EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
By and Among
Hosposable Products, Inc.,
a New York corporation,
3290441 Canada Inc.,
a Canadian corporation
and
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.,
a Canadian corporation
Dated as of November 12, 1996
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Cross-reference sheet for Definitions
Defined in
Term Section
---- ----------
1. Acquired Business......................................................1.1
2. Acquired Subsidiary....................................................3.4
3. Affiliate............................................................3.12a
4. Agreement......................................................1.0 (Intro)
5. Agreements............................................................1.5i
6. Auditor ..............................................................1.4c
7. Benefit Plans .......................................................3.12a
8. ▇▇▇▇ of Sale ..........................................................1.1
9. Buyer .........................................................1.0 (Intro)
10. Buyer Benefit Plans ...................................................5.2b
11. Buyer Common Stock ....................................................4.4b
12. Buyer Disclosure Letter ................................................4.3
13. Buyer Indemnified Claims ..............................................8.1f
14. Buyer Indemnitees ......................................................8.1
15. Buyer Losses ...........................................................8.1
16. Buyer Parent ...................................................1.0 (Intro)
17. Buyer Parent Common Stock .............................................4.4a
18. Buyer Parties ..........................................................4.1
19. Class A Excluded Shares................................................5.19
20. Class A Mandatorily Redeemable Preferred Stock .........................1.2
21. Class B Mandatorily Redeemable Preferred Stock ........................ 1.2
22. Class E Exchangeable Preferred Stock ...................................1.2
23. Cleanup ..............................................................3.15m
24. Closing ................................................................2.1
25. Closing Date ...........................................................2.1
26. Contracts ............................................................3.16b
27. Covenant Agreement......................................................7.7
28. Deed ..................................................................1.5a
29. Disclosed Liabilities..............................................8.2b(ii)
30. Encumbrances ..........................................................1.5a
31. Environmental Laws ...................................................3.15m
32. Environmental Liabilities and Costs ..................................3.15m
33. Event of Insolvency of the Buyer.......................................5.15
34. Excess ................................................................1.4e
35. Exchange Act ...........................................................4.7
36. Excise Act ............................................................5.11
37. Excluded Assets ........................................................1.1
38. Excluded Shares........................................................8.3g
39. Fairness Opinion .......................................................6.5
40. Family Member...................................................Undertaking
41. Fee Property ..........................................................3.8a
42. Final Statement of Net Assets .........................................1.4d
43. Former Property ......................................................3.15d
44. GAAP ..................................................................1.4a
45. Government Obligations.................................................5.13
46. Governmental Authority ................................................3.5d
47. Guaranty Agreement......................................................6.8
48. Hazardous Substances, Oils, Pollutants or Contaminants................3.15m
49. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ .........................................................5.3
50. Intellectual Property ................................................3.13a
51. Intellectual Property Assignment ......................................1.5a
52. Investments............................................................5.13
53. JDW Shares.............................................................8.3g
54. Laws ..................................................................3.5a
55. LE Shares..............................................................8.3g
56. Lease Assignments .....................................................1.5a
57. Material Adverse Effect ................................................3.1
58. Material Supplier .....................................................3.19
59. Net Asset Value .......................................................1.4a
60. Note ...................................................................1.2
61. Permits ..............................................................3.15b
62. Permitted Encumbrances ................................................1.5a
63. Permitted Investments..................................................5.13
64. Permitted Liens .......................................................3.7b
65. Person .................................................................3.5
66. Policy ................................................................1.5d
67. Preferred Stock ........................................................1.2
68. Preliminary Statement of Net Assets ...................................1.4a
69. Proceedings ............................................................3.6
70. Property .............................................................3.15c
71. Proxy Statement ........................................................5.9
72. Purchase Price .........................................................1.2
73. Purchase Price Indemnification Amount..............................8.3e(ii)
74. Real Property .........................................................3.8a
75. Real Property Leases ..................................................3.8a
76. Related Persons.................................................Undertaking
77. Reference Balance Sheet ................................................3.9
78. Reference Balance Sheet Date ...........................................3.9
79. Registration Rights Agreement...........................................7.8
80. Release ..............................................................3.15m
81. SEC ....................................................................4.7
82. SEC Documents ..........................................................4.7
83. Securities Act ........................................................3.25
84. Securities Laws .......................................................3.25
85. Seller .........................................................1.0 (Intro)
86. Seller Disclosure Letter ..............................................1.5a
87. Seller Indemnified Claims .............................................8.2c
88. Seller Indemnitees .....................................................8.2
89. Seller Losses ..........................................................8.2
90. Seller's Best Knowledge ...............................................3.24
91. Shortfall .............................................................1.4e
92. Special Committee ......................................................5.3
93. Transferred Employees .................................................5.2a
94. Underlying Shares .....................................................4.5b
95. Undertaking ............................................................1.2
96. Undisclosed Liabilities................................................5.15
97. X Shares...............................................................8.3g
TABLE OF CONTENTS
Page
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ARTICLE 1
TRANSFER OF BUSINESS, PROPERTIES AND ASSETS
1.1 Sale and Transfer of Business, Properties and
Assets....................................................... 1
1.2 Purchase Price............................................... 1
1.3 Payment of Purchase Price.................................... 2
1.4 Post-Closing Adjustment...................................... 2
(a) Preparation of Preliminary Statement of Net
Assets............................................... 2
(b) Review of Preliminary Statement of Net
Assets............................................... 3
(c) Disputes............................................. 3
(d) Final Statement of Net Assets........................ 3
(e) Adjustment to the Note............................... 4
1.5 Instruments of Conveyance, Transfer, Assumption,
Etc.......................................................... 4
1.6 Further Assurances........................................... 6
1.7 Purchase Price Allocation.................................... 7
1.8 Tax Elections................................................ 7
ARTICLE 2
CLOSING AND TERMINATION
2.1 Closing...................................................... 8
2.2 Termination.................................................. 8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization................................................. 8
3.2 Corporate Authority.......................................... 9
3.3 Other Agreements............................................. 9
3.4 Subsidiaries and Equity Investments.......................... 9
3.5 No Violation................................................ 10
3.6 Litigation.................................................. 11
3.7 Personal Property........................................... 11
3.8 Real Property............................................... 11
3.9 Financial Statements........................................ 13
3.10 Books and Records........................................... 14
3.11 Tax Matters................................................. 14
3.12 Employee Matters............................................ 14
3.13 Intellectual Property....................................... 16
3.14 Absence of Change or Event.................................. 18
3.15 Compliance With Law......................................... 19
3.16 Contracts and Commitments................................... 22
3.17 Insurance................................................... 23
3.18 Affiliate Interests......................................... 24
3.19 Customers and Suppliers..................................... 24
3.20 Products.................................................... 25
3.21 Accounts Receivable......................................... 25
3.22 Inventory................................................... 25
3.23 Disclosure.................................................. 25
3.24 Seller's Best Knowledge..................................... 25
3.25 Private Placement........................................... 25
3.26 Sufficiency of Assets to Conduct Acquired
Business.................................................... 26
3.27 Corporate Names............................................. 26
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization................................................ 27
4.2 Corporate Authority......................................... 27
4.3 No Violation................................................ 27
4.4 Authorized and Outstanding Shares of Capital
Stock....................................................... 28
4.5 Preferred Stock............................................. 28
4.6 Note........................................................ 29
4.7 SEC Documents............................................... 29
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF SELLER, BUYER AND BUYER PARENT
5.1 Conduct of Business Prior to the Closing Date............... 30
5.2 Employee Matters............................................ 30
5.3 Expenses and Finder's Fees.................................. 31
5.4 Access to Information and Confidentiality................... 31
5.5 Press Releases.............................................. 32
5.6 Transitional Assistance..................................... 32
5.7 Transfer Taxes.............................................. 32
5.8 Shareholder Meeting......................................... 32
5.9 Proxy Statement............................................. 33
5.10 Reservation of Underlying Shares; Exchange of
Class E Exchangeable Preferred Stock........................ 33
5.11 GST Election................................................ 33
5.12 Bulk Sales Legislation...................................... 34
5.13 Conduct of Business by Seller After the Closing
Date........................................................ 34
5.14 No Assignment of Note....................................... 34
5.15 Seller Reimbursement........................................ 34
5.16 Corporate Changes........................................... 35
5.17 Guarantee of Real Property Lease Obligations................ 35
5.18 Issuance of Preferred Stock................................. 36
5.19 Seller Covenant Relating to X Shares........................ 36
5.20 Seller Covenant Relating to Capital Stock................... 36
ARTICLE 6
CONDITIONS PRECEDENT OF BUYER AND BUYER PARENT
6.1 Representations and Warranties.............................. 36
6.2 Opinion of Seller's Counsel................................. 37
6.3 No Injunction............................................... 37
6.4 Consents.................................................... 37
6.5 Fairness Opinion............................................ 37
6.6 Material Adverse Change..................................... 37
6.7 Investment Letters.......................................... 38
6.8 Guaranty Agreement.......................................... 38
6.9 Financing................................................... 38
ARTICLE 7
CONDITIONS PRECEDENT OF SELLER
7.1 Representations and Warranties.............................. 38
7.2 Opinion of Special Counsel for the Special
Committee................................................... 38
7.3 No Injunction............................................... 39
7.4 Consents.................................................... 39
7.5 Fairness Opinion............................................ 39
7.6 Material Adverse Change..................................... 39
7.7 Covenant Agreement.......................................... 39
7.8 Registration Rights Agreement............................... 39
7.9 Financing................................................... 39
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Seller................................... 40
8.2 Indemnification by Buyer and Buyer Parent................... 41
8.3 Certain Limitations......................................... 42
8.4 Satisfaction of Seller Indemnity............................ 44
ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Representations, Warranties and Covenants................... 45
ARTICLE 10
MISCELLANEOUS
10.1 Cooperation................................................. 46
10.2 Waiver...................................................... 46
10.3 Notices..................................................... 46
10.4 Mail Received After Closing................................. 47
10.5 Governing Law and Consent to Jurisdiction;
Dispute Resolution.......................................... 47
10.6 Counterparts................................................ 48
10.7 Headings.................................................... 48
10.8 Entire Agreement............................................ 48
10.9 Amendment and Modification.................................. 48
10.10 Binding Effect; Benefits.................................... 48
10.11 Assignability............................................... 48
10.12 Acquired Subsidiary......................................... 49
Appendix A Terms for the Preferred Stock
Exhibit A ▇▇▇▇ of Sale
Exhibit B List of Excluded Assets
Exhibit C Form of Note
Exhibit D Undertaking
Exhibit E Statement of Net Assets Exceptions
Exhibit F Form of Deed for Fee Property
Exhibit G Form of Assignment for Intellectual
Property
Exhibit H-1 and H-2 Forms of Assignments for Real Property
Leases
Exhibit I Seller's "best knowledge"
Exhibit J-1 and J-2 Opinions of Seller's Counsel
Exhibit K Form of Guaranty Agreement
Exhibit L-1 and L-2 Opinions of Special Counsel to the
Special Committee
Exhibit M Form of Covenant Agreement
Exhibit N Form of Registration Rights Agreement
Exhibit O Pro Forma Balance Sheet
ASSET PURCHASE AGREEMENT dated as of November 12, 1996
(herein, together with the Exhibits attached hereto, referred to as the
"Agreement") by and among ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation incorporated
under the Canada Business Corporations Act ("Seller"), Hosposable Products,
Inc., a New York corporation ("Buyer Parent"), and 3290441 Canada Inc., a
corporation incorporated under the Canada Business Corporations Act, and a
wholly owned subsidiary of Buyer Parent ("Buyer").
In reliance upon the representations and warranties made
herein and in consideration of the mutual agreements herein contained, the
parties agree as follows:
ARTICLE 1
TRANSFER OF BUSINESS, PROPERTIES AND ASSETS
1.1 Sale and Transfer of Business, Properties and Assets.
Subject to the terms and conditions of this Agreement, and in reliance on the
representations, warranties, undertakings (including the Undertaking (as defined
in Section 1.2)), indemnities and agreements of Buyer and Buyer Parent made
hereunder, and in consideration of the purchase by Buyer described below, and
execution and delivery by Buyer to Seller of the Undertaking, Seller hereby
agrees to sell, transfer, convey, assign and deliver to Buyer at the Closing
provided for in Section 2.1 all the business and assets of Seller including,
without limitation, the properties, assets and other rights referred to in the
▇▇▇▇ of sale (the "▇▇▇▇ of Sale") substantially in the form of Exhibit A
attached hereto, excluding only the Excluded Assets, as defined in the next
succeeding sentence (such business, properties, assets and other rights to be
purchased and sold hereunder being hereinafter referred to as the "Acquired
Business"). It is understood and agreed that those assets listed on Exhibit B
attached hereto shall not be included in the Acquired Business and shall be
excluded therefrom (the "Excluded Assets").
1.2 Purchase Price. Subject to the terms and conditions of
this Agreement, and in reliance on the representations, warranties, undertakings
and agreements of Seller made hereunder, and in consideration of such sale,
transfer, conveyance, assignment and delivery, Buyer agrees, and Buyer Parent
agrees to cause Buyer, (i) to pay and deliver to Seller (w) Cdn$5 million, (x) a
promissory note in the aggregate principal amount of Cdn$4,262,741 subject to
adjustment, if any, as set forth in Section 1.4, and in the form of Exhibit C
attached hereto (the "Note"), (y) 3,800,000 shares of its Class B preferred
stock having an aggregate liquidation preference of Cdn$3,800,000, and having
the particular terms set forth in Schedule 1 to the Articles of Incorporation,
as amended, of Buyer attached hereto as Appendix A (the "Class B
Mandatorily Redeemable Preferred Stock") and (z) 1 million shares of its Class E
preferred stock having an aggregate liquidation preference and the particular
terms set forth in Schedule 1 to the Articles of Incorporation, as amended, of
Buyer attached hereto as Appendix A (the "Class E Exchangeable Preferred Stock")
(as adjusted, clauses (w), (x), (y) and (z) are hereinafter referred to
collectively as the "Purchase Price"), and (ii) to undertake, assume and agree
to perform and otherwise pay, satisfy and discharge in accordance with their
respective terms, and to indemnify and hold Seller harmless with respect to, and
only with respect to, the debts, liabilities and obligations of Seller specified
in the undertaking to be executed by Buyer and delivered to Seller at the
Closing substantially in the form of Exhibit D attached hereto (the
"Undertaking"). Immediately subsequent to the adjustment as set forth in Section
1.4, Seller hereby agrees to exchange the Note for shares of Buyer's Class A
preferred stock having a liquidation preference of Cdn$1 per share and having
the particular terms set forth in Schedule 1 to the Articles of Incorporation,
as amended, of Buyer attached hereto as Appendix A (the "Class A Mandatorily
Redeemable Preferred Stock" and, together with the Class B Mandatorily
Redeemable Preferred Stock and the Class E Exchangeable Preferred Stock, the
"Preferred Stock") on the basis of one share of Class A Mandatorily Redeemable
Preferred Stock for each Cdn$1 in unpaid principal amount of the Note and Buyer
hereby agrees, and Buyer Parent agrees to cause Buyer, to issue such shares in
such exchange.
1.3 Payment of Purchase Price. The Purchase Price shall be
paid by Buyer as follows: at the Closing (as defined in Section 2.1), Buyer
shall deliver to Seller (x) Cdn$5 million in immediately available funds by wire
transfer to an account designated by Seller at least two business days prior to
the Closing Date, (y) the Note in the form of one typewritten note in the
principal amount of the Note, and (z) stock certificate(s), in form suitable for
transfer, registered in the name of Seller, evidencing the Class B Mandatorily
Redeemable Preferred Stock and the Class E Exchangeable Preferred Stock.
1.4 Post-Closing Adjustment.
(a) Preparation of Preliminary Statement of Net Assets. As
soon as reasonably possible after the Closing Date (but not later than 90 days
thereafter), Seller will prepare and will cause Seller's auditors to audit a
statement of assets, liabilities and net assets (the "Preliminary Statement of
Net Assets") of the Acquired Business dated as of the Closing Date and shall
deliver the Preliminary Statement of Net Assets to Buyer. The Preliminary
Statement of Net Assets shall, except as set forth on Exhibit E attached hereto,
be prepared in accordance with generally accepted accounting principles
applicable in Canada ("GAAP") on a basis consistent with the Reference Balance
Sheet (as defined in Section 3.9) and shall set forth a net asset value (the
"Net Asset Value"); provided that, in any event the Preliminary Statement of Net
Assets shall record as a liability all unpaid fees and expenses payable by
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Seller to third parties in connection with the consummation of the transactions
contemplated by this Agreement. Buyer's auditors will have a right to consult
with Seller's auditors and have access to Seller's auditors' working papers in
connection with the Preliminary Statement of Net Assets.
(b) Review of Preliminary Statement of Net Assets. The
Preliminary Statement of Net Assets shall be binding and conclusive upon, and
deemed accepted by, Buyer unless Buyer shall have notified Seller in writing of
any objections thereto consistent with the provisions of this Section 1.4 within
30 days after receipt thereof. The written notice under this Section 1.4(b)
shall specify in reasonable detail each item on the Preliminary Statement of Net
Assets that Buyer disputes and a summary of Buyer's reasons for such dispute.
(c) Disputes. Disputes between Buyer and Seller relating to
the Preliminary Statement of Net Assets that cannot be resolved by them within
30 days after receipt by Seller of the notice referred to in Section 1.4(b) may
be referred no later than 30 days after such receipt for decision at the
insistence of either party to Price Waterhouse (such firm being referred to
herein as the "Auditor"). Prior to referring the matter to the Auditor, the
parties shall agree on the procedures to be followed by the Auditor (including
procedures with regard to presentation of evidence). Such procedures shall not
alter the accounting practices, principles and policies to be applied to the
Preliminary Statement of Net Assets that will be those required by this
Agreement. If the parties are unable to agree upon procedures before the end of
15 days after referral of the dispute to the Auditor, the Auditor shall
establish such procedures giving due regard to the intention of the parties to
resolve disputes as quickly, efficiently and inexpensively as possible, which
procedures may be, but need not be, those proposed by the parties. The parties
shall then submit evidence in accordance with the procedures established and the
Auditor shall decide the dispute in accordance therewith. The Auditor's decision
on any matter referred to it shall be final and binding on Seller and Buyer. The
fee and expenses of the Auditor shall be borne by Seller and Buyer in equal
portions, unless the Auditor decides, based on its determination with respect to
the reasonableness of the respective positions of the parties, that the fee and
expenses shall be borne in unequal proportions.
(d) Final Statement of Net Assets. The Preliminary Statement
of Net Assets shall become final and binding upon the parties upon the earlier
of (i) the failure by Buyer to object thereto within the period permitted under
Section 1.4(b), (ii) the agreement between Buyer and Seller with respect thereto
or (iii) the decision by the Auditor with respect to any disputes referred to
the Auditor under Section 1.4(c). The Preliminary Statement of Net Assets, as
adjusted pursuant to the agreement of the parties or decision of the Auditor,
when final and binding is referred to herein as the "Final Statement of Net
Assets".
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(e) Adjustment to the Note. As soon as practicable (but not
more than five business days) after the determination and delivery of the Final
Statement of Net Assets in accordance with this Section 1.4: (i) the amount, if
any, by which the Net Asset Value as at the Closing Date as reflected in the
Final Statement of Net Assets is less than Cdn$10,362,741 plus Cdn$2.7 million
(the "Shortfall") shall result in an immediate downward adjustment of the
principal amount of the Note in an amount equal to the Shortfall, which
adjustment shall be effected pursuant to the terms of the Note and which
adjustment shall be deemed to have occurred as of the Closing Date; and (ii) the
amount, if any, by which the Net Asset Value as at the Closing Date as reflected
in the Final Statement of Net Assets is greater than Cdn$10,362,741 plus Cdn$2.7
million (the "Excess") shall result in an immediate upward adjustment of the
principal amount of the Note in an amount equal to the Excess, which adjustment
shall be effected pursuant to the terms of the Note and which adjustment shall
be deemed to have occurred as of the Closing Date.
(f) Subject to Section 8.3(f), any payment required by this
Section 1.4 shall not limit or affect Buyer's rights or remedies (or be Buyer's
sole or exclusive right or remedy) with respect to this Agreement, the breach of
any representation, warranty or obligation herein, the failure of any condition
to Buyer's obligations hereunder to be satisfied or the indemnification
obligations of Seller hereunder.
1.5 Instruments of Conveyance, Transfer, Assumption, Etc. (a)
Seller shall properly execute and deliver to Buyer at the Closing: (i) the ▇▇▇▇
of Sale; (ii) assignments with respect to each of the contracts and other
agreements and rights to be assigned to Buyer hereunder and, where required for
such assignment, the consent or waiver of any third party, in each case in form
reasonably satisfactory to Buyer; (iii) a deed in the form of Exhibit F attached
hereto (the "Deed") sufficient to vest in Buyer good and valid title to the Fee
Property (as defined in Section 3.8) free and clear of all pledges, liens,
charges, encumbrances, easements, title defects, security interests, adverse
claims, options and restrictions of every kind (collectively, the
"Encumbrances"), except for (1) Encumbrances reflected in the Reference Balance
Sheet or created in the ordinary course of business subsequent to December 31,
1995, that, in either case, do not and will not materially interfere with the
present use by Seller of the property subject thereto or affected thereby, (2)
Encumbrances for taxes, assessments or governmental charges, or landlords',
mechanics', workmen's, materialmen's or similar liens, in each case that are not
delinquent or that are being contested in good faith, (3) Encumbrances that are
reflected in the title reports or surveys, if any, delivered to Buyer or Buyer
Parent in connection with the transactions contemplated hereby prior to the date
hereof, or (4) the Encumbrances of record and other Encumbrances, in each case,
listed on Schedule 1.5 to the disclosure letter provided by Seller to Buyer and
Buyer Parent dated the date hereof (the "Seller Disclosure Letter")
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(collectively, the "Permitted Encumbrances"); (iv) an assignment in the form of
Exhibit G attached hereto (the "Intellectual Property Assignment") sufficient to
convey the Intellectual Property (as defined in Section 3.13) free and clear of
all Encumbrances other than Permitted Liens (as defined in Section 3.7(b)); (v)
assignments in the forms of Exhibit H-1 and H-2 attached hereto (the "Lease
Assignments") sufficient to assign the Real Property Leases (as defined in
Section 3.8), with the consent to assignment of the other party to the Real
Property Leases, free and clear of all Encumbrances other than Permitted
Encumbrances; and (vi) if the Acquired Subsidiary (as defined in Section 3.4) is
not merged, amalgamated or otherwise combined with Seller prior to the Closing
Date, certificates evidencing all of the issued and outstanding capital stock of
the Acquired Subsidiary, accompanied by stock powers duly executed in blank.
Buyer shall pay all fees, costs and expenses relating to the Deed, the
Intellectual Property Assignment and the Lease Assignments, including but not
limited to the execution, delivery and recording thereof (it being understood
that only the Lease Assignments relating to the Scarborough, Ontario properties
and the Lachine, Quebec property leased by Seller will be recorded), all
documentary stamps on the Deed, and all transfer and conveyance taxes and fees
but excluding all liability for any income taxes or capital gains taxes
assessable in connection with the transfer. Seller and Buyer shall cooperate to
prepare and file all required documents and filings with the applicable
authorities. Unless otherwise indicated, all references to schedules in this
Agreement shall mean schedules to the Seller Disclosure Letter.
(b) At or prior to the Closing, Seller shall deliver to Buyer,
Buyer Parent and its title insurer such evidence as may be reasonably required
by Buyer, Buyer Parent or its title insurer of the due authorization, execution
and delivery of this Agreement and the consummation of the transfer of the Fee
Property contemplated hereunder.
(c) At or prior to the Closing, Seller shall deliver to Buyer
and Buyer Parent the real estate tax bills for the Fee Property for the most
recent tax year.
(d) There shall be available to Buyer and Buyer Parent at the
Closing, at Buyer's expense, a commitment or commitments to issue on a customary
form acceptable to Buyer and Buyer Parent, an owner's title insurance policy or
policies (the "Policy"), for the Fee Property, at standard rates, issued by
companies acceptable to Buyer and Buyer Parent, in amounts not less than the
value of the Fee Property, insuring title thereto to be good and marketable,
free and clear of all Encumbrances, except for Permitted Encumbrances.
(e) There shall be available to Buyer and Buyer Parent at the
Closing, at Buyer's expense, a survey of the Fee Property, certified to Buyer,
Buyer Parent and the title insurance company issuing the Policy in a manner
reasonably acceptable to Buyer, Buyer Parent and such title company, by a
registered land surveyor,
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dated not more than forty-five (45) days prior to the Closing, and complying
with the minimum detail requirements for land title surveys as applicable under
the laws of Ontario.
(f) Seller shall use its best efforts to obtain and deliver to
Buyer and Buyer Parent a certificate from any landlord or tenant of a Real
Property Lease, dated not more than thirty (30) days prior to the Closing Date,
certifying (i) that such Real Property Lease is in good standing and full force
and effect in accordance with its terms and has not been modified (except for
the modifications set forth therein); (ii) the date(s) to which rent and other
charges thereunder have been paid; (iii) that there is no default thereunder on
the part of any party thereto; (iv) that in such instances where Seller is the
landlord, all work required to be done by landlord under the lease has been
completed to the satisfaction of tenant; and (v) such further matters as may
reasonably be requested by Buyer or Buyer Parent.
(g) Simultaneously with the Closing, Seller shall take all
steps requisite to put Buyer in actual possession and operating control of the
Acquired Business.
(h) Buyer shall properly execute and deliver the Undertaking
to Seller at the Closing.
(i) This Agreement, the ▇▇▇▇ of Sale, the Undertaking, the
Deed, the Intellectual Property Assignment, the Lease Assignments, the Guaranty
Agreement (as defined herein), the Covenant Agreement (as defined herein) and
the Registration Rights Agreement (as defined herein) are hereinafter sometimes
referred to as the "Agreements".
1.6 Further Assurances. At the Closing and from time to time
after the Closing, (i) at the request of Buyer or Buyer Parent and without
further consideration, Seller shall promptly execute and deliver to Buyer such
certificates and other instruments of sale, conveyance, assignment and transfer,
and take such other action, as may reasonably be requested by Buyer or Buyer
Parent more effectively to confirm any obligation assumed by Buyer pursuant to
the Undertaking, to sell, convey, assign and transfer to and vest in Buyer or to
put Buyer in possession of the Acquired Business and to confirm and carry out
the indemnification by Seller pursuant to Section 8.1, and (ii) at the request
of Seller and without further consideration, (x) Buyer shall promptly execute
and deliver to Seller such certificates and other instruments of assumption and
take such other action as may reasonably be requested by Seller more effectively
to confirm and carry out the assumption by Buyer of the obligations of Seller
assumed by Buyer pursuant to the Undertaking and the indemnification by Buyer
pursuant to Section 8.2 and (y) Buyer Parent shall promptly execute and deliver
to Seller such certificates and other documents and take such other action as
may be reasonably requested by Seller more effectively to confirm and carry out
the indemnification by Buyer Parent pursuant to Section 8.2. To the extent that
any
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consents, waivers or approvals necessary to convey assets that are part of the
Acquired Business to Buyer are not obtained prior to the Closing, Seller shall
use its best efforts to: (i) provide to Buyer, at the request of Buyer or Buyer
Parent, the benefits of any such asset, and hold the same in trust for Buyer;
(ii) cooperate in any reasonable and lawful arrangement, approved by Buyer and
Buyer Parent, designed to provide such benefits to Buyer; and (iii) enforce and
perform, at the request of Buyer or Buyer Parent, for the account of Buyer, any
rights or obligations of Seller arising from any such asset against or in
respect of any third person (including a government or governmental unit),
including the right to elect to terminate any contract, arrangement or agreement
in accordance with the terms thereof upon the advice of Buyer or Buyer Parent.
1.7 Purchase Price Allocation. The allocation of the Purchase
Price shall be set by Seller by notice in writing to the Buyer within ten days
subsequent to the issuance of the Final Statement of Net Assets. For
informational purposes, the allocation of the Purchase Price if it were based on
the net asset value of the assets of the Acquired Business as at December 31,
1995 (excluding the Excluded Assets) would be the allocation set forth on
Schedule 1.7.
1.8 Tax Elections. The Seller and Buyer both hereby agree that
they will both jointly make an election pursuant to the provisions of section 85
of the Income Tax Act (Canada) and section 518 of the Quebec Taxation Act, so
that the proceeds of disposition to the Seller and the cost amount to the Buyer
with respect to the following of the assets that are part of the Acquired
Business will not be less than the respective cost amounts thereof. For purposes
of the tax elections herein referred to, the parties will use the undepreciated
capital cost or cumulative eligible capital account as at January 1, 1997 for
the following assets:
(1) Machinery
(2) Furniture and Fixtures
(3) Computer Equipment
(4) Leasehold Improvements
(5) Intangibles
(6) Buildings forming part of the Fee Property
Seller and Buyer agree to jointly make an election pursuant to
Section 22 of the Income Tax Act (Canada) and Section 184 of the Quebec Taxation
Act in respect of the accounts receivable forming part of the Acquired Business.
For purposes of this Section 1.8, the term "cost amount" shall have the meaning
ascribed to such term in subsection 248(1) of the Income Tax Act (Canada).
-7-
ARTICLE 2
CLOSING AND TERMINATION
-----------------------
2.1 Closing. The closing of the transactions provided for
herein (the "Closing") will take place at the offices of Winthrop, Stimson,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 A.M.
(local time) on January 3, 1997 (the "Closing Date") or at such other place,
time and date as may be
agreed upon by Buyer and Seller.
2.2 Termination. Anything contained in this Agreement other
than in this Section 2.2 to the contrary notwithstanding, this Agreement may be
terminated in writing at any time:
(a) without liability on the part of any party hereto (unless
occasioned by reason of a material breach by any party hereto of any of
its representations, warranties or obligations hereunder) by mutual
consent of Buyer and Seller;
(b) without liability on the part of any party hereto (unless
occasioned by reason of a material breach by any party hereto of any of
its representations, warranties or obligations hereunder) by either
Buyer or Seller, if the Closing shall not have occurred on or before
January 31, 1997 (or such later date as may be agreed upon in writing
by the parties hereto);
(c) by Buyer or Buyer Parent, if Seller shall materially
breach any of its representations, warranties or obligations hereunder
and such breach shall not have been cured or waived and Seller shall
not have provided reasonable assurance that such breach will be cured
on or before the Closing Date; or
(d) by Seller, if Buyer or Buyer Parent shall materially
breach any of its representations, warranties or obligations hereunder
and such breach shall not have been cured or waived and Buyer or Buyer
Parent shall not have provided reasonable assurance that such breach
will be cured on or before the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer and Buyer Parent that:
3.1 Organization. Seller is a corporation duly organized,
validly existing and has made all necessary corporate filings required to be
made under the laws of the jurisdiction of its organization to keep Seller in
good standing under such laws
-8-
and has all corporate power and authority to carry on its business as now being
conducted and to own its properties and is duly licensed or qualified and in
good standing as a foreign corporation in each jurisdiction in which it is
required to be so licensed or so qualified, except where the failure to be so
licensed or so qualified would not have a material adverse effect on the
business, financial condition, assets, liabilities (contingent or otherwise) or
results of operations (a "Material Adverse Effect") of Seller or the Acquired
Business. Seller has heretofore delivered to Buyer and Buyer Parent complete and
correct copies of the certificate and articles of amalgamation and all
amendments thereto and by-laws of Seller as currently in effect.
3.2 Corporate Authority. Seller has full corporate power and
authority to enter into this Agreement and the other Agreements to which it is
or will be a party at Closing and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Seller of the
Agreements to which it is a party or will be a party at Closing have been duly
authorized by all requisite corporate action. This Agreement has been, and each
of the other Agreements to which it will be a party as of the Closing Date will
be, duly executed and delivered by Seller, and (assuming due execution and
delivery by Buyer and Buyer Parent) this Agreement constitutes, and each of the
other Agreements to which it is or will be a party when executed and delivered
will constitute, a valid and binding obligation of Seller, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or by general equitable principles.
3.3 Other Agreements. The instruments of conveyance and
transfer to be executed by Seller and delivered to Buyer and Buyer Parent at the
Closing will be valid in accordance with their terms and effective to assign,
transfer and convey to Buyer at the Closing all of the then existing business of
the Acquired Business and properties, assets and other rights of Seller used in
the business of the Acquired Business, including such title as is specified in
Sections 3.7 and 3.8 but excluding the Excluded Assets.
3.4 Subsidiaries and Equity Investments. Schedule 3.4 sets
forth the name, jurisdiction of incorporation, authorized capitalization and
share ownership of the only direct or indirect subsidiary of Seller (the
"Acquired Subsidiary") and the jurisdictions in which the Acquired Subsidiary is
qualified to do business. As used in the first sentence of this Section 3.4, the
term "subsidiary" means any corporation of which Seller, directly or indirectly,
owns or controls capital stock representing more than fifty percent of the
general voting power under ordinary circumstances of such corporation, except
for Buyer, Buyer Parent, American Converting Paper Corporation and any
subsidiary of Buyer Parent. Except as disclosed in Schedule 3.4 and except for
securities of Buyer Parent, American Converting Paper Corporation
-9-
and any subsidiary of Buyer Parent, Seller does not own, directly or indirectly,
any capital stock or other equity securities of any corporation or have any
direct or indirect equity or ownership interest, including interests in
partnerships and joint ventures, in any business not listed in Schedule 3.4.
Except as disclosed in Schedule 3.4, all of the outstanding capital stock of the
Acquired Subsidiary is owned by Seller free and clear of all Encumbrances. All
such shares of capital stock have been duly authorized, validly issued and are
fully paid and nonassessable. There are no outstanding options, warrants or
other rights of any kind to acquire any additional shares of capital stock of
the Acquired Subsidiary or securities convertible into or exchangeable for, or
that otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor is the Acquired Subsidiary committed to issue any such
option, warrant, right or security. The Acquired Subsidiary is a corporation
duly organized and validly existing and has made all necessary corporate filings
required to be made by the Acquired Subsidiary under the laws of its
jurisdiction of organization to keep the Acquired Subsidiary in good standing
under such laws and has all corporate power and authority to carry on its
business as now being conducted and to own its properties and is duly licensed
or qualified and in good standing as a foreign corporation in each jurisdiction
in which it is required to be so licensed or so qualified, except where the
failure to be so licensed or so qualified would not have a Material Adverse
Effect on the Acquired Business. Seller has heretofore delivered to Buyer and
Buyer Parent complete and correct copies of the certificate and articles of
incorporation and all amendments thereto and by-laws or similar corporate
organizational documents of the Acquired Subsidiary as currently in effect.
3.5 No Violation. Except as disclosed in Schedule 3.5, none
of Seller or the Acquired Subsidiary is subject to or bound by any provision of:
(a) any law, statute, legally binding rule (including the
civil law and the common law), regulation, policy, guideline, directive
or judicial or administrative decision (collectively, "Laws"),
(b) any articles or certificate of incorporation (or similar
corporate organizational documents) or by-laws,
(c) any mortgage, deed of trust, lease, note, shareholders'
agreement, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship, other restriction, or
(d) any judgment, order, writ, injunction or decree of any
court, governmental body, regulatory or administrative authority or
agency or arbitration tribunal (collectively, "Governmental
Authority"),
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that would prevent or be violated by or that would result in the creation of any
Encumbrance as a result of, or under which there would be a default or right of
termination as a result of, the execution, delivery and performance by Seller of
this Agreement and each of the other Agreements to which it is or will be a
party at Closing and the consummation of the transactions contemplated hereby
and thereby. Except as disclosed in Schedule 3.5, no consent, approval, or
authorization of or declaration or filing with any individual, corporation,
partnership, trust or unincorporated organization or any Governmental Authority
(a "Person") is required for the valid execution, delivery and performance by
Seller of this Agreement and each of the other Agreements to which it is or will
be a party at Closing and the consummation of the transactions contemplated
hereby and thereby.
3.6 Litigation. Except as disclosed in Schedule 3.6, there is
(i) no outstanding consent, order, judgment, injunction, award or decree of any
Governmental Authority against or involving Seller, the Acquired Subsidiary or
any of the business, assets or properties of the Acquired Business, (ii) no
action, suit, dispute or proceeding pending by or before any Governmental
Authority or, to Seller's best knowledge, threatened against or involving
Seller, the Acquired Subsidiary or any of the business, assets or properties of
the Acquired Business and (iii) to Seller's best knowledge, no investigation
pending by or before any Governmental Authority or threatened against or
relating to Seller, the Acquired Subsidiary or any of the business, assets or
properties of the Acquired Business (collectively, "Proceedings"). The
Proceedings disclosed in Schedule 3.6, singly or in the aggregate, have not had
and are not likely to have a Material Adverse Effect on the Acquired Business or
a material adverse effect on the ability of Seller to consummate the
transactions contemplated hereby.
3.7 Personal Property. (a) Schedule 3.7(a) sets forth all
loans or advances made by the Acquired Business to any Person in excess of
Cdn$1,000.
(b) Except for (i) Encumbrances for taxes, assessments or
governmental charges, or landlords', mechanics', workmen's, materialmen's or
similar liens, in each case that are not delinquent or that are being contested
in good faith or (ii) the Encumbrances of record and other Encumbrances, in each
case, listed on Schedule 3.7(b) (collectively, the "Permitted Liens"), Seller
and the Acquired Subsidiary have good and valid title to all of the assets that
are part of the Acquired Business that do not constitute the Fee Property, free
and clear of all Encumbrances.
3.8 Real Property. (a) Schedule 3.8(a) refers to each and
every parcel of real property or interest in real estate owned by Seller or the
Acquired Subsidiary (the "Fee Property"), held under lease (the "Real Property
Leases") or used by, or necessary for the conduct of the business of, the
Acquired Business (collectively, the "Real Property"), and separately identifies
(i) the Fee Property, (ii) the real property or interests held under
-11-
the Real Property Leases and (iii) any other Real Property. Seller has
heretofore delivered to Buyer and Buyer Parent complete and correct copies of
each and every of the following, if any, in the possession of Seller or the
Acquired Subsidiary: (i) title reports, title binders, survey documents or legal
opinions with respect to, certifying to, or evidencing the extent, current
title, title history, use, possession, restriction or regulation, if any
(governmental or otherwise), and compliance with applicable laws, of the Fee
Property; (ii) deed or title-holding or trust agreements, if any, under which
any of the Real Property may have been conveyed to Seller or the Acquired
Subsidiary or under which the same may be held for the benefit of Seller or the
Acquired Subsidiary; and (iii) Real Property Leases and all documents relating
thereto, including any amendments thereto and any assignment thereof.
(b) Seller or the Acquired Subsidiary:
(i) owns and has good and valid title in fee simple to
the Fee Property designated as such in Schedule 3.8(a) free and clear
of all Encumbrances, except for Permitted Encumbrances;
(ii) with respect to the real property held under the Real
Property Leases designated as such in Schedule 3.8(a), is in peaceful
and undisturbed possession of the space and/or estate under each lease
under which it is a tenant, subject to the rights of subtenants or
assignees under any subleases or assignments disclosed in Schedule
3.8(b)(ii), and, except as disclosed in Schedule 3.8(b)(ii), there are
no material defaults by it as tenant thereunder and, to Seller's best
knowledge, there are no material defaults of the landlord thereunder;
and
(iii) has good and valid rights of ingress and egress to
and from the Fee Property from and to the public street systems for all
usual street, road and utility purposes.
(c) Neither Seller nor the Acquired Subsidiary has received
any written notice of any appropriation, condemnation or like proceeding, or of
any violation of any applicable Law relating to or affecting the Real Property,
and to Seller's best knowledge, no such proceeding has been threatened or
commenced.
(d) Except as disclosed in Schedule 3.8(d), all of the
buildings, structures, improvements and fixtures which form part of the Fee
Property or the properties leased by Seller in Scarborough, Ontario and Lachine,
Quebec, are in a good state of repair, maintenance and operating condition and,
except as so disclosed and, except for normal wear and tear, there are no
defects with respect thereto that are materially impairing the day-to-day use of
any such buildings, structures, improvements or fixtures.
-12-
3.9 Financial Statements. (a) Seller has heretofore furnished
Buyer and Buyer Parent with copies of the following financial statements of
Seller and the Acquired Subsidiary: (i) audited consolidated financial
statements prepared in accordance with GAAP consistently applied as at December
31 for the fiscal year ended 1995; (ii) audited consolidated special purpose
financial statements prepared in accordance with GAAP consistently applied as at
December 31 for each of the fiscal years ended 1994 and 1995, respectively,
including an audited consolidated balance sheet (the "Reference Balance Sheet")
as at December 31, 1995 (the "Reference Balance Sheet Date"), except that the
investment of Seller in Buyer Parent has been reflected on an equity accounting
basis; and (iii) an unaudited interim consolidated special purpose balance sheet
as of September 30, 1996 and an unaudited consolidated special purpose statement
of income for the nine-month period ended September 30, 1996, in each case
prepared in accordance with GAAP consistently applied, except that the
investment of Seller in Buyer Parent has been reflected on an equity accounting
basis. Except as noted therein and except for normal year-end adjustments with
respect to the unaudited financial statements, all such financial statements are
complete and correct, were prepared in accordance with GAAP consistently applied
throughout the periods indicated and present fairly the consolidated financial
position of Seller and the Acquired Subsidiary at such dates and the
consolidated results of their operations and, where applicable, their
consolidated cash flows for the periods then ended. The pro forma balance sheet
of Seller attached hereto as Exhibit O accurately reflects the assets of Seller
immediately after the Closing and after giving effect to the transactions
specified in Schedule 3.14 and that Seller will have no liabilities immediately
after the Closing other than (x) liabilities of Seller specifically assumed by
Buyer pursuant to the Undertaking and (y) the liability to pay two promissory
notes held by 1186020 Ontario Limited and 3287858 Canada Inc. each in the amount
of Cdn$6,266,790 and expressly excluded from the Undertaking, which liability
shall be discharged from assets not reflected on such pro forma balance sheet as
specified in Schedule 3.14 no later than the time provided for the post-closing
adjustment set forth in Section 1.4.
(b) There are no liabilities, debts, obligations or claims
against the Acquired Business of any nature, absolute or contingent, except (i)
as and to the extent reflected or reserved against on the Reference Balance
Sheet; (ii) as specifically described in any of the schedules delivered to Buyer
and Buyer Parent pursuant to the Seller Disclosure Letter (or by reason of
thresholds applicable thereto are not required to be disclosed); (iii) as
incurred since the Reference Balance Sheet Date in the ordinary course of
business or consistent with Section 3.14; (iv) open purchase or sales orders or
agreements for delivery of goods and services in the ordinary course of business
consistent with prior practice; or (v) those that are not required to be
disclosed by GAAP; provided that nothing in this Section 3.9(b) constitutes or
shall be deemed to constitute a representation or warranty by
-13-
the Seller with respect to the liabilities, debts, obligations or claims of
Buyer Parent or any subsidiary of Buyer Parent insofar as such matters are
required to be set forth under GAAP applied on a consistent basis.
(c) None of the operating assets of Seller relating to the
Acquired Business are being retained by Seller pursuant to the terms of this
Agreement.
3.10 Books and Records. Seller has made and will make
available for inspection by Buyer and Buyer Parent all the books of account
relating to the Acquired Business. Such books of account reflect all the
transactions and other matters required to be set forth under GAAP applied on a
consistent basis.
3.11 Tax Matters. Seller or the Acquired Subsidiary has filed,
or will prepare and timely file, all Tax returns or reports relating or
attributable to the Acquired Business that are required to be filed for all
periods prior to or including the Closing Date, and such returns or reports are
(or to the extent filed between the date hereof and the Closing Date will be)
correct and complete. All Taxes (whether or not requiring the filing of returns
or reports) of Seller and the Acquired Subsidiary for the aforementioned periods
have been timely and fully paid or adequately reserved against. All Taxes that
Seller or the Acquired Subsidiary is required by Law to withhold or collect have
been duly withheld or collected and have been paid over to the appropriate
Governmental Authority or are properly recorded as a liability on the books of
Seller. No Tax liens shall attach to any of the assets in the Acquired Business
because of a deficiency or delinquency in payment of Taxes by Seller or because
of a failure to qualify in any jurisdiction in which the Acquired Business owns
or leases property or conducts business. There will be no Tax deficiencies, or
any interest or penalties thereon assessed, related to the Acquired Business for
any period ending on or before the Closing Date. As used in this Agreement, the
term "Tax" or "Taxes" means any federal, state, provincial, local, foreign or
other taxes (including, without limitation, income (net or gross)), gross
receipts, profits, alternative or add-on minimum, franchise, license, capital,
capital stock, intangible, services, premium, mining, transfer, goods and
services, sales, use, ad valorem, payroll, wage, severance, employment,
occupation, property (real or personal), windfall profits, import, excise,
custom, stamp, withholding or governmental charges of any kind whatsoever
(including interest, penalties, additions to tax or additional amounts with
respect to such items).
3.12 Employee Matters. (a) Except for two employees of the
Acquired Business who will not continue as employees after the Closing, as set
forth in Schedule 3.12(a), Schedule 3.12(a) attached hereto sets forth the name,
title, current base salary rate and actual bonus payments for the 1995 fiscal
year of each present employee of the Acquired Business having a base salary
greater than Cdn$30,000; organizational charts of the Acquired
-14-
Business; collective bargaining, union or other employee association agreements;
employment, managerial, advisory and consulting agreements; employee
confidentiality or other agreements protecting proprietary processes, formulae
or information; each employee benefit plan (including, without limitation,
pension, profit-sharing, supplemental retirement income, hospitalization,
insurance and medical insurance plans), stock purchase plan, stock option plan,
fringe benefit plan, bonus policy and plan and any other deferred compensation
agreement or plan or funding arrangement sponsored, maintained or to which
contributions are made by Seller or any of its Affiliates and that cover current
or former employees of the Acquired Business (such plans are referred to
collectively as the "Benefit Plans"); and the amount of any unfunded retirement
liabilities, including medical coverage, arising under any plan, fund, or
arrangement described in this Section 3.12 and the identity of the plan, fund,
or arrangement giving rise thereto. Except as disclosed in Schedule 3.12(a),
neither Seller nor the Acquired Subsidiary has any other written or oral
employment agreements other than contractual terms that are implied by Law. As
used in this Agreement, the term "Affiliate" of Seller is a Person (other than
Buyer Parent or any subsidiary of Buyer Parent) that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, Seller.
(b) Except as set forth on Schedule 3.12(a), neither Seller
nor the Acquired Subsidiary (i) is a party to any collective bargaining
agreement or employment or consulting agreement of the Acquired Business; and
(ii) has made any promise to create any additional employee benefit plan,
arrangement or to modify or improve any existing Benefit Plan, except such
modification or improvement as may be required to be made to secure the
continued registration, where applicable, of any existing Benefit Plan with each
applicable regulatory authority.
(c) Except as set forth in Schedule 3.12(c), the Benefit Plans
are duly registered where required by, are in substantial compliance with, and
are in good standing under, all applicable Laws, including without limitation,
the Income Tax Act (Canada), the Taxation Act (Quebec) and the Supplemental
Pension Plans Act (Quebec) and all reports, returns, and filings required to be
made thereunder have been made. All contributions to such Benefit Plans required
to be made by Seller and by members of such plans have been made and will
continue to be made up to the Closing Date. To Seller's best knowledge, nothing
has occurred which would adversely affect the registered and qualified status of
any Benefit Plan.
(d) Except as set forth in Schedule 3.12(d), the execution of
this Agreement and the performance of the transactions contemplated herein will
not constitute an event under any Benefit Plan that will result in any
acceleration of vesting or increase in benefits with respect to any employee of
the Acquired Business.
-15-
(e) Except as set forth in Schedule 3.12(e), and except as
otherwise provided by Law, no contract, agreement, plan, trust, escrow account,
guarantee, letter, understanding or other written or oral agreement requires or
provides for any payment in cash or other consideration or otherwise provides a
benefit or advantage to any employee of the Acquired Business upon termination
of such employee's employment or engagement upon or following a change in
control of the Acquired Business, or upon the consummation of this Agreement or
any of the transactions contemplated hereby.
(f) Except as set forth in Schedule 3.12(f), no trade union,
council of trade unions, employee bargaining agency or affiliated bargaining
agent: (A) holds bargaining rights with respect to any employees of the Acquired
Business by way of certification, interim certification, voluntary recognition,
designation or successor rights; or (B) has applied to be certified as the
bargaining agent of any of the employees of the Acquired Business.
3.13 Intellectual Property. (a) Schedule 3.13(a) sets forth
the intellectual property of Seller and the Acquired Subsidiary (collectively,
the "Intellectual Property"), as follows:
(i) all patents held by or licensed by the Seller or the
Acquired Subsidiary and all reissues, divisions, continuations,
continuations in part and extensions thereof and all pending patent
applications by the Acquired Business, including for each such patent
the serial or patent number and country;
(ii) all registered trademarks and service marks held by
or licensed by the Seller or the Acquired Subsidiary and pending
registrations by the Acquired Business of trademarks and service marks,
including for each such trademark or service ▇▇▇▇, the registration
number and country;
(iii) all registered copyrights held by or licensed by the
Seller or the Acquired Subsidiary and applications by the Acquired
Business for registration of copyrights, including the registration
number and country;
(iv) all trade names and common law marks held by or
licensed by the Seller or the Acquired Subsidiary and used by, or
necessary for the conduct of the business of, the Acquired Business,
including a statement of and evidence supporting the date of first use
and length of use of such names and marks and the jurisdictions of such
use; and
(v) all trademark licenses, service ▇▇▇▇ licenses,
copyright licenses, royalty agreements, patent licenses, assignments,
grants and contracts of the Seller or the Acquired Subsidiary with
employees or others relating in whole or in part to disclosure,
assignment, registering or patenting
-16-
of any trademarks, service marks, copyrights, inventions, discoveries,
improvements, processes, formulae, trade secrets or other know-how of,
used by, or necessary for the conduct of the business of, the Acquired
Business.
(b) Except as disclosed in Schedule 3.13(b):
(i) Seller and the Acquired Subsidiary own the
Intellectual Property set forth in Schedule 3.13(a) free and clear of
any Encumbrances, except for Permitted Liens;
(ii) neither Seller nor the Acquired Subsidiary has
granted any other party rights with respect to the Intellectual
Property;
(iii) to Seller's best knowledge, the patents,
trademarks, service marks and copyrights set forth in Schedule 3.13(a)
are valid;
(iv) to Seller's best knowledge, the trademark
registrations, service ▇▇▇▇ registrations, copyright registrations and
patents set forth in Schedule 3.13(a) have been duly issued and have
not been canceled, abandoned or otherwise terminated;
(v) the trademark applications, service ▇▇▇▇
applications, copyright applications and patent applications set forth
in Schedule 3.13(a) have been duly filed;
(vi) all licenses, assignments, grants, agreements and
contracts set forth in Schedule 3.13(a) were entered into in the
ordinary course of business, are valid and binding in accordance with
their terms and are in full force and effect; and
(vii) neither Seller nor any Acquired Subsidiary is in
default under any of the foregoing licenses, assignments, grants,
agreements and contracts, and, to Seller's best knowledge, no other
party is in default thereunder.
(c) Except as disclosed in Schedule 3.13(c):
(i) none of the processes currently used by the Acquired
Business or any of the properties or products currently sold by the
Acquired Business or trademarks, trade names, labels or other marks or
copyrights used by the Acquired Business, infringes the patent,
industrial property, trademark, trade name, label, other ▇▇▇▇, right or
copyright of any other Person;
(ii) neither Seller nor the Acquired Subsidiary has
received any notice of adverse claim or threat of adverse claim by any
third party with respect thereto, and, to
-17-
Seller's best knowledge, no basis exists for any such claim; and
(iii) Seller and the Acquired Subsidiary have license
agreements in force to the extent necessary to permit their full use of
all of the processes used by them in the operation in accordance with
present and planned practices.
3.14 Absence of Change or Event. Except as disclosed in
Schedule 3.14, since the Reference Balance Sheet Date, Seller and the Acquired
Subsidiary have conducted the Acquired Business only in the ordinary course and
have not with respect to the Acquired
Business:
(a) mortgaged, pledged or subjected to lien,
restriction or any other Encumbrance any of the property, businesses or
assets, tangible or intangible, of the Acquired Business;
(b) sold, transferred, leased to others or otherwise
disposed of any of its assets (or committed to do any of the
foregoing), including the payment of any loans owed to any Affiliate,
except for sales of surplus equipment not exceeding Cdn$350,000 in the
aggregate, for inventory sold to customers or returned to vendors and
payments to any non- Affiliates on account of accounts payable or
scheduled payments in respect of indebtedness for money borrowed
disclosed on the Reference Balance Sheet or in the Schedules to the
Seller Disclosure Letter, in each case in the ordinary course of
business and consistent with prior practice, or canceled, waived,
released or otherwise compromised any debt or claim, or any right of
significant value, except in the ordinary course of business and
consistent with prior practice;
(c) suffered any damage, destruction or loss (whether
or not covered by insurance) that has had or could have a Material
Adverse Effect on the Acquired Business;
(d) when considered as a whole, made or committed to
make any capital expenditures or capital additions or betterments in
excess of an aggregate of Cdn$1,200,000;
(e) encountered any labor union organizing activity or
had any actual or threatened employee strikes, work stoppages,
slow-downs or lock-outs;
(f) instituted any litigation, action or proceeding
before any Governmental Authority relating to it or its property,
except for litigation, actions or proceedings instituted in the
ordinary course of business and consistent with prior practice; or
-18-
(g) except for the dividends disclosed on Schedule
3.14(g), declared or paid any dividend or made any other payment or
distribution in respect of its capital stock, or directly or indirectly
redeemed, purchased or otherwise acquired for consideration any of its
capital stock.
3.15 Compliance With Law. (a) Except as disclosed in Schedule
3.15(a), the operations and activities of the Acquired Business since January 1,
1991 have complied and are in compliance with all applicable federal, provincial
and local Laws, including, without limitation, health and safety statutes and
regulations and all applicable Environmental Laws, including, without
limitation, all restrictions, conditions, standards, limitations, prohibitions,
requirements, obligations, schedules and timetables prescribed by the applicable
Environmental Laws or prescribed by any regulation, code, plan, order, decree,
judgment, injunction, written notice or demand letter issued, entered,
promulgated or approved thereunder and legally binding on Seller.
(b) Schedule 3.15(b) sets forth: (i) all federal, provincial,
local and foreign governmental licenses, permits and other authorizations (the
"Permits") of the Acquired Business; and (ii) all reports of inspection of the
Acquired Business and the Real Property in Seller's possession made during the
period from January 1, 1994 to the date hereof under all applicable federal,
provincial and local health and safety Laws. Seller has heretofore delivered to
Buyer and Buyer Parent complete and correct copies of all of such Permits and
reports and all pending applications by Seller for Permits.
(c) Except as disclosed in Schedule 3.15(c), Seller and the
Acquired Subsidiary have obtained all Permits that are (i) required under all
federal, provincial and local Laws, including the applicable Environmental Laws,
for the ownership, use and operation of each location owned, operated or leased
by Seller and the Acquired Subsidiary in the Acquired Business (the "Property")
or (ii) otherwise necessary in the conduct of the business of the Acquired
Business. Except as disclosed in Schedule 3.15(c), all such Permits are in
effect, each of Seller and the Acquired Subsidiary is in material compliance
with all terms and conditions of all such Permits, and, to Seller's best
knowledge, no appeal nor any other action is pending to revoke any such Permit.
(d) Seller has heretofore delivered to Buyer and Buyer Parent
true and complete copies of all environmental site assessments conducted by
environmental consultants made in the last three years by or on behalf of Seller
(or any other Person unless disclosure would breach a confidentiality
obligation) and in Seller's possession relating to (i) the Property or (ii) any
other property or facility once owned or leased by Seller or the Acquired
Subsidiary and which is not owned or leased by Seller or the Acquired Subsidiary
on the Closing Date (the "Former Property"), all of which site assessments are
set forth on Schedule 3.15(d).
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(e) (i) Except as disclosed in Schedule 3.15(e)(i), there is
no pending civil, criminal or administrative action, suit, demand, claim,
hearing or proceeding as to which Seller or the Acquired Subsidiary is a party
relating to Seller, the Acquired Subsidiary or the Fee Property, nor, to
Seller's best knowledge, (x) is any other investigation or proceeding pending
relating to the foregoing or (y) is any of the foregoing threatened relating to
Seller, the Acquired Subsidiary or the Fee Property and in either case relating
in any way to the applicable Environmental Laws or any regulation, code, plan,
order, decree, judgment, injunction, written notice or demand letter issued,
entered, promulgated or approved thereunder and legally binding on Seller.
(ii) Except as disclosed in Schedule 3.15(e)(ii), there is
no pending civil, criminal or administrative action, suit, demand, claim,
hearing or proceeding as to which Seller or the Acquired Subsidiary is a party,
or, to Seller's best knowledge, any other investigation or proceeding pending
relating to any location leased by Seller or the Acquired Subsidiary or the
Former Property, nor, to Seller's best knowledge, is any of the foregoing
threatened relating to any location leased by Seller or the Acquired Subsidiary
or the Former Property and in either case relating in any way to the applicable
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, written notice or demand letter issued, entered, promulgated or
approved thereunder and legally binding on Seller.
(f) Except as disclosed in Schedule 3.15(f), neither Seller
nor the Acquired Subsidiary has Released, placed, stored, buried or dumped any
Hazardous Substances, Oils, Pollutants or Contaminants produced by, or resulting
from, any business, commercial, or industrial activities, operations, or
processes of Seller or the Acquired Subsidiary, on or beneath, the Property or
the Former Property in violation of applicable Environmental Laws.
(g) Except as disclosed in Schedule 3.15(g), no Release or
Cleanup occurred at the Property resulting from any business, commercial or
industrial activities, operations or processes of Seller or the Acquired
Subsidiary or, to Seller's best knowledge, otherwise, that could result in the
assertion or creation of a lien on the Property by any Governmental Authority
with respect thereto, nor has any such assertion of a lien been made by any
Governmental Authority with respect thereto.
(h) Except as disclosed in Schedule 3.15(h), no employee of
Seller or the Acquired Subsidiary in the course of his or her employment with
Seller or the Acquired Subsidiary has been exposed as a result of the operation
of the Acquired Business by Seller or the Acquired Subsidiary to any Hazardous
Substances, Oils, Pollutants or Contaminants generated, produced or used by
Seller or the Acquired Subsidiary in violation of applicable Environmental Laws
that could give rise to any claim against the Acquired Business.
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(i) Except as disclosed in Schedule 3.15(i), none of Seller
and the Acquired Subsidiary has received any written notice or order from any
Governmental Authority or private or public entity advising it that pursuant to
applicable Environmental Laws Seller or the Acquired Subsidiary is responsible
for or potentially responsible for Cleanup or paying for the cost of Cleanup of
any Hazardous Substances, Oils, Pollutants or Contaminants in each case at the
Property or the Former Property, and none of Seller and the Acquired Subsidiary
has entered into any agreements concerning such Cleanup.
(j) Except as disclosed in Schedule 3.15(j), to Seller's best
knowledge, the Fee Property does not contain any: (a) underground storage tanks;
(b) asbestos; (c) equipment using PCBs; (d) underground injection ▇▇▇▇▇; or (e)
septic tanks in which process wastewater or any Hazardous Substances, Oils,
Pollutants or Contaminants have been disposed in violation of applicable
Environmental Laws.
(k) Except as disclosed in Schedule 3.15(k), neither Seller
nor the Acquired Subsidiary has entered into any written agreement that by its
express terms may require it to pay, reimburse, guarantee, pledge, defer,
indemnify, or hold harmless any person for or against Environmental Liabilities
and Costs (it being understood that any warranty obligations for the purchase,
sale or transport of supplies, materials and goods in the ordinary course of
business shall be excluded from this Section 3.15(k)).
(l) The following terms shall be defined as follows:
Cleanup - means all actions ordered by any Governmental Authority in
accordance with applicable Environmental Laws to: (1) cleanup, remove,
treat or remediate Hazardous Substances, Oils, Pollutants or
Contaminants in the indoor or outdoor environment; (2) prevent the
Release of Hazardous Substances, Oils, Pollutants or Contaminants so
that they do not migrate, endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; (3) perform
pre-remedial studies and investigations and post-remedial monitoring
and care; or (4) respond to any requests from any Governmental
Authority for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal,
treatment or remediation of Hazardous Substances, Oils, Pollutants or
Contaminants in the indoor or outdoor environment.
Environmental Laws - means all federal, provincial and local Laws
relating to pollution or protection of the environment, including,
without limitation, Laws relating to Releases or threatened Releases of
Hazardous Substances, Oils, Pollutants or Contaminants into the indoor
or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
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treatment, storage, Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants, and all Laws with regard
to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or Contaminants.
Environmental Liabilities and Costs - means all liabilities,
obligations, responsibilities, obligations to conduct Cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, costs
and expenses (including, without limitation, all reasonable fees,
disbursements and expenses of counsel, expert and consulting fees and
costs of investigations and feasibility studies and responding to
government requests for information or documents), fines, penalties,
restitution and monetary sanctions, interest, direct or indirect, known
or unknown, absolute or contingent, past, present or future, resulting
from any claim or demand, by any Person, whether based in contract,
tort, implied or express warranty, strict liability, joint and several
liability, criminal or civil statute, including any Environmental Law,
or arising from environmental, health or safety conditions, the Release
or threatened Release of Hazardous Substances, Oils, Pollutants or
Contaminants into the environment in violation of applicable
Environmental Laws, as a result of past or present ownership, leasing
or operation of any properties, owned, leased or operated by Seller or
the Acquired Subsidiary, including, without limitation, any of the
foregoing incurred in connection with the conduct of any Cleanup.
Hazardous Substances, Oils, Pollutants or Contaminants - means all
substances defined as such by, or regulated as such under, any
applicable Environmental Law.
Release - means, when used as a noun, any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air, soil, surface water,
groundwater or property contrary to applicable Environmental Laws and
when used as a verb, the occurrence of any Release.
(m) Anything to the contrary herein notwithstanding, any
representations contained in this Section 3.15 relating to Former Property that
constituted Former Property as of January 1, 1994 are made to Seller's best
knowledge (it being understood that for purposes of this sentence the definition
of Former Property set forth in Section 3.15(d) shall refer to January 1, 1994
instead of the Closing Date).
3.16 Contracts and Commitments. (a) Schedule 3.16(a) sets
forth each written contract or agreement outstanding as of the
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date hereof to which Seller or the Acquired Subsidiary is a party relating to
the Acquired Business (other than any contract or agreement required to be
disclosed on any other schedule to the Seller Disclosure Letter) and which:
(i) involves future payment or receipt of in excess of
Cdn$250,000 or future performance or receipt of services or delivery or
receipt of goods and materials, in each case with an aggregate value in
excess of Cdn$250,000, including but not limited to sale and purchase
agreements, distributorship and sales representative agreements and
loan agreements, notes and other financing documents or commitments to
enter into any of the foregoing agreements;
(ii) is a guarantee or indemnity in respect of
indebtedness of any Person (including Seller or any Affiliate of Seller
or the Acquired Subsidiary) which may involve future payment in excess
of Cdn$5,000 or is a mortgage, security agreement or other arrangement
intended to secure indebtedness of any Person (including Seller or any
Affiliate of Seller or the Acquired Subsidiary) in excess of Cdn$5,000
and creating an Encumbrance on any asset relating to the Acquired
Business;
(iii) imposes a right of first refusal, option or other
restriction with respect to any assets relating to the Acquired
Business;
(iv) is a loan or advance to, or investment in, any
Person or an agreement, contract or commitment relating to the making
of any such loan, advance or investment in excess of Cdn$5,000 that
will be outstanding after the Closing; or
(v) is an agreement, contract or commitment limiting
the freedom of the Acquired Business to engage in any line of business
or to compete with any Person (except for exclusive distributorship
agreements of Seller entered into in the ordinary course of business).
(b) Except as disclosed on Schedule 3.16(b), Seller has
heretofore delivered to Buyer and Buyer Parent complete and correct copies of
each of the agreements set forth in Schedule 3.16(a) and the written agreements
or contracts of the Acquired Business disclosed in any other schedule to the
Seller Disclosure Letter (the "Contracts"). There is not under any material
Contract: (A) any existing material default by Seller or the Acquired Subsidiary
or, to Seller's best knowledge, by any other party thereto, or (B) any event
that, after notice or lapse of time or both, would constitute a material default
by Seller or the Acquired Subsidiary or, to Seller's best knowledge, by any
other party, or result in a right to accelerate or terminate or result in a loss
of rights of Seller or the Acquired Subsidiary.
3.17 Insurance. Schedule 3.17 sets forth the policies of
insurance presently in force covering the Acquired Business and,
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without restricting the generality of the foregoing, those covering public and
product liability, personnel, properties, buildings, machinery, equipment,
furniture, fixtures and operations, specifying with respect to each such policy
and the name of the insurer. Seller has heretofore delivered to Buyer and Buyer
Parent complete and correct copies of the policies and agreements set forth in
Schedule 3.17. No notice of cancellation or termination has been received with
respect to any insurance policy set forth in Schedule 3.17.
3.18 Affiliate Interests. (a) Schedule 3.18(a) sets forth all
amounts in excess of Cdn$5,000 in the aggregate paid (or deemed for accounting
purposes to have been paid) and services provided by the Acquired Business to,
or received by the Acquired Business from, any Affiliate of Seller (except for
Buyer Parent, any subsidiary of Buyer Parent and the Acquired Subsidiary) during
the last fiscal year for products or services (including any charge for
administrative, purchasing, financial or other services) and all such amounts
currently owed by the Acquired Business, or to the Acquired Business by, any
Affiliate of Seller (except for Buyer Parent, any subsidiary of Buyer Parent and
the Acquired Subsidiary).
(b) Each contract, agreement or arrangement between the
Acquired Business, on the one hand, and Seller or any Affiliate of Seller (other
than Buyer Parent, any subsidiary of Buyer Parent and the Acquired Subsidiary)
or any shareholder, officer or director of Seller, the Acquired Subsidiary or
any Affiliate of Seller (other than Buyer Parent, any subsidiary of Buyer Parent
and the Acquired Subsidiary), on the other hand is described in Schedule
3.18(b).
(c) Except as set forth in Schedule 3.18(c), no officer or
director of Seller or the Acquired Subsidiary has any material interest in any
property, real or personal, tangible or intangible, including without
limitation, inventions, patents, trademarks or trade names, used in or
pertaining to the business of the Acquired Business.
(d) American Converting Paper Corporation has no assets,
liabilities, profits or losses reflected in the financial statements of Seller
referred to in Section 3.9.
3.19 Customers and Suppliers. (a) Except as set forth in Schedule
3.19(a), since January 1, 1996, no Material Supplier of the Acquired Business
has canceled or otherwise terminated, or made any written threat to Seller or
the Acquired Subsidiary or to any of their respective Affiliates to cancel or
otherwise terminate, for any reason, including the consummation of the
transactions contemplated hereby, its relationship with the Acquired Business,
or decreased materially its services or supplies to the Acquired Business.
Except as set forth in Schedule 3.19(a), Seller has no knowledge that any such
Material Supplier intends to cancel or otherwise terminate its relationship with
the Acquired Business or to decrease materially its services or supplies to the
Acquired
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Business. For purposes of this Section 3.19(a), "Material Supplier" means any of
Seller's ten largest suppliers for the 1995 fiscal year based on sales to Seller
as set forth in Schedule 3.19(a).
(b) None of the Seller or the Acquired Subsidiary has any
customers who account for greater than five percent (5%) of all services or
products sold by the Acquired Business.
3.20 Products. Schedule 3.20 sets forth all claims asserted
or, to Seller's best knowledge, threatened at any time during the past five
years against the Acquired Business in respect of personal injury, wrongful
death or property damage alleged to have resulted from products or services
provided by the Acquired Business exceeding Cdn$25,000, together with a
description of each such claim or action initiated with respect thereto and the
disposition thereof.
3.21 Accounts Receivable. The amounts reflected for accounts
receivable and reserves for such accounts receivable of the Acquired Business
that are set forth on the Reference Balance Sheet or on the Preliminary
Statement of Net Assets are properly reflected in accordance with GAAP. Seller
makes no warranty, express or implied, as to the collectibility of such accounts
receivable.
3.22 Inventory. The amount reflected for inventory of the
Acquired Business that is set forth on the Reference Balance Sheet or on the
Preliminary Statement of Net Assets is properly reflected in accordance with
GAAP.
3.23 Disclosure. Seller has furnished or caused to be
furnished to Buyer and Buyer Parent complete and correct copies of all
agreements, instruments and documents set forth on a schedule to the Seller
Disclosure Letter. Each of the schedules to the Seller Disclosure Letter is
complete and correct.
3.24 Seller's Best Knowledge. The term "Seller's best
knowledge" shall mean the actual knowledge of the persons listed on Exhibit I
attached hereto.
3.25 Private Placement. Seller understands (i) that the
Preferred Stock has not been, and the Underlying Shares (as defined in Section
4.5) will not be, registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), or any other securities laws of the United
States or Canada (the "Securities Laws") because Buyer is issuing the Preferred
Stock, and Buyer Parent will be issuing the Underlying Shares, in reliance upon
the exemptions from the registration requirements of the Securities Laws
providing for issuance of securities not involving a public offering, (ii) that
Buyer has relied upon the fact that the Preferred Stock and the Underlying
Shares are to be held by Seller for investment, and (iii) that exemption from
registration under the Securities Laws would not be available if the Preferred
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Stock and the Underlying Shares were acquired by Seller with a view to
distribution. Accordingly, Seller hereby confirms to Buyer and Buyer Parent that
Seller is acquiring the Preferred Stock, and will acquire the Underlying Shares,
for the account of Seller, for investment and not with a view to the resale or
distribution thereof under the Securities Laws. Seller agrees not to transfer,
sell or offer for sale all or any portion of the Preferred Stock and the
Underlying Shares, unless there is an effective registration or other
qualification or exemption relating thereto under the Securities Laws. Except as
otherwise contemplated by this Agreement and the Registration Rights Agreement,
Seller understands that neither Buyer nor Buyer Parent is under any obligation
to register the Preferred Stock and the Underlying Shares or to assist Seller in
complying with any exemption from registration under the Securities Laws. Prior
to acquiring the Preferred Stock and, upon exchange, the Underlying Shares,
Seller has made an investigation of Buyer and Buyer Parent and their respective
businesses and has had made available to Seller all information with respect
thereto that Seller needs to make an informed decision to acquire the Preferred
Stock and the Underlying Shares. Seller considers itself to be a person
possessing experience and sophistication as an investor that is adequate for the
evaluation of the merits and risk of Seller's investment in the Preferred Stock
and, upon exchange, the Underlying Shares. Seller acknowledges that each
certificate for the Preferred Stock and the Underlying Shares will be imprinted
with a legend in substantially the following form: "The securities represented
by this certificate were originally issued on January __, 1997, and have not
been registered under the Securities Act of 1933, as amended, or any other
securities laws of the United States or Canada. The transfer of the securities
represented by this certificate is subject to the conditions specified in the
Asset Purchase Agreement dated as of November 12, 1996 among the parties
thereto, and 3290441 Canada Inc. reserves the right to refuse the transfer of
such securities until such conditions have been fulfilled with respect to such
transfer. A copy of such conditions will be furnished by 3290441 Canada Inc. to
the holder hereof upon written request and without charge."
3.26 Sufficiency of Assets to Conduct Acquired Business.
Except as disclosed in Schedule 3.26, Seller and the Acquired Subsidiary own,
have valid leases or valid contractual rights to use all of the material assets,
tangible and intangible, used by, or necessary for the conduct of, the Acquired
Business.
3.27 Corporate Names. Schedule 3.27 sets forth all of the
previous corporate names of Seller whether in French or English.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER PARENT
--------------------------------------------------------
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Each of Buyer and Buyer Parent represents and warrants to
Seller, jointly and severally, that:
4.1 Organization. Each of Buyer and Buyer Parent
(collectively, the "Buyer Parties") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 Corporate Authority. Each of the Buyer Parties has full
corporate power and authority to enter into this Agreement and the Agreements to
which it is or will be a party at Closing and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Buyer Parties of the Agreements to which they respectively are parties have been
duly authorized by all requisite corporate action. This Agreement has been, and
each of the other Agreements to which a Buyer Party is to be a party as of the
Closing Date will be, duly executed and delivered by such Buyer Party, and
(assuming due execution and delivery by Seller) this Agreement constitutes, and
each of the other Agreements to which a Buyer Party will be a party when
executed and delivered will constitute, a valid and binding obligation of such
Buyer Party, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar Laws affecting creditors' rights generally or by general equitable
principles.
4.3 No Violation. Except as disclosed in Schedule 4.3 to the
disclosure letter provided by Buyer and Buyer Parent to Seller dated the date
hereof (the "Buyer Disclosure Letter") and except for rules promulgated by the
National Association of Securities Dealers, Inc. for Nasdaq National Market
issuers, neither Buyer Parent nor Buyer is subject to or bound by any provision
of:
(a) any Law or judicial or administrative decision,
(b) any articles or certificate of incorporation (or similar
corporate organizational documents) or by-laws,
(c) any mortgage, deed of trust, lease, note, shareholders'
agreement, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship, other restriction, or
(d) any judgment, order, writ, injunction or decree of any
Governmental Authority,
that would prevent or be violated by, or under which there would be a default as
a result of, the execution, delivery and performance by Buyer and Buyer Parent
of this Agreement and the consummation of the transactions contemplated hereby.
Except as disclosed in Schedule 4.3 to the Buyer Disclosure Letter and except as
contemplated by this Agreement, and except for approval of the transactions
contemplated hereby by the shareholders of Buyer
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Parent, no consent, approval or authorization of or declaration or filing with
any Person is required for the valid execution, delivery and performance by
Buyer or Buyer Parent of this Agreement and the consummation of the transactions
contemplated hereby.
4.4 Authorized and Outstanding Shares of Capital Stock. (a)
As of the date hereof, the authorized capital stock of Buyer Parent consists of
3,000,000 shares of Common Stock, par value $.01 per share (the "Buyer Parent
Common Stock"), of which 1,692,476 shares of Buyer Parent Common Stock are
issued and outstanding. At the Closing Date, the authorized capital stock of
Buyer Parent will consist of 6,000,000 shares of Buyer Parent Common Stock.
Except as disclosed on Schedule 4.4(a) to the Buyer Disclosure Letter and except
as contemplated by this Agreement, no subscription, warrant, option or other
right to purchase or acquire any shares of any class of capital stock of Buyer
Parent or securities convertible into such capital stock is authorized or
outstanding and there is no commitment of Buyer Parent to issue any such shares,
warrants, options or other such rights or securities.
(b) The authorized capital stock of Buyer consists of an
unlimited number of shares of Common Stock (the "Buyer Common Stock"), an
unlimited number of Class A Mandatorily Redeemable Preferred Stock, an unlimited
number of Class B Mandatorily Redeemable Preferred Stock and an unlimited number
of Class E Exchangeable Preferred Stock, of which one share of Buyer Common
Stock is issued and outstanding and held of record by Buyer Parent. Except as
disclosed on Schedule 4.4(b) to the Buyer Disclosure Letter and except as
contemplated by this Agreement, no subscription, warrant, option or other right
to purchase or acquire any shares of any class of capital stock of Buyer or
securities convertible into such capital stock is authorized or outstanding and
there is no commitment of Buyer to issue any such shares, warrants, options or
other such rights or securities.
4.5 Preferred Stock. (a) The Articles of Incorporation, as
amended, of Buyer authorize and establish the terms of the Preferred Stock. The
Preferred Stock has been duly authorized and, when the Preferred Stock has been
delivered in accordance with this Agreement on the Closing Date and on the date
referred to in Section 1.4(e) (with respect to the Class A Mandatorily
Redeemable Preferred Stock), the Preferred Stock will have been duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Encumbrances
of Persons claiming by or through Buyer or Buyer Parent and free and clear of
preemptive rights.
(b) When the Class E Exchangeable Preferred Stock is
delivered pursuant to this Agreement on the Closing Date, the Class E
Exchangeable Preferred Stock will be exchangeable for a like amount of shares of
Buyer Parent Common Stock, as such shares may be adjusted from time to time (the
"Underlying Shares") in accordance with their terms as set forth in Appendix A
attached hereto. The Underlying Shares issuable upon the exchange of the Class E
Exchangeable Preferred Stock as of the Closing Date will be
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duly authorized and reserved for issuance upon such exchange by Buyer Parent
and, when issued upon such exchange, will be validly issued, fully paid and
nonassessable, free and clear of all Encumbrances of Persons claiming by or
through Buyer or Buyer Parent and free and clear of preemptive rights.
4.6 Note. The execution, delivery and performance by Buyer of
the Note have been duly authorized by all requisite corporate action. The Note,
as of the Closing Date, will be duly executed and delivered by Buyer and will
constitute a valid and binding obligation of Buyer, enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
or by general equitable principles.
4.7 SEC Documents. Buyer Parent has furnished or will furnish
Seller with a true and complete copy of each report, schedule, registration
statement and definitive proxy statement (including all exhibits and schedules
thereto and documents incorporated by reference therein) filed by Buyer Parent
with the Securities and Exchange Commission (the "SEC") since January 1, 1994
(the "SEC Documents"), which are all the SEC Documents (other than preliminary
material) that Buyer Parent was required to file with the SEC since such date.
As of their respective filing dates, the SEC Documents complied as to form in
all material respects with the requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the SEC thereunder applicable to such SEC Documents and none
of the SEC Documents, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of Buyer Parent
included or incorporated by reference in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q promulgated by the SEC) and fairly present (subject, in the case of
the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of Buyer Parent as at the dates thereof and the
consolidated results of operations and cash flows for the periods then ended.
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ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF SELLER, BUYER AND BUYER PARENT
---------------------------------
5.1 Conduct of Business Prior to the Closing Date. Seller
agrees that, between the date hereof and the Closing Date:
(a) Except as contemplated by this Agreement or permitted by
written consent of Buyer or Buyer Parent, Seller shall cause the Acquired
Business to operate its businesses only in the ordinary course consistent with
prior practice and not to:
(i) take any action of the nature referred to in
Section 3.14, except as permitted therein; or
(ii) change Seller's or the Acquired Subsidiary's
certificate or articles of incorporation (or similar corporate
organizational documents) or by-laws.
(b) Seller shall preserve the business organization of the
Acquired Business intact and shall use its best efforts to keep available to
Buyer the services of the present officers and employees of the Acquired
Business listed on Schedule 3.12(a) as continuing employees and to preserve for
Buyer the goodwill of the Acquired Business suppliers, customers, distributors,
sales representatives and others having business relations with the Acquired
Business except for any loss of the foregoing which would not, singly or in the
aggregate, have a Material Adverse Effect on the Acquired Business.
(c) Seller shall maintain in force the insurance policies
referred to in Schedule 3.17 or insurance policies providing the same or
substantially similar coverage; provided, however, that Seller will notify Buyer
prior to the expiration of any of such insurance policies.
(d) Seller shall diligently pursue its rights with respect to
the matters listed in Schedule 3.6 and Schedule 3.13(c).
(e) Except as contemplated by this Agreement or permitted by
written consent of Buyer or Buyer Parent, no plan, fund, or arrangement
disclosed or required to be disclosed in Schedule 3.12(a) has been or will be:
(i) terminated by Seller;
(ii) amended (except as expressly required by law) in
any manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder; or
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(iii) amended in any manner which would materially
increase the cost to Buyer of maintaining such plan, fund, or
arrangement.
5.2 Employee Matters. (a) Buyer shall offer employment to the
employees of the Acquired Business listed on Schedule 3.12(a) as continuing
employees on the same terms and conditions with respect to employment conditions
and remuneration as enjoyed by such employees immediately prior to or effective
as of the Closing Date. Employees of the Acquired Business who accept such offer
of employment shall be referred to herein as "Transferred Employees". From and
after the Closing Date, the employment or cost of termination or future
compensation to the Transferred Employees shall be the sole responsibility of
Buyer. In the event that an employee of the Acquired Business does not accept
the Buyer's offer of employment, the costs of termination or future compensation
of such employee shall be the sole responsibility of Buyer.
(b) Employee Benefit Plans. Effective as of the Closing Date,
Buyer shall assume all of the Benefit Plans set forth on Schedule 3.12(a) and
all assets, liabilities and obligations to provide benefits thereunder.
Effective as of the Closing Date, Seller shall not have any liabilities or
obligations with respect to the Benefit Plans set forth on Schedule 3.12(a).
5.3 Expenses and Finder's Fees. Buyer, Buyer Parent and Seller
will bear their own expenses in connection with this Agreement and its
performance, except that, if this Agreement is terminated, otherwise than by
reason of a material breach of the terms hereof by Buyer or Buyer Parent, Seller
shall reimburse Buyer and Buyer Parent for all out-of-pocket expenses incurred
by them in the preparation, negotiation, execution and delivery and performance
of the Agreements, including but not limited to the fees and expenses of (i)
Buyer Parent's independent certified public accountants, (ii) Houlihan, Lokey,
▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇") and (iii) special United States and
Canadian counsel to the Special Committee of the Board of Directors of Buyer
Parent (the "Special Committee"). Seller, on the one hand, and Buyer and Buyer
Parent, on the other hand, each represent and warrant to the other that the
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on in such a manner as not to give rise to any valid claims
against the other party or the Acquired Business for a brokerage commission,
finder's fee or other like payment.
5.4 Access to Information and Confidentiality. Seller agrees
that Buyer and Buyer Parent may conduct such reasonable investigation with
respect to the business, business prospects, assets, liabilities (contingent or
otherwise), results of operations, employees and financial condition of Seller
and the Acquired Subsidiary as will permit Buyer and Buyer Parent to evaluate
their interest in the transactions contemplated by this Agreement. Each of
Seller, Buyer and Buyer Parent will hold and
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will cause their respective representatives to hold in strict confidence, unless
compelled to disclose by judicial or administrative process, or, in the opinion
of its counsel, by other requirements of Law, all documents and information
concerning Seller or the Acquired Business furnished to Buyer and Buyer Parent
and all documents and information concerning Buyer and Buyer Parent furnished to
Seller in connection with the transactions contemplated by this Agreement
(except to the extent that such information can be shown to have been (a)
previously known by Buyer or Buyer Parent prior to its disclosure to Buyer or
Buyer Parent by Seller, (b) previously known by Seller prior to its disclosure
to Seller by Buyer or Buyer Parent, (c) in the public domain through no fault of
either Seller or Buyer or Buyer Parent or (d) later lawfully acquired by either
Seller or Buyer or Buyer Parent from other sources that are not under an
obligation of confidentiality) and will not release or disclose such information
to any other Person, except in connection with this Agreement to its lenders,
auditors, attorneys, financial advisors and other consultants and advisors.
5.5 Press Releases. Except as required by law or stock
exchange regulation, any public announcements regarding the transactions
contemplated hereby shall be made only with the mutual consent of Seller, Buyer
and Buyer Parent.
5.6 Transitional Assistance. Seller shall cooperate with and
assist Buyer in the orderly transfer of the business of the Acquired Business
after the Closing Date. Such cooperation and assistance shall include but not be
limited to (a) the physical transfer of any books, records and computer software
of the Acquired Business; (b) reasonable access to and assistance from any
employees of Seller; and (c) reasonable access to and use of the facilities and
equipment of Seller during such transitional period.
5.7 Transfer Taxes. All transfer Taxes, realty documentary
stamp Taxes, sales and use Taxes and goods and services Taxes, if any, payable
by reason of this transaction or the sale, transfer or delivery of the Acquired
Business shall be borne by Buyer. Seller and Buyer shall cooperate in minimizing
any such sales, transfer or similar Taxes, including the execution and delivery
of any necessary certificates, questionnaires, affidavits or other similar
documents in connection with such Taxes.
5.8 Shareholder Meeting; Voting of Buyer Parent Common Stock.
(a) Buyer Parent shall take all action (coordinating the timing thereof with
Seller) to the extent necessary, in accordance with applicable Law, Buyer
Parent's certificate of incorporation and by-laws, to convene a meeting of its
shareholders as promptly as practicable after the execution of this Agreement to
consider and vote on the transactions contemplated by this Agreement.
(b) At any such shareholder meeting referred to in clause (a)
of this Section 5.8, Seller shall cause all of the shares of Buyer Parent Common
Stock owned by Seller, beneficially or
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otherwise, to be voted in favor of the transactions contemplated by this
Agreement. After the date hereof, Seller shall cause all of the shares of Buyer
Parent Common Stock owned by Seller, beneficially or otherwise, to be voted in
favor of maintaining the Special Committee, or a similarly constituted group,
for the purpose of monitoring the compliance by Seller of its obligations under
the Agreements.
5.9 Proxy Statement. Buyer Parent shall promptly prepare and
file with the SEC, subject to the prior approval of Seller (which approval shall
not be unreasonably withheld), a proxy or information statement relating to the
transactions contemplated by this Agreement (the "Proxy Statement") as required
by the Exchange Act and the rules and regulations thereunder. Seller shall
furnish all information concerning the Acquired Business and the shareholders of
Seller as may be reasonably requested by Buyer Parent in connection with the
Proxy Statement. Buyer Parent shall use its best efforts to respond to any
comments of the SEC and to cause the Proxy Statement to be mailed to Buyer
Parent's shareholders at the earliest practicable time. Buyer Parent will notify
Seller promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Seller with copies of
all correspondence between Buyer Parent or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the transactions contemplated by this Agreement. If at any time
prior to the Closing Date, any event shall occur that should be set forth in an
amendment or supplement to the Proxy Statement, Buyer Parent will promptly
prepare and mail such amendment or supplement. Buyer Parent will not mail the
Proxy Statement, or any amendment thereof or supplement thereto, to its
shareholders unless it has first obtained consent of Seller to such mailing,
which consent shall not be unreasonably withheld or delayed.
5.10 Reservation of Underlying Shares; Exchange of Class E
Exchangeable Preferred Stock. Buyer Parent shall continue to reserve the
Underlying Shares for issuance until exchange of the Class E Exchangeable
Preferred Stock pursuant to its terms. Upon exchange of the Class E Exchangeable
Preferred Stock pursuant to the terms thereof, Buyer Parent shall cause such
exchange to be effected and issue the Underlying Shares in connection with such
exchange to the holder or holders of the Class E Exchangeable Preferred Stock.
5.11 GST Election. The Buyer and the Seller shall elect
jointly pursuant to the provisions of subsection 167(1) of the Canadian Excise
Tax Act and section 75 of the Quebec Sales Tax Act (collectively, the "Excise
Act"), by completing and filing all prescribed forms and related documents in
such manner and at such time as is prescribed, that for the purposes of the
Excise Act, no tax is payable under the Excise Act in respect of the assets
relating to the Acquired Business and the Buyer shall be deemed to
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have acquired such assets for use exclusively in commercial activities of the
Buyer. Each of the Seller and the Buyer hereby represents that it is a
registrant as described under the Excise Act. In the event Revenue Canada (or
its Quebec counterpart) does not accept the foregoing and the Seller is
challenged by Revenue Canada (or its Quebec counterpart), the Buyer will provide
all assistance, cooperation and documentation as reasonably requested by the
Seller.
5.12 Bulk Sales Legislation. The parties agree to waive
compliance with the provisions of any bulk sales legislation or similar
legislation which may be applicable to the transactions contemplated by this
Agreement.
5.13 Conduct of Business by Seller After the Closing Date.
Seller agrees that for a period of three years after the Closing Date, except as
contemplated by this Agreement or permitted by written consent of Buyer or Buyer
Parent, Seller shall not engage in any business other than the making of
Permitted Investments. For purposes of this Section 5.13, (a) "Permitted
Investments" mean (i) Investments in Government Obligations maturing within 365
days of the date of acquisition thereof, (ii) Investments in certificates of
deposit or Eurodollar deposits maturing within 365 days of the date of
acquisition thereof issued by a bank or trust company that is organized under
the laws of the United States, or any state thereof, or the laws of Canada, or
any province thereof, and that has a combined capital and surplus of at least
Cdn$1 billion and rated at least A3 by ▇▇▇▇▇'▇ Investors Service, Inc. or
otherwise of investment grade, (iii) Investments in repurchase agreements
involving investments in Government Obligations entered into with any bank,
trust company or investment bank rated at least A- by Standard & Poor's and at
least A3 and P-1 by ▇▇▇▇▇'▇ Investors Service, Inc. or otherwise of investment
grade, (iv) Investments in commercial paper maturing not more than 150 days from
the date of acquisition thereof and rated at least A- 1 by Standard & Poor's and
at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc. or otherwise of investment grade
issued by a corporation (except Seller) that is organized under the laws of any
state of the United States or the District of Columbia or under the laws of
Canada or of any province of Canada and (v) Investments in money market accounts
or funds whose assets solely consists of cash or the items listed in clauses
(a)(i), (ii), (iii) and (iv) hereof and this clause (a)(v), (b) "Investments"
mean, with respect to any Person, any loan or advance to, any acquisition of
equity interests, obligations or other securities of, or capital contribution or
other investment in, such Person and (c) "Government Obligations" mean direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States or any state thereof or Canada or any province
thereof (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States or any state thereof or
Canada or any province thereof, as the case may be, is pledged.
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5.14 No Assignment of Note. Seller agrees not to sell, assign,
hypothecate, transfer, pledge or otherwise convey the Note until the Note is
exchanged for the Class A Mandatorily Redeemable Preferred Stock pursuant to
Section 1.2.
5.15 Seller Reimbursement. Within the three-year period
following the Closing Date, to the extent any Undisclosed Liabilities are
discharged by Buyer or Buyer Parent, and within six months of such discharge, if
an Event of Insolvency of the Buyer occurs, Seller shall reimburse Buyer or
Buyer Parent, as the case may be, for the amount so discharged (it being
understood that Buyer Parent shall reimburse Seller to the extent Seller makes
any payment to Buyer Parent under this Section 5.15 and applicable bankruptcy
law requires Seller to make such payment to Buyer and such payment is made by
Seller). For purposes of this Section 5.15, (a) "Undisclosed Liabilities" shall
mean all liabilities of Seller specifically assumed by Buyer pursuant to the
Undertaking other than Disclosed Liabilities (as defined in Section 8.2(b)(ii))
and (b) "Event of Insolvency of the Buyer" shall mean (i) the Buyer admits in
writing its inability to pay its debts generally as they become due, (ii) the
Buyer makes a general assignment for the benefit of creditors, (iii) the Buyer
becomes subject to bankruptcy proceedings that it is not contesting in good
faith, diligently and by appropriate means or which proceedings continue
undischarged, unstayed or undismissed for a period of thirty (30) days, (iv) the
Buyer submits to or makes any application to any Governmental Authority for the
purpose of suspension of payment of its liabilities generally, (v) the Buyer
petitions to or applies to any Governmental Authority for the appointment of an
administrator, receiver, trustee or intervenor for itself or for any substantial
part of its property, (vi) the Buyer commences or has commenced against it or in
respect of its debts, any proceeding under any Law, relating to reorganization,
compromise, settlement, arrangement, adjustment, dissolution or liquidation,
which proceedings it is not contesting in good faith, diligently and by
appropriate means or which proceedings continue undischarged, unstayed or
undismissed for a period of thirty (30) days or (vii) the Buyer by any act
indicates its consent to, approval of or acquiescence in any bankruptcy,
reorganization or insolvency proceeding under any Law or any proceeding for the
appointment of an administrator, trustee, receiver or intervenor for itself or
for any substantial part of its property or suffers any such receivership or
trustee to remain undischarged for a period of thirty (30) days.
5.16 Corporate Changes. On or about the Closing Date, (a) the
Certificate of Incorporation, as amended, of Buyer Parent will be amended to (i)
increase the authorized capital stock of Buyer Parent Common Stock from
3,000,000 shares to 6,000,000 shares and (ii) change the corporate name of Buyer
Parent from "Hosposable Products, Inc." to "▇▇▇▇▇ Corporation," (b) the Articles
of Incorporation, as amended, of Seller will be amended to change the corporate
name of Seller from "▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc." to another corporate name that may
include "▇▇▇▇▇" but otherwise will be
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distinct from "▇▇▇▇▇ Corporation" and "▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc." and (c) the
Articles of Incorporation, as amended, of Buyer will be amended to change the
corporate name of Buyer from "3290441 Canada Inc." to "▇▇▇▇-▇▇▇▇▇ Inc."
5.17 Guarantee of Real Property Lease Obligations. Buyer
Parent agrees to guarantee Buyer's obligations under the Real Property Leases
being assigned to Buyer pursuant to the Lease Assignments if the landlord
requires such guarantee as a condition of consenting to the Lease Assignment or
releasing Seller from its obligations under any such Real Property Leases.
5.18 Issuance of Preferred Stock. Buyer agrees not to issue
additional shares of its Class A preferred stock or its Class B preferred stock
until the Class A Mandatorily Redeemable Preferred Stock and the Class B
Mandatorily Redeemable Preferred Stock are no longer outstanding.
5.19 Seller Covenant Relating to X Shares. Seller agrees that
until six years after the Closing Date (a) dividends or other distributions
declared or paid with respect to the X Shares (as defined in Section 8.3(g))
will be limited in amount to (i) the proceeds of dividends or other
distributions received by Seller with respect to the Excluded Shares (as defined
in Section 8.3(g)), (ii) the dividends disclosed on Schedule 3.14 in connection
with the corporate reorganization of the Seller and (iii) (x) the shares of
Class A Mandatorily Redeemable Preferred Stock to be distributed by Seller to
each of 1186020 Ontario Limited and 3287858 Canada Inc. after the exchange of
the Note as set forth in Section 1.2 all as specified in Schedule 3.14 (the
"Class A Excluded Shares") and (y) Cdn$4.4 million representing the portion of
the cash consideration to be paid by Buyer to Seller for the Acquired Business
pursuant to Section 1.2 to be distributed by Seller to 1186020 Ontario Limited
and 3287858 Canada Inc. after the Closing all as specified in Schedule 3.14 and
(b) any redemption, retraction or purchase price payable by Seller with respect
to the X Shares will be payable solely by delivery of the Excluded Shares or the
Underlying Shares relating to the Excluded Shares.
5.20 Seller Covenant Relating to Capital Stock. Seller agrees
until six years after the Closing Date not to issue or sell any shares of
Seller's capital stock to any Person other than ▇▇▇▇▇ ▇. ▇▇▇▇▇, by operation of
law or otherwise, unless Seller has first obtained and provided to Buyer and
Buyer Parent a guaranty of the transferee thereof substantially to the same
effect as the Guaranty Agreement (as defined in Section 6.8) satisfactory in
form and substance to Buyer and Buyer Parent; provided, however, that this
Section 5.20 shall not apply to sales or issuances by Seller of the X Shares.
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ARTICLE 6
CONDITIONS PRECEDENT OF BUYER AND BUYER PARENT
----------------------------------------------
Buyer and Buyer Parent need not consummate the transactions
contemplated by this Agreement unless the following conditions shall be
fulfilled:
6.1 Representations and Warranties. Except as otherwise
contemplated or permitted by this Agreement, (a) the representations and
warranties of Seller contained in this Agreement or in any certificate or
document delivered to Buyer and Buyer Parent pursuant hereto shall be deemed to
have been made again at and as of the Closing Date and shall then be true in all
material respects (except for any such representation or warranty that by its
terms is qualified as to materiality, which representation and warranty shall
then be true in all respects) and (b) Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by Seller prior to or on the Closing Date, and Buyer and Buyer
Parent shall have been furnished with a certificate of an appropriate officer of
Seller, dated the Closing Date, certifying to the effect of clauses (a) and (b)
of this Section 6.1.
6.2 Opinion of Seller's Counsel. Buyer and Buyer Parent shall
have been furnished with opinions dated the Closing Date of each of Winthrop,
Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, each counsel for Seller,
substantially in the forms attached hereto as Exhibits J-1 and J-2.
6.3 No Injunction. No injunction, restraining order or decree
of any Governmental Authority shall exist against Buyer, Buyer Parent, Seller or
the Acquired Subsidiary, or any of the principals, officers or directors of any
of them, that restrains, prevents or materially changes the transactions
contemplated hereby.
6.4 Consents. All consents and approvals of third parties,
including, without limitation, Governmental Authorities and non-governmental
self-regulatory agencies and the requisite approval of the transactions
contemplated by this Agreement by the shareholders of Buyer Parent, and all
filings with and notifications of Governmental Authorities, regulatory agencies
(including non-governmental self-regulatory agencies) or other entities which
regulate the business of Buyer, Buyer Parent, Seller or the Acquired Subsidiary
necessary on the part of Buyer, Buyer Parent, Seller or the Acquired Subsidiary,
to the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and to permit the continued operation of the
respective businesses of Buyer or the Acquired Business in substantially the
same manner after the Closing Date as theretofore conducted, other than routine
post-closing notifications or filings, shall have been obtained or effected.
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6.5 Fairness Opinion. The Board of Directors of Buyer Parent
shall have been furnished with an opinion dated the date hereof, and updated to
a date not more than five business days prior to the Closing Date, of ▇▇▇▇▇▇▇▇
▇▇▇▇▇ advising Buyer Parent's Board of Directors that the consideration to be
paid by Buyer for the purchase of the Acquired Business pursuant to this
Agreement is fair to the shareholders of Buyer Parent, in their capacity as
such, from a financial point of view (the "Fairness Opinion").
6.6 Material Adverse Change. Since September 30, 1996, there
has been no material adverse change in the business, financial condition,
assets, liabilities (contingent or otherwise) or results of operations of the
Acquired Business.
6.7 Investment Letters. Buyer and Buyer Parent shall have
been furnished with investment letters from each of ▇▇▇▇▇ ▇. ▇▇▇▇▇, 1186020
Ontario Limited, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, 3287858 Canada Inc. and ▇▇▇▇▇ ▇▇▇▇▇ setting
forth substantially the representations contained in Section 3.25.
6.8 Guaranty Agreement. Buyer and Buyer Parent shall have been
furnished with a guaranty agreement among ▇▇▇▇▇ ▇. ▇▇▇▇▇, Buyer and Buyer Parent
substantially in the form of Exhibit K attached hereto (the "Guaranty
Agreement").
6.9 Financing. (a) Credit facilities will be available to
Buyer and Buyer Parent on substantially the same terms as existing credit
facilities of Seller and Buyer Parent, respectively, with such modifications as
may be necessary to permit Buyer and Buyer Parent to fulfill their obligations
under the terms of this Agreement and the other Agreements, and (b) Buyer Parent
shall have entered into a credit agreement with an institutional lender enabling
Buyer Parent to borrow at the Closing up to U.S.$2 million at market interest
rates and with a maturity date at least three years after the Closing Date.
ARTICLE 7
CONDITIONS PRECEDENT OF SELLER
------------------------------
Seller need not consummate the transactions contemplated
hereby unless the following conditions shall be fulfilled:
7.1 Representations and Warranties. Except as otherwise
contemplated or permitted by this Agreement, (a) the representations and
warranties of Buyer and Buyer Parent contained in this Agreement or in any
certificate or document delivered to Seller pursuant hereto shall be deemed to
have been made again at and as of the Closing Date and shall then be true in all
material respects (except for any such representation and warranty that by its
terms is qualified as to materiality, which representation and warranty shall
then be true in all respects) and (b) Buyer and
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Buyer Parent shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or on the Closing Date, and Seller shall have been furnished a
certificate of an appropriate officer of Buyer and of Buyer Parent, dated the
Closing Date, certifying to the effect of clauses (a) and (b) of this Section
7.1.
7.2 Opinion of Special Counsel for the Special Committee.
Seller shall have been furnished with opinions dated the Closing Date of each of
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P. and Stikeman, Elliott, each special counsel
for the Special Committee, substantially in the forms attached hereto as
Exhibits L-1 and L-2.
7.3 No Injunction. No injunction, restraining order or decree
of any court or Governmental Authority shall exist against Buyer, Buyer Parent,
Seller or any Acquired Subsidiary, or any of the principals, officers or
directors of any of them, that restrains, prevents or materially changes the
transactions contemplated hereby.
7.4 Consents. All consents and approvals of third parties
including, without limitation, Governmental Authorities, and non-governmental
self-regulatory agencies and the requisite approval of the transactions
contemplated by this Agreement by the shareholders of Buyer Parent, and all
filings with and notifications of Governmental Authorities, regulatory agencies
(including non-governmental self-regulatory agencies) or other entities which
regulate the Acquired Business, necessary on the part of Seller, to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, other than routine post-closing notifications
or filings, shall have been obtained or effected.
7.5 Fairness Opinion. The Board of Directors of Buyer Parent
shall have been furnished with the Fairness Opinion.
7.6 Material Adverse Change. Since the filing date of its most
recent SEC Document, there has been no material adverse change in the business,
financial condition, assets, liabilities (contingent or otherwise) or results of
operations of Buyer Parent.
7.7 Covenant Agreement. Seller shall have been furnished with
a covenant agreement among Buyer, Buyer Parent and Seller substantially in the
form of Exhibit M attached hereto (the "Covenant Agreement").
7.8 Registration Rights Agreement. Seller shall have been
furnished with a registration rights agreement among Buyer Parent, Seller and
▇▇▇▇▇ ▇. ▇▇▇▇▇ substantially in the form of Exhibit N attached hereto (the
"Registration Rights Agreement").
7.9 Financing. (a) Credit facilities will be available to
Buyer and Buyer Parent on substantially the same terms as
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existing credit facilities of Seller and Buyer Parent, respectively, with such
modifications as may be necessary to permit Buyer and Buyer Parent to fulfill
their obligations under the terms of this Agreement and the other Agreements,
and (b) Buyer Parent shall have entered into a credit agreement with an
institutional lender enabling Buyer Parent to borrow at the Closing up to U.S.$2
million at market interest rates and with a maturity date at least three years
after the Closing Date.
ARTICLE 8
INDEMNIFICATION
---------------
8.1 Indemnification by Seller. Seller hereby agrees to defend,
indemnify and hold harmless Buyer, Buyer Parent, their respective successors,
assigns, directors, officers and Affiliates (except for ▇.▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇) (collectively, the "Buyer Indemnitees") from and against any and all
losses, deficiencies, liabilities, damages, assessments, judgments, costs and
expenses, including attorneys' fees (both those incurred in connection with the
defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision), including Environmental
Liabilities and Costs, whether or not involving a third-party claim
(collectively, "Buyer Losses"), caused by, resulting from or arising out of:
(a) (i) breaches of representation or warranty on the part of
Seller contained in this Agreement or in any certificate or document delivered
to Buyer or Buyer Parent pursuant hereto; and (ii) failures by Seller to perform
or otherwise fulfill any undertaking or other agreement or obligation hereunder;
(b) any liability of Seller not specifically assumed by Buyer
pursuant to the Undertaking;
(c) any liability for the failure of the parties to comply
with the provisions of any bulk sales legislation or similar legislation which
may be applicable to the transactions contemplated by this Agreement, provided
that nothing herein shall derogate or be deemed to derogate from the obligations
of Buyer under the Undertaking and the obligations of Buyer and Buyer Parent
under Section 8.2;
(d) the invalidity of the Fairness Opinion as a result of (i)
the data, material and other information (excluding financial forecasts and
projections) provided by or on behalf of Seller only with respect to Seller, its
stockholders and the Acquired Subsidiary and identified by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in the
Fairness Opinion as being relied upon by it being incomplete or incorrect in any
material respect or (ii) the financial forecasts and projections provided by or
on behalf of Seller only with respect to Seller and the Acquired Subsidiary and
identified by
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in the Fairness Opinion as being relied upon by it not having
been prepared in good faith and on a reasonable basis;
(e) (i) the data, material and other information (excluding
financial forecasts and projections) provided by or on behalf of Seller only
with respect to Seller, its stockholders and the Acquired Subsidiary and
identified by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in the Fairness Opinion as being relied upon by it
being incomplete or incorrect in any material respect or (ii) the financial
forecasts and projections provided by or on behalf of Seller only with respect
to Seller and the Acquired Subsidiary and identified by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in the
Fairness Opinion as being relied upon by it not having been prepared in good
faith and on a reasonable basis but, in each case, only to the extent Buyer
Losses are incurred by the Buyer Indemnitees in connection with any claim of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ relating thereto;
(f) claims of any shareholder of Buyer Parent that the
information provided by or on behalf of Seller only with respect to Seller, its
stockholders and the Acquired Subsidiary for inclusion in the Proxy Statement,
at the date of mailing to shareholders of Buyer Parent and at the time of the
meeting of shareholders of Buyer Parent contemplated by Section 5.8(a),
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(g) any and all actions, suits, proceedings, claims or
demands, incident to any of the foregoing or such indemnification; provided,
however, that if any claim, liability, demand, assessment, action, suit or
proceeding shall be asserted against a Buyer Indemnitee in respect of which a
Buyer Indemnitee proposes to demand indemnification ("Buyer Indemnified
Claims"), Buyer or such other Buyer Indemnitee shall notify Seller thereof,
provided further, however, that the failure to so notify Seller shall not reduce
or affect Seller's obligations with respect thereto except to the extent that
Seller is materially prejudiced thereby. Subject to rights of or duties to any
insurer or other third Person having liability therefor, Seller shall have the
right promptly upon receipt of such notice to assume the control of the defense,
compromise or settlement of any such Buyer Indemnified Claims (provided that any
compromise or settlement must be reasonably approved by Buyer), including, at
its own expense, employment of counsel reasonably satisfactory to Buyer;
provided, however, that if Seller shall have exercised its right to assume such
control, Buyer may, in its sole discretion and at its expense, employ counsel to
represent it (in addition to counsel employed by Seller) in any such matter, and
in such event counsel selected by Seller shall be required to cooperate with
such counsel of Buyer in such defense, compromise or settlement.
8.2 Indemnification by Buyer and Buyer Parent. Each of Buyer
and Buyer Parent hereby agrees to jointly and severally
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defend, indemnify and hold harmless Seller and its successors, assigns,
directors, officers and Affiliates (collectively, "Seller Indemnitees") from and
against any and all losses, deficiencies, liabilities, damages, assessments,
judgments, costs and expenses, including attorneys' fees (both those incurred in
connection with the defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this provision), whether or not
involving a third-party claim (collectively, "Seller Losses"), resulting from or
arising out of:
(a) (i) breaches of representation and warranty on the part of
Buyer or Buyer Parent contained in this Agreement or in any certificate or
document delivered to Seller pursuant hereto; and (ii) failures by Buyer or
Buyer Parent to perform or otherwise fulfill any undertaking or agreement or
obligation hereunder;
(b) (i) with respect to Buyer, all liabilities of Seller
specifically assumed by Buyer pursuant to the Undertaking; and (ii) with respect
to Buyer Parent, any liability of Seller specifically assumed by Buyer pursuant
to the Undertaking (w) as and to the extent reflected or reserved against on the
Reference Balance Sheet or the Final Statement of Net Assets; (x) as
specifically described in any of the schedules delivered to Buyer and Buyer
Parent pursuant to the Seller Disclosure Letter (or by reason of thresholds
applicable thereto are not required to be disclosed); (y) as incurred since the
Reference Balance Sheet Date in the ordinary course of business or consistent
with Section 3.14; or (z) open purchase or sales orders or agreements for
delivery of goods and services in the ordinary course of business consistent
with prior practice (the liabilities in clauses (w), (x), (y) and (z) are
hereinafter referred to as "Disclosed Liabilities"); and
(c) any and all actions, suits, proceedings, claims and
demands incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Seller Indemnitee
proposes to demand indemnification ("Seller Indemnified Claims"), Seller or such
other Seller Indemnitee shall notify Buyer and Buyer Parent thereof, provided
further, however, that the failure to so notify Buyer and Buyer Parent shall not
reduce or affect Buyer's or Buyer Parent's obligations with respect thereto
except to the extent that Buyer or Buyer Parent is materially prejudiced
thereby. Subject to rights of or duties to any insurer or other third Person
having liability therefor, Buyer and Buyer Parent shall have the right promptly
upon receipt of such notice to assume the control of the defense, compromise or
settlement of any such Seller Indemnified Claims (provided that any compromise
or settlement must be reasonably approved by Seller) including, at their own
expense, employment of counsel reasonably satisfactory to Seller; provided,
however, that if Buyer and Buyer Parent shall have exercised their right to
assume such control, Seller may, in its sole discretion and at its expense,
employ counsel to represent it (in addition to counsel
-42-
employed by Buyer and Buyer Parent) in any such matter, and in such event
counsel selected by Buyer and Buyer Parent shall be required to cooperate with
such counsel of Seller in such defense, compromise or settlement.
8.3 Certain Limitations. The liability of Seller, Buyer or
Buyer Parent, as applicable, for claims under this Agreement shall be limited by
the following:
(a) If the Closing shall not have occurred, recovery of the
Buyer Indemnitees or the Seller Indemnitees, as the case may be, pursuant to
Section 8.1 or Section 8.2, as the case may be, shall be limited to actual
out-of-pocket expenses and shall in no event include any special, indirect,
incidental or consequential damages whatsoever.
(b) Two years after the Closing Date (or, in the case of a
claim for breach of Section 3.15, three years after the Closing Date, and, in
the case of a claim for breach of Section 3.11, six years after the Closing
Date), Seller shall have no further obligations under this Article 8, this
Agreement or otherwise, except for Buyer Losses with respect to which the Buyer
Indemnitees have given Seller written notice prior to such date.
(c) Two years after the Closing Date, Buyer and Buyer Parent
shall have no further obligations under this Article 8, this Agreement or
otherwise, except for Seller Losses with respect to which the Seller Indemnitees
have given Buyer or Buyer Parent written notice prior to such date.
(d) No Buyer Losses or Seller Losses, as the case may be,
shall be asserted by a Buyer Indemnitee or a Seller Indemnitee, as
applicable, with respect to any matter that is covered by insurance, to
the extent proceeds of such insurance are paid.
(e) (i) Anything to the contrary herein notwithstanding, the
representations and warranties contained in clauses (a) through (e) of
Section 3.15 and clauses (f) through (h) of Section 3.15 (but only to
the extent there was a violation of applicable Environmental Laws at
the time the event referred to in such clauses (f) through (h)
occurred) shall be deemed to be breached only to the extent that any
such breaches result in Buyer Losses in excess of Cdn$50,000 in the
aggregate and then only to the extent such Buyer Losses exceed
Cdn$50,000 in the aggregate.
(ii) Anything to the contrary herein notwithstanding, the
representations and warranties contained in clauses (f) through (h) of
Section 3.15 (but only to the extent not subject to clause (i) of this
Section 8.3(e)) shall be deemed to be breached only to the extent that
any such breaches result in Buyer Losses in excess of Cdn$30,000 in the
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aggregate and then only to the extent such Buyer Losses exceed
Cdn$30,000 in the aggregate.
(iii) No claim or claims shall be asserted by a Buyer
Indemnitee or a Seller Indemnitee, as applicable, pursuant to the
provisions of this Article 8, unless the amount of Buyer Losses or
Seller Losses, as the case may be, equals at least Cdn$350,000 in the
aggregate and then only to the extent such Buyer Losses or Seller
Losses, as the case may be, exceed Cdn$350,000 in the aggregate.
(iv) The aggregate amount of Buyer Losses recoverable
pursuant to the provisions of this Article 8 (other than with respect
to Section 8.1(d), (e) and (f)) by all Buyer Indemnitees shall be
limited in the aggregate to the Purchase Price Indemnification Amount.
For purposes of this Section 8.3(e)(ii), "Purchase Price
Indemnification Amount" shall mean the sum of (x) Cdn$13,062,741 (plus
or minus any adjustment to the Note as contemplated by Section 1.4(e))
and (y) the product of 1,000,000 multiplied by the average of the
closing prices reported on the Nasdaq National Market for Buyer Parent
Common Stock for the twenty trading days (whether or not any trades of
Buyer Parent Common Stock occur on any such day) prior to the date
hereof.
(f) Notwithstanding anything to the contrary contained in this
Agreement, Buyer or Buyer Parent shall not be entitled to
indemnification under Section 8.1 for any Buyer Losses to the extent
that Buyer or Buyer Parent receives at or after the Closing an
adjustment to the Purchase Price for such Buyer Losses by reason of
Section 1.4.
(g) Anything to the contrary herein notwithstanding, Buyer or
Buyer Parent shall not have any recourse against the Excluded Shares
for purposes of satisfying any claims under this Agreement. For
purposes of this Section 8.3(g), "Excluded Shares" means (i) the 83,333
shares of Class E Exchangeable Preferred Stock that will be held by
Seller and, upon issuance thereof, will be identified by the Buyer on
its stock records as being attributable to 1186020 Ontario Limited
after the Closing through the X1 shares of Seller held by 1186020
Ontario Limited (the "JDW Shares") and (ii) the 83,333 shares of Class
E Exchangeable Preferred Stock that will be held by Seller and, upon
issuance thereof, will be identified by the Buyer on its stock records
as being attributable to 3287858 Canada Inc. after the Closing through
the X shares of Seller held by 3287858 Canada Inc. (the "LE Shares"
and, together with the JDW Shares, the "X Shares") and, in each case,
any distributions, exchanges or other substitutions therefor relating
thereto.
(h) Anything to the contrary herein notwithstanding, Buyer or
Buyer Parent shall not have any recourse against the Class A Excluded
Shares (or the unpaid principal amount of the
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Note corresponding to the Class A Excluded Shares to the extent the
Note has not been exchanged for the Class A Excluded Shares pursuant to
Section 1.2) for purposes of satisfying any claims under this
Agreement.
8.4 Satisfaction of Seller Indemnity. Buyer, Buyer Parent and
Seller agree (a) that Seller shall satisfy its obligations under this Article 8
by surrender of the certificates representing, in this order and this order
only, the shares of Class A Mandatorily Redeemable Preferred Stock (or the Note
to the extent the Note has not been exchanged for the Class A Mandatorily
Redeemable Preferred Stock pursuant to Section 1.2), Class B Mandatorily
Redeemable Preferred Stock, Class E Exchangeable Preferred Stock, the Underlying
Shares, if any, and Buyer Parent Common Stock, in each case held by Seller,
which surrender shall be automatic and without any further action of Seller,
until such time as all such shares (or the Note, if applicable) have been
surrendered, and (b) that Buyer and Buyer Parent will have no recourse against
any other assets of Seller until the assets set forth in clause (a) hereof have
been exhausted in the order so set forth. For purposes of this Section 8.4, (w)
the value of the Note shall be the unpaid principal amount of the Note, (x) the
value of each share of Class A Mandatorily Redeemable Preferred Stock and each
share of Class B Mandatorily Redeemable Preferred Stock shall be its Redemption
Price (as defined in Appendix A hereto), (y) the value of each share of Class E
Exchangeable Preferred Stock at any time shall be the value of the Underlying
Shares at such time and (z) the value of the Underlying Shares and the Buyer
Parent Common Stock at the time any such shares or any shares of Class E
Exchangeable Preferred Stock are surrendered pursuant to this Section 8.4 shall
be the average of the closing prices reported on the Nasdaq National Market for
Buyer Parent Common Stock for the twenty trading days (whether or not any trades
of Buyer Parent Common Stock occur on any such day) prior to the date of such
surrender.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------
9.1 Representations, Warranties and Covenants. The covenants
contained in this Agreement shall survive the Closing Date without limitation.
The representations and warranties contained herein shall survive the Closing
Date for a period of two years, except that any representation or warranty of
Seller contained in Section 3.15 (Compliance with Law) shall survive for a
period of three years and any representation or warranty contained in Section
3.11 (Tax Matters) shall survive for a period of six years. The right of a Buyer
Indemnitee to make a claim for indemnification under Section 8.1(a)(i), and the
right of a Seller Indemnitee to make a claim for indemnification under Section
8.2(a)(i), for a breach of any representation or warranty shall be made on or
prior to the date, if any, on which the survival period
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for such representation or warranty expires, it being understood that claims
made on or prior to such expiration date shall survive such expiration date.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Cooperation. Each of the parties hereto shall use its
reasonable efforts to take or cause to be taken all actions, to cooperate with
the other party hereto, with respect to all actions, and to do, or cause to be
done all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement.
10.2 Waiver. Any failure of Seller to comply with any of its
obligations or agreements herein contained may be waived prior to Closing only
in writing by Buyer or Buyer Parent, after the consent of a majority of the
Special Committee. Any failure of Buyer or Buyer Parent to comply with any of
its obligations or agreements herein contained may be waived only in writing by
Seller.
10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given upon receipt of:
hand delivery; certified or registered mail, return receipt requested; or
telecopy transmission with confirmation of receipt:
(i) If to Seller, to:
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
(with a copy to)
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
and
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
"Le Windsor"
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇, Esq.
(ii) If to Buyer or Buyer Parent, to
Hosposable Products, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
(with a copy to)
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Such names and addresses may be changed by written notice to each person listed
above.
10.4 Mail Received After Closing. Following the Closing, Buyer
may receive and open all mail addressed to Seller or any Subsidiary or any agent
or former agent thereof and deal with the contents thereof in its discretion to
the extent that such mail and the contents thereof relate to the Acquired
Business.
10.5 Governing Law and Consent to Jurisdiction; Dispute
Resolution. (a) The rights and duties of the parties hereto under this Agreement
shall, pursuant to New York General Obligations Law Section 5-1401, be governed
by the law of the State of New York.
(b) Any dispute, claim or controversy arising out of or
relating to this Agreement, or the interpretation or breach thereof, shall be
referred to arbitration under the rules of the American Arbitration Association,
to the extent such rules are not inconsistent with this Section 10.5. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
-47-
and order its enforcement, as the case may be. The demand for arbitration shall
be made within a reasonable time after the claim, dispute or other matter in
question has arisen, and in any event shall not be made after the date when
institution of legal or equitable proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations.
(c) The arbitration panel shall consist of three arbitrators,
one of whom shall be appointed by each party hereto. The two arbitrators thus
appointed shall choose the third arbitrator; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator,
either arbitrator may petition the American Arbitration Association to make the
appointment.
(d) The place of arbitration shall be New York, New York.
10.6 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
10.7 Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.8 Entire Agreement. This Agreement, including the Exhibits
hereto and the documents referred to herein, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
10.9 Amendment and Modification. This Agreement may be amended
or modified only by written agreement of the parties hereto.
10.10 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto and their
respective successors and assigns (and, to the extent provided in Sections 8.1
and 8.2, the other Buyer Indemnitees and Seller Indemnitees) any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.11 Assignability. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties provided
that Buyer may assign its rights under the Agreement to any Affiliate of Buyer
provided that (a) the assignee Buyer and Buyer Parent enter into an agreement
with the Seller under which the assignee acknowledges that it has assumed
-48-
all of the obligations of Buyer and Buyer Parent hereunder and Buyer and Buyer
Parent acknowledge that they will remain jointly and severally liable for all
obligations of the assignee under this Agreement.
10.12 Acquired Subsidiary. Anything to the contrary herein
notwithstanding, Buyer and Buyer Parent agree to permit the Acquired Subsidiary
to be merged, amalgamated or otherwise combined with the Seller prior to the
Closing Date.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
HOSPOSABLE PRODUCTS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President and Chief
Operating Officer
3290441 CANADA INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By /s/ ▇.▇. ▇▇▇▇▇
________________________________
Name: ▇.▇. ▇▇▇▇▇
Title: Chairman of the Board
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice Chairman of the Board
APPENDIX A
SHARE CONDITIONS FOR 3290441 CANADA INC.
SCHEDULE I
I. An unlimited number of Class A shares, an unlimited number of Class B
shares, an unlimited number of Class E exchangeable shares
("Exchangeable Shares") and an unlimited number of common shares are
hereby created.
II. The Class A shares, the Class B shares, the Exchangeable shares and the
common shares shall carry and be subject to the following rights,
privileges, restrictions and conditions, that is to say:
III. CLASS A SHARES AND CLASS B SHARES
1. Dividends
(a) The holders of record of the Class A shares shall be entitled
to a fixed cumulative preferential dividend, subject to the
provisions of the Canada Business Corporations Act, ranking
pari passu with holders of record of the Class B shares, in
preference and priority to any payment of dividends on any
other class of shares of the Corporation, at an annual rate
per share of 4% of the Redemption Price (as herein defined),
payable monthly, on the last day of each month. Such dividends
shall accrue and be cumulative from the respective dates of
issue of the Class A shares. If on any dividend payment date
the Corporation shall not have paid the said dividends in full
on all Class A shares, then the outstanding dividends or the
unpaid part thereof shall be paid on a subsequent date or
dates in priority to dividends on any shares of any other
class of shares of the Corporation ranking junior as to the
payment of dividends to the Class A shares.
(b) The holders of record of the Class B shares shall be entitled
to a fixed cumulative preferential dividend, subject to the
provisions of the Canada Business Corporations Act, ranking
pari passu with the holders of record of the Class A shares,
in preference and priority to any payment of dividends on any
other class of shares of the Corporation, at an annual rate
per share of 3.999999% of the Redemption Price, payable
monthly, on the last day of each month. Such dividends shall
accrue and be cumulative from the respective dates of issue of
the Class B shares. If on any dividend payment date the
Corporation shall not have paid the said dividends in full on
all Class B shares, then the outstanding dividends or the
unpaid part thereof shall be paid on a subsequent date or
dates in priority to dividends on any shares of any other
class of shares of the Corporation ranking junior as to the
payment of dividends to the Class B shares.
2.
(c) No dividends shall at any time be declared, paid or set apart
for payment upon any shares of the Corporation, unless the
prescribed monthly dividend on all then outstanding Class A
shares and Class B shares shall have been declared, paid or
set apart for payment.
(d) No dividends shall be declared or paid or set aside for
payment in any year on any class of shares of the Corporation,
other than the Class A shares and the Class B shares, that
would result in the Corporation having insufficient assets to
redeem the Class A shares and the Class B shares scheduled for
redemption in such year at their Redemption Price.
(e) Cheques of the Corporation payable at par at any branch of the
Corporation's bankers in Canada shall be issued in respect of
such dividends (less any taxes required to be deducted) and
the mailing of such a cheque to any holder shall satisfy the
dividend represented thereby.
2. Redemption and Retractation
(a) The Class A shares and the Class B shares shall be redeemable
and retractable in the manner hereinafter provided, on payment
to the holders thereof of an amount equal to $1.00 per share,
plus all dividends accrued thereon and unpaid to the
applicable redemption date ("Redemption Price"). The Class A
shares and the Class B shares redeemed pursuant to this
paragraph shall be cancelled.
(b) Subject to the provisions of the Canada Business Corporations
Act, the Corporation shall be obliged to redeem all the
outstanding Class A shares and Class B shares as follows:
(i) redemptions shall be made in consecutive, annual
tranches, each tranche equal to the lesser of (y) ten
percent (10%) of the aggregate number of Class A
shares and Class B shares outstanding immediately
prior to the first such redemption and (z) the
aggregate number of Class A shares and Class B shares
then outstanding,
(ii) no Class B shares shall be included for redemption in
any such tranche until either (y) all of the Class A
shares have been previously redeemed, or (z) all of
the then outstanding Class A shares are included for
redemption in such tranche, and
(iii) the first tranche shall be redeemed on the third day
of January 1998 and the subsequent tranches shall be
redeemed on the third day of January of each
-2-
3.
successive year until all of the Class A shares
and Class B shares shall have been redeemed.
(c) Before redeeming any Class A or Class B shares the Corporation
shall mail to each person who, at the date of such mailing, is
a registered holder of shares to be redeemed notice of the
intention of the Corporation to redeem such shares held by
such registered holder. Such notice shall be mailed by
ordinary prepaid post addressed to the last address of such
holder as it appears on the books of the Corporation or, in
the event of the address of any such holder not appearing on
the books of the Corporation, then to the last known address
of such holder, at least 30 days before the date specified for
redemption. Such notice shall set out the Redemption Price,
the date on which redemption is to take place and the number
thereof so to be redeemed. In case a part only of the then
outstanding Class A or Class B shares, as the case may be, is
at any time to be redeemed, the shares so to be redeemed shall
be redeemed from the respective holders thereof pro rata,
disregarding fractions, and the directors may make such
adjustments as may be necessary to avoid the redemption of
fractional parts of shares. On and after the date so specified
for redemption the Corporation shall pay or cause to be paid
to the registered holders the Redemption Price of the shares
to be redeemed on presentation and surrender of the
certificates for the shares so called for redemption at the
registered office of the Corporation or at such other place or
places as may be specified in such notice, and the
certificates for such shares shall thereupon be cancelled and
the shares represented thereby shall thereupon be and be
deemed to be redeemed. From and after the date specified in
such notice for redemption, the holders of such shares called
for redemption shall cease to be entitled to dividends and
shall not be entitled to any rights in respect thereof, except
to receive the Redemption Price, unless payment of the
Redemption Price shall not be made by the Corporation in
accordance with the foregoing provisions, in which case the
rights of the holders of such shares shall remain unimpaired.
On or before the date specified for redemption the Corporation
shall have the right to deposit the Redemption Price of the
shares called for redemption in a special account with any
chartered bank or trust company named in the notice of
redemption to be paid, without interest, to or to the order of
the respective holders of such shares called for redemption
upon presentation and surrender of the certificates
representing the same and, upon such deposit being made, the
shares in respect whereof such deposit shall have been made
shall be deemed to be redeemed and the rights of the several
holders thereof, after such deposit, shall be limited to
receiving, out of the moneys so deposited, without interest,
the Redemption Price payable with respect to their respective
shares plus the full amount of all dividends declared and
unpaid thereon against presentation and surrender of the
certificates representing such shares.
-3-
4.
(d) In the event that the Corporation shall fail to redeem any
tranche of Class A shares or Class B shares in accordance with
the provisions hereof, the holders of the Class A shares and
Class B shares shall be entitled to call upon the Corporation,
by written request, to redeem such tranche and, subject to
Section 36 of The Canada Business Corporations Act, the
Corporation shall redeem such shares within thirty (30) days
of receipt of such request in accordance with the provisions
of this Section .
3. Purchase for cancellation
The Corporation shall have the right at its option at any time and from
time to time to purchase for cancellation the whole or any part of the
Class A shares and the Class B shares, pursuant to tenders received by
the Corporation upon request for tenders addressed to all holders of
Class A or Class B shares, as the case may be, or with the unanimous
consent of the holders of all Class A or Class B shares by private
contract at a price per share equal to the Redemption Price per share.
If in response to an invitation for tenders, two or more shareholders
submit tenders at the same price and if such tenders are accepted by
the Corporation in whole or in part, then, unless the Corporation
accepts all such tenders in whole, the Corporation shall accept such
tenders in proportion as nearly as may be to the number of shares
offered in each such tenders; provided that no Class B shares shall be
purchased for cancellation until all of the Class A shares shall have
been previously redeemed or purchased for cancellation as the case may
be.
4. Liquidation
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the holders of the Class
A shares and the Class B shares shall be entitled to receive, equally
per share, before any distribution of any part of the assets of the
Corporation among the holders of any other shares, an amount equal to
the Redemption Price per share and no more.
5. Voting
(a) Subject to the provisions of the Canada Business Corporations
Act, the holders of the Class A shares and the Class B shares
shall not, as such, have any voting rights nor shall they be
entitled to attend shareholders' meetings unless and until (i)
the Corporation shall fail to pay dividends on the Class A
shares or the Class B shares on six dates on which the same
should be paid whether or not consecutive and whether or not
such dividends have been declared and whether or not there are
any moneys of the Corporation property applicable to
-4-
5.
the payments of dividends or (ii) the Corporation shall have
failed to redeem Class A shares or Class B shares in
accordance with Section 2 of these share conditions;
thereafter, but only so long as (i) any dividends on the Class
A shares or the Class B shares remain in arrears or (ii) any
redemptions which should have been made in accordance with
Section 2 of these share conditions remain outstanding, the
holders of the Class A shares and the Class B shares shall
collectively be entitled, voting separately and exclusively as
a class, to elect two members of the board of directors of the
Corporation; nothing herein contained shall be deemed to limit
the right of the Corporation from time to time to increase or
decrease the number of its directors.
(b) Unless the total number of directors on the board of directors
of the Corporation is modified to accommodate the two
directors appointed in accordance with subsection 5(a),
notwithstanding anything contained in the by- laws of the
Corporation, the term of office of all persons who may be
directors of the Corporation at any time when the right to
elect directors shall accrue to the holders of the Class A
shares and the Class B shares as provided in this section 5 or
who may be appointed as directors thereafter and before a
meeting of shareholders shall have been held shall terminate
upon the election of directors at the next annual meeting of
shareholders or at a special meeting of shareholders which may
be held for the purpose of electing directors at any time
after the accrual of such right to elect directors upon not
less than 21 days written notice and which shall be called by
the one-tenth (1/10) of the outstanding Class A shares and
Class B shares; in default of the calling of such special
meeting by the secretary within five days after the making of
such request such meeting may be called by any holder of
record of Class A shares or Class B shares.
(c) Notwithstanding anything contained in the by-laws of the
Corporation (i) upon any termination of the said right to
elect directors, the term of office of the directors elected
or appointed to represent the holders of Class A shares and
the Class B shares exclusively shall forthwith terminate and
(ii) it shall not be necessary for a person to be a holder of
Class A shares or Class B shares in order to qualify him for
election or appointment as a director of the Corporation to
represent the holders of Class A shares and the Class B shares
exclusively.
-5-
6.
IV. CLASS E EXCHANGEABLE SHARES
1. Dividends
(a) The Board of Directors shall declare and the Corporation shall
pay dividends out of the assets of the Corporation properly
applicable to the payment of dividends and after payment of
the dividends properly payable on the Class A shares and the
Class B shares as follows: (i) in the case of a cash dividend
declared in United States currency on a Common Share of the
Parent ("Parent Common Share") in an amount in cash in United
States currency for each Exchangeable Share equal to the cash
dividend declared on each Parent Common Share; (ii) in the
case of a stock dividend declared on Parent Common Shares to
be paid in Parent Common Shares, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to
the number of Parent Common Shares to be paid on each Parent
Common Share; and (iii) in the case of a dividend declared on
Parent Common Shares in property other than United States
currency or Parent Common Shares, in such type and amount of
property for each Exchangeable Share as is the same as or the
Economic Equivalent (as defined below) of the type and amount
of property declared as a dividend on each Parent Common
Share.
(b) The Board of Directors shall determine, in good faith and in
its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts
as the board may require), what is the Economic Equivalent for
the purposes of this section and each such determination shall
be conclusive and binding. In making such determination, the
following factors shall, without excluding other factors
determined by the Board of Directors to be relevant, be
considered by the Board of Directors, (i) the relationship
between the fair market value (as determined by the Board of
Directors) of such property to be issued or distributed with
respect to each outstanding Parent Common Share and the
Current Market Value (as determined by the Board of Directors
in the manner contemplated below) of a Parent Common Share;
and (ii) the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that
such consequences may differ from the taxation consequences to
holders of Parent Common Shares as a result of differences
between the taxation laws of Canada and the United States
(except for any differing consequences arising as a result of
differing marginal taxation rates and without regard to the
individual circumstances of holders of Exchangeable Shares).
For purposes of these share provisions, the "Current Market
Value" of any security listed and traded or quoted on a
securities exchange shall be the weighted average of the daily
closing prices of such security during a period of twenty (20)
consecutive trading days ending five (5) trading days before
the date of determination on the principal
-6-
7.
securities exchange on which such securities are listed and
traded or quoted; provided, however, that if in the opinion of
the Board of Directors the public distribution or trading
activity of such securities during such period does not create
a market which reflects the fair market value of such
securities, then the Current Market Value thereof shall be
determined by the Board of Directors, in good faith and in its
sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts
as the Board of Directors may require), and provided further
that any such determination by the Board shall be conclusive
and binding.
(c) Such dividends shall have record and payment dates identical
to the record and payment dates for dividends on the Parent
Common Shares. In the event a record or payment date for a
Parent Common Share is not a business day in Montreal, Quebec
or Toronto, Ontario, the record or payment date, as the case
may be, for the Exchangeable Shares shall be the next business
day.
2. Participation upon Liquidation, Dissolution or Winding-Up
(a) In the event of the liquidation, dissolution or winding-up of
the Corporation or other distribution of assets of the
Corporation among its shareholders for the purpose of
winding-up its affairs, the holders of the Exchangeable Shares
shall be entitled, subject to applicable law and subject to
the Liquidation Call Right as set forth below, to receive from
the assets of the Corporation for each Exchangeable Share on
the effective date ("Liquidation Date"), after the
distribution to the holders of Class A shares and Class B
shares of their respective liquidation entitlement, but before
any distribution of any part of the assets of the Corporation
among the holders of common shares or any other shares ranking
junior to the Exchangeable Shares an amount per share equal to
(y) the Current Market Value of a Parent Common Share,
determined on the trading day prior to the Liquidation Date,
which shall be paid and satisfied in full only by the
Corporation causing to be delivered to such holder one Parent
Common Share, plus (z) an additional amount in cash equivalent
to the full amount of all declared and unpaid dividends on
each such Exchangeable Share (collectively, the "Liquidation
Amount"). The Corporation shall immediately give notice to
Parent of any proposed liquidation, dissolution or winding-up.
(b) On or promptly after the Liquidation Date, and subject to the
exercise by Parent of the Liquidation Call Right (as set forth
below), the Corporation shall cause to be delivered to the
holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share, upon the surrender by the holder
thereof of the certificate evidencing such Exchangeable
Shares, together with such other documents and instruments as
may be required to effect a transfer of Exchangeable Shares
under the Canada Business Corporations Act and the
-7-
8.
by-laws of the Corporation and such additional documents and
instruments as the secretary of the Corporation may reasonably
require, at the registered office of the Corporation. Payment
of the total Liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the
Corporation for the Exchangeable Shares or by holding for pick
up by the holder at the registered office of the Corporation
of certificates representing Parent Common Shares (which
shares shall be duly issued as fully paid and non-assessable
and shall be free and clear of any hypothec, mortgage,
security interest, charge or claim) and a cheque in United
States dollars of the Corporation payable at par at any branch
of the bankers of the Corporation in respect of the amount
equivalent to the full amount of all declared and unpaid
dividends comprising part of the total Liquidation Amount
(less any tax required to be deducted and withheld therefrom
by the Corporation). On and after the Liquidation Date, the
holders of the Exchangeable Shares shall cease to be holders
of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof,
other than the right to receive their proportionate part of
the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Exchangeable Shares shall not be
made upon presentation and surrender of share certificates in
accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total
Liquidation Amount has been paid in the manner hereinbefore
provided. The Corporation shall have the right at any time
after the Liquidation Date to deposit or cause to be deposited
the total Liquidation Amount in respect of the Exchangeable
Shares represented by certificates that have not at the
Liquidation Date been surrendered by the holders thereof in a
custodial account with any chartered bank or trust company.
Upon such deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be limited to
receiving their proportionate part of the total Liquidation
Amount (less any tax required to be deducted and withheld
therefrom) for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by
them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of the total
Liquidation Amount, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to
be the holders of the Parent Common Shares delivered to them.
(c) If Parent or an affiliate of Parent (within the meaning of the
Canada Business Corporations Act is the sole holder of common
shares of the Corporation, Parent shall have the overriding
right (the "Liquidation Call Right"), in the event of and
notwithstanding the proposed liquidation, dissolution or
winding-up of the Corporation pursuant to subsection 2(a) of
these share provisions, to purchase from all but not less than
all of the holders of Exchangeable Shares on the Liquidation
Date all but not less than all of the Exchangeable Shares held
by each such holder on payment by Parent to the holder of an
amount per share equal to (y) the Current Market Value of a
Parent Common Share determined on the trading day prior to the
-8-
9.
Liquidation Date, which shall be satisfied in full only by
causing to be delivered to such holder one Parent Common
Share, plus (z) an additional amount equivalent to the full
amount of all dividends declared and unpaid on such
Exchangeable Shares (collectively, the "Liquidation Call
Purchase Price"). In the event of the exercise of the
Liquidation Call Right by Parent, each holder shall be
obligated to sell all the Exchangeable Shares held by the
holder to Parent on the Liquidation Date on payment by Parent
to the holder of the Liquidation Call Purchase Price for each
such share.
(d) To exercise the Liquidation Call Right, Parent must notify
holders of Exchangeable Shares and the Corporation of Parent's
intention to exercise such right within two business days of
receiving notification of the liquidation, dissolution or
winding-up from the Corporation as provided in subsection 2(a)
of these share provisions. If Parent exercises the Liquidation
Call Right, on the Liquidation Date Parent will purchase and
the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation
Call Purchase Price.
(e) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right,
Parent shall deposit with the secretary of the Corporation, on
or before the Liquidation Date, certificates representing the
aggregate number of Parent Common Shares deliverable by Parent
in payment of the total Liquidation Call Purchase Price and a
cheque or cheques in the amount of the remaining portion, if
any, of the total Liquidation Call Purchase Price. Provided
that the total Liquidation Call Purchase Price has been so
deposited with the secretary of the Corporation, on and after
the Liquidation Date the rights of each holder of Exchangeable
Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase
Price payable by Parent upon presentation and surrender by the
holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the
Liquidation Date be considered and deemed for all purposes to
be the holder of the Parent Common Shares delivered to it.
Upon surrender to the secretary of the Corporation of a
certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
Canada Business Corporations Act and the by-laws of the
Corporation and such additional documents and instruments as
the secretary of the Corporation may reasonably require, the
holder of such surrendered certificate or certificates shall
be entitled to receive in exchange therefor, and the secretary
of the Corporation on behalf of Parent shall deliver to such
holder, certificates representing the Parent Common Shares to
which the holder is entitled and a cheque or cheques of Parent
payable at par and in United States dollars at any branch of
the bankers of Parent or of the Corporation in Canada in
payment of the remaining portion, if any, of the total
Liquidation Call Purchase Price. If Parent does not exercise
-9-
10.
the Liquidation Call Right in the manner described above, on
the Liquidation Date the holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the
liquidation price otherwise payable by the Corporation in
connection with the liquidation, dissolution or winding-up of
the Corporation pursuant to subsection 2(a) of these share
provisions.
3. Corporation Voting Rights
(a) The holders of the Exchangeable Shares shall not be entitled
to receive notice of, or to attend, any meetings of
shareholders of the Corporation, subject to applicable law.
4. Special Events
(a) The Exchangeable Shares shall be subject to adjustment or
modification from time to time in each of the following
circumstances:
(i) Parent shall sub-divide the then outstanding Parent
Common Shares into a greater number of Parent Common
Shares;
(ii) Parent shall reduce, combine or consolidate the then
outstanding Parent Common Shares into a smaller
number of Parent Common Shares;
(iii) Parent shall issue additional Parent Common Shares or
shares of another class of Parent or shares of a
subsidiary corporation to all or substantially all of
the holders of Parent Common Shares by way of
options, rights or warrants; or
(iv) Parent shall reclassify or otherwise change the
Parent Common Shares or effect an amalgamation,
merger or reorganization.
(b) The Board of Directors shall take all reasonable steps to
effect any such adjustment or modification including, if
necessary, submitting same to holders of Exchangeable Shares
for their approval. Such adjustment or modification shall
result in the same, or the Economic Equivalent (as determined
below) of the adjustment or modification as that made to the
Parent Common Shares and shall simultaneously be made to, or
in the rights of the holders of, the Exchangeable Shares.
(c) The Board of Directors shall determine, in good faith and in
its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts
as the board may require), what is the Economic Equivalent
-10-
11.
for the purposes of any event referred to in this section 4
and each such determination shall be conclusive and binding.
In making each such determination, the following factors
shall, without excluding other factors determined by the board
to be relevant, be considered by the Board of Directors:
(i) in the case of subsection 4(a)(iii), the relationship
between the exercise price of each of such options,
rights or warrants and the Current Market Value (as
determined by the Board of Directors in the manner
contemplated in subsection 1(b)) of a Parent Common
Share; and
(ii) the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent
that such consequences may differ from the taxation
consequences to holders of Parent Common Shares as a
result of differences between taxation laws of Canada
and the United States (except for any differing
consequences arising as a result of differing
marginal taxation rates and without regard to the
individual circumstances of holders of Exchangeable
Shares).
5. Retraction of Exchangeable Shares by Holder
(a) A holder of Exchangeable Shares shall be entitled at any time,
subject to the exercise by Parent of the Call Right (as
defined below) and otherwise upon compliance with the
provisions of this section 5(a), to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the
name of such holder for an amount per share equal to (y) the
Current Market Value of a Parent Common Share determined on
the trading day prior to the Retraction Date (as defined
below), which shall be paid and satisfied in full only by the
Corporation causing to be delivered to such holder one Parent
Common Share for each Exchangeable Share presented and
surrendered by the holder plus (z) an additional amount
equivalent to the full amount of all dividends declared and
unpaid thereon (collectively the "Retraction Price"), provided
that if the record date for any such declared and unpaid
dividends occurs on or after the Retraction Date the
Retraction Price shall not include such additional amount
equivalent to the declared and unpaid dividends. To effect
such redemption, the holder shall present and surrender at the
registered office of the Corporation the certificate or
certificates representing the Exchangeable Shares which the
holder desires to have the Corporation redeem, together with
such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Companies
Act, (Quebec) and the by-laws of the Corporation and such
additional documents and instruments as the secretary of the
Corporation may reasonably require, and together with a duly
executed statement in such form as may be acceptable to the
Corporation ("Retraction Request"):
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12.
(i) specifying that the holder desires to have all or any
number specified therein of the Exchangeable Shares
represented by such certificate or certificates (the
"Retracted Shares") redeemed by the Corporation;
(ii) stating the business day on which the holder desires
to have the Corporation redeem the Retracted Shares
(the "Retraction Date"), provided that the Retraction
Date shall be not less than five business days after
the date on which the Retraction Request is received
by the Corporation and further provided that, in the
event that no such business day is specified by the
holder in the Retraction Request, the Retraction Date
shall be deemed to be the fifth business day after
the date on which the Retraction Request is received
by the Corporation; and
(iii) acknowledging the overriding right (the "Call Right")
of Parent to purchase all but not less than all the
Retracted Shares directly from the holder and that
the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted
Shares to Parent in accordance with the Call Rights.
(b) Subject to the exercise by Parent of the Call Right, upon
receipt by the Corporation in the manner specified in section
5(a) hereof of a certificate or certificates representing the
number of Exchangeable Shares which the holder desires to have
the Corporation redeem, together with a Retraction Request,
the Corporation shall redeem the Retracted Shares effective at
the close of business on the Retraction Date and shall cause
to be delivered to such holder the total Retraction Price with
respect to such shares. If only a part of the Exchangeable
Shares represented by any certificate is redeemed (or
purchased by Parent pursuant to the Call Right), a new
certificate for the balance of such Exchangeable Shares shall
be issued to the holder at the expense of the Corporation.
(c) Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify Parent thereof. In order
to exercise the Call Right, Parent must notify the Corporation
in writing of its determination to do so (the "Retraction Call
Notice") within two business days of notification to Parent by
the Corporation of the receipt by the Corporation of the
Retraction Request. If Parent does not so notify the
Corporation within such two business day period, the
Corporation will notify the holder as soon as possible
thereafter that Parent will not exercise the Call Right. If
Parent delivers the Call Notice within such two business day
time period, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the
Retracted Shares to Parent in accordance with the Call Right.
In such event, the Corporation shall not redeem the Retracted
Shares and Parent shall purchase from such holder and such
holder shall sell to Parent on the Retraction Date the
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13.
Retracted Shares for a purchase price (the "Purchase Price")
per share equal to the Retraction Price per share. For the
purposes of completing a purchase pursuant to the Call Right,
Parent shall deposit with the secretary of the Corporation, on
or before the Retraction Date, certificates representing
Parent Common Shares and a cheque in the amount of the
remaining portion, if any, of the total Purchase Price.
Provided that the total Purchase Price has been so deposited
with the secretary of the Corporation, the closing of the
purchase and sale of the Retracted Shares pursuant to the Call
Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no
redemption by the Corporation of such Retracted Shares shall
take place on the Retraction Date. In the event that Parent
does not deliver a Retraction Call Notice within two business
day period, the Corporation shall redeem the Retracted Shares
on the Retraction Date and in the manner otherwise
contemplated in this section 5(c).
(d) the Corporation or Parent, as the case may be, shall deliver
or cause to be delivered to the relevant holder, at the
address of the holder recorded in the securities register of
the Corporation for the Exchangeable Shares or at the address
specified in the holder's Retraction Request or by holding for
pick up by the holder at the registered office of the
Corporation, certificates representing the Parent Common
Shares (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any hypothec,
mortgage, security interest, charge or claim) registered in
the name of the holder or in such other name as the holder may
request in payment of the total Retraction Price or the total
Purchase Price, as the case may be, and a cheque of the
Corporation payable at par at any branch of the bankers of the
Corporation in payment of the remaining portion, if any, of
the total Retraction Price (less any tax required to be
deducted and withheld therefrom by the Corporation) or a
cheque of Parent payable at par and in United States dollars
at any branch of the bankers of Parent or of the Corporation
in Canada in payment of the remaining portion, if any, of the
total Purchase Price, as the case may be, and such delivery of
such certificates and cheque on behalf of the Corporation or
by Parent, as the case may be, shall be deemed to be payment
of and shall satisfy and discharge all liability for the total
Retraction Price or total Purchase Price, as the case may be,
to the extent that the same is represented by such share
certificates and cheque (plus any tax required and in fact
deducted and withheld therefrom and remitted to the proper tax
authority), unless such cheque is not paid on due
presentation.
(e) On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall cease to be a holder of
such Retracted Shares and shall not be entitled to exercise
any of the rights of a holder in respect thereof, other than
the right to receive this proportionate part of the total
Retraction Price or total Purchase Price, as the case may be,
unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total
Retraction Price or the total Purchase Price, as the case may
-13-
14.
be, shall not be made, in which case the rights of such holder
shall remain unaffected until the total Retraction Price or
the total Purchase Price, as the case may be, has been paid in
the manner hereinbefore provided. On and after the close of
business on the Retraction Date provided that presentation and
surrender of certificates and payment of the total Retraction
Price or the total Purchase Price, as the case may be, has
been made in accordance with the foregoing provisions, the
holder of the Retracted Shares so redeemed by the Corporation
or purchased by Parent shall thereafter be considered and
deemed for all purposes to be a holder of the Parent Common
Shares delivered to it.
(f) Notwithstanding any other provision of this section 5, the
Corporation shall not be required to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent
that such redemption of Retracted Shares would be contrary to
solvency requirements or other provisions of applicable law.
If the Corporation believes that on any Retraction Date it
would not be permitted by any of such provisions to redeem the
Retracted Shares tendered for redemption on such date, and
provided that Parent shall not have exercised the Call Right
with respect to the Retracted Shares, the Corporation shall
only be required to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum
number that may be so redeemed (rounded to the next lower
multiple of 100 shares) as would not be contrary to such
provisions and shall notify the holder at least two business
days prior to the Retraction Date as to the number of
Retracted Shares which will not be redeemed by the
Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law, the
Corporation shall as soon as practicable and from time to time
redeem Retracted Shares in accordance with section 5(b) of
these share provisions on a pro rata basis and shall issue to
each holder of Retracted Shares a new certificate, at the
expense of the Corporation, representing the Retracted Shares
not redeemed by the Corporation pursuant to section 5(b)
hereof.
6. Amendment and Approval
(a) The rights, privileges, restrictions and conditions attaching
to the Exchangeable Shares may be added to, changed or removed
but only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
(b) Any approval given by the holders of the Exchangeable Shares
to add to, change or remove any right, privilege, restriction
or condition attaching to the Exchangeable Shares or any other
matter requiring the approval or consent of the holders of the
Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with
applicable law.
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15.
V. COMMON SHARES
1. Dividends
(a) After dividends have been declared and paid on the Class A
shares, the Class B shares and the Exchangeable Shares, as the
case may be, as provided for in the articles of the
Corporation, the holders of record of the common shares shall
be entitled to receive as and when declared by the directors
of the Corporation in their discretion, out of the moneys
properly applicable to the payment of dividends, dividends on
such shares, in such amounts and at such times as the
directors of the Corporation shall determine.
(b) Cheques of the Corporation payable at par at any branch of the
Corporation's bankers in Canada shall be issued in respect of
such dividends (less any taxes required to be deducted) and
the mailing of such a cheque to any holder shall satisfy the
dividend represented thereby.
2. Liquidation
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary after distribution to the
holders of the Class A shares, the Class B shares, and the Exchangeable
Shares, the holders of the common shares shall be entitled to receive
the remaining property of the Corporation.
3. Vote
The holders of the common shares are entitled to one vote for each
share held at all meetings of shareholders.
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16.
SCHEDULE II
No shares of the capital stock of the Corporation shall be transferred
without the consent of the directors of the Corporation, evidenced by a
resolution passed by them and recorded in the books of the Corporation.
-16-
17.
SCHEDULE III
1. The number of shareholders of the Corporation shall be limited to fifty
(50), not including persons who are in the employment of the
Corporation or of a subsidiary and persons who, having been formerly in
the employment of the Corporation or of a subsidiary, were, while in
that employment, and have continued after the termination of that
employment to be shareholders of the Corporation, two (2) or more
persons holding one (1) or more shares jointly being counted as a
single shareholder.
2. Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
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EXHIBIT A
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▇▇▇▇ OF SALE
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC., a Canadian corporation ("Assignor"),
pursuant to the Asset Purchase Agreement, dated as of November 12, 1996 (the
"Agreement"), by and between Assignor, HOSPOSABLE PRODUCTS, INC., a New York
corporation, and 3290441 CANADA INC., a corporation incorporated under the
Canada Business Corporations Act ("Assignee"), and for good and valuable
consideration to it in hand paid, the receipt and sufficiency of which is hereby
acknowledged, does hereby sell, convey, transfer, assign and deliver unto
Assignee, its successors and assigns, free and clear of all Encumbrances, except
as expressly set forth in the Agreement, as at 12:01 a.m. on the date hereof,
all of Assignor's right, title and interest in, to and under all of the assets
and business (except for the Excluded Assets) of the Assignor (collectively, the
"Purchased Assets"), including without limitation, the respective properties,
assets and other rights described in Schedule 1 hereto which by this reference
is incorporated herein. The parties acknowledge and agree that the conveyance
and transfer herein is made with the representations and warranties set forth in
the Agreement and with no other representations and warranties and subject to
all of the rights, restrictions and conditions set forth in the Agreement.
TO HAVE AND TO HOLD the Purchased Assets unto the said Assignee and
its successors and assigns, to and for its or their use forever.
Assignor hereby authorizes Assignee to take any and all appropriate
actions in connection with any of the Purchased Assets, in the name of the
Assignor or in its own or any other name.
The Excluded Assets are described in Schedule 2 hereto which by
this reference is incorporated herein.
Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Agreement.
IN WITNESS WHEREOF, Assignor has caused this ▇▇▇▇ of Sale to be
executed by ____________, its ____________, and attested to by _____________,
its _____________, as of this ____ day of __________ 1997.
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By________________________
Name:
Title:
By________________________
Name:
Title:
Attest:
________________________
Name:
Title:
-2-
Schedule 1
----------
Purchased Assets
----------------
All of the assets of Seller not listed on Schedule 2
-3-
Schedule 2
----------
Excluded Assets
---------------
- All of the Seller's shares in the capital stock of Buyer Parent
- All of the Seller's shares in the capital stock of American Converting Paper
Corporation
- Prepaid transaction costs paid or accrued by Seller with respect to the
transactions contemplated by the Asset Purchase Agreement to December 31,
1996
- Two Promissory Notes issued to Seller each in the amount of Cdn$557,404 by
3271706 Canada Inc. on September 3, 1996
- Promissory Note issued to Seller in the amount of Cdn$1,817,290 by 3287858
Canada Inc. on September 3, 1996
- Promissory Note issued to Seller in the amount of Cdn$1,817,290 by 1186020
Ontario Limited on September 3, 1996
- Life insurance policy no. T00610007 for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4157675 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4036570 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 152563 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 6103763 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 6027256 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4036597 for ▇.▇. ▇▇▇▇▇
-4-
EXHIBIT B
---------
EXCLUDED ASSETS
- All of the Seller's shares in the capital stock of Buyer Parent
- All of the Seller's shares in the capital stock of American Converting Paper
Corporation
- Prepaid transaction costs paid or accrued by Seller with respect to the
transactions contemplated by the Asset Purchase Agreement to December 31,
1996
- Two Promissory Notes issued to Seller each in the amount of Cdn$557,404 by
3271706 Canada Inc. on September 3, 1996
- Promissory Note issued to Seller in the amount of Cdn$1,817,290 by 3287858
Canada Inc. on September 3, 1996
- Promissory Note issued to Seller in the amount of Cdn$1,817,290 by 1186020
Ontario Limited on September 3, 1996
- Life insurance policy no. T00610007 for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4157675 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4036570 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 152563 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 6103763 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 6027256 for ▇▇▇▇▇ ▇. ▇▇▇▇▇
- Life insurance policy no. 4036597 for ▇.▇. ▇▇▇▇▇
EXHIBIT C
---------
PROMISSORY NOTE
Cdn$4,262,741 __________ __, 1997
FOR VALUE RECEIVED, 3290441 CANADA INC., a corporation incorporated
under the Canada Business Corporations Act ("Maker"), hereby promises to pay to
▇.▇. ▇▇▇▇ + ▇▇▇▇▇, INC., a corporation incorporated under the Canada Business
Corporations Act ("Payee"), Four Million, Two Hundred Sixty-two Thousand, Seven
Hundred Forty- one Dollars (Cdn$4,262,741), in legal tender of Canada, sixty
(60) days after the adjustment set forth in Section 1.4(e) of the Asset Purchase
Agreement dated as of November 12, 1996, by and among Maker, Hosposable
Products, Inc. and Payee (the "Asset Purchase Agreement"), together with
interest thereon as herein provided, at the office of Payee at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, or any other place which may be specified in writing by
the holder of this Note.
1. The unpaid principal of this Note shall bear interest at the rate of
six (6%) per annum, and shall be calculated based upon a year of 365 days and
the actual number of days elapsed. Interest on the unpaid principal amount of
this Note shall begin to accrue on the date of this Note and shall be payable
together with the unpaid principal of this Note sixty (60) days after the date
of the adjustment set forth in Section 1.4(e) of the Asset Purchase Agreement.
2. If Maker fails to make any payment of principal or interest by Payee,
unless otherwise required by law, interest shall accrue on all unpaid principal
and such overdue amount at the rate of eight percent (8%) per annum from five
days after the demand date until such payments are current.
3. Maker shall have the right to prepay the unpaid principal of this Note
in whole or in part, together with interest accrued on the amount prepaid, at
any time without premium or penalty.
4. Upon the occurrence of any Event of Default (as hereinafter defined)
hereunder, in addition to any other remedies available to Payee, Payee may, at
its option, satisfy the unpaid principal of this Note in whole or in part,
together with any interest accrued thereon, by set-off against any amounts due
and owing to Maker by Payee. The following are Events of Default:
(A) default shall occur in the payment of the principal of, or interest
on, this Note when due; or
(B) Maker shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator for any substantial part of his property,
(ii) admit in writing his inability to pay his debts as they mature, (iii)
make a general assignment for the benefit of creditors, (iv) be the subject
of any involuntary petition seeking relief under the Bankruptcy Code,
Bankruptcy and Insolvency Act (Canada) or similar applicable legislation,
which petition is not dismissed within thirty (30) days, or Maker does not
within the first five (5) days of such period interpose valid and good faith
defenses to the grant of relief under such petition, or with respect to
which petition an order for relief is entered, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or
seeking to take advantage of any bankruptcy, reorganization or insolvency
statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law.
5. No delay or omission on the part of Payee in exercising any right,
power or remedy hereunder shall operate as a waiver of such right or any other
right under this Note, nor shall any single or partial exercise of any such
right, power or remedy by Payee preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. A waiver on any one
occasion shall not be construed as a bar to or waiver of any such right, power
or remedy on any future occasion. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
6. Maker and Payee agree that the original principal amount of this Note
as set forth above shall be adjusted after the date hereof in accordance with
the terms of Section 1.4(e) of the Asset Purchase Agreement. Immediately after
the determination of such adjustment, if any, Maker and Payee agree to inscribe
the adjusted principal amount of this Note onto Annex A, together with the
initials of their respective representatives. Maker and Payee agree that the
adjusted principal amount of this Note inscribed onto Annex A shall be deemed
the original principal amount of this Note as if the same had been set forth
above on the date of this Note.
-2-
7. Any notice under or in connection with this Note shall be in writing
and addressed to Maker c/o Hosposable Products, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, and to Payee at ▇. ▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, or any or at such other address specified by
notice given in accordance herewith.
8. Maker agrees to pay all costs and expenses of enforcement of this Note,
including, but not limited to, attorneys' fees and court costs.
9. This Note, and the terms, covenants and conditions hereof, shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, estates and heirs.
10. Neither this Note nor any provisions hereof may be amended, modified,
waived, discharged or terminated orally, except by an instrument in writing duly
signed by or on behalf of Payee.
11. This Note is issued under the provisions of the Asset Purchase
Agreement. It may be paid by way of issue to the Payee of Class A preferred
stock of the Maker, in accordance with the Asset Purchase Agreement, that have
priority over the provisions of this Note. Pursuant to Section 5.14 of the Asset
Purchase Agreement, this Note may not be assigned by Payee.
12. This Note shall be construed and enforced in accordance with the laws
of the State of New York without regard to principles of choice or conflict of
laws.
IN WITNESS WHEREOF, this Note has been executed and delivered by
Maker on the date first set forth above.
3290441 CANADA INC.
By:___________________________
Name:
Title:
-3-
ANNEX A TO PROMISSORY NOTE
--------------------------
Pursuant to Section 6 of the Note, the adjusted principal amount of
the Note is _____________________________ (Cdn$________).
Accepted and Agreed: Initials:
-------------------- ---------
3290441 Canada Inc. By:______
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc. By:______
-4-
EXHIBIT D
---------
UNDERTAKING
Undertaking by 3290441 Canada Inc., a corporation incorporated
under the Canada Business Corporations Act ("Buyer"), in favor of ▇.▇. ▇▇▇▇ +
▇▇▇▇▇ Inc., a corporation incorporated under the Canada Business Corporations
Act ("Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to an Asset Purchase Agreement dated as of
November 12, 1996 (the "Purchase Agreement") by and among Seller, Buyer and
Hosposable Products, Inc., a New York corporation, Seller has concurrently
herewith sold, assigned, transferred and conveyed to Buyer the assets and
business of Seller, except as specifically excluded under the list of Excluded
Assets set forth on Schedule 2 to the ▇▇▇▇ of Sale (the "Acquired Business");
and
WHEREAS, in partial consideration therefor, the Purchase Agreement
requires that Buyer undertake to assume and to agree to perform, pay or
discharge all liabilities, debts, obligations and claims of Seller of any nature
whatsoever, and whether conditional or unconditional, absolute or contingent,
accrued or unaccrued, arising prior to or becoming due following Closing except
for (i) any liabilities, debts, obligations or claims relating to criminal
activities or fraud of Seller, (ii) claims of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or any of his
Related Persons against Seller (other than obligations to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or
▇▇▇▇▇ ▇. ▇▇▇▇▇ who constitute Transferred Employees to the extent their claims
arise in their capacity as employees of Seller) and (iii) the liability to pay
two promissory notes held by 1186020 Ontario Limited and 3287858 Canada Inc.
each in the amount of Cdn$6,266,790; and
WHEREAS, all terms used but not otherwise defined herein shall have
the meaning set forth in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth
in the Purchase Agreement and other good and valuable consideration, the receipt
of which is hereby acknowledged, Buyer hereby undertakes, assumes and agrees to
perform, pay or discharge, when due, each and every liability, debt, obligation
and claim of Seller of any nature whatsoever, and whether conditional or
unconditional, absolute or contingent, accrued or unaccrued, arising prior to or
becoming due following Closing except for (i) any liabilities, debts,
obligations or claims relating to criminal activities or fraud of Seller, (ii)
claims of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or any of his Related Persons against Seller (other
than obligations to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇ who constitute Transferred
Employees to the extent their claims arise in their capacity as employees of
Seller) and (iii) the liability to pay two promissory
notes held by 1186020 Ontario Limited and 3287858 Canada Inc. each in the amount
of Cdn$6,266,790.
For purposes of this Undertaking, the term "Related Persons," with
respect to any individual, shall mean and include (i) any parent, spouse,
brother, sister, or natural or adopted lineal descendent of such individual and
any spouse of any of the foregoing (each, a "Family Member") and (ii) each
Affiliate of such individual or of a Family Member.
Subject to the terms of the Purchase Agreement and other than as
specifically stated in the preceding paragraph, Buyer assumes no liability or
obligation of Seller by this Undertaking.
This Undertaking shall be governed by and construed in accordance
with the internal substantive laws and not the choice of law rules of the State
of New York.
This Undertaking shall inure to the benefit of and be binding upon
Buyer and Seller and their respective successors and permitted assigns in
accordance with the Purchase Agreement.
3290441 CANADA INC.
By: ________________________
Name:
Title:
Agreed and Accepted:
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By: _____________________
Name:
Title:
By: _____________________
Name:
Title:
-2-
EXHIBIT E
---------
EXCEPTIONS TO GAAP IN CONNECTION WITH PREPARATION OF
PRELIMINARY AND FINAL STATEMENT OF NET ASSETS
----------------------------------------------------
- Deferred Income Taxes of Seller in an amount not to exceed
Cdn$1,000,000 are excluded from the Preliminary and Final
Statement of Net Assets
EXHIBIT F
---------
Form of Deed for Fee Property
Insert of Transfer/Deed of Land on Form 1 - Land Registration Reform Act,
from ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc. to 3290441 Canada Inc. for property described as
Part of ▇▇▇ ▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ of Pickering,
Regional Municipality of Durham, designated as Part 4 on Plan 40R-3303,
for consideration of Four Million Dollars ($4,000,000).
-1-
EXHIBIT G
---------
INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
------------------------------------------
THIS AGREEMENT is made this _____ day of ______________ 1996.
BETWEEN: 3290441 Canada Inc., a corporation incorporated under the
Canada Business Corporations Act,
[hereinafter referred to as "ASSIGNEE"]
AND: ▇.▇. ▇▇▇▇ & ▇▇▇▇▇ Inc., a corporation incorporated
under the Canada Business Corporations Act,
[hereinafter referred to as the "ASSIGNOR"]
Whereas the ASSIGNEE, whose full post office address and principal
place of business is 1465-32nd Avenue, Lachine (Quebec), ▇▇▇ ▇▇▇, and the
ASSIGNOR, whose full post office address and principal place of business is [ ],
together with Hosposable Products, Inc., a New York corporation, have entered
into an Asset Purchase Agreement dated as of November 6, 1996 ("Asset Purchase
Agreement"), pursuant to which the ASSIGNOR sold all of its business and certain
of its assets to the ASSIGNEE;
Whereas capitalized terms used but not defined herein shall have the
meaning attributed to them in the Asset Purchase Agreement, unless the context
requires otherwise;
Whereas at article 1.5 of the Asset Purchase Agreement, the ASSIGNOR
undertook to properly execute and deliver to Buyer at the Closing and the Buyer
agreed to accept an assignment sufficient to convey the Intellectual Property
free and clear of all Encumbrances other than Permitted Liens;
THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assignment
----------
1.1 The ASSIGNOR hereby assigns to the ASSIGNEE, for good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, all of the Assignor's right, title and
interest in and to all of its patents, copyrights, industrial
designs, trademarks, trade secrets and other intellectual
property rights in and to all works including, without
limitation, the Intellectual Property, including all goodwill
appertaining to such intellectual property.
2.
1.2 This assignment is made with the representations and
warranties provided in the Asset Purchase Agreement and with
no other representations and warranties.
2. Cooperation
-----------
2.1 The ASSIGNOR agrees to cooperate fully with the ASSIGNEE, with
respect to signing further documents and doing such acts and
other things reasonably requested by the ASSIGNEE to confirm
the assignments made herein and register such assignments in
the name of the ASSIGNEE.
3. General
-------
[3.1 This Agreement shall be construed and controlled by the laws
in force in the Province of Quebec, Canada.]
3.2 Subject to the limitations set forth in this Agreement, this
Agreement will enure to the benefit of and be binding upon the
parties, their successors and assigns.
3.3 If any provision of this Agreement shall be held by a court of
competent jurisdiction to be illegal, invalid or
unenforceable, the remaining provisions shall remain in full
force and effect. The parties agree to negotiate in good faith
a substitute provision after receiving notice from a party of
the invalidity of the original provision.
4. Language
--------
[4.1 This Agreement has been drafted in English at the express wish
of the parties. Ce contrat a ete redige en anglais a la
demande expresse des parties.]
IN WITNESS WHEREOF the parties hereto have executed this Agreement by their
representatives duly authorized for such purposes as they so declare.
ASSIGNEE ASSIGNOR
[3290441 Canada Inc.] [▇.▇. ▇▇▇▇ & ▇▇▇▇▇ Inc.]
_____________________ ________________________
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
EXHIBIT H-1
-----------
ASSIGNMENT OF LEASE
-------------------
This assignment made as of the o day of o, 19o
between:
o
(hereinafter referred to as the "Assignor")
of the first part,
- and -
o
(hereinafter referred to as the "Assignee")
of the second part,
- and -
o
(hereinafter referred to as the "Landlord")
of the third part.
witnesses that whereas:
1. by a lease (the "Lease") dated the o day of o, 19o , a copy of
which is attached hereto as Schedule A, the Landlord leased to the Assignor
certain premises (the "Premises") in the building municipally known as o, and
which premises are more particularly described in the Lease and are outlined in
red on the sketch attached hereto as Schedule B for a term expiring the o day of
o, 19o;
2. the Assignor has agreed to assign the Lease to the Assignee;
3. the Landlord has agreed to consent to this assignment.
Now therefore in consideration of the covenants in this
agreement and $1.00 now paid by each of the parties to the others (the receipt
and sufficiency of which are hereby acknowledged by each of them):
- 2 -
I. The Assignor hereby grants and assigns to the Assignee the
Lease and all the rights, benefits and interest granted to the Assignor in the
Lease including the Assignor's leasehold estate in the Premises.
II. The Assignor hereby represents and warrants to the Assignee
that:
1. the Lease is in full force and effect and has not been
amended;
2. all rents and other amounts payable under the Lease
have been paid up to the o day of o, 19o;
3. the Assignor is not in default under the Lease nor is
there any circumstance which could give rise to a
default; and
4. the Assignor has the right, power and authority to
assign the Lease and all other rights of the tenant
thereunder free and clear of all liens, charges or
other encumbrances.
III. The Assignor hereby indemnifies and agrees to save harmless
the Assignee from all actions, suits, costs, losses, charges, demands and
expenses for and in respect of any non-fulfilment of the obligations of the
tenant under the Lease that have accrued or occurred up to the date hereof
including any costs or expenses in respect thereof.
IV. Subject to the payment of rent and to the fulfilment of the
tenant's obligations under the Lease, the Assignee shall be entitled to
possession of the Premises for the balance of the term of the Lease without any
interruption by the Assignor or any other person claiming through or under the
Assignor;
V. The Assignor shall from time to time at the request and cost
of the Assignee execute such further assurances as the Assignee shall reasonably
require.
VI. The Assignee covenants with the Assignor and with the Landlord
that the Assignee shall from and including the o day of o, 19o pay the rent
reserved in the Lease and fulfil the other obligations of the Tenant under the
Lease.
VII. The Assignee will save the Assignor harmless from all actions,
suits, costs, losses, charges, demands and expenses with respect to the
non-fulfilment of any of the tenant's obligations under the Lease accruing or
occurring after the date hereof including any costs or expenses in respect
thereof.
VIII. The Landlord hereby consents to this assignment reserving,
however, its right to consent or otherwise in respect of any other assignment,
sublease or other disposition. This consent shall operate to release the
Assignor from the obligations of the tenant under the Lease for the balance of
the term of the Lease.
- 3 -
IX. The Landlord represents and warrants to the Assignee that:
1. the Lease is in full force and effect and has not been
amended;
2. all rents and other amounts payable under the Lease
have been paid up to the o day of o, 19o;
3. the Assignor is not in default under the Lease nor is
there any circumstance which could give rise to a
default; and
4. the Landlord has the right, power and authority to
consent to this assignment.
X. The Landlord hereby agrees to waive compliance with all
applicable bulk sales legislation in respect of this assignment.
In witness whereof the parties hereto have executed this
assignment under seal.
o
By:
c/s
o
By:
c/s
o
By:
c/s
EXHIBIT H-2
-----------
ASSIGNMENT OF LEASE
-------------------
This assignment made as of the o day of o, 19o
between:
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
(hereinafter referred to as the
"Assignor")
of the first part,
- and -
3290441 Canada Inc.
(hereinafter referred to as the
"Assignee")
of the second part,
- and -
Triad Lachine Development Ltd.
(hereinafter referred to as the
"Landlord")
of the third part.
witnesses that whereas:
(i) by a lease (the "Lease") dated the 9th day of January, 1989 and
registered by memorial in the Registry Office for the Registration Division of
Montreal under the number 4116941, a copy of which is attached hereto as
Schedule A, the Landlord leased to Papiers Grande Ville Inc. a certain
emplacement fronting on 32nd Avenue, in the City of Lachine, Province of Quebec,
being original lot number two thousand nine hundred and thirty-nine (2,939) of
the
-1-
2.
Official Cadastre of the Parish of St-Laurent, having a superficial area of
approximately nineteen thousand one hundred and sixty-two decimal five
square-meters (19,162.5 m2) together with the industrial building then in course
of construction thereon, comprising approximately ninety-one thousand six
hundred ninety decimal forty-one square feet (91,690.41 ft2) and now bearing
civic number 1475 of said 32nd Avenue;
(ii) Papiers Grande Ville Inc. sublet a portion of the said building to
▇▇▇▇▇ & Company Limited by Agreement of Sublease dated as of April 1, 1989, a
copy of which is attached hereto as Schedule B;
(iii) ▇▇▇▇▇ & Company Limited and ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc. amalgamated on
July 31, 1994 to form the Assignor;
(iv) Papiers Grande Ville Inc. was wound-up as of January 4, 1995 into
its sole shareholder, the Assignor;
(iv) the Assignor has agreed to assign the Lease to the Assignee;
(v) the Landlord has agreed to consent to this assignment.
Now therefore in consideration of the covenants in this
agreement and $1.00 now paid by each of the parties to the others (the receipt
and sufficiency of which are hereby acknowledged by each of them):
1. The Assignor hereby grants and assigns to the Assignee the Lease
and all the rights, benefits and interest granted to the Assignor in the Lease
including the Assignor's leasehold estate in the Premises.
2. The Assignor hereby represents and warrants to the Assignee that:
(i) the Lease is in full force and effect and has not been
amended;
-2-
3.
(ii) all rents and other amounts payable under the Lease have been
paid up to the o day of o, 19o;
(iii) the Assignor is not in default under the Lease nor is there
any circumstance which could give rise to a default; and
(iv) the Assignor has the right, power and authority to assign the
Lease and all other rights of the tenant thereunder free and
clear of all liens, charges or other encumbrances.
3. The Assignor hereby indemnifies and agrees to save harmless the
Assignee from all actions, suits, costs, losses, charges, demands and expenses
for and in respect of any non-fulfilment of the obligations of the tenant under
the Lease that have accrued or occurred up to the date hereof including any
costs or expenses in respect thereof.
4. Subject to the payment of rent and to the fulfilment of the
tenant's obligations under the Lease, the Assignee shall be entitled to
possession of the Premises for the balance of the term of the Lease without any
interruption by the Assignor or any other person claiming through or under the
Assignor;
5. The Assignor shall from time to time at the request and cost of the
Assignee execute such further assurances as the Assignee shall reasonably
require.
6. The Assignee covenants with the Assignor and with the Landlord that
the Assignee shall from and including the o day of o, 19o pay the rent reserved
in the Lease and fulfil the other obligations of the Tenant under the Lease.
7. The Assignee will save the Assignor harmless from all actions,
suits, costs, losses, charges, demands and expenses with respect to the
non-fulfilment of any of the tenant's obligations under the Lease accruing or
occurring after the date hereof including any costs or expenses in respect
thereof.
-3-
4.
8. The Landlord hereby consents to this assignment reserving, however,
its right to consent or otherwise in respect of any other assignment, sublease
or other disposition. This consent shall operate to release the Assignor from
the obligations of the tenant under the Lease for the balance of the term of the
Lease.
9. The Landlord represents and warrants to the Assignee that:
(i) the Lease is in full force and effect and has not been
amended;
(ii) all rents and other amounts payable under the Lease have been
paid up to the o day of o, 19o;
(iii) the Assignor is not in default under the Lease nor is there
any circumstance which could give rise to a default; and
(iv) the Landlord has the right, power and authority to consent to
this assignment.
10. The Landlord hereby agrees to waive compliance with the provisions
of the Civil Code of Quebec relating to the sale of an enterprise in respect of
this assignment.
11. This assignment will be governed by, interpreted and construed in
accordance with the laws of Quebec and the laws of Canada applicable therein.
12. The Landlord, Assignor and Assignee acknowledge having requested
and being satisfied that this assignment as well as all documents and notices
relating thereto be drawn up in English. Le locateur, le cedant et le
cessionnaire reconnaissent avoir demande que cette cession ainsi que les
documents et avis y afferents soient rediges en anglais et s'en declarent
satisfaits.
-4-
5.
In witness whereof the parties hereto have executed this
assignment.
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By:___________________________
___________________________
______________________________
Witness
______________________________
Witness
3290441 Canada Inc.
By:___________________________
___________________________
______________________________
Witness
______________________________
Witness
-5-
6.
TRIAD LACHINE DEVELOPMENT INC.
By:___________________________
___________________________
______________________________
Witness
______________________________
Witness
-6-
AFFIDAVIT
---------
I, the undersigned, o, residing and domiciled at o of o, o, solemnly declare:
1. that I am of full age;
2. that I am one of the witnesses to the signature of the Assignment of
Lease;
3. that this Assignment of Lease has been signed by o, for and on behalf of
the Assignor and by o on behalf of the Assignee, in my presence and in
the presence of o, the other subscribing witness;
4. that I know said o and o, both of whom are more than eighteen (18) years
old;
AND I HAVE SIGNED at o, this o day of o,
199o
o
SOLEMNLY DECLARED BEFORE ME
in Montreal, this o day
of o, 199o.
-----------------------------
Commissioner of Oaths
AFFIDAVIT
---------
I, the undersigned, o, residing and domiciled at o of o, o, solemnly declare:
1. that I am of full age;
2. that I am one of the witnesses to the signature of the Assignment of
Lease;
3. that this Assignment of Lease has been signed by o, for and on behalf of
the Landlord, in my presence and in the presence of o, the other
subscribing witness;
4. that I know said o and o, both of whom are more than eighteen (18) years
old;
AND I HAVE SIGNED at o, this o day of o,
199o
o
SOLEMNLY DECLARED BEFORE ME
in Montreal, this o day
of o, 199o.
-----------------------------
Commissioner of Oaths
EXHIBIT I
---------
SELLER'S BEST KNOWLEDGE
-----------------------
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ D'Amour
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT J-1
FORM OF WINTHROP, STIMSON, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ OPINION
January ___, 1997
Hosposable Products, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
3290441 Canada Inc.
c/o Hosposable Products, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as special United States counsel to ▇.▇. ▇▇▇▇ +
▇▇▇▇▇ Inc., a corporation incorporated under the Canada Business Corporations
Act ("Seller"), in connection with that certain Asset Purchase Agreement dated
as of November 12, 1996 (the "Agreement"), by and among Seller, Hosposable
Products, Inc., a New York corporation, and 3290441 Canada Inc., a corporation
incorporated under the Canada Business Corporations Act. This opinion is given
to you pursuant to Section 6.2 of the Agreement. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the
Agreement.
In giving this opinion, we have examined and relied upon,
among other things, executed copies of the Agreement, the ▇▇▇▇ of Sale, the
Guaranty Agreement, the Covenant Agreement and the Registration Rights Agreement
(collectively, the "Agreements"). In connection with the foregoing, we have also
examined and relied upon originals or copies satisfactory to us of such other
instruments and documents and we have made such other inquiries and
investigations of law as we have deemed necessary or appropriate as a basis for
the opinion hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as original documents and the conformity with the original document of all
documents submitted to us as certified or photostatic copies. As to questions of
fact material to this opinion, we have, to the extent that the relevant facts
were not independently established by us, relied upon certificates of public
officials and certificates, oaths and declarations of officers or other
representatives of Seller as well as the accuracy of the representations and
warranties of Seller made in the Agreements.
Whenever used in any statement set forth in this opinion
letter, "to our knowledge" qualifies and limits such statement to the current
awareness of the attorneys of this firm primarily responsible for representing
Seller of factual matters that such attorneys recognize as being relevant to the
statement so qualified and limited. Except as otherwise stated herein, we have
undertaken no independent investigation or verification of such matters.
We are admitted to practice in the State of New York, and do
not express any opinion herein as to matters governed by any laws other than the
laws of the United States of America and the State of New York.
Based upon the foregoing, we are of the opinion that:
1. Assuming that Seller has sufficient legal capacity under
the laws of its jurisdiction of incorporation to enter into and carry out its
obligations under the Agreements, and assuming the due execution and delivery by
each of the parties named therein, each of the Agreements constitutes a valid
and legally binding agreement of Seller, enforceable against Seller in
accordance with the respective terms thereof, except as (i) limited or otherwise
affected by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application relating to or affecting creditors' rights,
including, without limitation, the effect of statutory or other law regarding
fraudulent conveyances and preferential transfers and (ii) limited by general
principles of equity (regardless of whether considered in a proceeding at law or
in equity) including, without limitation, the availability or unavailability of
equitable remedies.
2. The execution and delivery by Seller of the Agreements, and
the performance by Seller of its obligations thereunder, are not prevented by
and do not violate or result in a default under (i) the Business Corporation Law
of the State of New York, (ii) any other applicable statute or regulation of the
State of New York that a lawyer in such state exercising customary professional
diligence would reasonably recognize as being directly applicable or (iii) to
our knowledge, any order or ruling of any court or other governmental authority
of the United States or the State of New York.
This opinion is delivered to you solely for your use in
connection with the Agreement and the transactions contemplated thereby. This
opinion may not be used or relied upon by you for any other purpose, or by any
other person, without our prior written consent.
Very truly yours,
-2-
EXHIBIT J-2
FORM OF ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ OPINION
[January __, 1997]
HOSPOSABLE PRODUCTS, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
▇.▇.▇. ▇▇▇▇▇
and
3290441 CANADA INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Dear Sir/Madam:
This opinion is furnished pursuant to Section 6.2 of the Asset Purchase
Agreement executed by and among ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation
incorporated under the Canada Business Corporations Act ("Seller"), 3290441
Canada Inc., a corporation incorporated under the Canada Business Corporations
Act ("Buyer"), and Hosposable Products, Inc., a New York corporation ("Buyer
Parent"), dated as of November 12, 1996 (the "Asset Purchase Agreement") whereby
Seller sold all of its business and certain of its assets as more fully set out
in the Asset Purchase Agreement. Capitalized terms used but not defined herein
shall have the meaning attributed to them in the Asset Purchase Agreement. We
have acted as counsel to Seller in connection with the foregoing.
We have examined originals or copies, certified or otherwise identified
to our satisfaction of:
(a) the Asset Purchase Agreement;
(b) the ▇▇▇▇ of Sale;
(c) the Guaranty Agreement;
(d) the Covenant Agreement; and
(e) the Registration Rights Agreement
(collectively, the "Purchase Documents").
In rendering the opinions set forth below, we have assumed that (i)
each of the parties to the Purchase Documents (other than Seller) has duly and
validly executed and delivered each instrument, document and agreement to which
such party is a signatory, (ii) each person executing any instrument, document
or agreement on behalf of any such party (other than Seller) is duly authorized
to do so, (iii) each natural person executing any instrument, document or
agreement referred to herein is legally competent to do so, (iv) the genuineness
of all signatures and the authenticity and completeness of all documents
submitted to us as originals, and (v) the conformity to authentic original
documents of all documents submitted to us as copies, whether facsimile,
photostatic, certified or otherwise.
In connection with the opinions hereinafter expressed, we have
considered such questions of law and examined such public and corporate records,
certificates, opinions and other documents and concluded such other examinations
as we have considered necessary for the purposes of the opinions hereinafter
expressed.
This opinion is limited to the laws of the Province of Quebec and the
federal laws of Canada applicable therein, as presently in effect, and we
express no opinion with respect to the laws of any other jurisdiction. In
particular, we express no opinion as to (i) any antitrust or unfair competition
laws or regulations or (ii) any securities laws or regulations relating to the
Purchase Documents or the transactions contemplated thereby or otherwise
governed by the laws of any other jurisdiction.
On the basis of the foregoing and subject to the qualifications
hereinafter expressed, we are of the opinion that:
1. The Seller is duly constituted, validly in existence and in
good standing under the Canada Business Corporations Act, and
has all the corporate power and authority to carry on its
business and to own its properties under the laws of Canada and
is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which it was required to be
so licensed or so qualified, except where the failure to be so
licensed or so qualified would not have a material adverse
effect on the business, financial condition, assets,
liabilities (contingent or otherwise) or results of operations
of the Seller.
2. The Seller has full corporate power and authority to enter into and
execute the Purchase Documents, and the performance by Seller of its
obligations thereunder will not contravene or result in a breach of or
constitute a default under the Articles or By-laws or any resolutions
of the directors or shareholders of Seller.
3. No consent, approval, order, authorization of or registration,
declaration or filing with any government authority is required for the
execution and delivery by Seller of the Purchase Documents.
4. The execution and delivery by Seller of the Purchase Documents to which
it is a party, and the performance by Seller of its obligations
thereunder, have been duly authorized by all requisite corporate action
on the part of Seller.
5. Each of the Purchase Documents to which Seller is a party has
been duly executed and delivered on behalf of Seller.
6. The choice of laws of the State of New York to govern the
Purchase Documents is permitted under the laws of the Province
of Quebec, subject to such laws being specifically pleaded and
proved in the manner required by the court. In an action
brought before a court of competent jurisdiction in the
Province of Quebec to enforce the Purchase Documents, a Quebec
court would give effect to such choice of law, excluding the
rules governing conflict of laws and penal, fiscal, procedural
and expropriatory laws and rules, of the State of New York and
laws of the United States of America applicable therein,
subject to the following:
(i) the application of the laws of the State of New York, if
manifestly inconsistent with the public order as understood in
international relations, would not be given effect by the
courts in Quebec; however, we have no reason to believe that
this would be the case as regards the Purchase Documents;
(ii) under the Currency Act (Canada), Canadian courts may
render judgement only in Canadian currency;
(iii) all applicable bankruptcy, insolvency, rearrangement,
reorganization and other debtor relief legislation
affecting the rights of creditors; and
(iv) the discretion of the courts to limit the availability of
the remedies of specific performance and injunctive
relief.
7. We have no reason to believe that a Quebec court would not give effect
to the provisions of the Purchase Agreement under which the parties
agreed to submit disputes thereunder to arbitration under the rules of
the American Arbitration Association.
8. In an action brought before a court of competent jurisdiction
in the Province of Quebec to enforce a decision by an
arbitration panel against the Buyer made in accordance with the
terms and conditions of the Purchase Agreement, the Quebec
court would enforce such decision provided such decision is
enforceable in the jurisdiction in which it was rendered and
subject to the exceptions and exclusions provided and referred
to in Articles 3155 to 3168 of the Civil Code, a copy of which
is attached as Schedule A.
The opinions expressed in this letter are limited to the matters set
forth in this letter, and no other opinions should be inferred.
This opinion letter is solely for your benefit. This opinion letter may
not be relied on by, nor copies delivered to, any other person without our prior
written consent.
Yours Truly
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
EXHIBIT K
---------
GUARANTY AGREEMENT
------------------
THIS GUARANTY AGREEMENT (this "Guaranty"), dated as of _______ __,
1997, among ▇▇▇▇▇ ▇. ▇▇▇▇▇, having an address c/o ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ("Guarantor"), HOSPOSABLE PRODUCTS, INC., a
New York corporation ("HPI"), and 3290441 CANADA INC., a corporation
incorporated under the Canada Business Corporations Act, and a wholly owned
subsidiary of HPI ("HPI Sub", and collectively with HPI and the other Buyer
Indemnitees, the "Guaranteed Parties").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation incorporated under
the Canada Business Corporations Act ("Seller"), HPI and HPI Sub have entered
into an Asset Purchase Agreement dated as of November 12, 1996 (the "Asset
Purchase Agreement"), providing for the sale by Seller to HPI Sub of the
Acquired Business;
WHEREAS, immediately following the consummation of the transactions
contemplated by the Asset Purchase Agreement, Guarantor will be the legal and
beneficial owner of all of the issued and outstanding shares of Seller's voting
stock;
WHEREAS, in order to provide the Guaranteed Parties further
assurance as to the payment by Seller of its indemnity obligations under Section
8.1 of the Asset Purchase Agreement and as a condition precedent to the
obligations of HPI and HPI Sub to consummate the Closing under the Asset
Purchase Agreement, Guarantor, simultaneously with the Closing, will execute and
deliver to HPI and HPI Sub this Guaranty; and
WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Asset Purchase Agreement.
NOW, THEREFORE, as an inducement to HPI and HPI Sub to consummate
the transactions contemplated by the Asset Purchase Agreement and in
consideration of them so doing, each party hereto hereby covenants and agrees as
follows:
ARTICLE 1
GUARANTY
--------
Section 1.01. Guaranty. Subject to Section 2.01 hereof, Guarantor
hereby guarantees the full and faithful performance by Seller of Seller's
obligations to indemnify the Guaranteed Parties pursuant to Article 8 of the
Asset Purchase Agreement, but only to
the extent one or more Guaranteed Parties have made a written demand of Seller
to satisfy its obligations pursuant to such Article 8 and Seller has failed to
satisfy its obligations pursuant to such Article 8 for fifteen days after such
demand (the "Guaranteed Obligations").
Section 1.02. Payment and Performance of the Guaranteed
Obligations. If the Guaranteed Obligations are not paid by Seller through
set-off or otherwise in accordance with the terms and conditions of the Asset
Purchase Agreement (an "Event of Default") and the Guaranteed Parties shall have
complied with Section 1.01 hereof, Guarantor shall, upon written demand made by
a Guaranteed Party upon Guarantor, subject to Section 2.01 hereof, immediately
pay or cause the performance of the same in accordance with the terms and
conditions of the Asset Purchase Agreement. Payment to such Guaranteed Party
shall be made at such place and in such manner as directed by such Guaranteed
Party, without any deduction whatsoever whether for counterclaim, set-off or
otherwise.
Section 1.03. Continuing Liability of Guarantor. In the event the
Guaranteed Obligations are paid in whole or in part by Seller, the liability of
Guarantor pursuant to this Guaranty shall continue and remain in full force and
effect in the event that all or any part of any such payment is recovered by
Seller or its successors from a Guaranteed Party as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
Each of the Guaranteed Parties agrees to take all actions that are reasonably
appropriate to defend against any such attempt to recover all or part of any
such payment.
ARTICLE 2
LIMITATION OF GUARANTY
----------------------
Section 2.01. Limitation of Guaranty. Guarantor's liability
hereunder shall not exceed in the aggregate the excess of (i) the aggregate
amount of any cash or non-cash dividends, payments or other distributions,
including compensation or other bonus arrangement received by him from Seller,
from the Closing through the date on which a claim is made hereunder by a
Guaranteed Party over (ii) an amount equal to Cdn$35,000 for each successive
twelve month period that has elapsed from the Closing Date to the date as of
which the maximum liability of Guarantor is being determined under this Section
2.01, provided that this Section 2.01 shall not require any reimbursement by any
Guaranteed Party to Guarantor of any amount paid to such Guaranteed Party
hereunder that was consistent with the limitations in this Section 2.01 at the
time such payment was made.
-2-
ARTICLE 3
SATISFACTION OF GUARANTY
------------------------
Section 3.01. Satisfaction of Guaranty. The Guarantor and the
Guaranteed Parties agree (a) that Guarantor shall satisfy his obligations under
this Guaranty by surrender of the certificates representing, in this order and
this order only, the shares of Class A Mandatorily Redeemable Preferred Stock
(other than the Class A Excluded Shares), the Class B Mandatorily Redeemable
Preferred Stock, the Class E Exchangeable Preferred Stock (other than the
Excluded Shares), the Underlying Shares, if any, and Buyer Parent Common Stock,
in each case held by Guarantor, which surrender shall be automatic and without
any further action of Guarantor, until such time as all such shares have been
surrendered, and (b) that the Guaranteed Parties will have no recourse against
any other assets of Guarantor until the assets set forth in clause (a) hereof
have been exhausted in the order so set forth. For purposes of this Section
3.01, (w) the value of each share of Class A Mandatorily Redeemable Preferred
Stock and each share of Class B Mandatorily Redeemable Preferred Stock shall be
its Redemption Price (as defined in the Articles of Incorporation of HPI Sub),
(x) the value of each share of Class E Exchangeable Preferred Stock at any time
shall be the value of the Underlying Shares at such time, (y) the value of the
Underlying Shares or the Buyer Parent Common Stock at the time any such shares
or any shares of Class E Exchangeable Preferred Stock are surrendered pursuant
to this Section 3.01 shall be the average of the closing prices reported on the
Nasdaq National Market for Buyer Parent Common Stock for the twenty trading days
(whether or not any trades of Buyer Parent Common Stock occur on any such day)
prior to the date of such surrender and (z) the value of any Preferred Stock,
Underlying Shares or Buyer Parent Common Stock sold by Guarantor shall be the
sale price of such Preferred Stock, Underlying Shares or Buyer Parent Common
Stock, as the case may be, in such sale by Guarantor.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF GUARANTOR
------------------------------------------------------
Section 4.01. Representations, Warranties and Covenants. Guarantor
hereby represents, warrants and covenants to and for the benefit of the
Guaranteed Parties as follows:
(a) As of the date hereof, Guarantor is the holder of all of the
issued and outstanding capital stock of Seller other than the X Shares; and
(b) Guarantor agrees not to sell or otherwise transfer any shares
of Seller's capital stock, or permit Seller to issue or sell any shares of
Seller's capital stock for as long as Guarantor owns that number of shares
of voting capital stock of
-3-
Seller sufficient to enable him to elect a majority of Seller's Board of
Directors, to any Person other than Guarantor, by operation of law or
otherwise, unless Guarantor or Seller has first obtained and provided to HPI
and HPI Sub a guaranty of the purchaser or other transferee thereof
substantially to the same effect as this Guaranty satisfactory in form and
substance to HPI and HPI Sub.
ARTICLE 5
MISCELLANEOUS
-------------
Section 5.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
receipt of hand delivery, certified or registered mail, return receipt
requested, or telecopy transmission with confirmation of receipt, to the
Guarantor at the address set forth in the preamble, and to the Guaranteed
Parties at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇. Such names and addresses may be changed by written notice to
each person listed above.
Section 5.02. Binding Effect; No Assignment. This Guaranty shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Guaranty may only be assigned by the
Guaranteed Parties to an assignee of their rights in accordance with Section
10.11 of the Asset Purchase Agreement.
Section 5.03. Governing Law. The rights and duties of the parties
hereto under this Guaranty shall, pursuant to New York General Obligations Law
Section 5-1401, be governed by the law of the State of New York.
Section 5.04. Severability of Provisions. If any provision or
portion of such provision of this Guaranty shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Guaranty shall not be affected thereby.
Section 5.05. Counterparts. This Guaranty may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
Section 5.06. Headings. The headings in this Guaranty are for
reference only, and shall not affect the interpretation of this Guaranty.
Section 5.07. Third-Party Beneficiaries. The Buyer Indemnitees
shall be third-party beneficiaries of this Guaranty.
-4-
Section 5.08. Termination. Except as otherwise provided in Section
1.03, this Guaranty shall terminate on the later of (a) six years after the date
hereof and (b) the date which all indemnification claims of any Buyer Indemnitee
as to which claims were made in accordance with the Asset Purchase Agreement
prior to such expiration shall have been paid in full pursuant to the Asset
Purchase Agreement or this Guaranty or determined not to be payable by any
settlement agreement with the claimant or any final and non-appealable
arbitration award or judgment of a competent court.
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Guaranty
as of the day and year first above written.
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
HOSPOSABLE PRODUCTS, INC.
By:____________________________
Name:
Title:
3290441 CANADA INC.
By:____________________________
Name:
Title:
-▇-
▇▇▇▇▇▇▇ ▇-▇
FORM OF OPINION OF SPECIAL COMMITTEE'S U.S. COUNSEL
January __, 1997
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
3287858 Canada Inc.
c/o ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
1186020 Ontario Limited
c/o ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7.2 of
that certain Asset Purchase Agreement dated as of November 12, 1996 ("Purchase
Agreement"), among ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation incorporated under the
Canada Business Corporations Act, Hosposable Products, Inc., a New York
corporation ("Buyer Parent"), and 3290441 Canada Inc., a corporation
incorporated under the Canada Business Corporations Act and a wholly owned
subsidiary of Buyer Parent ("Buyer"). Capitalized terms defined in the Purchase
Agreement and used but not otherwise defined herein have the meanings ascribed
to them in the Purchase Agreement. We have acted as independent U.S. counsel to
the Special Committee in connection with the execution and delivery of the
Purchase Agreement, the Note, the Undertaking, the Guaranty Agreement, the
Registration Rights Agreement and the Covenant Agreement (collectively, the
"Purchase Documents").
In rendering the opinions set forth below, we have assumed
that (i) each of the parties to the Purchase Documents (other than Buyer Parent
and Buyer (collectively, the "Companies")) has duly and validly executed and
delivered each instrument, document and agreement to which such party is a
signatory and that such party's obligations set forth therein are its legal,
valid and binding obligations, enforceable in accordance with their respective
terms, (ii) each person executing any instrument, document or agreement on
behalf of any such party (other than the Companies) is duly authorized to do so
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
3287858 Canada Inc.
1186020 Ontario Limited
January __, 1997
Page 2
and (iii) each natural person executing any instrument, document or agreement
referred to herein is legally competent to do so.
Except as expressly stated in the next sentence, this opinion
is limited to the effect of the laws of the State of New York and the laws of
the United States of America, as presently in effect, and we express no opinion
with respect to the laws of any other jurisdiction. Insofar as the opinions
expressed in numbered paragraph 4 below relate to matters governed by the laws
of Canada, we have not made an independent investigation of such laws and have
relied, with your consent, as to such laws, upon the opinion of Stikeman,
Elliott, independent Canadian counsel to the Special Committee, of even date
herewith addressed to you. We express no opinion as to (i) any antitrust or
unfair competition laws and regulations, or (ii) any securities laws or
regulations, relating to the Purchase Documents or the transactions contemplated
thereby or otherwise.
We have made such inquiry of Buyer Parent and have examined
such records of Buyer Parent, public records and other documents as we have
deemed necessary to form the basis of the opinions hereinafter expressed,
including, without limitation, (i) the Purchase Documents, (ii) a certificate of
good standing from the New York Department of State dated ____________ __, 199_
for Buyer Parent, (iii) the current certificate of incorporation and bylaws of
Buyer Parent and (iv) certain certificates and other documents executed by
officers of each of the Companies. In addition, we have made such investigations
of law as we deem necessary and relevant for the purposes of this opinion.
In our examination of documents for purposes of this opinion,
we have assumed the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as copies
and the authenticity of the originals of such copies. We have also assumed the
genuineness of all signatures on all documents submitted to us for examination.
We have also assumed that all certificates issued by public officials have been
properly issued and that such certificates are accurate.
Whenever used in any statement set forth in this opinion
letter, "to our knowledge" or other words of similar meaning qualify and limit
such statement to the current awareness of the attorneys of this firm primarily
responsible for representing the Special Committee of factual matters that such
attorneys recognize as being relevant to the statement so qualified and limited.
Except as otherwise stated herein, we
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have undertaken no independent investigation or verification of such matters.
Based upon and subject to the foregoing and subject to the
further exceptions and qualifications set forth below, we are of the opinion
that:
1. Buyer Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
2. Buyer Parent has full corporate power and authority to
execute and deliver the Purchase Documents to which it is a party and to perform
its obligations thereunder. The execution and delivery by Buyer Parent of the
Purchase Documents to which it is a party, and the performance by Buyer Parent
of its obligations thereunder, have been duly authorized by all requisite
corporate action on the part of Buyer Parent.
3. Each of the Purchase Documents to which Buyer Parent is a
party has been duly executed and delivered by Buyer Parent, and constitutes a
valid and binding obligation of Buyer Parent, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally or by general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or at law).
4. Each of the Purchase Documents to which Buyer is a party
has been duly executed and delivered by Buyer, and constitutes a valid and
binding obligation of Buyer, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally or by general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or at law).
5. The execution and delivery by Buyer Parent of the Purchase
Documents to which it is a party, and the performance by Buyer Parent of its
obligations thereunder, are not prevented by and do not violate or result in a
default under (i) the Business Corporation Law of the State of New York, (ii)
any other applicable statute or regulation of the State of New York that a
lawyer in such state exercising customary professional diligence would
reasonably recognize as being directly applicable, (iii) any provision of its
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certificate of incorporation or bylaws, or (iv) to our knowledge, any order or
ruling of any court or other governmental authority of the United States or the
State of New York.
The opinions expressed in this letter are limited to the
matters set forth in this letter, and no other opinions should be inferred.
This opinion letter is solely for your benefit. This opinion
letter may not be relied on by, nor copies delivered to, any other person
without our prior written consent.
We do not undertake to advise you of any changes in the
opinions expressed herein subsequent to the issuance of this letter resulting
from changes in law or matters which may hereafter be brought to our attention.
Very truly yours,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
By:____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT L-2
FORM OF OPINION OF SPECIAL COMMITTEE'S CANADIAN COUNSEL
January __, 1997
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
3287858 Canada Inc.
c/o ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
1186020 Ontario Limited
c/o ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7.2 of that
certain Asset Purchase Agreement dated as of November 12, 1996 ("Purchase
Agreement"), among ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation incorporated under the
Canada Business Corporations Act, Hosposable Products, Inc., a New York
corporation ("Buyer Parent"), and 3290441 Canada Inc., a corporation
incorporated under the Canada Business Corporations Act and a wholly owned
subsidiary of Buyer Parent ("Buyer"). Capitalized terms defined in the Purchase
Agreement and used but not otherwise defined herein have the meanings ascribed
to them in the Purchase Agreement. We have acted as independent Canadian counsel
to the Special Committee in connection with the execution and delivery of the
Purchase Agreement, the Note, the Undertaking, the Guaranty Agreement and the
Covenant Agreement (collectively, the "Purchase Documents").
In rendering the opinions set forth below, we have assumed that (i)
each of the parties to the Purchase Documents (other than Buyer) has duly and
validly executed and delivered each instrument, document and agreement to which
such party is a signatory, (ii) each person executing any instrument, document
or agreement on behalf of any such party (other than Buyer) is duly authorized
to do so and (iii) each natural person executing any instrument, document or
agreement referred to herein is legally competent to do so.
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This opinion is limited to the laws of the Province of Quebec and the
federal laws of Canada applicable therein, as presently in effect, and we
express no opinion with respect to the laws of any other jurisdiction. We
express no opinion as to (i) any antitrust or unfair competition laws or
regulations or (ii) any securities laws or regulations relating to the Purchase
Documents or the transactions contemplated thereby or otherwise.
We have made such inquiry of Buyer and have examined such records of
Buyer, public records and other documents as we have deemed necessary to form
the basis of the opinions hereinafter expressed, including, without limitation,
(i) the Purchase Documents, (ii) a certificate of compliance issued under
Subsection 263(2) of the Canada Business Corporations Act dated _________ __,
199_ concerning Buyer, (iii) the current articles of incorporation and bylaws of
Buyer and (iv) certain certificates and other documents executed by officers of
each of Buyer and Buyer Parent. In addition, we have made such investigations of
law as we deem necessary and relevant for the purposes of this opinion.
In our examination of documents for purposes of this opinion, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as copies and
the authenticity of the originals of such copies. We have also assumed the
genuineness of all signatures on all documents submitted to us for examination.
We have also assumed that all certificates issued by public officials have been
properly issued and that such certificates are accurate.
Whenever used in any statement set forth in this opinion letter, "to
our knowledge" or other words of similar meaning qualify and limit such
statement to the current awareness of the attorneys of this firm practicing in
the Province of Quebec and primarily responsible for representing the Special
Committee of factual matters that such attorneys recognize as being relevant to
the statement so qualified and limited. Except as otherwise stated herein, we
have undertaken no independent investigation or verification of such matters.
Based upon and subject to the foregoing and subject to the further
exceptions and qualifications set forth below, we are of the opinion that:
1. Buyer is a corporation duly organized and validly
existing and has made all the necessary corporate filings required to be made
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under the laws of its jurisdiction of incorporation to keep the Buyer in good
standing under such laws.
2. Buyer has full corporate power and authority to execute and deliver
the Purchase Documents to which it is a party and to perform its obligations
thereunder. The execution and delivery by Buyer of the Purchase Documents to
which it is a party, and the performance by Buyer of its obligations thereunder,
have been duly authorized by all requisite corporate action on the part of
Buyer.
3. Each of the Purchase Documents to which Buyer is a party has been
duly executed and delivered on behalf of Buyer.
4. The choice of laws of the State of New York to govern the Purchase
Documents is permitted under the laws of the Province of Quebec, subject to
proof of such laws as a question of fact. A Court in Quebec would give effect to
such choice of law, excluding the rules governing conflict of laws and penal,
fiscal, procedural and expropriatory laws and rules, of the State of New York,
and would enforce the Purchase Documents, in any action brought to enforce the
Purchase Documents in the Province of Quebec, as provided in Article 3111 of the
Civil Code, subject to the following:
(i) the laws of the State of New York would have to be
proved as a question of fact;
(ii) the application of the laws of the State of New York, if
manifestly inconsistent with the public order as understood in
international relations, would not be given effect by the
courts in Quebec; however, we have no reason to believe that
this would be the case as regards the Purchase Documents;
(iii) under the Currency Act (Canada), Canadian courts may
render judgment only in Canadian currency;
(iv) even though a Quebec authority has jurisdiction to hear a
dispute, it may exceptionally, and on an application by a
party, decline jurisdiction if it considers that the
authorities of another jurisdiction are in a better position
to decide upon the matter;
(v) all applicable bankruptcy, insolvency, rearrangement,
reorganization and other debtor relief legislation
affecting the rights of creditors; and
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(vi) the discretion of the courts to limit the availability
of the remedies of specific performance and injunctive
relief.
5. Under Article 3111 of the Civil Code, a juridical act, whether or
not it contains a foreign element, is governed by the law expressly designated
by such act. The application of the conflict of laws rules of the Province of
Quebec would therefore result in the laws of the State of New York determining
whether or not the Purchase Documents are legal, valid and enforceable in
accordance with their respective terms.
6. Quebec law implicitly recognizes that the parties to the Purchase
Agreement may contractually submit to arbitration under the rules of the
American Arbitration Association.
7. If a decision from the arbitration panel is obtained against the
Buyer pursuant to the Purchase Agreement, the Quebec courts, in the face of the
express submission to the arbitration contained in the Purchase Agreement, will
recognize and declare enforceable a decision from the arbitration panel, subject
to the exceptions and exclusions provided in Articles 3155 to 3163 of the Civil
Code, a copy of which is joined hereto as Schedule A.
8. The execution and delivery by Buyer of the Purchase Documents to
which it is a party, and the performance by Buyer of its obligations thereunder,
are not prevented by and do not violate or result in a default under (i) the
Canada Business Corporations Act, (ii) any other applicable statute or
regulation of Canada or of the Province of Quebec that a lawyer in such
jurisdiction exercising customary professional diligence would reasonably
recognize as being directly applicable, (iii) any provision of its articles of
incorporation or bylaws, or (iv) to our knowledge, any order or ruling of any
court or other governmental authority of Canada of the Province of Quebec.
9. The 3,800,000 shares of Class B Mandatorily Redeemable Preferred
Stock and the 1,000,000 shares of Class E Exchangeable Preferred Stock issued to
Seller pursuant to the Purchase Agreement have been validly issued in accordance
with the requirements of the Canada Business Corporations Act and are fully paid
and non-assessable.
10. The authorized capital of Buyer comprises, inter alia, an unlimited
number of shares of Class A Redeemable Preferred Stock, none of which have been
issued yet. The issuance of the shares of Class A Redeemable Preferred Stock in
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accordance with the Purchase Agreement as it now reads has been duly authorized
by resolution of the Board of Directors of Buyer and, once the consideration for
their issuance has been fully paid to Buyer, the shares of Class A Redeemable
Preferred Stock then so issued in accordance with the Purchase Agreement as it
now reads and such resolution of the Board of Directors shall be shares that are
validly issued in accordance with the requirements of the Canada Business
Corporations Act and that are fully paid and non-assessable, on the condition
that no event or change in circumstances occurs between the date of this opinion
and the date of issuance of such shares of Class A Redeemable Preferred Stock
that would prevent such issuance in accordance with the Purchase Agreement as it
now reads.
The opinions expressed in this letter are limited to the matters set
forth in this letter, and no other opinions should be inferred.
This opinion letter is solely for your benefit. This opinion letter may
not be relied on by, nor copies delivered to, any other person without our prior
written consent.
We do not undertake to advise you of any changes in the opinions
expressed herein subsequent to the issuance of this letter resulting from
changes in law or matters which may hereafter be brought to our attention.
Very truly yours,
Stikeman, ▇▇▇▇▇▇▇
EXHIBIT M
COVENANT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the o day of o , 1996
BETWEEN: HOSPOSABLE PRODUCTS, INC., a
corporation incorporated under the laws of the
State of New York,
(hereinafter referred to as the "Parent"),
OF THE FIRST PART,
AND: 3290441 CANADA INC., a corporation
incorporated under the Canada Business
Corporations Act,
(hereinafter referred to as the "Corporation"),
OF THE SECOND PART,
AND: ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC., a corporation
incorporated under the Canada Business
Corporations Act,
(hereinafter referred to as the "Seller"),
OF THE THIRD PART,
WHEREAS pursuant to an asset purchase agreement dated as of o , 1996
among the Parent, the Corporation and the Seller (the "Asset Purchase
Agreement"), the Seller sold all of its business and certain assets to the
Corporation;
WHEREAS the Corporation is a subsidiary of the Parent;
WHEREAS the Asset Purchase Agreement provided that as part of the
consideration for the sale of such business and assets, the Seller was issued:
2.
(i) a promissory note in the aggregate principal amount of Cdn
$4,262,741, subject to adjustment, if any, as set forth in the
Asset Purchase Agreement, which note will be exchanged for
fully paid and non-assessable non-voting Class A shares of the
capital stock of the Corporation, such shares being entitled
to an annual fixed, cumulative, preferential dividend equal to
4% of their redemption price and a redemption privilege (the
"Class A Shares"),
(ii) 3,800,000 fully paid and non-assessable non-voting Class B
shares of the capital stock of the Corporation such shares
being entitled to an annual fixed, cumulative, preferential
dividend equal to 3.999999% of their redemption price and a
redemption privilege (the "Class B Shares"), and
(iii) 1,000,000 fully paid and non-assessable non-voting Class E
shares of the Corporation (the "Exchangeable Shares") such
Exchangeable Shares being subject to a call right and a
liquidation call right in favour of the Parent (the
"Parent Call Rights");
WHEREAS the articles of incorporation of the Corporation, as amended,
set forth the rights, privileges, restrictions and conditions attaching to the
Class A Shares (collectively the "Class A Share Provisions"), the Class B Shares
(collectively the "Class B Share Provisions") and the Exchangeable Shares
(collectively, the "Exchangeable Share Provisions");
WHEREAS Parent is the registered and beneficial owner of all of the
issued and outstanding voting common shares of the Corporation and wishes to
make certain covenants in respect of the Corporation relating to:
(i) payments in respect of the Class A Shares pursuant to the
Class A Share Provisions;
(ii) payments in respect of the Class B Shares pursuant to the
Class B Shares pursuant to the Class B Share Provisions;
(iii) payments in respect of the Exchangeable Shares pursuant to the
Exchangeable Share Provisions; and
(iv) the availability of common shares of the capital stock of
Parent, $0.01 par value per share (the "Parent Common Shares")
to holders of Exchangeable Shares ("Exchangeable Holders")
pursuant to the Exchangeable Share
Provisions;
WHEREAS all defined terms not defined herein shall have the meanings
ascribed to them in the Exchangeable Share Provisions;
-2-
3.
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
COVENANTS OF THE CORPORATION
1. Respect Terms of Shares. To the extent permitted by applicable law,
including without limitation the provisions of the Canada Business
Corporations Act, the Corporation covenants and agrees in favour of
each of the Seller, Parent and all subsequent holders of the Class A
Shares, Class B Shares and Exchangeable Shares (collectively the
"Subsequent Holders") to observe and perform the Class A Share
Provisions, the Class B Share Provisions and the Exchangeable Share
Provisions.
COVENANTS OF PARENT
2. Payments under Class A Shares, Class B Shares and Exchangeable Shares.
Parent agrees and covenants in favour of each of the Corporation, the
Seller and the Subsequent Holders to ensure that the Corporation is
able and has the financial resources (taking into account any
requirements under applicable law):
2.1 To declare and pay dividends on its Class A Shares, to redeem
and retract and pay the redemption price for such Class A
Shares and to pay the liquidation entitlement in respect of
the Class A Shares at the times and in accordance with the
terms set forth in the Class A Share Provisions;
2.2 To declare and pay dividends on its Class B Shares, to redeem
and retract and pay the redemption price for such Class B
Shares and to pay the liquidation entitlement in respect of
the Class B Shares at the times and in accordance with the
terms set forth in the Class B Share Provisions; and
2.3 To declare and pay dividends on its Exchangeable Shares, to
pay the Liquidation Amount and to redeem and pay the
Retraction Price for such Exchangeable Shares upon receipt of
a retraction request, at the times and in accordance with the
terms set forth in the Exchangeable Share Provisions.
2.4 Notwithstanding the foregoing provisions of this Section :
2.4.1 in the event that (i) the Corporation notifies the
Seller and the Parent that the Corporation does not
have the financial resources (taking into account any
requirements under applicable law) to pay any of the
amounts payable in accordance with the foregoing or
(ii) the Corporation has failed to pay any of the
amounts payable in accordance with the foregoing and
such failure to pay persists for thirty (30) days
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4.
following a written demand for such payment by
Seller, the Seller may, at its sole option and
discretion, elect by giving written notice to the
Parent and the Corporation within twenty (20) days of
receipt of such notice from the Corporation or within
twenty (20) days following the expiry of the
aforementioned thirty (30) day delay, as the case may
be, to receive directly from the Parent any such
amount payable to the Seller. The Parent undertakes
to pay directly to the Seller within five days of
receipt of the Seller's notice the amount which
Seller has elected to receive directly from Parent.
The Seller's election to receive any such amount
directly from Parent and the payment of such amount
by Parent to Seller will not (i) affect the right of
Seller to receive from the Corporation any other
amounts payable to Seller in accordance with the
Class A Share Provisions, the Class B Share
Provisions and the Exchangeable Share Provisions, or
(ii) deprive the Parent of any recourse it may have
against the Corporation by reason of having paid such
amount to Seller;
2.4.2 in the event that (i) the Corporation has given
notice to the Seller and the Parent in accordance
with subsection and the Seller has not elected to
receive payment directly from the Parent as provided
for in subsection or (ii) the Corporation has failed
to pay any of the amounts payable in accordance with
the foregoing and such failure to pay persists for
thirty (30) days following a written demand for such
payment by Seller, then the Parent may, at its sole
option and discretion, elect to pay any of such
amounts directly to Seller, by giving written notice
to the Seller and the Corporation within five (5)
days of the expiry of the applicable twenty (20) day
notice period set out in subsection . The Parent
undertakes to pay directly to Seller within five (5)
days of giving such notice the amount which it has
elected to pay directly to Seller. The Parent's
election to pay such amount directly to Seller and
the payment of such amount by Parent to Seller will
not (i) affect the right of Seller to receive from
the Corporation any other amounts payable to Seller
in accordance with the Class A Share Provisions, the
Class B Share Provisions and the Exchangeable Share
Provisions, and (ii) deprive the Parent of any
recourse it may have against the Corporation by
reason of having paid such amount to Seller.
3. Availability of Parent Common Shares. Parent agrees and covenants in
favour of the Corporation, the Seller and each Exchangeable Holder:
3.1 to ensure at all times that sufficient numbers of authorized
but unissued shares or treasury shares and Parent Shares are
available to the Corporation to permit
-4-
5.
the Corporation to satisfy its obligation to deliver Parent
Common Shares to Exchangeable Holders pursuant to the
Exchangeable Share Provisions; and
3.2 to ensure that such Parent Common Shares are validly
authorized and reserved for issuance and, when issued upon
exchange, shall be validly issued, fully paid and
non-assessable, free and clear of any encumbrances and
preemptive rights.
4. Parent's Call Right. Parent agrees and covenants in favour of the
Corporation and each Exchangeable Holder, that if the Parent exercises
any of the Parent Call Rights it will deliver the appropriate number of
Parent Common Shares to the relevant Exchangeable Holder, the whole in
conformity with the Exchangeable Share Provisions.
5. Event of Insolvency of the Corporation. If an Event of Insolvency of
the Corporation should occur, then the Seller may, at its option, give
notice to the Parent that the Seller has elected to require the Parent
to purchase from the Seller all of the Class A Shares and the Class B
Shares then outstanding and held by the Seller for a price of $1.00
(Canadian) per Class A Share and per Class B Share and the Parent shall
purchase and pay the aggregate purchase price for such shares on a date
(the "Closing Date") specified in the notice from the Seller which
shall not be less than 15 days after the sending of the notice. At the
closing on the Closing Date, the Seller shall deliver to the Parent the
share certificates representing such Class A Shares and Class B Shares
duly endorsed for transfer against delivery of the entire amount of the
purchase price which shall be payable by way of a promissory note to be
issued by Parent to Seller providing for payments in such amounts
payable on such dates and bearing such rate of interest to reflect the
dividend entitlement and redemption entitlement as provided in the
Class A Share Provisions and the Class B Share Provisions.
For purposes hereof:
5.1 "Event of Insolvency of the Corporation" shall mean the
occurrence of any of the following events:
5.1.1 the Corporation admits in writing its inability to
pay its debts generally as they become due;
5.1.2 the Corporation makes a general assignment for the
benefit of creditors;
5.1.3 the corporation becomes subject to bankruptcy
proceedings which it is not contesting in good faith,
diligently and by appropriate means or which
proceedings continue undischarged, unstayed or
undismissed for a period of thirty (30) days;
-5-
6.
5.1.4 the Corporation submits to or makes any application
for the purpose of suspension of payment of its
liabilities;
5.1.5 the Corporation petitions to or applies to any
authority for the appointment of an administrator,
receiver, trustee or intervenor for itself or for any
substantial part of its property;
5.1.6 the Corporation commences or has commenced against it
or in respect of its debts, any proceeding under any
Law, relating to reorganization, compromise,
settlement, arrangement, adjustment, dissolution or
liquidation, which proceedings it is not contesting
in good faith, diligently and by appropriate means or
which proceedings continue undischarged, unstayed or
undismissed for a period of thirty (30) days;
5.1.7 the Corporation becomes bankrupt within the meaning
of the laws of its country; or
5.1.8 the Corporation by any act indicates its consent to,
approval of or acquiescence in any bankruptcy,
reorganization or insolvency proceeding under any Law
or any proceeding for the appointment of an
administrator, receiver, trustee or intervenor for
itself or for any substantial part of its property or
suffers any such receivership or trustee to remain
undischarged for a period of thirty (30) days.
5.2 "Governmental Authority" means any federal, provincial, state,
regional, municipal, local or other governmental authority,
domestic or foreign, and includes any court, tribunal, agency,
department, commission, board, bureau or instrumentality
thereof and other Person exercising executive, legislative,
judicial, regulatory or administrative functions thereof or
pertaining thereto.
5.3 "Law" means:
5.3.1 all constitutions, treaties, laws, statutes, codes,
ordinances, orders, decrees, rules, regulations, and
municipal by-laws, whether domestic, foreign or
international;
5.3.2 all judgments, orders, writs, injunctions, decisions,
rulings, decrees, and awards of any Governmental
Authority;
5.3.3 all policies, voluntary restraints, practices or
guidelines of any Governmental Authority; and
5.3.4 all provisions of the foregoing,
-6-
7.
in each case binding on or affecting the Person referred to in
the context in which such word is used.
5.4 "Person" includes any individual, corporation, body corporate,
partnership, limited partnership, limited liability company,
joint venture, trust, estate, unincorporated association or
other entity or any government or governmental authority
(including any Governmental Authority) however designated or
constituted.
6. Event of Default of Parent.
6.1 If Parent is in default of its obligation to make a payment in
accordance with section hereof, and Parent fails to remedy
such default within 10 days of receiving written notice
thereof from Seller, then the Seller may, at its option, give
notice to the Parent that the Seller has elected to require
the Parent to purchase from the Seller all of the Class A
Shares and the Class B Shares then outstanding and held by the
Seller for a price of $1.00 (Canadian) per Class A Share and
per Class B Share and the Parent shall purchase and pay the
aggregate purchase price for such shares plus any accrued and
unpaid dividends thereon on a date (the "Closing Date")
specified in the notice from the Seller which shall not be
less than 15 days after the sending of the notice. At the
closing on the Closing Date, the Seller shall deliver to the
Parent the share certificates representing such Class A Shares
and Class B Shares duly endorsed for transfer against delivery
of the entire amount of the purchase price which shall be
payable by certified cheque or bank draft payable to Seller
and drawn on a branch of a Canadian chartered bank located in
the City of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ or, at the option of the
Seller, by wire transfer to Seller's bank in Canada in
accordance with wire transfer instructions set forth in a
notice by Seller to the Parent.
6.2 If Parent is in default of its obligation to make a payment
pursuant to a promissory note issued pursuant to Section and
Parent fails to remedy such default within 10 days of
receiving written notice thereof from Seller or if an Event of
Insolvency of the Parent should occur, then the entire
principal amount and all accrued and unpaid interest thereon
payable under such promissory note shall become immediately
due and payable by Parent to Seller by certified cheque or
bank draft payable to Seller and drawn on a branch of a
Canadian chartered bank located in the City of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇ or, at the option of the Seller, by wire
transfer to Seller's bank in Canada in accordance with wire
transfer instructions set forth in a notice by Seller to the
Parent. For purposes of this section "Event of Insolvency of
the Parent" shall have the same meaning as "Event of
Insolvency of the Corporation" except that all references to
the "Corporation" in such definition shall be read as if they
referred to the "Parent".
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8.
COVENANTS OF SELLER
7. Parent Call Rights. The Seller agrees to be bound by, and to cooperate
with the Parent in the Parent's exercise of, the Parent Call Rights.
Seller shall not assign, transfer or otherwise dispose of any of the
Exchangeable Shares or any interest therein to any Person without
obtaining and providing to the Parent the written agreement of such
Person to be bound by, and to cooperate with the Parent in the Parent's
exercise of, the Parent Call Rights.
8. Voting Rights. The Seller agrees not to exercise its right to elect
directors of the Corporation pursuant to Section 5 of the Class A Share
Provisions and the Class B Share Provisions for so long as Parent shall
have made payments to the Seller in accordance with section hereof.
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
9. Amendments, Modifications, etc. This agreement may not be amended or
modified except by an agreement in writing executed by the Corporation,
the Parent and the Seller.
TERMINATION
10. Survival of Agreement. This agreement shall continue until the later of
the following events:
10.1 the Class A Shares and the Class B Shares have been completely
redeemed and the redemption price in respect of such
redemptions shall have been fully paid in accordance with the
Class A Share Provisions and the Class B Share Provisions
respectively; and
10.2 there are no issued and outstanding Exchangeable Shares except
any Exchangeable Shares which may be held by Parent following
the redemption or exchange of all the Exchangeable Shares and
the payment of the Retraction Price therefor.
WARRANTY OF PARENT AND THE CORPORATION
11. Corporate Authority. Each of Parent and the Corporation has full
corporate power and authority to enter into this Agreement and to
provide the covenants set out herein. The execution, delivery and
performance by Parent and the Corporation of this
-8-
9.
Agreement have been duly authorized by all requisite corporate action.
Upon the due execution and delivery of this Agreement, this Agreement
shall constitute a valid and binding obligation of each of Parent and
the Corporation, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or
by general equitable principles.
GENERAL
12. Continuing Liability of Parent. In the event Parent makes payments to
Seller in accordance with this Agreement, the liability of Parent
pursuant to this Agreement shall continue and remain in full force and
effect in the event that all or any part of any such payment is
recovered by Parent or its successors from Seller or a Subsequent
Holder as a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law. Parent agrees to take all
actions that are reasonably appropriate to defend against any such
attempt to recover all or part of any such payment.
13. Severability. If any provision of this agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or
impaired thereby and the agreement shall be carried out as nearly as
possible in accordance with its original terms and conditions.
14. Enurement. This agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and
assigns and to the benefit of any Subsequent Holders and for such
purposes the provisions of this Agreement in favour of the "Seller" and
the "Exchangeable Holders" (including, without limitation the
provisions of sections , , and hereof) shall be interpreted as if each
reference therein to the "Seller" or the "Exchangeable Holders"
referred to the Subsequent Holders.
15. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given upon receipt of:
hand delivery; certified or registered mail, return receipt requested;
or telecopy transmission with confirmation of receipt:
-9-
10.
15.1 If to the Parent or the Corporation, to:
Hosposable Products, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
15.2 If to the Seller, to:
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
16. Governing Law. The rights and duties of the parties hereto under this
Agreement shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
-10-
11.
17. The parties hereto recognize the non-exclusive jurisdiction of the
courts of the State of New York over disputes relating to this
Agreement.
-11-
12.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.
HOSPOSABLE PRODUCTS, INC.
By:____________________________
By:____________________________
3290441 CANADA INC.
By:____________________________
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By:____________________________
By:____________________________
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13.
INTERVENTION
Each of 3287858 Canada Inc. ("3287858") and 1186020 Ontario Limited
("1186020") intervene to the covenant agreement dated January o by and among
Hosposable Products, Inc., 3290441 Canada Inc. and ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc. (the
"Covenant Agreement"), declares that it has read the Covenant Agreement,
understands its meaning and scope and is satisfied therewith.
Each of 3287858 and 1186020 accepts the benefit of any provisions of
the Covenant Agreement which may accrue to it as a Subsequent Holder (as defined
in the Covenant Agreement) and, as a Subsequent Holder, agrees to be bound by
the covenants of Seller set out therein as if it were the party making such
covenant.
3287858 CANADA INC.
Per:__________________________
▇▇▇▇▇ ▇▇▇▇▇
1186020 ONTARIO LIMITED
Per:__________________________
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, M.D.
-13-
EXHIBIT N
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT, dated as of _____________, 1997
(the "Agreement") by and among Hosposable Products, Inc., a New York corporation
(the "Company"), ▇.▇. ▇▇▇▇ + ▇▇▇▇▇ Inc., a corporation incorporated under the
Canada Business Corporations Act ("▇▇▇▇▇"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (a "Stockholder"
and, collectively with ▇▇▇▇▇, the "Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, 3290441 Canada Inc., a corporation
incorporated under the Canada Business Corporations Act, and a wholly owned
subsidiary of the Company ("Buyer"), and ▇▇▇▇▇ have entered into an Asset
Purchase Agreement dated as of November 12, 1996 (the "Purchase Agreement")
pursuant to which, subject to the terms and conditions set forth therein, Buyer
has agreed to acquire, and ▇▇▇▇▇ has agreed to sell, all of the operating assets
of ▇▇▇▇▇ (the "Acquired Business");
WHEREAS, as partial consideration for the Acquired Business, ▇▇▇▇▇
shall receive certain shares of Class E Preferred Stock of Buyer, which shares
are exchangeable, at the option of the holder, for an equal number of shares of
Common Stock;
WHEREAS, it is a condition to ▇▇▇▇▇'▇ obligations to sell the
Acquired Business that the Company enter into this Agreement to provide certain
registration rights.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions. The following capitalized terms have the following
meanings:
Commission: The United States Securities and Exchange Commission or any
other United States Federal agency administering the Securities Act.
Common Stock: The Company's Common Stock, par value $.01 per share, and any
securities issued with respect to such Common Stock by way of a stock
dividend, stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or similar transaction.
Demand Stockholder: Each of the Stockholders, either acting individually or
jointly pursuant to Section 2(a) of this
Agreement; provided, however, that such Persons shall not be deemed to be
Demand Stockholders unless the aggregate net proceeds to be received by such
Persons from the sale of their Registrable Securities pursuant to the
requested Demand Registration, as determined by the lead managing
underwriter of the offering for such Demand Registration (or if such
offering is not an underwritten offering, as reasonably determined by the
Persons that requested such Demand Registration), exceed $1,000,000.
Exchange Act: The United States Securities Exchange Act of 1934 and the
rules and regulations of the Commission thereunder, as in effect from time
to time.
Exempt Transfer: The transfer of Common Stock (i) by any Stockholder to an
Affiliate of such Stockholder, (ii) to a member of such Stockholder's Family
Group, (iii) pursuant to a registered public offering and (iv) pursuant to
Rule 144 under the Securities Act.
Family Group: With respect to ▇▇▇▇▇ ▇. ▇▇▇▇▇, his spouse, siblings, parents,
grandparents and descendants, whether natural or adopted.
Public Offering: The closing of an underwritten public offering of equity
securities of the Company or securities convertible into or exchangeable or
exercisable for any of such securities registered with the Commission under
the Securities Act.
NASD: The National Association of Securities Dealers, Inc. and any successor
organization.
Person: An individual, corporation, partnership, limited liability company,
association, joint-stock company, trust where the interests of the
beneficiaries are evidenced by a security, unincorporated organization,
estate, governmental or political subdivision thereof or governmental
agency.
Registrable Securities: Shares of Common Stock that (i) at any time, are
owned by any Stockholder, including, among other things, shares of Common
Stock received by any Stockholder pursuant to an exchange of shares of Class
E Preferred Stock of Buyer or received by way of a stock dividend or stock
split, or in connection with a combination of shares, recapitalization,
merger, consolidation or similar transaction, and (ii) have not at any time
been transferred except pursuant to an Exempt Transfer.
Registration Statement: A registration statement provided for in Section 6
of the Securities Act under which securities are registered under the
Securities Act, together with any preliminary, final or summary prospectus
contained therein, any amendment or supplement thereto, and any document
incorporated by reference therein.
-2-
Securities Act: The United States Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.
Capitalized terms used herein and not defined herein have the meanings as
defined in the Purchase Agreement. Terms defined in the Exchange Act or the
Securities Act and not otherwise defined herein have the meanings herein as
therein defined.
2. Demand Registration.
(a) Right to Demand. From and after the second anniversary date of
the Closing, each Demand Stockholder shall, have the one-time right, exercisable
by written notice to the Company, to request that the Company effect the
registration under the Securities Act of all or part of such Demand
Stockholder's Registrable Securities (a "Demand Registration").
Upon receipt of such notice, the Company shall promptly give
written notice of such Demand Registration to all registered holders of
Registrable Securities, and shall use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities that the Company has been
requested to register by such Demand Stockholder (including, without
limitation, an offering on a delayed or continuous basis pursuant to Rule
415 (or any successor rule to similar effect) under the Securities Act), and
(ii) all other Registrable Securities that the Company has been
requested to register by the holders thereof, by written request given to the
Company within 30 days after the giving of such written notice by the Company,
all to the extent required to permit the disposition of the Registrable
Securities so to be registered.
(b) Selection of Underwriters. The underwriters of any offering
pursuant to a Demand Registration shall be (a) a lead managing underwriter
(which shall be a nationally-recognized investment banking firm) selected by the
Demand Stockholder which requested such Demand Registration, subject, however,
to the approval of the other Stockholder that did not request such Demand
Registration, which approval shall not be unreasonably withheld, and (b) such
co-managing underwriters (which shall be one or more nationally-recognized
investment banking firms) selected by the Demand Stockholder that requested such
Demand Registration.
(c) Priority in Demand Registrations. If the managing underwriter
advises the Company that, in its opinion, the number of Registrable Securities
requested to be included in a Demand Registration exceeds what can be sold in
such offering at a price acceptable to the Demand Stockholder(s), then the
Company will include in such Demand Registration the number of Registrable
-3-
Securities requested to be included in such Demand Registration which the
Company is so advised can be sold in such offering in accordance with the
following priority: first, all Registrable Securities requested by the Demand
Stockholders to be included in such Demand Registration, allocated between such
Persons as they shall determine; and second all Registrable Securities requested
by other holders of Registrable Securities to be included in such Demand
Registration, pro rata among such Persons.
(d) Additional Demand Registrations. If the Company effects the
registration of less than all of the Registrable Securities held by the Demand
Stockholders pursuant to the Demand Registration pursuant to Subsection 2(a)
solely as a result of the operation of Subsection 2(c), the Demand Stockholder
may at any time request an additional two Demand Registrations, provided that at
least six months have elapsed since the effective date of the most recent Demand
Registration. Any such Demand Registration shall be requested, effected and in
all other respects be in accordance with the terms of the first Demand
Registration.
(e) Restrictions on Demand Registrations. The Company may postpone
for up to three months the filing or the effectiveness of a Registration
Statement for a Demand Registration, whether pursuant to Subsection 2(a) or
2(d), if the Company's Board of Directors determines that such Demand
Registration would reasonably be expected to have an adverse effect on any
proposal or plan by the Company or any of its subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction. In such event, the
Demand Stockholders will be entitled to withdraw their request for the Demand
Registration. If the request for the Demand Registration is so withdrawn, such
Demand Registration request shall not count as a Demand Registration request
hereunder.
(f) Registration of Other Securities. Whenever the Company shall
effect a Demand Registration pursuant to this Section 2, no securities other
than Registrable Securities shall be included among the securities covered by
such Demand Registration unless the Demand Stockholder which requested such
Demand Registration shall have previously consented in writing to the inclusion
of such other securities.
(g) Other Registration Rights. Except as otherwise provided in this
Agreement, the Company will not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
written consent of each of the Stockholders.
(h) Effective Registration Statement. A Demand Registration
pursuant to this Section 2 shall not be deemed to have been effected (i) unless
a Registration Statement with respect thereto has become effective, (ii) if
after it has become effective, such Demand Registration is interfered with by
any stop
-4-
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (iii) if the Registrable
Securities are not sold to the public thereunder as a result of the conditions
to closing specified in the purchase agreement or underwriting agreement entered
into in connection with such Demand Registration not being satisfied, other than
by reason of some act or omission by the selling Stockholders.
3. Piggyback Registration.
(a) Right to Piggyback. If the Company at any time proposes to
register any securities under the Securities Act (other than registrations on
Form S-4 or S-8 or the equivalent thereof) with respect to an underwritten
public offering and the form of Registration Statement to be used may be used
for the registration of Registrable Securities, the Company will give prompt
written notice to all holders of Registrable Securities of its intent to do so.
Within 30 days after receipt of such notice, any Stockholder which is a holder
of Registrable Securities may by written notice to the Company request the
registration by the Company under the Securities Act of Registrable Securities
in connection with such proposed registration by the Company under the
Securities Act of securities (a "Piggyback Registration"). Such written notice
to the Company shall specify the Registrable Securities intended to be disposed
of by such Stockholders and the intended method of distribution thereof. Upon
receipt of such request, the Company will use its best efforts to register under
the Securities Act all Registrable Securities which the Company has been so
requested to register, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered; provided, however, that if at any
time after giving notice of its intent to register securities and before the
effective date of the Registration Statement filed in connection with such
Piggyback Registration, the Company determines for any reason not to register or
to delay registration of such securities, the Company may, at its election, give
notice of such determination to the Stockholders requesting such Piggyback
Registration, and, thereupon, (i) in the case of a determination not to
register, the Company shall be relieved of its obligation to register any
Registrable Securities in connection with such Piggyback Registration (but not
from its obligation to pay registration expenses pursuant to Section 5 hereof)
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration be
effected as a Demand Registration under Section 2 hereof, and (ii) in the case
of a determination to delay registering, the Company may delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. No registration effected under this Section 3 shall relieve
the Company of its obligation to effect any Demand Registration upon request
under Section 2 hereof.
(b) Selection of Underwriters. The underwriters of any offering
pursuant to a Piggyback Registration shall be one or more
-5-
nationally-recognized investment banking firms selected by the Company.
(c) Priority in Piggyback Registrations. If the managing
underwriter informs the Company in writing of its judgment that including the
Registrable Securities in the Piggyback Registration creates a substantial risk
that the proceeds or price per unit to be received from such offering might be
reduced or that the number of Registrable Securities to be registered is too
large to be reasonably sold, then the Company will include in such Piggyback
Registration, to the extent of the number which the Company is so advised can be
sold in such offering: first, all securities proposed by the Company to be sold
for its own account; and second, such Registrable Securities requested by the
Stockholders to be included in such Piggyback Registration pro rata on the basis
of the number of shares of such Registrable Securities so proposed to be sold
and so requested to be included.
4. Registration Procedures.
(a) Company Covenants. Whenever the Company is hereunder required
to use its best efforts to effect the registration under the Securities Act of
any Registrable Securities as provided in Section 2 or 3, the Company will:
(i) prepare and file with the Commission the requisite
Registration Statement to effect such registration and thereafter use its
best efforts to cause such Registration Statement to become effective,
provided that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances specified
in Subsection 3(a), its securities which are Registrable Securities) at any
time prior to the effective date of the Registration Statement relating
thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered
by such Registration Statement until the earlier of (a) such time as all
such securities have been disposed of in accordance with the intended
methods of disposition by the sellers thereof set forth in such Registration
Statement and (b) the expiration of 180 days from the date such Registration
Statement first becomes effective (exclusive of any period during which the
Stockholders are prohibited or impaired from disposition of Registrable
Securities by reason of the occurrence of any event described in Section
4(a)(v)(a), (vii) or 4(c)), at which time the Company shall have the right
to deregister any of such securities which remain unsold;
(iii) furnish to each seller of Registrable Securities covered
by such Registration Statement such number of conformed
-6-
copies of the Registration Statement, and of each amendment and supplement
thereto, such number of copies of the prospectus contained in such
Registration Statement and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents as such seller may reasonably request;
(iv) use its best efforts to register or qualify all securities
covered by such Registration Statement under such other securities or blue
sky laws of jurisdictions as each seller thereof shall reasonably request,
to keep such registration or qualification in effect for so long as the
Registration Statement remains in effect, and to take any other action which
may be reasonably necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be required
to (a) qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not be obligated to be so qualified but for
the requirements of this subsection; (b) subject itself to taxation in any
such jurisdiction; or (c) consent to general service of process in any such
jurisdiction;
(v) use its best efforts to (a) obtain the withdrawal of any
order suspending the effectiveness of such Registration Statement or sales
thereunder at the earliest possible time and (b) cause all Registrable
Securities covered by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities of United States
jurisdictions as may be necessary to enable the seller thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller and the underwriters, of:
(x) an opinion of counsel for the Company dated the effective
date of the Registration Statement (and dated the closing date under the
underwriting agreement), reasonably satisfactory in form and substance to
such seller, and
(y) a "comfort letter" dated the effective date of the
Registration Statement (and dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who
have certified the Company's financial statements included in such
Registration Statement, covering substantially the same matters with respect
to such Registration Statement and, in the case of the "comfort letter,"
with respect to events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters
-7-
in underwritten public offerings of securities, and, in the case of the
legal opinion, such other legal matters, and, in the case of the "comfort
letter," such other financial matters, as such seller or the underwriter may
reasonably request;
(vii) at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, notify each seller of Registrable
Securities covered by such Registration Statement promptly after the Company
discovers that the prospectus included in such Registration Statement as
then in effect includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller promptly prepare
and furnish to such seller a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such Registration
Statement from and after a date not later than the effective date of such
Registration Statement; and
(x) use its best efforts to list all Registrable Securities
covered by such Registration Statement on a securities exchange on which
similar securities issued by the Company are then listed and shall take any
other action necessary or advisable to facilitate the disposition of such
Registrable Securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
request. Any Person participating in any Demand Registration or Piggyback
Registration must (a) agree to sell their securities on the basis provided in
the underwriting agreement and (b) complete and execute all documents required
under this Agreement or the underwriting agreement.
Each holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind described
in subparagraph (vii) of this Subsection 4(a), such holder will discontinue
immediately such holder's disposition of securities pursuant to the Registration
-8-
Statement until such holder receives copies of the supplemented or amended
prospectus contemplated by such subparagraph (vii) and, if so directed by the
Company, will deliver to the Company all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice.
(b) Underwriting Agreements. The Company will enter into an
underwriting agreement with the underwriters for any offering pursuant to a
Demand Registration or Piggyback Registration if requested by the underwriters
so to do. The underwriting agreement will contain such representations and
warranties by the Company and such other terms as are generally prevailing at
such time in underwriting agreements. The holders of Registrable Securities to
be distributed by the underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations, warranties, and other agreements by the Company to and for the
benefit of the underwriters also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required to make representations or
warranties to, or agreements with, the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities, such holder's intended method of distribution and any
representations required by law.
(c) Holdback Agreements. (i) Each holder of Common Stock party
hereto agrees by acquisition of such Common Stock not to effect any public sale
or distribution of any equity securities of the Company or securities
convertible into or exchangeable or exercisable for any of such securities
during the seven days prior to and the 120 days after any Public Offering,
Demand Registration or Piggyback Registration has become effective, except as
part of such Public Offering, Demand Registration or Piggyback Registration, as
the case may be, unless the managing underwriter of the Public Offering, Demand
Registration or Piggyback Registration otherwise agrees to such sale or
distribution.
(ii) The Company agrees (x) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven days
prior to and the 120 days after any Public Offering, Demand Registration or
Piggyback Registration has become effective, except as part of such Demand
Registration or Piggyback Registration, as the case may be, and except
pursuant to registrations on Form ▇-▇, ▇-▇ or any successor or similar forms
thereto and (y) to use its best efforts to cause each holder of at least 5%
of its equity securities (on a fully-diluted basis), or any securities
convertible into or exchangeable or exercisable for any such securities, to
agree not to effect any such public sale or
-9-
distribution of such securities during such period, unless the managing
underwriter otherwise agrees to such sale or distribution.
(d) Preparation; Reasonable Investigation. In connection with the
preparation and filing of each Registration Statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities to be registered under such Registration Statement, the underwriters
and their respective counsel and accountants, the opportunity to participate in
preparing the Registration Statement. The Company will also give each of such
Persons such access to its books and records and opportunities to discuss the
business of the Company with the Company's officers and independent public
accountants who have certified the Company's financial statements as shall, in
the opinion of such holders' and such underwriters' respective counsel, be
necessary to conduct a reasonable investigation within the meaning of the
Securities Act.
(e) Rule 144. The Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act to enable the
Stockholders to sell their Registrable Securities without registration under the
Securities Act and within the exemptions provided under the Securities Act by
Rule 144 or any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
5. Registration Expenses. The Company will bear all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all registration, filing and NASD fees, all
securities and blue sky compliance fees and expenses, all word processing
expenses, duplicating expenses, printing expenses, engraving expenses, messenger
and delivery expenses, all Company general and administrative expenses, all
Company counsel and accountants fees and disbursements, all special audit,
financial statement and reconstruction costs, all comfort letter costs, all
underwriter fees and disbursements customarily paid by issuers or sellers of
securities (including fees paid to a "qualified independent underwriter"
required by the rules of the NASD in connection with a distribution), all "road
show" expenses and allocations and the expense for other Persons retained by the
Company, but excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers, sales agents or similar securities industry
professionals relating to the distribution of Registrable Securities and
applicable transfer taxes, if any, which shall be borne by the sellers of the
Registrable Securities being registered in all cases.
6. Indemnification.
(a) Indemnification by the Company. In the event of any Demand
Registration or Piggyback Registration of any Registrable
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Securities under the Securities Act, the Company shall, and hereby does,
indemnify and hold harmless each seller of any Registrable Securities covered by
the Registration Statement with respect thereto, such seller's partners,
directors and officers, each underwriter (including any "qualified independent
underwriter" required by the rules of the NASD) of the offering or sale of such
securities, and each Person who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities to which such seller, partner, director, officer, underwriter or
controlling Person, as the case may be, may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of material fact contained in the Registration Statement under which such
Registrable Securities were sold or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse each such
indemnified Person for expenses reasonably incurred by it in connection with
defending such loss, claim, damage, liability, action or proceeding; provided
that the Company shall not be liable in any such case for any losses, claims,
damages, liabilities (or actions or proceedings in respect thereof) or expenses
which arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made by the Company in such
Registration Statement in reliance upon information furnished to the Company by
such Person through an instrument duly executed by such Person specifically
stating that it is for use in the preparation thereof; and provided further that
the Company shall not be liable to and does not indemnify any underwriter in the
offering or sale of Registrable Securities, or any Person who controls an
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be supplemented or amended, to
the Person asserting an untrue statement or alleged untrue statement or omission
or alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person, if such statement or omission was
corrected in such final prospectus. This indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of an
indemnified party, and shall survive the transfer of such Registrable Securities
by the seller thereof.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any Registration Statement,
that the Company receive an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subsection (a) of this
Section 6) the Company, its directors, its officers, and each other Person who
controls the Company within the meaning of the
-11-
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such Registration Statement, if such statement
or alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such Registration Statement. The prospective sellers'
obligation to indemnify will be several, not joint and several, among such
sellers and the liability of each such seller of Registrable Securities shall be
in proportion to and limited to the net amount received by such seller from the
sale of Registrable Securities pursuant to such Registration Statement. This
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company, its directors, officers or controlling
Persons, and shall survive the transfer of such Registrable Securities by the
seller thereof.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Subsection 6(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action. The
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 6, except to the extent that the indemnifying party
is prejudiced by the failure to give such notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified party and
the indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent that
it may wish, with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable for any settlement made by the indemnified party without its consent
(which consent will not be unreasonably withheld) or for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal
-12-
or state law or regulation of any governmental authority other than the
Securities Act.
(e) Indemnification Payments. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this
Agreement is for any reason unavailable or insufficient to indemnify an
indemnified party under Subsection 6(a), (b) or (d) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, or referred
to therein, then each indemnifying party shall, in lieu of indemnifying such
party, contribute to the amount payable by such indemnified party as a result of
such loss, claim, damage or liability, or action in respect thereof, in a
proportion which reflects: (i) first, the relative benefits received on the one
hand by the Company and on the other hand by the holders of the Registrable
Securities included in the offering; and (ii) second, the relative fault with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, on the one hand of the
Company and on the other hand of the holders of the Registrable Securities
included in the offering, as well as any other relevant equitable
considerations.
The relative benefits received shall be deemed to be in the same
proportion which the sum of the total subscription price paid to the Company in
respect of the Registrable Securities plus the total net proceeds from the
offering of the securities (before deducting expenses) received by the Company
bears to the amount by which the total net proceeds from the offering of the
securities (before deducting expenses) received by the holders of the
Registrable Securities with respect to such offering exceeds the subscription
price paid to the Company in respect of the Registrable Securities, and in each
case, the net proceeds received from such offering shall be determined as set
forth on the table of the cover page of the prospectus.
The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the holders of the Registrable Securities; the
intent of the parties; the parties' relative knowledge; the parties' access to
information; and the parties' opportunity to correct or prevent such statement
or omission. The Company and the Stockholders agree that it would not be just
and equitable if contribution pursuant to this Section 6 is determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to herein.
-13-
The amount paid or payable by an indemnified party as a result of
the loss, claim, damage or liability, or action in respect thereof, referred to
in this Subsection 6(f) shall be deemed to include, for purposes of this
Subsection 6(f), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of "fraudulent misrepresentation" within the meaning
of Section 11 of the Securities Act shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended or waived
by the consent of the Company and each of the Stockholders. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Subsection 7(a), whether or not such Registrable
Securities shall have been marked to indicate such consent.
(b) Nominees for Beneficial Owners. If Registrable Securities are
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its election, be treated as the holder of such Registrable Securities
for purposes of (i) any action by holders of Registrable Securities pursuant to
this Agreement and (ii) any determination of number of Registrable Securities
held by any holders of Registrable Securities contemplated by this Agreement. If
the beneficial owner of any Registrable Securities so elects, the Company may
require assurances of such beneficial owner's ownership of such Registrable
Securities.
(c) Notices. All consents, notices and other communications
provided for hereunder shall be in writing and sent in the manner provided in
the Purchase Agreement. Communications to a stockholder must be addressed to
such stockholder in the manner set forth in the Purchase Agreement or at such
other address as such stockholder communicates to the Company, or to the address
of the last holder of such security who has communicated an address to the
Company. Communications to the Company must be addressed to the Company in the
manner set forth in the Purchase Agreement.
(d) Assignment. This Agreement is personal to the parties hereto
and not assignable and may not be enforced by any subsequent holder of
securities of the Company; provided, however, that upon execution and delivery
to the Company of a commitment to be bound by the terms of this Agreement, this
Agreement may be assigned to, and may be enforced by, a transferee of Common
Stock pursuant to clauses (i), (ii) and (iii) of the definition of "Exempt
Transfer", which transferee shall thereupon have all of the rights and
obligations of its transferor hereunder.
-14-
(e) Descriptive Headings. The descriptive headings of the sections
and paragraphs of this Agreement are for reference only and shall not limit or
otherwise affect the meaning hereof.
(f) Governing Law. The rights and duties of the parties hereto
under this Agreement shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
(g) WAIVER OF JURY TRIAL. THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREON.
(h) Specific Performance. The parties hereto acknowledge that there
may be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement, in any
court of the United States or any state thereof having jurisdiction.
(i) Counterparts. This Agreement may be executed in any number of
counterparts. Each counterpart is an original, but all counterparts shall
together constitute one and the same instrument.
-15-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
HOSPOSABLE PRODUCTS, INC.
By:_______________________________
Name:
Title:
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
-16-
EXHIBIT O
---------
▇.▇. ▇▇▇▇ + ▇▇▇▇▇ INC.
PRO-FORMA POST CLOSING BALANCE SHEET
JANUARY X, 1997(1)
================================================================================
Assets
--------------------------------------------------------------------------------
Cash $600,000
(2) Hosposable shares (315,690) 2,162,476
(3) Redeemable Preferred shares 4,562,741
(4) Class "E" Exchangeable Preferred
shares 6,850,000
-------------
$14,175,217
=============
Liabilities NIL
Shareholder's equity 14,175,217
-------------
$14,175,217
=============
--------------------------------------------------------------------------------
NOTES TO PRO-FORMA POST CLOSING BALANCE SHEET
1. Assumes transactions contemplated by the Asset Purchase Agreement have
occurred. All ▇▇▇▇▇ corporate reorganization transactions have occurred
prior to balance sheet preparation date.
2. Based on a market value of U.S. $5.00 per share and an exchange rate of
U.S. $1.00 = CDN $1.37.
3. The amount will increase dollar for dollar with 1996 pre-tax earnings.
4. The amount is derived from the product of 1,000,000 shares at a price of
U.S. $5.00 (the assumed value of Hosposable common shares) and an
exchange rate of U.S. $1.00 = CDN $1.37. Of the 1,000,000 Class "E"
Exchangeable Preferred shares in the Company, only 833,333 will be owned
and controlled by ▇▇▇▇▇ ▇. ▇▇▇▇▇. The remainder, 166,667 shares, will be
owned and controlled by ▇▇▇▇▇ ▇. ▇▇▇▇▇'▇ siblings.