrowed money of the Company and
shall have provided the Company with funds necessary to effect such discharge
without penalty or premium, each holder of such indebtedness shall have released
and discharged the same and any lien securing the same against payment by or on
behalf of the Company of such funds, and the Buyer shall have received written
evidence satisfactory to it of the foregoing. Any guarantee made by the Company
of the indebtedness of any other person (and any lien on the assets of the
Company securing the same) shall have been released and discharged, and the
Buyer shall have received written evidence satisfactory to it of the foregoing.
5.9 FINANCING. The Buyer shall have received or otherwise
have available, on terms and conditions reasonably satisfactory to the Buyer,
financing sufficient to pay the cash Purchase Price and all fees and expenses
incurred by the Buyer in connection with the transactions contemplated hereby
and to satisfy the ongoing working capital requirements of the Company.
5.10 EMPLOYMENT AND STAY-PAY AGREEMENTS. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and the Company shall have executed and delivered to Buyer (a) the Employment
Agreement in substantially the form of Exhibit 4.6(a) hereto and (b) the
Stay-Pay Agreement in substantially the form of Exhibit 4.6(b) hereto.
25
5.11 EQUITY AGREEMENTS. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
shall have executed and delivered to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ the HDL Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.7(a), 4.7(b), 4.7(c) and
4.7(d) hereto.
5.12 MUTUAL RELEASE. Each of the Sellers shall have executed
and delivered to the Buyer the Mutual Release in substantially the form of
Exhibit 4.8 hereto.
5.13 SHAREHOLDER CONSENT. Each Seller holding any Retained
Shares shall have executed a written resolution approving the amalgamation of
Buyer and the Company and the unanimous shareholders agreement of the continuing
company resulting from the amalgamation of the Buyer and the Company in
substantially the form of Exhibit 5.13 hereto.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY COMPANY. The Sellers, jointly and
severally, covenant that, except (i) as otherwise expressly contemplated by this
Agreement, (ii) as provided in Section 6.1 of the Disclosure Schedule or (iii)
as consented to by the Buyer, acting reasonably, in writing, from and after the
date of this Agreement and until the Closing Date the Sellers shall cause the
Company to:
(a) use all reasonable efforts consistent with good business
judgment to (i) maintain the present business organization of the Company, (ii)
maintain the Company's books and records in accordance with past practices;
(iii) keep available the services of the Company's officers and employees
(except for any effect which results from any announcement of the transactions
contemplated by this Agreement); and (iv) maintain satisfactory relationships
with licensors, suppliers, creditors, distributors, customers and others
transacting business with the Company (except for any effect which results from
any announcement of the transactions contemplated by this Agreement);
(b) purchase inventory, pay payables and other accrued
liabilities, and collect receivables in the ordinary and regular course of
business in a manner consistent with past practice and otherwise operate the
Company in the ordinary and regular course of business consistent with past
practice;
(c) notify the Buyer of any material change in the normal
course of business or operations of the Company and of any material governmental
complaints, investigations or hearings of which the Sellers or the Company are
notified (or communications received by the Sellers or the Company indicating
that the same may be contemplated), or the institution or settlement of material
litigation, in each case involving the Company, and to keep the Buyer informed
of such events;
26
(d) not (i) cause to be issued or sold any debt or equity
securities of the Company or issue, grant or enter into any options, warrants,
rights, subscription agreements or commitments of any kind with respect thereto;
(ii) directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any equity securities of the Company; (iii) permit or
allow the Company to borrow or agree to borrow any funds or incur, whether
directly or by way of guarantee, any obligation for borrowed money, other than
borrowings under existing lines of credit in the ordinary course of business and
consistent with past practice; (iv) subject any of the assets of the Company
(real, personal or mixed, tangible or intangible) to any Encumbrance or
otherwise permit or allow the sale, lease, transfer or disposition of any assets
of the Company (real, personal or mixed, tangible or intangible), other than in
the ordinary course of business and consistent with past practice; (v) assume,
guarantee, or otherwise become responsible for the obligations of, or make any
loans or advances to, any other individual, firm or corporation; (vi) waive or
release any rights of material value, or cancel, compromise, release or assign
any material indebtedness owed to it or any material claims held by it; (vii)
except for capital expenditures not to exceed Cdn $100,000 and except for those
commitments and expenditures disclosed in Section 6.1(d)(vii) of the Disclosure
Schedule, make any investment or expenditure of a capital nature either by
purchase of shares or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other individual,
firm or corporation; (viii) cancel or terminate any insurance policy naming it
as a beneficiary or a loss payable payee; (ix) enter into any collective
bargaining agreements; (x) increase the compensation or fringe benefits of any
of its officers or, other than in accordance with past practice, effect any
material general increase in the compensation or fringe benefits of its
employees or pay or agree to pay any pension, retirement allowance, or other
benefit not required by any existing employee benefit plan to any such officers
or employees, commit itself to any employment agreement or employee benefit plan
with or for the benefit of any of its officers or employees or any other person,
or alter, amend, terminate in whole or in part, or curtail or permanently
discontinue contributions to, any pension plan or any other employee benefit
plan; (xi) enter into any contract, commitment, agreement or arrangement which
requires payments in excess of Cdn $100,000 in any 12-month period, to the
extent such contract, commitment, agreement or arrangement is not terminable
within 30 days without payment of premium or penalty; (xii) amend its articles
of incorporation or by-laws; or (xiii) agree to do any of the foregoing; and
(e) not declare, set aside or pay any dividend or other
distribution or make any other payment, in cash or in property, to any of the
Company's shareholders or any family member thereof, other than salary and
benefits paid in the ordinary course of business to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ which would
otherwise be payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ under the Employment Agreement had the
Employment Agreement then been in effect.
(f) comply in all material respects with all applicable laws,
including, without limitation, applicable Environmental Laws.
27
6.2 ACCESS TO BOOKS AND RECORDS; COOPERATION.
(a) Except in respect of liability for Taxes, in which event
the commitment shall continue until the expiration of the Sellers' rights
hereunder, the Buyer agrees that from the Closing Date and until the fifth
anniversary of the Closing Date, during normal business hours upon reasonable
advance notice, it shall, at no cost to the Buyer (other than the time of
officers, directors and employees and of any other persons who are available to
the Buyer without additional compensation) and its affiliates and without
unreasonable disruption of the business of the Buyer and its affiliates, (1)
permit the Sellers and their respective counsel, accountants and other
authorized representatives to have access to the officers, directors, employees,
accountants and other advisors and agents, properties, books, records and
contracts of the Company, and the right to make copies and extracts from such
books, records and contracts, and (2) use all reasonable efforts to make
available to the Sellers and their authorized representatives those officers,
directors, employees, accountants and other advisors and agents whose
assistance, testimony or presence is necessary to assist the Sellers, in each
case to the extent necessary to investigate and defend any threatened or actual
litigation, to permit the Sellers to exercise any rights they may have hereunder
and in connection with any Tax matters involving the Company.
(b) The Buyer agrees not to, and to cause its subsidiaries
not to, destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to the Sellers' Representative, and giving
the Sellers' Representative 30 days following receipt of such notice to request
in writing that all or a portion of the records intended to be destroyed be
delivered to the Sellers' Representative at the Sellers' reasonable expense. The
Sellers acknowledge that the Buyer shall not be liable to the Sellers in the
event of any accidental destruction of such records.
(c) Subject to the provisions of the Confidentiality
Agreement (as defined in Section 9.7), during the period commencing on the date
hereof and ending on the Closing Date, the Company will, and the Sellers will
cause the Company to, afford to the Buyer and its counsel, accountants and other
authorized representatives access at all reasonable times upon reasonable
advance notice to the officers, directors, employees, accountants and other
advisors and agents, properties, books, records and contracts, of the Company,
and the right to make copies and extracts from such books, records and
contracts, and to furnish the Buyer with all financial, operating and other data
and information concerning the Company as Buyer and its advisors may reasonably
request. The Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ acknowledge and agree that they are
Representatives (as that term is defined therein) of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp. under
that Confidentiality Agreement dated January 30, 1997 made between the Company
and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp. and are bound by the terms thereof to the same extent
as if they were signatories thereto.
(d) During the period commencing on the date hereof and
ending on the Closing Date, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ will afford to the Company and its
counsel, accountants and other authorized representatives access at all
reasonable times upon reasonable advance notice to the officers, directors,
employees, accountants and other advisors and agents, books, records and
contracts of the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, and the right to make copies and
extracts from such books, records and contracts, and to furnish the Company with
all financial, operating and other
28
data and information concerning the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ as the Company may
reasonably request.
6.3 FILINGS AND CONSENTS. Each of the Sellers and the
Company, on the one hand, and the Buyer, on the other hand, shall use all
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any Governmental Authority or other third party required in connection
with the execution, delivery or performance of this Agreement.
6.4 TAX MATTERS.
(a) SELLERS' INDEMNITY FOR TAXES. From and after the Closing
Date, each Seller shall jointly and severally indemnify and hold harmless the
Buyer Indemnified Persons (as defined in Section 8.1(a)) against the following
Taxes (other than custom duties and import and export taxes on goods purchased
or shipped after the sixtieth day preceding the Closing Date) and, against any
loss, damage, liability or expense, including, but not limited to, reasonable
fees for attorneys and other outside consultants, incurred in contesting or
otherwise in connection with any such Taxes: (i) Taxes imposed on the Sellers or
the Company or any Subsidiary with respect to taxable years or periods ending on
or before the Closing Date, including, without limitation, any Taxes arising as
a result of or with respect to or in connection with the restructuring of the
Company described in Section 2.10 of the Disclosure Schedule as the Hunter
Packaging Reorganization; (ii) Taxes required to be paid or reimbursed by the
Sellers under Section 6.4(c) hereof (to the extent such Taxes have not been paid
by the Sellers); (iii) Taxes or additional Taxes imposed on any Buyer
Indemnified Person as a result of a breach of the representations and warranties
set forth in Section 2.12 of this Agreement or of the covenants contained in
this Section 6.4; or (iv) Taxes or other payments required to be made after the
date hereof by the Company or any Subsidiary to any party under any Tax sharing,
indemnity or allocation agreement (whether or not written); PROVIDED, HOWEVER,
that the Sellers shall have no liability under this Section 6.4(a) for (i) any
Taxes that were actually paid by or on behalf of the Company or any Subsidiary
to the proper Governmental Authority prior to the close of business on the
Business Day prior to the Closing Date or (ii) Taxes (excluding Other Taxes)
imposed with respect to taxable years or periods beginning on or after January
1, 1997 and ending on or prior to the Closing Date in an amount not in excess of
Cdn. $850,000 in the aggregate; and, PROVIDED, FURTHER, that the Sellers shall
not be liable for any Other Taxes imposed on the Company except to the extent
that such Other Taxes (net of any credits for Other Taxes) exceed, in the
aggregate, $50,000. For purposes of this Section 6.4, the term "OTHER TAXES"
shall mean any and all Taxes other than Taxes measured on or by reference to
income or capital, sales (including provincial sales), goods and services (GST)
or any transfer or conveyance taxes described in Section 6.4(c) of this
Agreement.
(b) PREPARATION OF TAX RETURNS; REFUNDS. (i) The Company
shall, as instructed by the Sellers' Representative, prepare and file, or cause
to be prepared and filed, any and all Tax Returns required to be filed by the
Company or any Subsidiary (after giving effect to any valid extensions of the
due date for filing any such Tax Returns) in respect of periods ending on or
prior to the Closing Date. All such Tax Returns shall be prepared in a manner
consistent with the prior Tax Returns of the Company and the Subsidiaries,
unless otherwise required under
29
applicable law. The Company, as instructed by the Buyer, shall prepare and file,
or cause to be prepared and filed any and all other Tax Returns required to be
filed by the Company and the Subsidiaries. Without prejudice to its right to
indemnification under this Section 6.4, the Buyer shall cause the Company to pay
all Taxes shown as due and owing on all such Tax Returns. The Company and Buyer
shall reasonably cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and other representatives reasonably to
cooperate, in preparing and filing all Tax Returns, including maintaining and
making available to the other parties all records necessary in connection with
Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes.
(ii) Any refunds received by the Company or a Subsidiary or
any successor to any of the foregoing of Taxes in respect of the Company or any
Subsidiary that relate to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of the Company and its
Subsidiaries and their successors.
(c) TRANSFER AND CONVEYANCE TAXES. The Sellers shall be
liable for and shall pay all applicable sales, transfer, recording, deed, stamp
and other similar taxes, including, without limitation, any real property
transfer or gains taxes (if any), resulting from the consummation of the
transactions contemplated by this Agreement.
(d) CONTESTS. The Buyer shall promptly notify the Sellers'
Representative in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding involving the Company
or any Subsidiary which, if determined adversely to the taxpayer, would be
grounds for indemnification under this Section 6.4; PROVIDED, HOWEVER, that a
failure to give such notice will not affect the Buyer's right to indemnification
hereunder, except to the extent, if any, that, but for such failure, the
Sellers' Representative could have avoided the Tax liability in question. In the
case of an audit or administrative or judicial proceeding that relates to any
Pre-Closing Period, PROVIDED that within 30 days after the Sellers'
Representative receives the written notice from the Buyer required under this
Section 6.4(d) and prior to taking any action with respect to such audit or
administrative or judicial proceeding, the Sellers' Representative acknowledges
in writing the Sellers' liability under this Section 6.4 to hold the Buyer and
the Company harmless against the full amount of any adjustment which may be made
as a result of such audit or proceeding, the Sellers' Representative shall have
the right at his, her or its own expense to control the conduct of such audit or
proceeding; PROVIDED, HOWEVER, that the Sellers' Representative shall not settle
or otherwise compromise any issue or matter without the Buyer's prior written
consent if such issue or matter will have a material effect on the Tax liability
of the Buyer or the Company or any Subsidiary for a post-Closing taxable year or
period. The Buyer also may participate in any such audit or proceeding at its
own expense and, if the Sellers' Representative does not assume the defense of
any such audit or proceeding, the Buyer may, without any effect to its or the
Company's right to indemnification under this Section 6.4, defend the same in
such manner as it may deem appropriate, including, but not limited to, settling
such audit or proceeding. Except as provided otherwise in this Section 6.4(d),
the Buyer shall control at its own expense any and all audit, administrative and
judicial proceedings related to the Company, the Subsidiaries or their Taxes.
30
(e) TIME OF PAYMENT. Indemnity payments due under Section
6.4(a) of this Agreement, shall be made within three Business Days following a
settlement or compromise of an assessment of a Tax by a Government Authority or
a determination under subsection 152(1.1) of the Income Tax Act (Canada). If
liability under this Section 6.4 is in respect of costs or expenses other than
Taxes, payment by the Sellers of any amounts due under this Section 6.4 shall be
made within five Business Days after the date that the Sellers' Representative
has been notified by the Buyer that the Sellers have a liability for a
determinable amount under this Section 6.4 and is provided with calculations or
other materials supporting such liability. Any payments made by the Sellers
under this Section 6.4(e) shall be made directly to the Buyer (or any successor
to Buyer).
(f) TERMINATION OF SELLERS' INDEMNITY OBLIGATIONS FOR TAXES.
Notwithstanding any provision herein to the contrary, the obligations of the
Sellers to indemnify and hold harmless the Buyer and the Company pursuant to
this Section 6.4 shall terminate at the close of business on the 120th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).
(g) TAX ELECTIONS. From and after the date hereof, the
Sellers shall not, without the prior written consent of the Buyer (which may not
unreasonably withhold such consent), make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would adversely affect the Company or any Subsidiary. From and after the
Closing Date, the Buyer shall not, and shall not cause or permit the Company to,
without the prior consent of the Sellers' Representative (which may not
unreasonably withhold such consent), make, amend or revoke any Tax election, or
adopt or change any method of accounting, in either case in relation to a period
ending on or before the Closing Date, that would adversely affect the Sellers,
unless, in either case, such Tax election, the amendment or revocation of such a
Tax election or the adoption or change of any such method of accounting is
required by any Governmental Authority or, in Buyer's reasonable judgment, is
otherwise required under applicable law.
(h) TAX SHARING AGREEMENTS. As of the Closing Date, any and
all Tax sharing, indemnity or allocation agreements shall terminate as between
the Company and the Subsidiaries on the one hand, and the Sellers and/or any
affiliate of the Sellers, on the other hand, and, after the date hereof, no
Taxes or other amounts shall be paid or reimbursed by the Company and the
Subsidiaries under any such agreement, regardless of the taxable year or period
for which such Taxes are imposed, and the provisions of this Section 6.4 shall
govern thereafter.
(i) RESOLUTION OF DISAGREEMENTS. If the Sellers and the Buyer
disagree as to the amount for which the Buyer or the Company and the Sellers are
liable under this Section 6.4, the Sellers' Representative and the Buyer shall
promptly consult with each other in an effort to resolve such dispute. If any
such point of disagreement cannot be resolved within 30 days of the date of
consultation, such dispute shall be submitted to a tax adviser which is mutually
acceptable to the Buyer and the Sellers's Representative to act as an arbitrator
to resolve all points of disagreement concerning Taxes with respect to this
Agreement.
31
6.5 NO NEGOTIATION. Neither the Company nor any of the
Sellers will, without the prior written consent of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, directly or
indirectly through any director, employee, representative, affiliate, agent or
otherwise (i) solicit, initiate, encourage or assist in the submission of any
inquiries, proposals or offers from any corporation, partnership, person or
other entity or group relating to any acquisition or purchase of any assets of,
or any equity interest in, the Company or any form of recapitalization
transaction, merger, amalgamation, arrangement, consolidation, business
combination, spin-off, liquidation or similar transaction involving, directly or
indirectly, the Company (other than the purchase of assets of the Company in the
ordinary course of business consistent with past practice and except as
described in Section 6.1 of the Disclosure Schedule) (each an "ACQUISITION
PROPOSAL"), (ii) participate in any discussions or negotiations regarding an
Acquisition Proposal or, except as expressly permitted by the Confidentiality
Agreement (as defined in Section 9.7) executed in favor of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
Corp., furnish to any person or entity any information concerning the Company or
any Acquisition Proposal or (iii) otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to make or enter into an Acquisition Proposal. Except as expressly
contemplated by the Reorganization, the Sellers agree not to pledge, encumber or
dispose of the Shares or any other securities of the Company beneficially owned
by them prior to the Closing. If the Company or any Seller receives any inquiry,
proposal or offer to enter into any transaction of any type referred to above,
such party agrees to inform the Buyer promptly of the terms thereof.
6.6 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees
to use all reasonable efforts to insure that the conditions set forth in Article
IV and Article V hereof are satisfied, insofar as such matters are within the
control of such party.
6.7 NONDISCLOSURE OF CONFIDENTIAL INFORMATION;
NON-COMPETITION. (a) None of the Sellers shall, without the prior written
consent of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, use, divulge, disclose or make accessible to any
other person, firm, partnership, corporation or other entity any Confidential
Information (as defined below) pertaining to the business of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or
any of its subsidiaries, except (i) while employed by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of
its subsidiaries, which use, divulgence or disclosure such Seller reasonably
determines to be in connection with the business of and for the benefit of
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its subsidiaries, (ii) as required by law, (iii) as
reasonably required to enforce such Sellers' rights hereunder or under the HDL
Investors' Agreement, the Registration Rights Agreement, the Amended and
Restated Stockholders Transfer Rights Agreement, the Amended and Restated Voting
Agreement, the Support Agreement or the Exchange Agreement or, in the case of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, under the Employment Agreement or the Stay/Pay Agreement or (iv)
for the purposes of obtaining personal, legal or financial advice from
independent professional advisors. For purposes of this Section 6.7(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its subsidiaries
or their respective customers, that, in any case, is not otherwise available to
the public (other than by a Seller's breach of the terms hereof).
(b) Except for actions or failures to take action that are
permitted by, or are contemplated by and are not prohibited by, Section 1.3 of
the Employment Agreement as such Employment Agreement
32
is in effect on the Closing Date (without regard to any subsequent modification
or termination thereof), during the period ending the later of (i) 5 years from
the date of this Agreement and (ii) 1 year from the date of termination of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ employment with the Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ agrees that,
without the prior written consent of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, he (A) will not, directly
or indirectly, either alone or in conjunction with any individual, partnership,
firm, association, syndicate, company or other entity, whether as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in, advise, invest, lend
money to, guarantee the debts or obligations of, or have any financial interest
in, any business which is in competition with the business (as of the date of
termination of such employment if such termination has occurred) of
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its subsidiaries in North America, (B) shall not, on his own
behalf or on behalf of any person, firm or company, directly or indirectly,
solicit (other than by means of a general solicitation of employees through the
media) or hire any person who has been employed by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its
subsidiaries at any time during the 12 months immediately preceding such
solicitation (other than employees of any of the Company and the Subsidiaries
who have been fired by any of the Company and the Subsidiaries), and (C) will
not induce any person who is an agent, contractor, customer, supplier or dealer
of or relating to the business of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its subsidiaries to
leave, to stop selling to, or stop buying from ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its
subsidiaries.
(c) For purposes of this Section 6.7, a business shall be
deemed to be in competition with the business of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its
subsidiaries if it is involved in the purchase, sale, lease, management of or
other dealing in any property or the rendering of any service purchased, sold,
leased, managed, dealt in or rendered by any of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its
subsidiaries as a part of the business of any of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and its
subsidiaries, and a business shall be deemed to be in competition with the
business of the Company if it is involved in the manufacturing, sale,
distribution, leasing, reconditioning and/or fleet management of rigid
industrial packaging.
(d) Except as provided otherwise below, during the period
ending 5 years from the date of this Agreement, each Seller (other than ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇) agrees that, without the prior written consent of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇,
such Seller (A) (other than as a director, shareholder or officer of, or
otherwise through, Hunter Packaging Ltd. at a time when Sellers, members of
Sellers' families and one or more corporations solely owned, directly or
indirectly, by one or more of Sellers and members of their family and trusts
solely for the benefit of Sellers and members of their family do not
collectively alone control Hunter Packaging Ltd.) will not, directly or
indirectly, either alone or in conjunction with any individual, partnership,
firm, association, syndicate, company or other entity, whether as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in, advise, invest, lend
money to, guarantee the debts or obligations of, or have any financial interest
in, any business which is in competition with the business (as of the date
hereof) of the Company in North America, (B) (except by reason of actions of
Hunter Packaging Ltd. not personally involving ▇▇▇▇ ▇. ▇▇▇▇▇▇ at a time when
Sellers, members of Sellers' families and one or more corporations solely owned,
directly or indirectly, by one or more of Sellers and members of their family
and trusts solely for the benefit of Sellers and members of their family do not
collectively alone control Hunter Packaging Ltd.) shall not, on such Seller's
own behalf or on behalf of any person, firm or company, directly or indirectly,
33
solicit (other than by means of a general solicitation of employees through the
media) or hire any person who has been employed by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its
subsidiaries at any time during the 12 months immediately preceding such
solicitation (other than employees of any of the Company and the Subsidiaries
who have been fired by any of the Company and the Subsidiaries), and (C) (except
by reason of actions of Hunter Packaging Ltd. not personally involving ▇▇▇▇ ▇.
▇▇▇▇▇▇ at a time when Sellers, members of Sellers' families and one or more
corporations solely owned, directly or indirectly, by one or more of Sellers and
members of their family and trusts solely for the benefit of Sellers and members
of their family do not collectively alone control Hunter Packaging Ltd.) will
not induce any person who is an agent, contractor, customer, supplier or dealer
of or relating to the business of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its subsidiaries to
leave, to stop selling to, or stop buying from ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or any of its
subsidiaries; PROVIDED, HOWEVER, that if Sellers, members of Sellers' families
and one or more corporations solely owned, directly or indirectly, by one or
more of Sellers and members of their family and trusts solely for the benefit of
Sellers and members of their family acquire control of Hunter Packaging Ltd. at
a time when Hunter Packaging Ltd. is engaging in any business which is in
competition with the business (as of the date hereof) of the Company in North
America, such Sellers shall not be deemed in breach of Section 6.7(d) as a
result thereof so long as, within 90 days after the acquisition of such control,
(x) such control is divested or (y) Hunter Packaging Ltd. ceases to be involved
in any such business. Notwithstanding anything contained above in this Section
6.7(d), nothing in this Agreement shall prevent (i) such Seller (other than
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇) from owning any class of publicly traded securities if (x)
such ownership (other than ownership of Hunter Packaging Ltd.) does not exceed
5% of such class (provided, however, that if such Seller unknowingly makes an
investment prohibited by this Section 6.7(d) and divests itself or himself of
such investment (to the extent so prohibited) as promptly as practicable, and in
no event later than the ninetieth day, following the date on which such Seller
obtains such knowledge, such investment shall not constitute a breach of this
Section 6.7(d)) and (y) such Seller's activities with respect to the issuer of
such securities (other than Hunter Packaging Ltd.) are consistent with those of
a passive investor or (ii) subject to Section 6.7(e), ▇▇▇▇ ▇. ▇▇▇▇▇▇, directly
or indirectly, from owning shares of Performance Recycling Inc. or being a
director or officer thereof.
(e) The Sellers agree that, upon the written request of
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ made within six months of the Closing Date and prior to the
disposition by Sellers of their interest in Performance Recycling Inc.
("Recycling"), they will, unless they sooner dispose of their interest in
Recycling, (1) subject to obtaining any necessary consents, sell their interest
in Recycling to the existing shareholders thereof or to a third party for a
purchase price equal to Cdn $167,500 (or a lesser amount if ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
reimburses them for the difference), (2) subject to obtaining any necessary
consents, sell such interest to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ for a purchase price equal to
Cdn $167,500, (3) subject to obtaining any necessary consents, abandon such
interest if ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ pays them Cdn $167,500 and indemnifies them against
any actual damages (excluding loss of profits or other consequential damages)
suffered by them as a result of taking such action or (4) make a "Shotgun Offer"
pursuant to Article 7 of the Unanimous Shareholders' Agreement dated March 12,
1996 among, Recycling, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the other parties
named therein, if ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ agrees, if necessary, to purchase any interest
owned by them for Cdn $167,500 and to purchase any additional interest which
they become obliged to acquire as a result of taking such action at the mandated
price.
34
(f) Each Seller agrees that the provisions of this Section
6.7 are reasonable covenants under the circumstances, and further agree that if
in the opinion of any court of competent jurisdiction such restraints are not
reasonable in any respect, such court shall have the right, power and authority
to modify such provision or provisions of such covenants to the extent the court
determines such restraints are not reasonable and to enforce the covenants as so
amended. Each Seller agrees that any breach of this Section 6.7 would
irreparably injure ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇. Accordingly, each Seller agrees that
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ may, in addition to pursuing any other remedies it may have in
law or in equity, obtain an injunction against such Seller from any court having
jurisdiction over the matter restraining any further violation of this Agreement
by such Seller.
6.8 CERTAIN PAYMENTS. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby confirms that
he has repaid Cdn $117,500 owed to the Company pursuant to an advance to ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual consent of the Sellers' Representative and
the Buyer;
(b) by the Buyer if the Closing has not occurred on or before
October 31, 1997, unless (i) the failure of such consummation shall be due to
the failure of the Buyer to comply with the representations, warranties,
agreements and covenants contained herein to be performed by the Buyer on or
before October 31, 1997 or (ii) the Buyer shall otherwise not be entitled to
choose to not effect the Closing under Article V;
(c) by the Sellers' Representative if the Closing has not
occurred on or before October 31, 1997, unless (i) the failure of such
consummation shall be due to the failure of the Sellers to comply with the
representations, warranties, agreements and covenants contained herein to be
performed by the Sellers on or before October 31, 1997 or (ii) the Sellers shall
otherwise not be entitled to choose to not effect the Closing under Article IV;
or
(d) by either the Sellers' Representative or the Buyer if any
court or Governmental Authority of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree or ruling or other action shall have become final and nonappealable.
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby by the Sellers' Representative or the Buyer pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
parties. If this Agreement is terminated and the transactions contemplated by
this Agreement are abandoned as provided herein, no party to this Agreement will
35
have any liability under this Agreement to any other except (i) that nothing
herein shall relieve any party from any liability for any breach of any of the
representations, warranties, covenants and agreements (including, without
limitation, Section 8.1) set forth in this Agreement and (ii) as contemplated by
Section 9.1.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. INDEMNIFICATION BY SELLERS. (a) Subject
to the limits set forth in this Section 8.1, the Sellers agree, jointly and
severally, to indemnify, defend and hold the Buyer and its affiliates
(including, after the Closing Date, the Company) and their respective officers,
directors, partners, stockholders, employees, agents and representatives (the
"BUYER INDEMNIFIED PERSONS") harmless from and in respect of any and all losses,
damages, costs and reasonable expenses (including, without limitation,
reasonable fees and expenses of counsel) (collectively, "LOSSES"), that they may
incur arising out of or due to any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking or other agreement of the Sellers
contained in this Agreement or the Disclosure Schedule. Anything to the contrary
contained herein notwithstanding, (x) none of the Buyer Indemnified Persons
shall be entitled to recover from the Sellers for any single claim for indemnity
with respect to any inaccuracy or breach of any representations or warranties
(other than recovery for claims predicated upon the inaccuracy or breach of
Sections 2.2, 2.3, 2.4, 2.19 and 2.25 and the first sentence of Section 2.1),
unless such claim in respect of Losses pursuant to this Section 8.1(a) exceeds
Cdn $25,000 and then only for the amount by which such claim exceeds such
amount, (y) none of the Buyer Indemnified Persons shall be entitled to recover
from the Sellers for any claims for indemnity with respect to any inaccuracy or
breach of any representations or warranties (other than recovery for claims
predicated upon the inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.19 and
2.25 and the first sentence of Section 2.1), unless and until the total of all
such claims in respect of Losses pursuant to this Section 8.1(a) (after giving
effect to any tax benefits related to such Losses) exceeds Cdn $250,000
(provided that, if such total exceeds Cdn $250,000, the first Cdn $250,000 as
well as all Losses in excess of such amount shall be indemnifiable) and (z) the
Buyer Indemnified Parties shall not be entitled to recover more than an
aggregate of Cdn $3,000,000 from the Sellers for any claims for indemnity under
this Section 8.1(a)(other than recovery for claims predicated upon the
inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.19 and 2.25 and the first
sentence of Section 2.1).
(b) INDEMNIFICATION BY ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇. Subject to the limits
set forth in this Section 8.1, the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ agree that after
the Closing Date ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer shall indemnify, defend and hold
the Sellers and their respective agents and representatives (the "SELLER
INDEMNIFIED PERSONS") harmless from and in respect of any and all Losses that
they may incur arising out of or due to any inaccuracy of any representation or
the breach of any warranty, covenant, undertaking or other agreement of the
Buyer contained in this Agreement. Anything to the contrary contained herein
notwithstanding, (x) none of the Seller Indemnified Persons shall be entitled to
recover from the Buyer or ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ for any single claim for indemnity
with respect to any inaccuracy or breach of any representations or warranties,
36
unless such claim in respect of Losses pursuant to this Section 8.1(b) exceeds
Cdn $25,000, and then only for the amount by which such claim exceeds such
amount, (y) none of the Seller Indemnified Persons shall be entitled to recover
from the Buyer or ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ for any claims for indemnity with respect to
any inaccuracy or breach of any representations or warranties, unless and until
the total of all such claims in respect of Losses pursuant to this Section
8.1(b) (after giving effect to any tax benefits related to such Losses) exceeds
Cdn $250,000 (provided that, if such total exceeds Cdn $250,000, the first Cdn
$250,000 as well as all Losses in excess of such amount shall be indemnifiable)
and (z) the Seller Indemnified Parties shall not be entitled to recover more
than an aggregate of Cdn $3,000,000 from the Buyer or ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ for any
claims for indemnity under this Section 8.1(b).
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter until the second anniversary of the
Closing Date, provided that (i) the representations and warranties set forth in
Sections 2.2, 2.3, 2.4 and 2.19 and the first sentence of Section 2.1 will
survive the Closing Date and will remain in full force and effect until the
expiration of the applicable statute of limitations (after giving effect to
waiver, mitigation or extension thereof) and (ii) the representations and
warranties set forth in Section 2.12 will survive the Closing Date and will
remain in full force and effect until the ninetieth (90th) day following the
expiration of the period within which the relevant authorities are entitled to
assess or reassess liabilities for Taxes against the Company or its Subsidiaries
for any period ending on or before the Closing Date, having regard, without
limitation, to any waiver given by the Company or a Subsidiary in respect of
such period; PROVIDED, FURTHER, that such representations or warranties shall
survive (if at all) beyond such period with respect to any inaccuracy therein or
breach thereof, written notice of which shall have been duly given within such
applicable period in accordance with Section 8.1(d) hereof.
(d) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an
event which a party asserts is an indemnifiable event pursuant to Section 8.1(a)
or 8.1(b), the party or parties seeking indemnification shall notify the other
party or parties obligated to provide indemnification (the "INDEMNIFYING PARTY")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the party seeking indemnification will
give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the failure
to provide prompt notice as provided herein will relieve the Indemnifying Party
of its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any party in respect of which that person is seeking indemnification and it
shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein or, following the
delivery by the Indemnifying Party to the party or parties seeking
indemnification of the Indemnifying Party's acknowledgement in writing that the
relevant Loss is an indemnified liability hereunder and that the Indemnifying
Party, in its good faith judgment, will be able to pay any award of money
damages against the indemnified party in connection with such action, to assume
the defense thereof, with counsel reasonably satisfactory to such party or
37
parties seeking indemnification and, after notice from the Indemnifying Party to
such party or parties seeking indemnification of such election so to assume the
defense thereof, the Indemnifying Party shall not be liable to the party or
parties seeking indemnification hereunder for any legal expenses of other
counsel or any other expenses subsequently incurred by such party or parties in
connection with the defense thereof. The Indemnifying Party and the party
seeking indemnification agree to cooperate fully with each other and their
respective counsel in connection with the defense, negotiation or settlement of
any such action or asserted liability. The party or parties seeking
indemnification shall have the right to participate at their own expense in the
defense of such action or asserted liability. If the Indemnifying Party assumes
the defense of an action (a) no settlement or compromise thereof may be effected
(i) by the Indemnifying Party without the written consent of the indemnified
party (which consent shall not be unreasonably withheld or delayed) unless (x)
there is no finding or admission of any violation of law or any violation of the
rights of any person by any indemnified party and no adverse effect on any other
claims that may be made against any indemnified party and (y) all relief
provided is paid or satisfied in full by the Indemnifying Party or (ii) by the
indemnified party without the consent of the Indemnifying Party and (b) the
indemnified party may subsequently assume the defense of such action if a court
of competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action. In no event shall an Indemnifying Party be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed). If more than one Seller is an
Indemnifying Party with respect to any matter, the Sellers' Representative shall
have the authority to exercise all rights of the Indemnifying Party afforded by
this Section 8.1(d).
(e) PAYMENT. On each occasion that any indemnified party
shall be entitled to indemnification or reimbursement under this Section 8.1,
the Indemnifying Party shall, at each such time, promptly pay the amount of such
indemnification or reimbursement (i) in the case of payment pursuant to Section
8.1(a), directly to the Buyer (or any successor to the Buyer) and (ii) in the
case of payment pursuant to Section 8.1(b), to the Sellers (allocated in
accordance with Exhibit 1.3(b)(i)). If any indemnified party shall be entitled
to indemnification under this Section 8.1, the Indemnifying Party shall pay the
indemnified party's costs and expenses arising as a result of a proceeding
directly relating to indemnifiable Losses (including, without limitation, any
reasonable fees and expenses paid to witnesses), periodically as incurred.
(f) ADJUSTMENT FOR INSURANCE AND TAXES. The amount which the
Sellers are required to pay to the Buyer or that the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
are required to pay to the Sellers pursuant to Section 6.4 or Section 8.1 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by any Buyer Indemnified Person, in the case of a
payment to the Buyer, and by any Seller Indemnified Person, in the case of a
payment to the Sellers, in reduction of the related indemnifiable Losses (the
Buyer hereby undertakes to, and shall cause each other Buyer Indemnified Person
to, and the Sellers hereby undertake to, and shall cause each other Seller
Indemnified Person to, use reasonable efforts to recover same) and (ii) to take
account of any tax benefit actually realized by any Buyer Indemnified Person, in
the case of a payment to the Buyer, and by any Seller Indemnified Person, in the
case of a payment to the Sellers, as a result of any indemnifiable Losses.
Amounts required to be paid, as so reduced, are hereafter sometimes called an
"Indemnity Payment." If the Buyer or any Seller shall have received an Indemnity
Payment in respect of an indemnifiable Loss and the parties in good faith
38
believe that any Buyer Indemnified Person or any Seller Indemnified Person (a
"Beneficiary") is likely to subsequently receive insurance proceeds in respect
of such indemnifiable Loss, or has or will actually realize any tax benefit as a
result of such indemnifiable Loss, then the parties shall negotiate in good
faith to determine the present value of such anticipated insurance proceeds or
tax benefit and the Beneficiary shall promptly pay, in accordance with Section
8.1(e), such amount or, if lesser, the amount of the Indemnity Payment.
(g) TAX INDEMNITY. Other than with respect to Section 8.1(f),
notwithstanding anything to the contrary in this Section 8.1, indemnification
with respect to Taxes shall be governed solely by Section 6.4.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES. The Sellers shall bear all fees and
disbursement charges of counsel, accountants, environmental consultants and
other professional advisors retained by or on behalf of the Sellers and their
affiliates (including the Company), and the Buyer shall bear its own expenses,
in connection with the preparation and negotiation of this Agreement and the
consummation of the transactions contemplated by this Agreement. Each of the
Sellers and the Buyer shall bear the fees and expenses of any broker or finder
retained by such party or parties and their respective affiliates (including, in
the case of the Sellers, the Company) in connection with the transactions
contemplated herein.
9.2 GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the Province of Ontario without regard to the
conflicts of law principles thereof.
9.3 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the Buyer and the Sellers' Representative.
9.4 NO ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the Buyer, in the case of assignment by any
Seller, and the Sellers' Representative, in the case of any assignment by the
Buyer.
9.5 WAIVER. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof; PROVIDED, HOWEVER, that the Sellers'
Representative is authorized to make any such waiver on behalf of any and all
the Sellers. Any waiver of any of the provisions of this Agreement by any party
hereto shall be binding only if set forth in an instrument in writing signed on
behalf of such party. No failure to enforce any provision of this Agreement
shall be deemed to or shall constitute a waiver of such provision and no waiver
of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
9.6 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if (a) personally delivered,
39
(b) sent by a nationally recognized overnight courier service, to the recipient
at the address below indicated or (c) delivered by facsimile which is confirmed
in writing by sending a copy of such facsimile to the recipient thereof pursuant
to clause (a) or (b) above:
If to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ or the Buyer:
c/o ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
With copies to:
Vestar Capital Partners III, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
If to the Sellers' Representative or any Seller:
Hunter Drums Limited
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
40
With a copy to:
Stikeman, ▇▇▇▇▇▇▇
Commerce Court West, 53rd Floor
Post Office Box 85
Toronto, Ontario
Canada M5L 1B9
Attn: W. ▇▇▇▇▇ ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this
Agreement will be deemed to have been given (x) on the date such notice is
personally delivered or delivered by facsimile or (y) the next succeeding
business day after the date such notice is delivered to the overnight courier
service if sent by overnight courier; PROVIDED that in each case notices
received after 4:00 p.m. (local time of the recipient) shall be deemed to have
been duly given on the next business day.
9.7 COMPLETE AGREEMENT. This Agreement, the confidentiality
agreements, dated January 9, 1997 and January 30, 1997, between the Company and
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp. ("CONFIDENTIALITY AGREEMENTS") and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
9.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.9 PUBLICITY. The Sellers' Representative and the Buyer will
consult with each other and will mutually agree upon any publication or press
release or third party communication of any nature with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
publication or press release or communication prior to such consultation and
agreement except as may be required by applicable law, or as reasonably required
to enforce rights hereunder, or by obligations pursuant to any listing agreement
with any securities exchange or any securities exchange regulation, in which
case the party proposing to issue such publication or press release or
communication shall make all reasonable efforts to consult in good faith with
the other party or parties before issuing any such publication or press release
or communication and shall provide a copy thereof to the other party or parties
prior to such issuance.
41
9.10 HEADINGS. The headings contained in this Agreement are
for reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.11 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
9.12 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ▇▇▇▇▇▇▇-
▇▇▇▇▇▇▇ hereby irrevocably attorns and submits to, and agrees to take all
further steps necessary to submit to, the jurisdiction of the Ontario Court
(General Division) in any action or proceeding relating to the purchase of the
Shares or arising out of or related to this Agreement and irrevocably agrees
that all claims in respect of any such action or proceeding shall be heard and
determined in such Ontario court. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ hereby
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ hereby irrevocably
designates and appoints Osler, ▇▇▇▇▇▇ & Harcourt, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, or
any other partner of Osler, ▇▇▇▇▇▇ & Harcourt, as its authorized agent to accept
and acknowledge on its behalf service of any and all process that may be served
in any such action or proceeding in any such court and agrees that service of
process upon such agent, and written notice of such service to ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
delivered to such agent, shall be deemed in every respect effective service of
process upon ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ in any such suit, action, or proceeding and shall
be taken and held to be valid personal service upon ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇.
9.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
42
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.15 SELLERS' REPRESENTATIVE. Each of the Sellers hereby
irrevocably makes, constitutes and appoints ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as his or its
attorney-in-fact (the "SELLERS' REPRESENTATIVE") with full power to act in his
or its place and stead to compromise any claim or take any other action,
including, without limitation, pursuant to Section 6.4 or 8.1, with respect to
this Agreement. Each of the Sellers hereby agrees and acknowledges that any
obligations or liabilities of any Seller under this Agreement shall be joint and
several obligations or liabilities of all Sellers.
9.16 OBLIGATIONS GUARANTEE. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ hereby (i)
covenants, acknowledges and agrees that all representations, warranties,
covenants, undertakings and other agreements contained herein on the part of the
Buyer are joint and several obligations of the Buyer and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, and
(ii) guarantees the obligations of the Buyer under this Agreement and agrees to
cause the Buyer to comply with the terms of this Agreement. This guarantee shall
be a continuing and irrevocable guarantee and shall survive the Closing. Without
limitation, the
43
obligations of this guarantee shall not be released, discharged or affected by
any extensions of time or indulgences or modifications granted by the Sellers in
favour of the Buyer, or by any failure to enforce any of the terms of this
Agreement or by the bankruptcy, insolvency, dissolution, amalgamation,
winding-up or reorganization of the Buyer, and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ hereby waives any
right to require the Sellers to exhaust any action or recourse against the Buyer
before requiring performance by ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ pursuant to this guarantee.
44
IN WITNESS WHEREOF, each of the Sellers has executed this
Agreement, and each of the Company, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ and the Buyer has caused
this Agreement to be executed by its duly authorized officer, in each case as of
the day and year first above written.
/s/ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------- ----------------------------------------
Witness to execution by
▇.▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇. ▇▇▇▇▇
---------------------------
Witness to execution by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ HOLDINGS INC.
▇.▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name:
Title:
▇▇▇▇ ▇. ▇▇▇▇▇▇ HOLDINGS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
HUNTER HOLDINGS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
373062 ONTARIO LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
45
HUNTER DRUMS LIMITED
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title:
HDL ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
Title: