COUPHAR LTD.
BALYROBE LTD.
879185 ONTARIO INC.
568745 ONTARIO INC.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (in trust)
PENFUND PARTNERS AND COMPANY
BANTOR COMPANY
▇.▇. ▇▇▇▇▇▇▇▇
- and -
CASCADE (CANADA) HOLDINGS INC.
- and -
CASCADE CORPORATION
SHARE PURCHASE AGREEMENT
March 11, 1997
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THIS SHARE PURCHASE AGREEMENT is made the 11th day of March, 1997
AMONG:
COUPHAR LTD., a corporation governed by the laws of the
Province of Ontario ("Couphar")
- and -
BALYROBE LTD., a corporation governed by the laws of the
Province of Ontario ("Balyrobe")
- and -
879185 ONTARIO INC., a corporation governed by the laws of
the Province of Ontario ("879")
- and -
568745 ONTARIO INC., a corporation governed by the laws of
the Province of Ontario ("568")
- and -
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (in trust), an individual resident in the
Province of Ontario ("▇▇▇▇▇▇▇")
- and -
PENFUND PARTNERS AND COMPANY, LIMITED PARTNERSHIP a limited
partnership formed under the laws of the Province of Quebec
("Penfund") by its general partner PENFUND PARTNERS INC.
- and -
BANTOR COMPANY, a partnership formed under the laws of the
Province of Ontario ("Bantor")
- and -
▇.▇. ▇▇▇▇▇▇▇▇ of the Township of Puslinch
-3-
- and -
CASCADE (CANADA) HOLDINGS INC., a corporation
governed by the laws of the Province of Ontario (the
"Purchaser")
- and -
CASCADE CORPORATION, a corporation governed by the
laws of the State of Oregon ("Cascade")
RECITALS:
Couphar, Balyrobe, 879, 568, ▇▇▇▇▇▇▇, Penfund and Bantor (collectively, the
"Vendors") are the registered owners of all the issued and outstanding shares of
Kenhar Corporation, a corporation governed by the laws of the Province of
Ontario ("Kenhar" or the "Company").
The Vendors have agreed to sell to the Purchaser and the Purchaser has
agreed to purchase from the Vendors all of the issued and outstanding shares of
Kenhar upon and subject to the terms and conditions of this Agreement.
NOW THEREFORE, the parties agree as follows:
ARTICLE
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
Definitions - Whenever used in this Agreement, unless there is something
inconsistent in the subject matter or context, the following words and terms
shall have the meanings set out below:
"Accounts Payable" means all amounts due and owing by a Corporation to
traders, suppliers and other Persons in the ordinary course of business;
"Accounts Receivable" means any and all accounts receivable, bills
receivable, trade accounts, book debts and insurance claims recorded as
receivable in the Books and Records and any other amount due to a
Corporation including any refunds and rebates, and the benefit of all
security (including cash deposits), guarantees and other collateral held by
a Corporation;
"Accrued Liabilities" means any and all accrued liabilities of a
Corporation incurred in the ordinary course of business, including without
limitation, accruals for vacation pay, customer rebates and allowances for
product returns;
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"Affiliate" has the meaning ascribed thereto in the Business Corporations
Act (Ontario), as amended from time to time;
"Agreement" means this Share Purchase Agreement, including all schedules,
and all instruments supplementing or amending or confirming this Agreement
and references to "Article" or "Section" mean and refer to the specified
Article or Section of this Agreement;
"Applicable Laws" means all applicable statutes, laws, by-laws, rules,
decrees, regulations, orders, ordinances, policies, legally binding
protocols, notices, directions and judgments or other requirements of any
Governmental Authority in effect on or prior to the Closing Date;
"arm's length" means arm's length as defined in the Tax Act;
"Auditor" means KPMG Peat Marwick ▇▇▇▇▇▇, Chartered Accountants and its
predecessor firms;
"Benefit Plans" means all plans, arrangements, agreements, programs,
policies or practices, including Pension Plans and U.S. Plans, whether oral
or written, formal or informal, funded or unfunded, insured or uninsured,
to which any of the Corporations is a party or bound by or in which their
Employees participate or under which any of the Corporations have any
liability or contingent liability, relating to any bonus, profit sharing,
deferred compensation, incentive compensation, loans, savings, stock
option, stock purchase, hospitalization, health, dental, welfare,
disability, group insurance, supplementary unemployment insurance, vacation
pay, severance pay, club memberships, company cars, company awards,
education or other benefit plan with respect to any of their Employees or
former Employees excluding statutory plans which any of the Corporations
are required to comply with, including, without limitation, plans
administered pursuant to applicable provincial health tax, workers'
compensation and unemployment insurance legislation;
"Books and Records" means all books and records of a Corporation, including
financial, corporate, operating and sales books, records, books of account,
sales and purchase records, lists of suppliers and customers, formulae,
business reports, plans and projections and all other documents, files,
records, correspondence, and other data and information, financial or
otherwise, including without limitation, all data and information stored on
computer and computer-related media;
-5-
"Business" means the business of developing, manufacturing, modifying,
selling, distributing and servicing forks, basebands, fabricated wheels,
carriage bars, carriage assemblies and parts for the preceding items;
"Business Day" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located at Toronto, Ontario are open for
business during normal banking hours;
"Cascade" means Cascade Corporation, a corporation governed by the laws of
the State of Oregon;
"Claims" means any claim, demand, action, cause of action, damage, loss,
costs, liability or expense, including, without limitation, reasonable
professional fees and all costs incurred in investigating or pursuing any
of the foregoing or any proceeding relating to any of the foregoing;
"Closing" means the completion of the sale to and purchase by the Purchaser
of the Purchased Shares under this Agreement;
"Closing Date" means March 11, 1997 provided that, if ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Approval or the approval of The Toronto-Dominion Bank shall not have been
obtained by such date, the Closing Date shall be the third Business Day
following receipt of ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Approval and the approval of The
Toronto-Dominion Bank provided such Business Day occurs on or before March
31, 1997, or such other date as the Parties may agree in writing as the
date upon which the Closing shall take place;
"Closing Time" or "Time of Closing" means 2 o'clock p.m. Eastern Standard
Time on the Closing Date or such other time on such date as the Parties may
agree in writing as the time at which the Closing shall take place;
"Company" or "Kenhar" means Kenhar Corporation, a corporation incorporated
pursuant to the laws of the Province of Ontario;
"Contaminant" has the meaning ascribed thereto in Section 4.20;
"Contracts" means all contracts, licences, leases, agreements, commitments,
entitlements and engagements of the Company and includes all quotations,
orders or tenders for contracts which remain open for acceptance and any
manufacturers' or suppliers' warranty, guarantee or commitment (express or
implied);
"control" has the meaning ascribed thereto in the Business Corporations Act
(Ontario);
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"Corporations" means Kenhar and all the Subsidiaries of Kenhar, including
the corporations listed in Column 1 of Schedule 4.1 hereto and
"Corporation" means any of them;
"Employees" means all individuals employed part-time or full-time by any of
the Corporations, individuals working on contract with any of the
Corporations or other individuals providing services to any of the
Corporations of a kind normally provided by employees;
"Employment Agreement" means an employment agreement to be entered into as
of the Closing Date between ▇.▇. ▇▇▇▇▇▇▇▇, the Company and Cascade in the
form of the agreement set out in Schedule 1.1.1;
"Encumbrances" means any security interest, pledge, lien, charge, security
agreement, lease, title retention agreement, mortgage, encumbrance, option
or adverse claim, of any kind or character whatsoever;
"Environment" has the meaning ascribed thereto in Section 4.20;
"Environmental Approvals" has the meaning ascribed thereto in Section 4.20;
"Environmental Laws" has the meaning ascribed thereto in Section 4.20;
"Environmental Lien" has the meaning ascribed thereto in Section 4.20;
"Escrow Agreement" has the meaning ascribed thereto in Section 3.4;
"Equipment Contracts" means all motor vehicle leases, equipment leases,
conditional sales contracts, title retention agreements and other similar
agreements relating to equipment used by a Corporation;
"Escrow Agent" means TD Trust Company or such other escrow agent acceptable
to the Purchaser and the Vendors acting reasonably which shall be a
Canadian chartered bank or trust company;
"Exchange Agreement" means the exchange agreement to be entered into as of
the Closing Date between Cascade and Couphar in the form of Schedule 1.1.2;
"Exchangeable Shares" means the exchangeable preference shares in the
capital of the Purchaser of which shall have the rights, privileges,
restrictions and conditions set forth in Schedule 1.1.3;
-7-
"Financial Statements" means the consolidated balance sheets of the Company
as at April 30, in each of the years 1994 to 1996, inclusive, and the
related consolidated statements of income, retained earnings and
changes in financial position for the fiscal years then ended and the
notes thereto showing all of the assets and liabilities of the
Company, together with an unqualified opinion of the Auditor to the
effect that the Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and
present fairly in all material respects the assets, liabilities and
financial position of the Company at the respective dates of such
statements;
"Fixed Assets" means the fixed assets, machinery, equipment, fixtures,
furniture, furnishings, vehicles, material handling equipment, implements,
parts, tools, jigs, discs, molds, patterns and tooling, spare parts owned
or used or held by a Corporation, including, without limitation, any which
are in storage or in transit, and other tangible property and facilities
used by a Corporation whether located in or on the premises of such
Corporation or elsewhere as reflected on the Interim Balance Sheet and such
other Fixed Assets which have been acquired or disposed of since October
31, 1996 and which are listed and described in Schedule 4.24;
"Goodwill" means the goodwill of a Corporation, and information and
documents relevant thereto including, without limitation, lists of
customers and suppliers, credit information, research materials and
research and development files;
"Governmental Authorities" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown
corporation, or court or other law, rule or regulation-making entity having
or purporting to have jurisdiction on behalf of any nation, or province or
state or other subdivision thereof or any municipality, district or other
subdivision thereof;
"Governmental Authorization" means all authorizations, approvals, including
Environmental Approvals, licences or permits issued to any Corporation by
any Governmental Authorities;
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Approval" means all requisite approvals or waiting
periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, shall have been obtained or satisfied or the waiting period shall
have expired or terminated to permit the purchase of the Purchased Shares
by the Purchaser under this Agreement;
-8-
"Hazardous Substance" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance, dangerous
substance or dangerous good as defined, judicially interpreted or
identified in any Environmental Law;
"Intellectual Property" means all patents, copyrights, registered and
unregistered trade-marks, service marks, trade-names, logos, commercial
symbols, industrial designs, (including applications for all of the
foregoing and renewals, divisions, extensions and reissues, where
applicable, relating thereto), inventions, licences, trade secrets,
patterns, drawings, computer software, formulae, technical information,
research data, concepts, methods, procedures, designs, know-how, and all
other intellectual property owned by, licensed to or used by a Corporation;
"Interim Balance Sheet" means the consolidated balance sheet of the Company
as at October 31, 1996 and the notes thereto, forming part of the Interim
Financial Statements;
"Interim Financial Statements" means the unaudited consolidated financial
statements of the Company for the 6 month fiscal period ended October 31,
1996, consisting of the consolidated balance sheet and the notes thereto
and the related consolidated statements of income, retained earnings and
changes in financial position, a copy of which are attached hereto as
Schedule 4.9;
"Inventories" means all inventories of every kind and nature and
wheresoever situate owned by a Corporation including, without limitation,
all inventories of raw materials, work-in-progress, finished goods,
operating supplies and packaging materials;
"Key Employees" means those Employees listed in Schedule 7.9;
"Leased Premises" means the premises which are the subject of the Real
Property Leases;
"Material Contract" means any Contract involving aggregate payments to or
by a Corporation in excess of $50,000, or any commitment to or by a
Corporation that may reasonably extend beyond 1 year and which does not or
cannot be terminated without penalty on less than 3 months notice or which
is outside the ordinary course of business, not including intercompany
transactions, contracts in respect of goods manufactured by or supplied to
any Corporation and all services and employment agreements entered into in
the ordinary course of business;
-9-
"Non-Competition and Non-Solicitation Agreement" means a non-competition
agreement to be entered into as of the Closing Date between ▇.▇. ▇▇▇▇▇▇▇▇,
the Company, the Purchaser and Cascade in the form of Schedule 1.1.4;
"Notice" shall have the meaning given in Section 11.3;
"Parties" means the Vendors and the Purchaser collectively, and "Party"
means any one of them;
"Pension Plans" means all plans, arrangements, agreements, programs,
policies or practices, whether oral or written, formal or informal, funded
or unfunded, registered or non-registered, which any of the Corporations is
a party to or is bound by or in which their Employees participate or under
which any of the Corporations has any liability or contingent liability,
relating to retirement savings or pensions, including, without limitation,
any defined benefit pension plan, defined contribution pension plan, group
registered retirement savings plan, supplemental pension or retirement
plan, and where applicable U.S. Plans which are "employee pension benefit"
plans as defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended excluding statutory plans which any of the
Corporations are required to comply with under the laws of any other
jurisdiction;
"Permitted Encumbrances" means the Encumbrances listed in Schedule 4.10;
"Person" means any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, Governmental Authority, and a natural
person in such person's capacity as trustee, executor, administrator or
other legal representative;
"Proportionate Share" means in respect of any Vendor a fraction the
numerator of which is the number of Purchased Shares registered in the name
of such Vendor and the denominator of which is the aggregate number of
Purchased Shares.
"Proposed Acquisitions" means the proposed acquisitions by Kenhar of shares
of its Korean and Scandinavian Subsidiaries and of the assets of certain
businesses in China and Italy;
"Purchase Price" shall have the meaning ascribed thereto in Section 3.1;
"Purchased Shares" means all of the shares of the Company owned by the
Vendors being all of the issued and outstanding shares in the capital of
Kenhar on the date hereof and on the Closing Date;
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"Real Property" means all lands owned, or purported to be owned, by a
Corporation and all plants, buildings, structures, erections, improvements,
appurtenances and fixtures situate on or forming part of such lands;
"Real Property Leases" means those leases and subleases of real property
relating to real property used or occupied by a Corporation;
"Refusal Agreement" means the agreement to be entered into as of the
Closing Date between ▇.▇. ▇▇▇▇▇▇▇▇, Couphar and Cascade in the form of
Schedule 1.1.5;
"Registration Rights Agreement" means the registration rights agreement to
be entered into as of the Closing Date between ▇.▇. ▇▇▇▇▇▇▇▇, Couphar and
Cascade in the form of Schedule 1.1.6;
"Release" has the meaning ascribed thereto in Section 4.20;
"Remedial Action" has the meaning ascribed thereto in Section 4.20;
"Remedial Order" has the meaning ascribed thereto in Section 4.20;
"Shareholders Agreement" means the shareholders agreement to be entered
into as of the Closing Date between ▇.▇. ▇▇▇▇▇▇▇▇, Couphar and certain
Cascade shareholders in the form of Schedule 1.1.7;
"Subsidiary" means, with respect to Kenhar, any corporation of which
shares to which are attached more than 50% of the voting rights ordinarily
exercisable at meetings of the shareholders of such corporation are
beneficially owned, directly or indirectly, by Kenhar;
"Tax Act" means the Income Tax Act (Canada);
"Tax Returns" includes, without limitation, all returns, reports,
declarations, elections, notices, filings, information returns and
statements filed in respect of Taxes;
"Taxes" includes, without limitation, all taxes, duties, fees, premiums,
assessments, imposts, levies and other charges of any kind whatsoever
imposed by any Governmental Authority, together with all interest,
penalties, fines, additions to tax or other additional amounts imposed in
respect thereof, including, without limitation, those levied on, or
measured by, or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use, value-added,
excise, stamp, withholding, business, franchising, property, payroll,
employment, health, social services, education and social
-11-
security taxes, all surtaxes, all customs duties and import and export
taxes, all license, franchise and registration fees and all unemployment
insurance, health insurance, workers' compensation and Canada, Quebec and
other government pension plan premiums;
"U.S. Plans" means any "employee benefit plan" as defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended;
"Vendor's Shares" means, with respect to each Vendor, the shares in the
capital of the Company owned by such Vendor as set forth in Schedule 3.6;
"Voting Trust Agreement" means the voting trust agreement to be entered
into as of the Closing Date between Cascade, the Purchaser and TD Trust
Company in the form of Schedule 1.1.8; and
"1996 Balance Sheet" means the consolidated balance sheet (including notes
thereto) as at April 30, 1996 included in the Financial Statements.
Certain Rules of Interpretation - In this Agreement and the Schedules:
Time - time is of the essence in the performance of the Parties'
respective obligations;
Currency - unless otherwise specified, all references to money amounts
are to Canadian currency;
Headings - the descriptive headings of Articles and Sections are
inserted solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of such Articles or
Sections;
Singular, etc. - the use of words in the singular or plural, or with a
particular gender, shall not limit the scope or exclude the application of
any provision of this Agreement to such person or persons or circumstances
as the context otherwise permits;
Consent - whenever a provision of this Agreement requires an approval
or consent by a Party to this Agreement and notification of such approval
or consent is not delivered within the applicable time limit, then, unless
otherwise specified, the Party whose consent or approval is required shall
be conclusively deemed to have withheld its approval or consent;
Calculation of Time - unless otherwise specified, time periods within
or following which any payment is to be made or act is to be done shall be
calculated by excluding the day on which the period commences and including
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the day on which the period ends and by extending the period to the next
Business Day following if the last day of the period is not a Business Day;
Business Day - whenever any payment is to be made or action to be
taken under this Agreement is required to be made or taken on a day other
than a Business Day, such payment shall be made or action taken on the next
Business Day following such day.
Knowledge - Any reference to the "knowledge of" a Vendor or a Corporation
or any similar phrase shall mean to the best of the knowledge, information and
belief of such Vendor after reviewing all relevant records and making due
inquiries regarding the relevant matter of all relevant officers, directors,
employees, consultants or advisors of such Vendor or the Corporations, as the
case may be, and shall include knowledge, information and beliefs that each
Vendor reasonably ought to have had or known on the basis of the review and
inquiries made or required to have been made hereunder by such Vendor and, in
any case shall be to the best of the knowledge, information and belief of
Messrs. Harrison, Hoy, ▇▇▇▇▇▇▇▇ and Ostmeier.
Entire Agreement - This Agreement and the Deposit Agreement together with
the agreements and other documents to be delivered pursuant to this Agreement,
constitute the entire agreement between the Parties pertaining to the subject
matter of this Agreement and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties and there
are no warranties, representations or other agreements between the Parties in
connection with the subject matter of this Agreement except as specifically set
forth in this Agreement and any document delivered pursuant to this Agreement.
No supplement, modification or waiver or termination of this Agreement shall be
binding unless executed in writing by the Party to be bound thereby.
Applicable Law - This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated, in all respects, as an Ontario
contract. The Parties shall attorn to the non-exclusive jurisdiction of the
Courts of Ontario.
Accounting Principles - All reference to generally accepted accounting
principles means to principles recommended, from time to time, in the Handbook
of the Canadian Institute of Chartered Accountants and all accounting terms not
otherwise defined in this Agreement have the meanings assigned to them in
accordance with Canadian generally accepted accounting principles.
Schedules - The schedules to this Agreement, as listed below, form part of
and are an integral part of this Agreement:
Schedule Description
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Schedule 1.1.1 Employment Agreement
Schedule 1.1.2 Exchange Agreement
Schedule 1.1.3 Exchangeable Share Provisions
Schedule 1.1.4 Non-Competition and Non-
Solicitation Agreement
Schedule 1.1.5 Refusal Agreement
Schedule 1.1.6 Registration Rights Agreement
Schedule 1.1.7 Shareholders Agreement
Schedule 1.1.8 Voting Trust Agreement
Schedule 3.4 Escrow Agreement
Schedule 3.5 Allocation
Schedule 4.1 Corporations, Jurisdictions and
Capitalization
Schedule 4.2 Conflicting Agreements
Schedule 4.4 Ownership of Purchased Shares
Schedule 4.9 Financial Statements and Interim Financial
Statements
Schedule 4.10(a) Permitted Encumbrances
Schedule 4.10(b) Owned Real Property
Schedule 4.10(c) Leased Real Property
Schedule 4.10(d) Real Property Disclosure Items
Schedule 4.11 Permitted Transactions
Schedule 4.14 Intellectual Property
Schedule 4.15 Undisclosed Liabilities
Schedule 4.17 Guarantees
Schedule 4.19 Tax Matters
Schedule 4.20(a) Litigation
Schedule 4.20(b) Product Liability
Schedule 4.20(d) Environmental Matters
Schedule 4.21 Government Authorizations
Schedule 4.22(a) Transaction Steps
Schedule 4.22(b) Proposed Acquisitions
Schedule 4.23 Customers
Schedule 4.24 Capital Expenditures
Schedule 4.25(a) Employees
Schedule 4.25(b) Employment Contracts
Schedule 4.25(c) Employment Policies and Plans
Schedule 4.25(d) Collective Agreements
Schedule 4.26 Benefit Plans
Schedule 4.27 Distributions
Schedule 4.28 Real Property Transactions
Schedule 4.30 Insurance
Schedule 4.31 Recent Transactions
Schedule 4.32 Compliance
Schedule 4.33 Bank Accounts
Schedule 4.40 Key Employees
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Schedule 7.4 Opinion of Vendors' Counsel
Schedule 7.10 Release
Schedule 8.3 Opinions of Purchaser's Counsel to Vendors other
than Couphar
Schedule 8A.5 Opinions of Purchaser's Counsel to
Couphar
ARTICLE
PURCHASE AND SALE
Action by Vendors and Purchaser - At the Closing Time:
Purchase and Sale of Purchased Shares - Each Vendor shall sell and the
Purchaser shall purchase the Vendor's Shares of such Vendor for that
Vendor's Proportionate Share of the Purchase Price to be paid and satisfied
as provided for in this Agreement;
Payment of Purchase Price - The Purchaser shall deliver to the Vendors
the Purchase Price as provided in Section 3.3;
Transfer and Delivery of the Purchased Shares - Each Vendor shall
transfer and deliver to the Purchaser the share certificates representing
the Vendor's Shares of such Vendor duly endorsed in blank for transfer, or
accompanied by irrevocable security transfer powers of attorney duly
executed in blank, in either case by the holders of record, and shall take
such steps as shall be necessary to cause the Company to enter the
Purchaser or its nominee(s) upon the books of the Company as the holder of
the Vendor's Shares of such Vendor and to issue one or more share
certificates to the Purchaser or its nominee(s) representing the Vendor's
Shares of such Vendor.
Other Documents - The Vendors and Purchaser shall deliver such other
documents as may be necessary to complete the transactions and as provided
for herein.
Place of Closing - The Closing shall take place at the Closing Time at the
offices of Osler, ▇▇▇▇▇▇ & Harcourt located at the ▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, or at such other place as may be agreed upon by
the Vendors and the Purchaser.
Tender - Any tender of documents or money under this Agreement may be made
upon the Parties or their respective counsel and money may be tendered by
official bank draft drawn upon a Canadian chartered bank or by negotiable cheque
payable in Canadian funds and certified by a Canadian chartered bank or trust
company or, with the consent of the Party entitled to payment, by wire transfer
of immediately available funds to the account specified by that Party.
-15-
ARTICLE
PURCHASE PRICE
Purchase Price - The amount payable by the Purchaser for the Purchased
Shares shall be the amount of $93,596,220, minus the sum of (i) any shareholder
distributions including without limitation the amount of any dividends declared
or paid on, any proceeds of redemption, retraction or purchase for cancellation
of any shares of the Company (except "safe income" dividends and returns of
capital not exceeding $30,000,000 in the aggregate which were paid on May 7,
1996 as described on Schedule 4.22 and the stock dividends declared and paid on
March 10, 1997 as described on Schedule 4.11) and (ii) the cost, on an after tax
basis, of any benefits paid or agreed or committed to be paid to any Key
Employee (other than ▇▇▇▇▇▇▇▇) prior to Closing, in each case after April 30,
1996 (the "Purchase Price").
Intentionally deleted
Satisfaction of Purchase Price - At the Closing Time, the Purchase Price
shall be satisfied as follows:
by the issuance by the Purchaser to Couphar of 1,100,000 Exchangeable
Shares in satisfaction of $18,333,333 of Couphar's Proportionate Share of
the Purchase Price;
by the delivery to the Escrow Agent by the Purchaser of the amount of
$10,000,000 to be held subject to the Escrow Agreement referred to in
Section 3.4; and
by payment to the Vendors by the Purchaser of the balance of the
Purchase Price, by wire transfer of immediately available funds to accounts
designated by the Vendors or by the delivery to the Vendors of certified
cheques or bank drafts made payable in lawful money of Canada in accordance
with a direction to the Purchaser executed by the Vendors.
Escrow Agreement - As security for the representations, warranties,
covenants and other obligations of the Vendors pursuant to this Agreement or in
any agreement, certificate or other document delivered or given pursuant to this
Agreement, the Vendors shall, at the Closing Time, execute and deliver in favour
of the Purchaser an escrow agreement in the form attached hereto as Schedule
3.4.
Allocation of Purchase Price - The Purchase Price shall be allocated
amongst the Vendors and amongst the common and preferred shares of Kenhar owned
by the Vendors in accordance with the provisions of Schedule 3.5. Each Vendor
and the Purchaser agree to report the purchase and sale of the Vendor's Shares
of such Vendor
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in any returns required to be filed under the Tax Act and other taxation
statutes in accordance with the provisions of Schedule 3.5.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Each of the Vendors hereby covenants, represents and warrants with and to
the Purchaser on a several, and not a joint basis, the matters set out below.
Due Incorporation and Capacity to Carry on Business - Each Corporation is
a corporation duly incorporated or continued, organized and validly subsisting
in good standing under the laws of the jurisdiction of its incorporation as
shown in Schedule 4.1. Each Corporation has the corporate power, authority and
capacity to own its property and assets and to carry on its business as now
being conducted by it and is registered, licensed or otherwise qualified in its
jurisdiction of incorporation and is registered, licensed or otherwise qualified
as a foreign or extra-provincial corporation in each jurisdiction in which it
carries on business and in which such registration, licence or other
qualification is required and is in good standing in respect of each such
registration, licence or qualification. Schedule 4.1 sets out each jurisdiction
in which each Corporation is registered as a foreign corporation or licensed.
No Corporation carries on business or owns assets except inventories and
accounts receivable in any jurisdiction except those set opposite its name in
such Schedule. Except as disclosed in Schedule 4.11, none of the Corporations
has amended its instrument of incorporation, by-laws or other like constating
documents since October 31, 1996.
Absence of Conflicting Agreements or Required Consents, Enforceability -
Except as set out in Schedule 4.2, the execution, delivery and performance of
this Agreement by the Vendors does not: (a) require notification to or the
consent of any Person; (b) violate any provision of any Corporation's charter,
by-laws or equivalent constitutional documents; (c) violate any applicable law,
judgment, order, injunction, decree, rule, regulation or ruling of any
Governmental Authority to which any Corporation is subject; (d) either alone or
with the giving of notice or the passage of time or both, conflict with,
constitute grounds for termination of, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any authorization,
agreement, instrument, license or permit to which any Corporation is now a party
or is otherwise subject; or (e) result in the creation of any debt, lien,
security, interest, mortgage, trust, claim or other liability or Encumbrance
whatsoever on any of the assets of any Corporation. This Agreement constitutes
a valid and binding obligation of each of the Vendors enforceable against such
Vendor in accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the court from which they
are sought.
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Issued Capital; Other Rights of Purchase - Schedule 4.1 sets out the
authorized and issued share capital of each Corporation and the registered and
beneficial owners thereof. No Corporation has authorized or agreed and no
Person has any written or oral agreement, option, understanding or commitment,
or any right or privilege capable of becoming an agreement (including
convertible or exchangeable securities, warrants or convertible obligations of
any kind),
for the purchase or other acquisition from any Corporation of any
of its undertaking, property and assets other than in the ordinary
course of the routine daily affairs of the Business, or
for the issue or sale by any Corporation of any of its previously
unissued shares of any class or of any shares held in treasury or of
any other securities of any Corporation.
Existence; Due Authorization; Ownership of Purchased Shares -
Existence. Such Vendor, if a corporation or partnership, is duly
incorporated or created, is subsisting and in good standing under the laws
governing its creation and has the corporate power and authority to execute
and deliver this Agreement and to complete the transactions contemplated
hereby and to perform all of its obligations under this Agreement and the
Deposit Agreement.
Due Authorization. The transactions contemplated hereby have been
duly authorized by all necessary corporate action (in the case of a Vendor
which is a corporation) by such Vendor and this Agreement and the Deposit
Agreement have been duly executed and delivered by such Vendor and
constitute valid and binding obligations of such Vendor enforceable in
accordance with their respective terms.
No Conflicting Agreement. Such Vendor has the exclusive right to
dispose of its Purchased Shares as provided in this Agreement and such
dispositions will not violate, contravene, breach or offend against or
result in any default under any indenture, mortgage, lease, agreement,
obligation, instrument, charter or by-law provision (in the case of a
Vendor which is a corporation), statute, regulation, order, judgement,
decree, licence, permit or law to which the Vendor is a party or subject or
by which the Vendor is bound or affected.
Ownership of Purchased Shares. Except for the Purchaser hereunder, no
Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming an agreement
(including convertible or exchangeable securities, warrants or convertible
obligations of any kind) for the purchase from such Vendor of any
outstanding
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shares of Kenhar and such Vendor is the registered and
beneficial owner free and clear of all Encumbrances of the number of
Purchased Shares set opposite its name in Schedule 4.4 hereto.
Issued Share Capital - The Purchased Shares are the only issued shares in
the capital of Kenhar. All of the Purchased Shares are listed in Schedule 4.4
and have been duly and validly issued and are outstanding as fully paid and
non-assessable shares of Kenhar.
Subsidiaries and Investments - Except as disclosed in Schedule 4.1, since
October 31, 1996, none of the Corporations has owned directly or indirectly or
had any obligation to acquire any debt obligations of or shares in the capital
of or interests in any corporation or other Person, or to acquire or lease any
other business operations or any interest therein except for shares and debt
obligations of others of the Corporations. None of the Corporations has
conducted business in partnership with any other Person. Schedule 4.1 contains
the name of every direct or indirect Subsidiary of Kenhar and the name of every
corporation, partnership, joint venture or other Person in which a Corporation
has an interest.
Minute Books and Corporation Records - The corporate records and minute
books of each Corporation contain complete and accurate resolutions or minutes
of all meetings of the directors (including all committees thereof) and
shareholders of such Corporation held since its incorporation (all of which
resolutions or meetings were duly passed or called and held, as the case may be)
and the share certificate books, register of shareholders, register of transfers
and register of directors of each Corporation are and shall be complete and
accurate and all exigible security transfer taxes payable in connection with the
transfer of any securities of such Corporation have been duly paid. All of the
corporate records and minute books of the Corporations have been delivered or
made available to the Purchaser.
Accuracy of Books and Records - The Books and Records of each Corporation
fairly and correctly set out and disclose in all material respects the basis for
the financial position of each Corporation reflected in the Financial Statements
and all financial transactions of each such Corporation have been accurately
recorded in such Books and Records.
Financial Statements - The Financial Statements and the Interim Financial
Statements attached hereto as Schedule 4.9, have been prepared in accordance
with Canadian generally accepted accounting principles as at April 30, 1994 to
1996 inclusively and as at October 31, 1996, respectively, applied on a basis
consistent with those of previous years and present fairly (A) the assets and
liabilities (whether accrued, absolute, contingent or otherwise) and the
financial position of the Corporations as at the respective dates thereof, and
(B) the sales, earnings and results of the operations of the Corporations for
the fiscal years and period then ended subject in the case of the
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Interim Financial Statements to minor or immaterial year end adjustments
normal and usual in the Business and to the fact that income tax provisions
are estimated. Since the date of the most recent Financial Statements, there
has been no material adverse change to the Business or the operations, assets
or condition (financial or otherwise) of the Corporations taken as a whole.
Title to Assets -
Except as disclosed in Schedule 4.10, the Corporations own, possess
and have good title to and are the sole registered owner (where the
interests are registerable) of all of the undertaking, property and assets
in respect of which any amount was included on the Interim Balance Sheet
free and clear of all Encumbrances and those in favour of Kenhar or any
wholly-owned Corporation and except for inventory and equipment sold and
accounts receivable collected thereafter in the ordinary course of the
routine daily affairs of the Business and there has been no assignment,
subletting or granting of any licence (of occupation or otherwise) of or in
respect of the assets of any Corporation. All of the Fixed Assets of the
Corporations are located on Owned Real Property or Leased Premises;
Schedule 4.10(b) contains a legal description of all real and
immoveable property owned by any of the Corporations or leased by any of
them for an original term exceeding 50 years and the name of the owner
thereof ("Owned Real Property");
Schedule 4.10(c) contains the municipal address of all real and
immoveable property leased by any of the Corporations ("Leased Premises")
and the name of the lessor thereof;
Except as disclosed on Schedule 4.10(d):
Each Corporation or the indicated owner in the case of leased
property which is Owned Real Property has good and marketable title to
the Owned Real Property, indicated to be owned by it in Schedule
4.10(a) free and clear of all Encumbrances;
The buildings upon Owned Real Property were constructed and
located in substantial compliance with the provisions of all
applicable statutes, regulations, by-laws and restrictions;
The buildings are entirely located within the boundaries of such
properties and are not subject to any encroachment, unregistered
easement, right-of-way or restriction affecting them;
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There are no agreements, undertakings or other documents which
affect or relate to the title to, or ownership of any Owned Real
Property;
Each Corporation has such rights of entry and exit to and from
the Owned Real Property as are reasonably necessary to carry on its
business upon the Owned Real Property;
No Person, other than the Purchaser as provided for in this
Agreement, has any right to purchase any of the Owned Real Property,
and no Person other than a Corporation is using or has any right to
use, as tenant, or is in possession or occupancy of, any part of such
Owned Real Property;
No Corporation has entered into any agreement to sell, transfer,
encumber, or otherwise dispose of or impair such Corporation's right,
title and interest in and to the Owned Real Property or the air,
density and easement rights relating to the Owned Real Property;
No Corporation has received any notification of and none of the
Vendors has knowledge of, any outstanding or incomplete work orders in
respect of any of the buildings, improvements or other structures
constructed on the Owned Real Property or of any current
non-compliance with applicable statutes and regulations or building
and zoning by-laws and regulations;
All accounts for work and services performed or materials placed
or furnished upon or in respect of the construction and completion of
any of the buildings, improvements or other structures constructed on
the Owned Real Property or Leased Premises which are currently payable
have been fully paid and no one has registered a lien under the
Construction Lien Act (Ontario) or other similar legislation for such
work performed by or on behalf of a Corporation;
No Corporation has made application for a rezoning of any of the
Owned Real Property and, the Vendors have no knowledge of any proposed
or pending change to any zoning affecting the Owned Real Property that
would adversely affect its current use or the Business;
The Vendors have no knowledge of any expropriation or
condemnation or similar proceeding pending or threatened against the
Owned Real Property or any part of the Owned Real Property; and
There are no matters affecting the right, title and interest of a
Corporation in and to the Owned Real Property, which in the aggregate,
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would materially and adversely affect the ability of such Corporation
to carry on its business upon the Owned Real Property; and
The Corporations are entitled to enjoy peaceful and undisturbed
possession, as lessees, under all leases for Leased Premises necessary for
the operation of the Business and all such leases are valid and subsisting
and in full force and effect and no default on the part of any of the
Corporations or the lessors of the Leased Premises exists thereunder. The
Corporations are not a party to any real property leases as lessor.
No Payment of Dividends or Other Distributions - Except as disclosed in
Schedule 4.11, since the date of the most recent Financial Statements, no
Corporation:
has declared or paid any dividends or any other distribution on any of
its shares of any class except distributions deducted in computing the
Purchase Price and has not, directly or indirectly, redeemed, purchased or
otherwise acquired any of its shares or made any commitment to do so except
dividends payable by one Corporation to another or made any loan or advance
to any employee, officer, director, Vendor or any Person who does not deal
at arm's length with any of the foregoing except for advances on account of
expenses made in the ordinary course of the routine daily affairs of the
Business;
transferred, assigned, sold or otherwise disposed of any of the assets
shown or reflected in the Financial Statements or cancelled any debts or
entitlements except, in each case, in the ordinary and usual course of
business consistent with past practice;
incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and liabilities incurred
in the ordinary and usual course of business consistent with past practice;
discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than liabilities
included in the Financial Statements and liabilities incurred since the
date of the Financial Statements in the ordinary and usual course of
business and consistent with past practice;
suffered an operating loss or any extraordinary loss, waived or
omitted to take any action in respect of any rights of substantial value,
or entered into any commitment or transaction not in the ordinary and usual
course of business where such loss, rights, commitment or transaction is or
would be material in relation to the Corporations taken as a whole;
granted any bonuses, whether monetary or otherwise, or made any
general wage or salary increases in respect of its Employees, other than as
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provided for in any collective bargaining agreements or changed the terms
of employment for any Employee except in the ordinary course of business
and consistent with past practice except only for such payments which shall
be deducted in computing the Purchase Price as provided for in Section 3.1
hereof;
hired or dismissed any senior Employees other than the anticipated
hiring of one senior employee to replace a retiring senior employee, the
particulars of which have been disclosed to the Purchaser;
mortgaged, pledged, subjected to lien (other than unregistered
construction liens arising in the ordinary course of business), granted a
security interest in or otherwise encumbered any of its assets or property,
whether tangible or intangible; or
authorized, agreed or otherwise become committed to do any of the
foregoing.
Condition of Equipment and Inventory; Transfer Pricing -
All buildings, plant, machinery and equipment currently in use or
reasonably required for use by the Corporations in connection with the
Business are in good operating condition and proper working order, have
been properly used and maintained having regard to their age and the nature
of their use.
The Corporations' finished goods Inventory meets design and
manufacturing specifications, is merchantable and complies with any and all
warranties customarily given by the Corporations to their customers. The
Corporations' raw materials, work-in-progress, semi-finished work,
attachments and supplies Inventory are not obsolete, are in commercially
saleable quantities and are all capable of being processed at ordinary
costs and by ordinary procedures into finished goods that will be in good
and merchantable condition except for obsolete or imperfect inventory with
an initial value of not in excess of $100,000 which has been written-down
appropriately and reflected accurately in the Books and Records and
Financial Statements. All Inventories are valued on the books of the
Corporations at the lower of cost, using the first in, first out method, or
net realizable value.
Accounts Receivable - Subject to an allowance for doubtful accounts
determined by examining each individual account and not exceeding $150,000 in
respect of such Accounts Receivable included in the Interim Financial
Statements, all Accounts Receivable recorded on the books of the Corporations
are bona fide and, except as provided in Section 4.20(c), good and collectible
at the aggregate recorded amounts thereof and are not, except as provided in
Section 4.20(c), subject to any defence, set off or counter-claim.
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Intellectual Property - Schedule 4.14(a) contains a list of all trademarks,
service marks and patents, tradenames, copyrights, industrial designs and
applications therefor (including registration details) and trademark
applications of each of the Corporations owned by, used in or required for and
which are material to the operation of the Business (collectively "Intellectual
Property"). Schedule 4.14(b) contains a list of such similar property which is
not material to the Business or a Corporation and which is owned by or used in
connection with the Business. Each of the Corporations has the sole and
exclusive right to use and is the sole and exclusive owner of all right, title
and interest in all patents, trademarks, service marks, trade names and
copyrights, technology, industrial designs, know-how and processes, and all
rights with respect to the foregoing, which constitute the Intellectual Property
without, to the knowledge of the Corporations, any material conflict with the
rights of others and all licences are in full force and effect amended as of the
date hereof. The Intellectual Property owned by the Corporation is in full
force and effect and has not been used or enforced or failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Intellectual Property. None of the Intellectual
Property has been licensed to any Person except the Corporations. No product of
the Corporations infringes on any patent, trademark, service ▇▇▇▇, trade name,
copyright, license or other right owned by any other Person. No claim or
litigation is pending or threatened against or affecting any Corporation
contesting its right to sell or use any product or material. The Corporations
have no knowledge of any claim of adverse ownership, invalidity or other
opposition to or conflict with any Intellectual Property nor of any pending or
threatened suit, proceeding, claim, demand, action or investigation of any
nature or kind against a Corporation relating to the Intellectual Property. To
the knowledge of the Corporations, there is no violation by any Person of any
right of any Corporation with respect to any patent, trademark, trade name or
service ▇▇▇▇ owned by any Corporation, the consequence of which, in the
aggregate, adversely affect or in the future may (so far as the Corporations can
now foresee) adversely affect the business, operations, affairs, conditions
(financial or otherwise), properties or prospects of the Corporation, taken as a
whole. The Vendors have no knowledge that a Corporation, any activity in which
a Corporation is engaged or any product which a Corporation manufactures, uses
or sells or any process, method, packaging, advertising, or material that a
Corporation employs in the manufacture, marketing or sale of any such product,
or the use of any of the Intellectual Property breaches, violates, infringes or
interferes with any intellectual property rights of any third party or requires
payment for the use of any patent, trade-name, trade secret, trade-▇▇▇▇,
copyright or other intellectual property right or technology of another.
No Undisclosed Liabilities - Except with respect to the environmental
matters which are the subject matter of the representations and warranties
contained in Section 4.20(d) hereof as to which this representation and warranty
does not speak, there are no liabilities (contingent or otherwise), of any of
the Corporations of any kind whatsoever, whether or not accrued and whether or
not determined or determinable, other than:
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liabilities disclosed on, reflected in or provided for in the Interim
Balance Sheet;
liabilities disclosed in Schedule 4.15; and
liabilities incurred in the ordinary course of the routine daily
affairs of the Business and attributable to the period since October 31,
1996, which are not in the aggregate materially adverse to the nature of
the Business or the results of operations, assets, financial condition or
manner of conducting the Business and which have been generally disclosed
to the Purchaser.
Vacation Pay - All vacation pay, bonuses, commissions and other emoluments
of Employees of the Corporations accrued to April 30, 1996 are reflected in the
1996 Balance Sheet.
Outstanding Guarantees - Except as disclosed in Schedule 4.17, none of the
Corporations is a party to or bound by or has agreed to give any agreement of
guarantee, indemnification, assumption or endorsement or any other like
commitment for the obligations, liabilities (contingent or otherwise) or
indebtedness of any other Person except for guarantees given by one or more of
the Corporations for obligations of Kenhar or wholly-owned Corporations.
Outstanding Long-term Indebtedness - Except as disclosed in the Interim
Balance Sheet and Schedule 4.15, none of the Corporations has any bonds,
debentures, mortgages, notes or other indebtedness maturing more than one year
after the date of their creation or issuance or is under any agreement to create
or issue any bonds, debentures, mortgages, notes or other indebtedness maturing
more than one year after the date of their creation or issuance.
Taxes - Except as disclosed in Schedule 4.19:
each of the Corporations has duly and timely filed all Tax Returns
required to be filed by it to the date hereof and will have duly and timely
filed all Tax Returns required to be filed by it to the Closing Date and
each of the Corporations has paid all Taxes which are due and payable
including all instalments on account of Taxes to the date hereof and will
have paid all Taxes due and payable, including all instalments on account
of Taxes to the Closing Date;
Part I of Schedule 4.19 sets out opposite the name of each Corporation
the year up to and including which the income or profit Tax liability of
each of the Corporations has been reviewed by the Governmental Authority
having jurisdiction over such Corporation;
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adequate provision has been made and reflected in the Interim
Financial Statements and in the books of account and accounting records of
the Corporations for Taxes payable for the current period for which Tax
Returns are not yet required to be filed;
there are no agreements, waivers and other arrangements providing for
an extension of time with respect to the filing of any Tax Return by, or
the payment of any Tax payable by any of the Corporations;
there are no actions, suits, proceedings, investigations or claims now
threatened or pending against any of the Corporations in respect of Taxes,
or any matters under discussion with any Governmental Authority relating to
Taxes;
Each Corporation has withheld from each payment made to any of its
shareholders, officers, directors, former directors, non-resident creditors
and employees the amount of all Taxes, including but not limited to income
tax, and other deductions required to be withheld therefrom and has paid
the same to the proper tax or other receiving officers within the time
required under any applicable legislation;
no Person or group of Persons has ever acquired or had the right to
acquire control of Kenhar for purposes of the Tax Act or any applicable
provincial or municipal taxing statute;
The transfer pricing practices of the Company have not been the
subject of a review or audit by any Governmental Authority and there are no
agreements, waivers or other agreements providing for an extension of time
with respect to the assessment or collection of any Taxes against the
Company with respect to any matter relating to transfer pricing issues or
the transfer pricing practices of the Company. There are no suits or
similar proceedings now pending or threatened against the Company with
respect to any transfer pricing issue or transfer pricing practice of the
Company. There are currently no matters under discussion with any
Governmental Authority relating to any transfer pricing issue, transfer
pricing practices of the Company or any advance pricing agreement or
similar process or agreement concerning transfer pricing practices and
issues of the Company;
There are no circumstances existing which could result in the
application to the Company of either Section 78 or Section 80 of the Tax
Act;
All reserves taken or required to be taken by the Company for purposes
of the Tax Act are listed in Schedule 4.19; and
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All Corporations incorporated other than pursuant to the laws of
Canada or a province thereof are non-residents of Canada for the purposes
of the Tax Act.
Litigation; Product Liability; Environmental Matters -
Litigation. Except as disclosed in Schedule 4.20(a) and 4.20(b),
there are no actions, suits, litigation, investigations, claims,
complaints, grievances or proceedings (whether or not purportedly on behalf
of any of the Corporations), including appeals and applications for review,
in progress, pending or threatened against or affecting any of the
Corporations at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which would, if decided
adversely to the Corporations:
involve the possibility of any judgment against or liability of
any of the Corporations for an amount in excess of $100,000 in the
aggregate;
enjoin, restrict or prohibit the transfer of all or any part of
the Purchased Shares as contemplated by this Agreement; or
prevent any Vendor or Kenhar from fulfilling all of its
obligations set out in this Agreement or arising from this Agreement.
Except with respect to environmental matters which are the subject matter
of the representations and warranties contained in Section 4.20(d) hereof,
as to which this sentence does not speak, and except as disclosed in
Schedule 4.20(a), there is no existing ground on which any such action,
suit or proceeding might be commenced against any of the Corporations with
any reasonable likelihood of success in whole or in part. Except as
disclosed in Schedule 4.20(a), there is not presently outstanding against a
Corporation any judgment, decree, injunction, rule or order of any court,
Governmental Authority, commission, board, bureau, agency or arbitrator.
Product Liability - Injury and Death. Schedule 4.20(b) discloses:
(A) the insurance policies maintained by the Corporations in respect of
third party liability, liability for personal injury including death and
product liability (excluding product liability claims referred to in
subsection 4.20(c)) caused by the products of the Corporations; and (B) all
claims made against any of the Corporations since April 30, 1992 in
relation to the matters which are within the general description of the
coverage of such policies (whether or not within the exclusions related
thereto) and the disposition of such claims;
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Product Liability to Customers. Since April 30, 1992, the
Corporations have settled all disputes with customers regarding allegedly
defective product by replacing product or issuing credit notes to such
customers in the amount equal to the customer's claim as accepted by the
Corporations. The aggregate of the cost to the Corporations of such
replacement product for and the aggregate amount of such credit notes
issued in, each fiscal year commencing after April 30, 1992, did not exceed
$250,000 and the aggregate cost to the Corporations (whether for
replacement of product or the issue of credit notes) which would be issued
if all claims pending at October 31, 1996 were settled for the full amount
of each customer's claim will not exceed $125,000. To the knowledge of the
Vendors, the aggregate cost to the Corporations (whether for replacement of
product or the issue of credit notes) for the year ending April 30, 1997,
will not exceed $250,000.
Environmental Matters. For purposes of this clause and for Section
6.3, the following expressions have the following meanings:
Contaminant: any substance, liquid or other matter which is or is
deemed to be, alone or in any combination, hazardous, toxic,
radioactive, a pollutant, a deleterious substance, a dangerous
substance or good, a contaminant or a source of contamination under
any Environmental Law, whether or not such substance, liquid or other
matter is defined as hazardous under such Environmental Law.
Environment: the environment or natural environment as defined in any
Environmental Laws including, without limitation, air, surface water,
groundwater, land surface, soil, subsurface strata, a sewer system and
the environment in the workplace.
Environmental Approvals: all permits, certificates, licences,
authorizations, consents, instructions, registrations, directions or
approvals issued or required by any Governmental Authority pursuant to
Environmental Laws or in relation to health and safety matters with
respect to the operation of the Corporations or their assets
including, without limitation, any sewer surcharge agreement.
Environmental Laws: all statutes, statutory instruments, codes,
protocols, notices, directions, ordinances, decrees, rules,
regulations, municipal by-laws, judicial, arbitral, administrative,
ministerial, departmental or regulatory judgments, orders, decisions,
rulings, awards, policies, voluntary restraints or guidelines,
including without limitation general principles of common and civil
law and equity relating in whole or in part to the Environment,
product liability, health and safety matters or conditions,
Contaminants, including, without limitation, the storage,
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generation, use, handling, manufacture, processing, labelling,
advertising, sale, display, transportation, treatment, Release and
disposal of Contaminants, pollution or the protection of the
Environment.
Environmental Lien: a lien in favour of any Governmental Authority
for (i) any liability under Environmental Laws or (ii) damages arising
from, or costs incurred by such Governmental Authority in response to
a Release or threatened Release of a Contaminant into the Environment.
Release: has the meaning prescribed in any Environmental Law and
includes, without limitation, release, spill, emission, leaking,
pumping, pouring, emptying, dumping, injection, deposit, disposal,
seepage, placement, spraying, abandonment, incineration, discharge,
dispersal, escape, leaching or migration into the Environment,
including, without limitation, the movement of Contaminants through or
in the air, soil, surface water, groundwater or property of any
Corporation in contravention of any Environmental Law.
Remedial Action: actions required pursuant to any Environmental Law
including, without limitation, actions to (a) clean up, remove, treat
or in any other way address Contaminants in the Environment; (b)
prevent or minimize the Release or threat of Release of Contaminants
so they do not migrate or endanger or threaten to endanger public
health or welfare or the Environment; and (c) perform pre-remedial
studies and investigations and post-remedial monitoring and care.
Remedial Order: any administrative complaint, direction, order or
sanction issued, filed or imposed by any Governmental Authority
pursuant to any Environmental Laws including, without limitation, any
order requiring any remediation, Remedial Action or clean-up of any
Contaminant, or requiring that any Release or any other activity be
reduced, modified or eliminated.
The following representations and warranties shall be interpreted so
as to cover and include the former Kenhar Dyson Chicago property.
Except as disclosed in Schedule 4.20(d):
the operations of and the Owned Real Property comply and, to
the knowledge of the Corporations, have always complied with all
Environmental Laws and with any future Environmental Laws that,
to the knowledge of the Corporations, are presently planned or
proposed by any Governmental Authorities, and no Remedial Action
is being taken, nor are there grounds which would give rise to
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any Remedial Action having to be taken, as a condition of
continued compliance with applicable Environmental Laws;
each of the Corporations has obtained all Environmental
Approvals, which are listed in Schedule 4.20(d), necessary for
their respective operations, all such Environmental Approvals are
in good standing and are valid and in full force and effect, each
of the Corporations is and has been in compliance with all terms
and conditions of such Environmental Approvals and no Remedial
Action is being taken, nor are there grounds which would give
rise to any Remedial Action having to be taken, as a condition of
continued compliance with such Environmental Approval and there
have been and are no proceedings commenced or threatened to
revoke or amend any such Environmental Approvals;
none of the Corporations has received any notice of, nor to
their knowledge is there threatened nor is there any basis for
nor has any investigation or evaluation commenced regarding the
need for any claim, notice, request for information, judgment,
order or agreement from or with any Governmental Authority or
private party or any judicial or administrative proceeding or
investigations respecting any breach of any Environmental Laws,
any contravention of any Environmental Approvals, any
noncompliance with any Remedial Action or Remedial Orders of any
liabilities, obligations or costs arising from the Release or
threatened Release of a Contaminant into the Environment with
respect to their present properties or operations or, to their
knowledge, with respect to any past properties or operations as
to which any of the Corporations has liability;
neither the Corporations nor any of their operations have
been or are now subject to any Remedial Order, nor do the
Corporations have any knowledge of any investigation or
evaluation commenced as to whether any such Remedial Order is
necessary nor has any threat of any such Remedial Order been made
nor are there any circumstances relating to the operations of the
Business or the Owned Real Property which could result in the
issuance of any such Remedial Order;
none of the Corporations has never been prosecuted for or
convicted of any offence under Environmental Laws nor has any
Corporation been found liable in any proceeding to pay any fine
or judgment to any Person as a result of any Release or
threatened Release of any Contaminant into the Environment or the
breach of
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any Environmental Law and to the knowledge of the
Corporations, there is no basis for any such proceeding;
all environmental data and studies, including, without
limitation, the results of any environmental audit relating to
the Corporations or to any real property or assets associated
with the Corporations have been delivered or made available to
the Purchaser;
other than in compliance with Environmental Laws, there has
been no Release by the Corporations of any Contaminant which is
now present in, on or under any real property or assets
associated with the Corporations (including underlying soil and
substrata, surface water and groundwater);
the Corporations have no knowledge of any Contaminant in, on
or under any real property associated with the Corporations or
any other assets of the Corporations which is not in compliance
with Environmental Laws;
the Corporations have no knowledge of any Contaminant
originating from any neighbouring or adjoining properties which
has migrated onto, or has migrating towards any real properties
associated with the Corporations or any other assets of the
Corporations which results in a contravention of Environmental
Laws;
none of the Corporations has been required to file or has
filed any notice required under any of the Environmental Laws
indicating past or present treatment, storage or disposal of a
Contaminant;
none of the Corporations has been required to file or has
filed any notice required under applicable Environmental Laws
reporting a Release of a Contaminant into the Environment and any
Release by any Corporation of any Contaminant into the
Environment complied and complies with all Environmental Laws;
there is not now, nor has there ever been, on, from or in
the property owned, leased or used by, or under the charge,
management or control of, and of the Corporations (A) a landfill
or any generation, treatment, handling, transport, recycling,
storage or off-site or on-site disposal of any Contaminant or any
other substance which in either case has violated or could
reasonably be
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expected to violate or result in liability under
any Environmental Law applicable in respect thereof to any of the
Corporations or (B) any underground storage tanks or surface
impoundments;
there is not now on any property owned, leased or used by,
or under the charge, management or control of, any of the
Corporations (A) any friable asbestos-containing materials, or
(B) any poly-chlorinated bipheyls ("PCB's") or any equipment,
waste or other material containing PCB's;
none of the Corporations has received any notice or claim,
nor to the knowledge of any Corporation is there threatened any
notice or claim, that any of them is or may be liable to any
Person as a result of the Release or threatened Release of a
Contaminant into the Environment, or as a result of exposure to a
Contaminant;
no Environmental Lien has attached to any property
associated with any of the Corporations, nor are there any facts
or circumstances currently known to any of the Corporations that
may reasonably be expected to give rise to the attachment of such
an Environmental Lien;
there are no facts, circumstances, conditions or occurrences
respecting any of the Corporations, their operations or any real
property owned, used or leased by them, or under their charge,
management or control, or, to the knowledge of any of the
Corporations, on any property adjoining or in the vicinity of any
such real property that could reasonably be expected (I) to form
the basis of claims against the Corporations or with respect to
any such real property owned, used or leased by them that
individually or in the aggregate could reasonably be expected to
have a material adverse affect on the Corporations, or (II) to
cause any of such real property to be subject to any restrictions
on ownership (in respect of Owned Real Property), occupancy, use
or transferability (in respect of Owned Real Property), other
than restrictions associated with any change in use from the
current use thereof;
no work, repair, construction or capital expenditure is
required or planned pursuant to or to comply with any
Environmental Law; and
copies of all Phase 1 or equivalent and all other
environmental studies conducted by or for or in respect of the
Corporations have been provided to the Purchaser.
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Compliance with Law -
Except with respect to environmental matters which are the subject
matter of the representations and warranties contained in Section 4.20(d)
hereof as to which this paragraph does not speak, each Corporation is
conducting and has conducted its business in compliance with all applicable
laws, rules and regulations of each jurisdiction in which its business is
carried on or has been carried on and is not in breach, and has not
received any notification alleging that it is in breach of any such laws,
rules or regulations;
The authorizations, approvals, excluding Environmental Approvals,
licences or permits issued to Corporations by any Governmental Authority
listed in Schedule 4.21 are all such Governmental Authorizations required
by the Corporations to enable each of them to carry on its business in the
relevant jurisdictions in compliance with applicable laws (except for
licences and permits, the absence of which would not have an adverse effect
on the operation of the Business or the properties of the Corporations).
Such Governmental Authorizations are in full force and effect in accordance
with their terms, and there have been no violations thereof and no
proceedings are pending or, to the knowledge of the Corporations,
threatened, which could result in their revocation or limitation;
None of the Corporations is in default in any respect with respect to
any judgment, order, injunction or decree of any court, administrative
agency or other Governmental Authority;
Except with respect to environmental matters which are the subject
matter of the representations and warranties contained in section 4.20(d)
hereof as to which this paragraph does not speak, the uses to which the
Owned Real Property of each Corporation has been put are not in breach of
any applicable statute, by-law, ordinance, regulation, covenant,
restriction or official plan and each Corporation has not received any
notification alleging any such breach; and
There are no outstanding work or compliance orders relating to the
facilities of each Corporation from or required by any police or fire
department, sanitation, health or factory authorities or from any other
federal, state or municipal authority.
Nature and Conduct of the Business - Since April 30, 1994, the only
business carried on by the Corporations has been the Business. Since April 30,
1996, the Corporations have carried on business in the ordinary and normal
course of the routine daily affairs of the Business consistent with past
practice. Since April 30, 1996, there has not been:
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any material change in the financial condition, operations or
prospects of the Corporations other than changes in the ordinary and usual
course of business, none of which has been materially adverse;
any damage, destruction, loss, labour trouble or other event,
development or condition of any character (whether or not covered by
insurance) materially and adversely affecting the business, assets,
properties or future prospects of the Corporations; or
any material change in the level of Inventories or Fixed Assets of the
Corporations
except for:
the acquisition by the Corporations of 60% of the
issued shares of Nuova SAR s.r.l. and 80% of the issued shares of
Kenhar Iron Works Inc.;
the borrowing by the Corporations of an aggregate of
$30,000,000 and the application thereof by Kenhar to the payment
of a dividend and reduction of capital in accordance with the
transaction steps set forth on Schedule 4.22(a);
the stock dividends declared and paid on March 10, 1997 as set
forth in Schedule 4.11; and
borrowings to effect the Proposed Acquisitions not in excess of
an aggregate of $8,135,000 as described in Schedule 4.22(b).
Customers of the Business - Schedule 4.23 is a list of each of the
customers of the Corporations to which the aggregate sales of the Corporations
exceed $500,000 for the 12-month period ended April 30, 1996 and the sales to
each such customer during the such year. The Corporations do not have any
agreement expiring later than 12 months from the date hereof with any of their
customers as to the price to be paid by such customer for products. Since April
30, 1996 no customer of the Corporations to which its sales exceed $500,000
during the year ended April 30, 1996 has ceased doing or materially decreased
the amount of or indicated that it intends to cease doing or materially
decreased the amount of business with the Corporations except as shown on
Schedule 4.23. All discounts, allowances, volume rebates or other preferential
terms including marketing and pricing policies and promotions and trade
allowances are consistent with and conform to industry standards.
-▇▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ - Schedule 4.24 discloses capital expenditures in
excess of $10,000 which have been authorized or committed by, but not invoiced
before November 1, 1996 to, any of the Corporations.
Employment Matters -
Schedule 4.25(a) sets forth a complete list of the number of Employees
currently employed in each jurisdiction where Kenhar and its Subsidiaries
carry on business together with the nature of their employment. Except as
disclosed, no Employee is on long-term disability leave, extended absence
or receiving workers' compensation.
Except for those written employment contracts with salaried Employees
identified in Schedule 4.25(b), there are no written contracts of
employment entered into with any Employees or any oral contracts of
employment which are not terminable on the giving of reasonable notice in
accordance with Applicable Law.
Except as set out in Schedule 4.25(c) there are no employment policies
or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or
terms or conditions upon which Employees may be terminated, which are
binding upon the Company.
Each of the Corporations has been and is being operated in full
compliance with all laws relating to employees, including employment
standards, occupational health and safety, pay equity and employment
equity. The Corporations have complied with and posted plans as required
under the Ontario Pay Equity Act. There have been no complaints under such
laws against the Corporations.
There are no complaints nor, to the knowledge of the Vendors, are
there any threatened complaints, against the Corporations, before any
employment standards branch or tribunal or human rights tribunal. There is
not now nor has there in the past been any complaint against the
Corporations, under any human rights legislation or employment standards
legislation. There are no outstanding decisions or settlements or pending
settlements under the employment standards legislation which place any
obligation upon the Corporations, to do or refrain from doing any act.
All current assessments under the Workers' Compensation Act (Ontario)
in relation to the Company have been paid or accrued and the Company has
not been subject to any special or penalty assessment under such
legislation which has not been paid.
-35-
Except as set out in Schedule 4.25(d), none of the Corporations is a
party, either directly or by operation of law, to any collective agreement,
letters of understanding, letters of intent or other written communication
with any trade union or association which may qualify as a trade union,
which would cover any of its Employees or any dependent contractors of the
Corporations.
To the knowledge of the Vendors there are no outstanding labour
tribunal proceedings of any kind, including any proceedings which could
result in certification of a trade union as bargaining agent for Employees
or dependent contractors of the Corporations, and there have not been any
such proceedings within the last two years.
To the knowledge of the Vendors there are no threatened or apparent
union organizing activities involving the Employees or dependent
contractors of the Corporations.
The Company does not have any serious labour problems that might
materially affect the value of the Company on a consolidated basis or lead
to an interruption of its operations at any location.
Benefit Plans -
In this Section 4.26, the following expressions have the following
meanings:
Definitions.
Code: the Internal Revenue Code of 1986 as
amended.
ERISA: the Employee Retirement Income Security
Act of 1974, as amended from time to time.
Except as otherwise disclosed in Schedule 4.25(c) and 4.27, Schedule
4.26 sets forth a complete list of all Benefit Plans. Except as disclosed
in Schedule 4.26:
Each Benefit Plan is, and has been, established, administered,
and to the extent applicable, registered, qualified and invested, in
compliance with (i) the terms thereof, (ii) all Applicable Laws and
(iii) any collective agreement.
All obligations under the Benefit Plans as of the Closing Date
(whether pursuant to the terms thereof or any Applicable Laws) have
-36-
been satisfied or have been provided for in the Interim Balance Sheet
and there are no unfunded liabilities with respect to Benefit Plans
which have not been reflected and disclosed in the Interim Financial
Statements, and there are no outstanding defaults or violations
thereunder by any of the Corporations and, to the Vendors' knowledge,
there has not been any default or material violation by any other
party to any Benefit Plan.
There has been no increase or promised increase in benefits or
improvements under any of the Benefit Plans since April 30, 1996.
Any and all contributions, premiums or remittances required to be
paid in respect of each Benefit Plan (employee and employer) have been
paid in a timely fashion in accordance with the terms thereof and all
Applicable Laws, and no Taxes, penalties or fees are owing or exigible
under any Benefit Plan.
There is no proceeding, action, suit or claim (other than routine
claims for benefits) pending or, to the knowledge of the Vendors,
threatened involving any Benefit Plan, any insurance contract relating
to any Benefit Plan, or the assets held in the funding media for any
Benefit Plan.
None of the Benefit Plans (other than Pension Plans) provide
benefits to former Employees or to their beneficiaries or dependents,
except as may be required by law.
None of the Benefit Plans require or permit a retroactive
increase in premiums or payments, and the level of insurance reserves,
if any, under any insured Benefit Plan is reasonable and sufficient to
provide for all incurred but unreported claims.
None of the Benefit Plans is a multi-employer plan as
defined under Applicable Laws.
As of the date of the last completed actuarial valuation, no
Pension Plan had any unfunded liability on a "going concern" basis as
determined in accordance with all Applicable Laws and using
assumptions and methods that are appropriate in the circumstances and
in accordance with generally accepted actuarial principles. No
material changes have occurred in respect of any Pension Plan since
the date of the most recent actuarial report issued in connection with
such Pension Plan, which could reasonably be expected to adversely
affect the report by rendering it misleading in any material respect.
-37-
All contributions, including any special payments to amortize any
unfunded liabilities required to be made prior to the Closing in
accordance with all Applicable Laws and the terms of each Pension Plan
have been made or are provided for on the Interim Balance Sheet.
No event has occurred and no condition exists with respect to any
Pension Plan that has resulted or is reasonably likely to result in
any Pension Plan being ordered or required to be wound up in whole or
in part pursuant to any Applicable Laws or having its registration
revoked or refused for the purposes of any Applicable Laws or being
placed under the administration of any relevant pension benefits
regulatory authority or in any Corporation or such Pension Plan being
required to pay any Taxes or penalties under any Applicable Laws.
No event has occurred and no condition exists which has resulted
or could reasonably be expected to result in any Corporation being
required to pay, repay or refund any amount (other than contributions
required to be made or benefits or expenses required to be paid in the
ordinary course) to or on account of any Pension Plan or a current or
former member thereof.
No event has occurred and no condition exists that has resulted
or could reasonably be expected to result in a payment being made out
of a guarantee fund established under any Applicable Laws in respect
of a Pension Plan. No order has been made and no notice has been
given pursuant to any Applicable Laws in respect of any Pension Plan
requiring (or proposing to require) any Person to take or refrain from
taking any action in respect thereof and, to the best of the knowledge
of each of the Corporations, there has been no contravention of any
such Applicable Laws and there are no circumstances that indicate that
there has been such a contravention.
Compliance with ERISA and the Code -
None of the Corporations with Employees reporting to work in
the United States of America (the "U.S. Corporations") has
breached the fiduciary rules of ERISA or engaged in any
non-exempt prohibited transaction, which could reasonably be
expected to result in any direct or indirect material liability
(including, without limitation, as a result of any
indemnification obligation) to any of the Corporations in
connection with a suit for damages or pursuant to Section 409,
502(i) or 502(1) of ERISA or Section 4975 of the Code, which
liability, either individually or in the aggregate, has had or
could reasonably be expected to have a material adverse
-38-
effect on the financial condition of the Corporations taken as
a whole.
Other than for premiums payable in the normal course that
are not past due, none of the U.S. Corporations has incurred any
direct or indirect material liability (including, without
limitation, as a result of an indemnification obligation) under
or pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to any U.S. Plans and no
event, transaction or condition has occurred or exists or, to any
of such Corporations' knowledge, is reasonably expected to occur
or exist with respect to any U.S. Plans that could result in any
such liability to any of the Corporations which liability, either
individually or in the aggregate, has had or could reasonably be
expected to have a material adverse affect on the financial
condition of the Corporations, taken as a whole.
Full timely payment has been made of all amounts which any
of the U.S. Corporations is required to have paid as
contributions to each such U.S. Plans under Applicable Law, the
terms of each U.S. Plan or any collective bargaining agreement.
No U.S. Plan is subject to either the minimum funding
requirements of ERISA Section 302 or code Section 412. Except as
disclosed in Schedule 4.26, no U.S. Plan is a Multiemployer Plan
or a "multiple employer" plan (within the meaning of Section 4063
or 4064 of ERISA).
Except as disclosed on Schedule 4.26, no U.S. Corporation
sponsors or maintains any plan, fund program or arrangement to
provide any benefit to any Employee following termination of
employment which plan, fund program or arrangement is not
terminable by the employer at will. Except as required under
ERISA Sections 601 et seq. and Code Section 4980B, no U.S.
Corporation sponsors or maintains any plan, fund program or
arrangement to provide life or health benefits to retirees,
former Employees or their dependents.
There are outstanding current Internal Revenue Service
determination letters stating that, to the extent applicable,
each U.S. Plan is qualified under the Code.
Payments - Except as disclosed in Schedule 4.27 and except for payments
made or benefits conferred by Kenhar or any wholly-owned Corporation to or on
another of them, since April 30, 1996:
-39-
none of the Corporations has made any payment to or conferred or
authorized to be conferred and will not confer or authorize to be
conferred any benefit upon any of its officers, directors, former
directors, shareholders, or Employees or on any Person or company not
dealing at arm's length with any of the foregoing except in the
ordinary course of the routine daily affairs of the Business
consistent with past practice and at the regular rates payable to them
of salary, Benefit Plans, rents or other remuneration of any nature
and relocation expenses and reimbursements; and
there has not been any increase in the rates of salary, Benefit
Plans, bonus, rents or other remuneration or relocation expenses or
reimbursements payable to any such Person including under any Benefit
Plan except (i) increases in accordance with written agreements
existing as at April 30, 1996 and (ii) increases approved by the
Purchaser in writing.
Except as disclosed on the 1996 Balance Sheet, since April 30, 1996, none
of the Corporations has had any amount receivable from or had any indebtedness
outstanding to any of its directors, former directors, officers, shareholders,
or Employees or to any other Person not dealing at arm's length with any of the
foregoing except travel advances of less than $10,000 made in the ordinary
course of the routine daily affairs of the Business consistent with past
practice.
Real Property - Except as disclosed on Schedule 4.28, since April 30, 1996:
none of the Corporations has owned or acquired any real property or
has been under any obligation to acquire real property;
none of the Corporations has been a party to any lease of real
property or agreement in the nature of a lease of real property, whether as
lessor or lessee, or agreement to enter into such a lease.
Conditional Sales Contracts and Leases of Personal Property - No
Corporation is a party, as purchaser, lessee or in other like capacity, under
any conditional sales, hire purchase, security or other title retention
agreement ("Personalty Contracts") related to personal property except for:
those which (i) are capital leases under Canadian generally accepted
accounting principles and the liability under which is fully included in
the consolidated balance sheet included in the Financial Statements; and
(ii) in respect of which the expense from April 30, 1995 to April 30, 1996
has been fully included in preparing the consolidated statement of earnings
included in the
-40-
Financial Statements and the liability under which for the next 4 fiscal
years of Kenhar has been disclosed in the notes thereto; and
those entered into since April 30, 1996 in the ordinary course of the
routine daily affairs of the Business consistent with past practice
(collectively "Excepted Contracts"). All of the personal property covered by
the Excepted Contracts is available to the Corporations on normal commercial
terms from other sources.
Insurance - The Corporations maintain and have maintained such policies of
insurance, issued by responsible insurers, as are appropriate to its operations,
property and assets, in such amounts and against such risks as are customarily
carried and insured against by owners of comparable businesses, properties and
assets since the commencement of its operations. The policies of insurance
relating to product liability are sufficient to satisfy all third party or
employee claims (including defence costs) resulting from injury or death. All
such policies of insurance are in full force and effect and the Corporations are
not in default, as to the payment of premium or otherwise, under the terms of
any such policy. Schedule 4.30 sets forth a complete list of all policies of
insurance which the Corporations maintain and the particulars of such policies,
including the name of the insurer, the risk insured against, the amount of
coverage and the amount of any deductible.
Other Agreements - Since April 30, 1996, none of the Corporations has been
or is a party to any Contract (including employment agreements for other than
indefinite hiring), whether written or oral, of any nature or kind whatsoever,
except (i) Contracts in the ordinary course of the routine daily affairs of the
Business consistent with past practice which can be terminated by such
Corporation, without further liability arising from such termination, on not
more than 180 days notice to the other parties thereto, (ii) prepaid service
Contracts on office equipment, (iii) Contracts where the aggregate annual
financial obligations thereunder of the Corporations are minor or immaterial to
the Business, (iv) the Contracts listed or described in the Schedules hereto,
including Schedule 4.31, and (v) Contracts to which the only parties are two or
more of Kenhar and the wholly-owned Corporations.
Compliance with Contracts - Except as disclosed in Schedule 4.32, none of
the Corporations is in default or breach under any Contract, written or oral,
indenture or other instrument to which it is a party and there exists no state
of facts which after notice or lapse of time or both would constitute such a
default and all such Contracts, indentures or other instruments are in good
standing and each of the Corporations is entitled to all benefits thereunder.
To the knowledge of the Corporations, each Corporation has the capacity,
including the necessary personnel, equipment and supplies, to perform all its
obligations under the foregoing.
-41-
Bank Accounts and Powers of Attorney - Annexed hereto as Schedule 4.33 is a
true and complete list showing:
the name of each bank, trust company or similar institution in which
any of the Corporations has accounts or safe deposit boxes, the
identification numbers of each such account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto;
and
the name of each Person, firm or corporation or business organization
holding a general or special power of attorney from any of the Corporations
and a summary of the terms thereof.
Residence - The Vendors are not non-residents of Canada for purposes of
Section 116 of the Income Tax Act (Canada).
Regulatory Approvals - No governmental or regulatory authorization,
approval, order, consent or filing is required other than ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Approval and consents or assignments to the Government Authorizations on the
part of any Vendor or Kenhar, in connection with the execution, delivery and
performance of this Agreement or any other documents and agreements to be
delivered under this Agreement or the performance of the Vendors' obligations
under this Agreement or any other documents and agreements to be delivered under
this Agreement.
Reserves and Accruals - The reserves and accrued liabilities disclosed on
or reflected in the Financial Statements and the Books and Records, are
sufficient in all respects to provide for the liabilities in respect of which
they have been established.
No Joint Venture Interests, etc. - No Corporation is a partner,
beneficiary, trustee, co-tenant, joint venturer or otherwise a participant in
any partnership, trust, joint venture, co-tenancy or other similar jointly owned
business undertaking or arrangement and no Corporation has other significant
investment interests in any business owned or controlled by any third party.
Restrictive Covenants - No Corporation is a party to or bound or affected
by any commitment, agreement or document containing any covenant expressly
limiting the freedom of the Corporation to compete in any line of business,
transfer or move any of its assets or operations or which materially or
adversely affects the business practices, operations or conditions of the
Corporation or the continued operation of the Business after the Closing.
Management Recommendation Letters - The Purchaser has been provided with
copies of all management recommendation letters received by any Corporation or
its board of directors from its auditor, or any previous auditor of any
Corporation.
-42-
Key Employees - No Key Employee listed in Schedule 4.40 has notified any of
the Vendors that it is his current intention to terminate his existing
employment arrangement with any Corporation as a result of the entering into or
consummating of the transactions contemplated hereby.
Full Disclosure - Such Vendor has made available to the Purchaser, all
information, including the financial, marketing, sales and operational
information on a historical basis relating to each Corporation which would be
material to a purchaser of the Corporations on a consolidated basis. Without
limiting the generality of the foregoing, such Vendor has not failed to disclose
to the Purchaser, any fact or information which would be material to a purchaser
of the Corporations on a consolidated basis.
No Broker - Except as disclosed in writing to the Purchaser by Kenhar,
which is to receive its fees and reimbursement of its expenses directly from the
Vendors, the Vendors have carried on all negotiations relating to this Agreement
and the transactions contemplated in this Agreement directly and without
intervention on its behalf of any other party in such manner as to give rise to
any valid claim for a brokerage commission, finder's fee or other like payment.
Representations Correct at Closing Date - Each of the Vendors covenants,
represents and warrants with and to the Purchaser that each of the covenants,
representations and warranties made in Sections 4.1 to 4.42, inclusive, hereof
shall be fulfilled and true at the Time of Closing as if made at such time.
Reliance - Each Vendor acknowledges that the Purchaser is relying on the
covenants, representations and warranties of such Vendor contained in this
Agreement and in any certificates or other documents delivered pursuant hereto
in connection with its purchase of the Purchased Shares.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to each of the Vendors the
matters set out below.
Incorporation - The Purchaser is a corporation duly incorporated and
validly existing under the laws of the Province of Ontario.
Due Authorization - The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and to carry out its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transaction contemplated under this Agreement have
been duly authorized by all necessary corporate action of the Purchaser.
-43-
Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of the Purchaser enforceable against it in accordance with
the terms of this Agreement, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar proceedings
and to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
Absence of Conflicting Agreements - The Purchaser is not a party to, bound
or affected by or subject to any indenture, mortgage, lease, agreement,
obligation, instrument, charter or by-law provision, statute, regulation, order,
judgment, decree, license, permit or law which would be violated, contravened or
breached by, or under which any default would occur or a lien, claim,
restriction or encumbrance would be created as a result of the execution and
delivery by it of this Agreement or the performance by it of any of the terms of
this Agreement.
Investment Canada - The Purchaser is a WTO Investor within the meaning of
the Investment Canada Act (Canada).
Status - The Purchaser is a taxable Canadian corporation within the meaning
of the Tax Act.
ARTICLE 5A
REPRESENTATIONS AND WARRANTIES OF CASCADE
Cascade hereby represents and warrants to Couphar the matters set out
below.
5A.1 Incorporation - Cascade is a corporation duly incorporated and validly
existing under the laws of the State of Oregon.
5A.2 Due Authorization - Unless otherwise specifically provided herein or
in any agreement or document delivered hereunder or pursuant hereto, Cascade
has all necessary corporate power, authority and capacity to enter into this
Agreement and to carry out its obligations under this Agreement and the
execution and delivery of this Agreement and the consummation of the
transaction contemplated under this Agreement have been duly authorized by
all necessary corporate action of Cascade.
5A.3 Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of Cascade enforceable against it in accordance with the
terms of this Agreement, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar proceedings
and to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
-44-
5A.4 Absence of Conflicting Agreements - Cascade is not a party to, bound or
affected by or subject to any indenture, mortgage, lease, agreement, obligation,
instrument, charter or by-law provision, statute, regulation, order, judgment,
decree, license, permit or law which would be violated, contravened or breached
by, or under which any default would occur or a lien, claim, restriction or
encumbrance would be created as a result of the execution and delivery by it of
this Agreement or the performance by it of any of the terms of this Agreement.
5A.5 Share Capital - As of the date hereof, the authorized share capital
of the Purchaser consists of an unlimited number of common shares, an
unlimited number of preferred shares and an unlimited number of Exchangeable
Shares of which 1,001 common shares are issued and outstanding and the
authorized share capital of Cascade consists of 20,000,000 common shares and
200,000 preferred shares of which approximately 11,666,704 common shares and
no preferred shares are issued and outstanding. Cascade beneficially owns
all of the issued and outstanding common shares of the Purchaser and no
Person has any right to acquire from the Purchaser any of its shares (other
than Cascade and Couphar).
5A.6 Listing - The shares of common stock of Cascade are listed on The
New York Stock Exchange.
5A.7 SEC Reports - Since January 31, 1996, Cascade has filed with the
U.S. Securities and Exchange Commission (the "SEC") all forms, reports,
financial statements, exhibits, schedules and other documents required to be
filed by it under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations promulgated by the SEC thereunder. As of their respective dates,
none of Cascade's Form 10-K dated April 12, 1996 and Form 10-Q dated December
12, 1996 (including all financial statements, exhibits and schedules thereto
and documents incorporated by reference therein) contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Such
documents complied when filed in all material respects with the then
applicable requirements of the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations promulgated by the SEC thereunder.
5A.8 Financial Statements - The financial statements of Cascade for the year
ended January 31, 1996 complied as to form in all material respects with the
then applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with U.S. generally
accepted accounting principles (except as may have been indicated in the notes
thereto) and fairly presented the financial position of Cascade on a
consolidated basis as at such date and the results of operations on a
consolidated basis for the year then ended.
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ARTICLE
NON-WAIVER; SURVIVAL
Non-Waiver - No investigations made by or on behalf of the Purchaser at any
time shall have the effect of waiving, diminishing the scope or otherwise
affecting any representation or warranty made by any of the Vendors in or
pursuant to this Agreement. No waiver of any condition or other provisions, in
whole or in part, shall constitute a waiver of any other condition or provision
(whether or not similar) nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
Nature and Survival -
Subject to subsection (b), all representations, warranties and
covenants contained in this Agreement on the part of each of the Parties
shall survive the Closing, the execution and delivery under this Agreement
of any share or security transfer instruments or other documents of title
to any of the Purchased Shares and the payment of the consideration for the
Purchased Shares.
Representations and warranties concerning the matters set out in
Section 4.19 shall survive for a period of sixty days after the relevant
Governmental Authority shall no longer be entitled to assess liability for
Taxes against the Corporations relating to the incorrectness in or breach
of any such representations and warranties. All other representations and
warranties shall survive for a period of 18 months from the Closing Date.
The representations and warranties provided in Section 4.20(d) shall be
subject to the limitations and restrictions set forth in Section 6.3. If
no written claim or written demand shall have been made under this
Agreement against a Party for any incorrectness in or breach of any
representation or warranty made in this Agreement prior to the expiry of
these survival periods, such Party shall have no further liability under
this Agreement with respect to such representation or warranty.
Notwithstanding the limitations set out in subsection (b) any Claim
which is based on title to the Purchased Shares, intentional
misrepresentation or fraud may be brought at any time.
Covenants, etc., of Vendors - The remedy in respect of Claims against
the Vendors arising out of, in connection with or in respect of any matter
referred to in Section 4.20(d) in respect of which the Purchaser is or would be
entitled to indemnification hereunder shall be limited to the aggregate of: (i)
payment by the Vendors of the cost of all remedial work required to restore the
property and any adjoining properties to compliance with Environmental Laws and
the use for which the property was intended in the Business, (ii) any fines,
penalties and damages incurred, sustained by or awarded against a Corporation,
the Purchaser or Cascade in favour of
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third parties (other than consequential damages suffered by the Corporations,
the Purchaser or Cascade) relating directly or indirectly to the work
referred to in clause (i), and (iii) all out of pocket expenses (including
legal, consulting and advisory fees) of any Corporation, the Purchaser and
Cascade relating directly or indirectly to the subject matter of such Claims.
Notice - Without prejudice to the rights and obligations of the
Parties hereunder, the Purchaser shall inform the Vendors prior to Closing if as
a result of its due diligence investigations the Purchaser is aware of any
matter or circumstance which may give rise to one or more Claims which in the
aggregate would total in excess of $500,000.
ARTICLE
PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to complete the purchase of all, but not
less than all, of the Purchased Shares under this Agreement shall be subject to
the satisfaction of, or compliance with, at or before the Closing Time, each of
the following conditions precedent (each of which is acknowledged to be inserted
for the exclusive benefit of the Purchaser and may be waived by it in whole or
in part).
Truth and Accuracy of Representations of Vendors at the Closing Time - All
of the representations and warranties of the Vendors made in or pursuant to this
Agreement shall be true and correct as at the Closing Time in all material
respects and with the same effect as if made at and as of the Closing Time
(except as such representations and warranties may be affected by the occurrence
of events or transactions expressly contemplated and permitted by this
Agreement) and the Purchaser shall have received a certificate from each Vendor
confirming the truth and correctness of the representations and warranties of
the Vendors.
Performance of Obligations - The Vendors and ▇▇▇▇▇▇▇▇ shall have performed
or complied with, in all respects, all their obligations, covenants and
agreements under this Agreement including without limitation with respect to the
Purchaser's due diligence investigation as set forth in section 9.3.
Receipt of Closing Documentation - All documentation relating to the due
authorization and completion of the sale and purchase of the Purchased Shares
under this Agreement and all actions and proceedings taken on or prior to the
Closing in connection with the performance by the Vendors of their obligations
under this Agreement shall be satisfactory to the Purchaser and the Purchaser
shall have received copies of all such documentation or other evidence as it may
reasonably request in order to establish the consummation of the transactions
contemplated hereby and the taking of all corporate proceedings in connection
therewith in compliance with these
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conditions, in form (as to certification and otherwise) and substance
satisfactory to the Purchaser.
Opinion of Counsel for the Vendors - The Purchaser shall have received an
opinion dated the Closing Date from counsel for the Vendors, Messrs. ▇▇▇▇ &
Berlis, substantially in the form of Schedule 7.4.
Consents, Authorizations and Registrations - All consents, approvals,
orders and authorizations of any Person or Governmental Authority (or
registrations, declarations, filings or recordings with any such authorities),
required in connection with the completion of any of the transactions
contemplated by this Agreement, the execution of this Agreement, the Closing or
the performance of any of the terms and conditions of this Agreement, including
the approval of The Toronto-Dominion Bank pursuant to the provisions of a letter
agreement dated April 29, 1996 and the ISDA Master Agreement dated April 29,
1996, in form and substance satisfactory to the Purchaser and ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Approval shall have been obtained, at or before the Closing Time. There shall
be no injunction or restraining order issued preventing, and no pending or
threatened claim, action, litigation or proceeding, judicial or administrative
or investigation against any Party by any Governmental Authority, for the
purpose of enjoining or preventing the consummation of the transactions
contemplated in this Agreement or otherwise claiming that this Agreement or the
consummation thereof is improper or would give rise to proceedings under any
statute or rule of law.
Material Adverse Change - No material adverse change in the business of the
Corporations taken as a whole (other than as a result of general industry
conditions) shall have occurred prior to the Closing Time.
No Laws - No Laws shall have been enacted, introduced or announced which
may materially and adversely affect the Corporations or the Business.
▇▇▇▇▇▇▇▇ Contracts - ▇.▇. ▇▇▇▇▇▇▇▇ shall have executed and delivered the
Employment Agreement and the Non-Competition and Non-Solicitation Agreement.
Resignation of Auditors - The Company shall have received the resignation
of its current auditor, in form and substance satisfactory to the Purchaser.
Directors and Officers - There shall have been delivered to the Purchaser
on or before the Closing Time the resignations of all individuals who are
presently directors of Kenhar (except ▇.▇. ▇▇▇▇▇▇▇▇) and duly executed
comprehensive releases in the form of Schedule 7.10 from each such individual
and from the Vendors of all their claims respectively, against the Corporations
except for any claims for current unpaid remuneration.
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Execution of Other Agreements - On or prior to the Closing Time:
Couphar and ▇.▇. ▇▇▇▇▇▇▇▇ shall have executed and delivered the
Exchange Agreement;
the Vendors, ▇.▇. ▇▇▇▇▇▇▇▇ and the Escrow Agent shall have
executed and delivered the Escrow Agreement; and
TD Trust Company shall have executed and delivered the
Voting Trust Agreement.
For the purposes of a determination of materiality with respect to the
conditions contained in sections 7.1, 7.6 and 7.7, any change, fact, omission,
occurrence or information will be considered to be material if it would have or
result in or would reasonably be expected to have or result in a significant
adverse impact on or change to the value of the Business or the Corporations
taken as a whole.
If any of the foregoing conditions in this Article has not been fulfilled by
Closing, the Purchaser may terminate this Agreement by notice in writing to the
Vendors, in which event the Purchaser is and shall be released from all
obligations under this Agreement. However, the Purchaser may waive compliance
with any condition in whole or in part if it sees fit to do so, without
prejudice to its rights of termination in the event of non-fulfilment of any
other condition, in whole or in part, or to its rights to recover damages for
the breach of any representation, warranty, covenant or condition contained in
this Agreement.
ARTICLE
VENDORS' CONDITIONS PRECEDENT
The obligations of the Vendors other than Couphar to complete the sale of
their Vendor's Shares under this Agreement shall be subject to the satisfaction
of or compliance with, at or before the Closing Time, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
exclusive benefit of such Vendors and may be waived by them in whole or in
part).
Truth and Accuracy of Representations of the Purchaser at Closing Time -
All of the representations and warranties of the Purchaser made in or pursuant
to this Agreement (other than the representations and warranties of the
Purchaser contained in Article 5A) shall be true and correct as at the Closing
Time in all material respects and with the same effect as if made at and as of
the Closing Time (except as such representations and warranties may be affected
by the occurrence of events or transactions expressly contemplated and permitted
by this Agreement) and such Vendors shall have received a certificate from an
authorized officer of the Purchaser confirming the truth and correctness of such
representations and warranties.
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Performance of Obligations - The Purchaser shall have performed or complied
with, in all respects, all its obligations, covenants and agreements under this
Agreement.
Opinion of Counsel - Such Vendors shall have received opinions dated the
Closing Date from Canadian and United States counsel to the Purchaser and
Cascade substantially in the forms thereof in Schedule 8.3.
If any of the foregoing conditions in this Article has not been fulfilled
by Closing, such Vendors may terminate this Agreement by notice in writing to
the Purchaser, in which event such Vendors are released from all obligations
under this Agreement. However, all, but not less than all, of such Vendors may
waive compliance with any condition in whole or in part if they see fit to do
so, without prejudice to their rights of termination in the event of
non-fulfilment of any other condition in whole or in part or to their rights to
recover damages for the breach of any representation, warranty, covenant or
condition contained in this Agreement.
ARTICLE 8A
COUPHAR'S CONDITIONS PRECEDENT
The obligations of Couphar to complete the sale of its Vendor's Shares
under this Agreement shall be subject to the satisfaction of or compliance
with, at or before the Closing Time, each of the following conditions
precedent (each of which is acknowledged to be inserted for the exclusive
benefit of Couphar and may be waived by it in whole or in part).
8A.1 Truth and Accuracy of Representations of the Purchaser at Closing
Time -All of the representations and warranties of each of the Purchaser and
Cascade made in or pursuant to this Agreement shall be true and correct as at
the Closing Time in all material respects and with the same effect as if made
at and as of the Closing Time (except as such representations and warranties
may be affected by the occurrence of events or transactions expressly
contemplated and permitted by this Agreement) and Couphar shall have received
a certificate from an authorized officer of each of the Purchaser and Cascade
confirming the truth and correctness of such representations and warranties.
8A.2 Performance of Obligations - The Purchaser and Cascade shall have
performed or complied with, in all respects, all its obligations, covenants
and agreements under this Agreement.
8A.3 Agreements - Each of the Employment Agreement, Exchange Agreement,
Registration Rights Agreement, Refusal Agreement and Shareholders Agreement
shall
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have been executed and delivered by the parties thereto (other than ▇.▇.
▇▇▇▇▇▇▇▇, Couphar and any of the Corporations or the Vendors).
8A.4 Allotment of Cascade Shares - Cascade shall have allotted to Couphar
and shall have reserved for issuance out its unissued shares of common stock,
sufficient shares to provide for the exchange in full of all of the
Exchangeable Shares and such shares of Cascade common stock shall have been
conditionally approved for listing on the New York Stock Exchange.
8A.5 Opinion of Counsel - Couphar shall have received opinions dated the
Closing Date from Canadian and United States counsel to the Purchaser and
Cascade substantially in the forms thereof in Schedule 8A.5.
If any of the foregoing conditions in this Article has not been fulfilled
by Closing, Couphar may terminate this Agreement by notice in writing to the
Purchaser, in which event Couphar shall be released from all obligations
under this Agreement. However, Couphar may waive compliance with any
condition in whole or in part if it sees fit to do so, without prejudice to
its rights of termination in the event of non-fulfilment of any other
condition in whole or in part or to its rights to recover damages for the
breach of any representation, warranty, covenant or condition contained in
this Agreement.
ARTICLE
OTHER COVENANTS OF THE PARTIES
Conduct of Business Prior to Closing - During the period from the date of
this Agreement to the Closing Time, the Vendors will cause each Corporation to
do the following:
Conduct Business in the Ordinary Course - Except as otherwise
contemplated or permitted by this Agreement, conduct its business in the
ordinary and normal course, consistent with past practice and regular
customer service and business policies and not, without the prior written
consent of the Purchaser, enter into any transaction which, if effected
before the date of this Agreement, would constitute a breach of the
representations, warranties or agreements of the Vendors contained in this
Agreement.
Continue Insurance - Continue in force all policies of insurance
maintained by it or by any Vendor for its benefit and give all notices and
present claims under all insurance policies in a timely fashion.
Perform Obligations - Comply with all Applicable Laws affecting its
operations.
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Not to Cause Certain Changes - Not, other than with respect to the
Proposed Acquisitions, without the prior written consent of the Purchaser,
take any of the actions, do any of the things or perform any of the acts
described in Sections 4.11, 4.15 and 4.22.
Approvals - Co-operate with the Purchaser and use all commercially
reasonable efforts and diligently pursue obtaining approval of The
Toronto-Dominion Bank and ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Approval.
Proposed Acquisitions - The terms of the Proposed Acquisitions shall be
settled by the appropriate Corporations in consultation with the Purchaser and
the Vendors shall cause the Corporations to provide the Purchaser with such
information and documentation with respect thereto as the Purchaser may
reasonably request.
Access for Investigation - The Vendors shall permit the Purchaser and its
representatives, between the date of this Agreement and the Closing Time, to
have free and unrestricted access during normal business hours to the
premises and to all the Books and Records and to the properties and assets of
the Corporations and to furnish the Purchaser with such financial and
operating data and other information as the Purchaser shall from time to time
reasonably request in respect of the Purchaser's due diligence investigation
and the confirmation of the matters represented and warranted herein.
Without limiting the generality of the foregoing, it is agreed that the
accounting representatives of the Purchaser shall be afforded ample
opportunity to make a full investigation of all aspects of the financial
affairs of the Corporations.
Elections - Couphar and the Purchaser shall elect in prescribed form and
manner to have the provisions of subsection 85(1) of the Tax Act apply to the
transfer of Couphar's Vendor's Shares and Couphar shall deliver to and file
the same with Revenue Canada, Customs, Excise and Taxation within the time
prescribed in accordance with the Act. Couphar shall pay any late filing
fees or penalties and shall provide the Purchaser with a copy of such forms
as filed. For this purpose the parties shall elect amounts in respect of such
Shares equal to an amount to be determined by Couphar in accordance with the
limits set out in the Tax Act. Couphar and the Purchaser shall file all
necessary elections or filings under all corresponding provincial legislation
to make the transfer effective on the same basis as contemplated under the
Tax Act.
Confidentiality - At all times, each of the Vendors, the Purchaser and
Cascade shall keep confidential all information disclosed to it, or to a
third party in connection with this transaction, by or on behalf of the other
Party relating to the other Party, except information which is or becomes
generally available to the public, it received from an independent third
party, who had obtained the information lawfully and was under no obligation
of secrecy or confidentiality, or it can show was in its possession before
receipt of such information from the other Party.
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Actions to Satisfy Closing Conditions - Each of the Parties agrees to take
all such actions as are within its power to control, and to use its best efforts
to cause other actions to be taken which are not within its power to control, so
as to ensure compliance with each of the conditions and covenants set forth in
Articles 7, 8, 8A or 9 which are for the benefit of any other Party. ▇.▇.
▇▇▇▇▇▇▇▇ hereby agrees to execute and deliver to the Purchaser and Cascade all
agreements to which he is a party and which are conditions to closing in favour
of the Purchaser hereunder.
Stub Period Returns - The Purchaser shall cause to be prepared and filed on
a timely basis, all Tax Returns for the Company for any period which ends on or
before the Closing Date and for which Tax Returns have not been filed as of such
date. The Purchaser shall also cause to be prepared and filed on a timely
basis, all Tax Returns for each of the Company for periods beginning before and
ending after the Closing Date. The Vendors and the Purchaser shall cooperate
fully with each other and make available to each other in a timely fashion such
data and other information as may reasonably be required for the preparation of
any Tax Return of the Company for a period ending on, prior to or including the
Closing Date and shall preserve such date and other information until the
expiration of any applicable limitation period under any applicable law with
respect to Taxes.
Waiver and Termination - Each Vendor hereby waives compliance with all of
the provisions of the Kenhar shareholders agreement made as of September 10,
1991 (the "Kenhar Shareholders Agreement") between the Vendors and Kenhar in
respect of all of the transactions, agreements, covenants and obligations
contemplated and created by this Agreement and the Kenhar Shareholders Agreement
is hereby terminated and each of the Vendors hereby confirms and agrees that it
has no rights thereunder in respect of this Agreement.
Key Employees - Conditional upon the Closing occurring, Cascade shall
determine whether the cash and bonus compensation of the Key Employees should be
adjusted upward by Kenhar in order to ensure that the Key Employees are entitled
to such cash and bonus compensation as is equivalent to Cascade personnel with
comparable duties. To this end, the Vendors shall cause Kenhar to provide the
Purchaser and Cascade with the terms of employment of the Key Employees
including compensation and the particulars of their duties.
Conditional upon the Closing occurring and subject to Applicable Laws and stock
exchange rules, the Key Employees will be granted options to purchase shares of
common stock of Cascade on such dates as and at levels, exercise prices and
other terms comparable to Cascade personnel having comparable duties. For the
purposes of such grants of options, prior service with Kenhar shall be treated
as service with Cascade under Cascade's stock option plan.
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Shareholders' Meeting - Cascade covenants and agrees with ▇▇▇▇▇▇▇▇ to
present to its shareholders for approval at its next meeting to be held on May
13, 1997 (the "Meeting"), subject to the timing requirements of Applicable Law
and any review by the SEC, a proposal to amend its articles of incorporation to
provide for the creation of a class of shares, in respect of which one will be
issued upon such approval being obtained to a voting trustee who will agree to
vote such share in accordance with the instructions of the holder of the
Exchangeable Shares, to which will be attached the right to the number of votes
at meetings of shareholders of Cascade equal to the number of votes which would
be attached to the shares of common stock into which the Exchangeable Shares
then issued and outstanding (other than such shares held by Cascade or any
subsidiary thereof) are exchangeable from time to time.
In connection with the preparation of proxy materials and any information
circular for the Meeting, the Vendors shall cause the Corporations to cooperate
with Cascade and provide in a timely manner such information (financial or
otherwise) as Cascade may request in connection with the preparation of such
materials for the Meeting.
Cascade Covenant - Cascade hereby covenants and agrees with the Vendors
that it shall cause the Purchaser to perform its obligations hereunder or cause
the obligations of the Purchaser hereunder to be performed, including without
limitation all payment obligations provided for herein.
▇▇▇▇▇▇▇▇ Covenant - ▇.▇. ▇▇▇▇▇▇▇▇ hereby covenants and agrees with the
Purchaser and Cascade that he shall cause Couphar to perform its obligations
hereunder or cause the obligations of Couphar hereunder to be performed,
including without limitation all payment obligations provided for herein.
Purchaser's Covenant - The Purchaser shall not, without Couphar's prior
written consent, make any further acquisitions of assets or businesses from
arm's length third parties, it being understood and agreed that the Purchaser
may acquire and own the shares of Cascade (Canada) Inc. and its subsidiary
Industrial Tires Limited and its subsidiaries. In the event that the SEC "no
action" letter contemplated in the Registration Rights Agreement is obtained in
accordance with the terms thereof, then the obligations of the Purchaser under
this section 9.13 shall terminate and no longer apply and Couphar shall consent
to or vote in favour of an amendment to the articles of the Purchaser which will
have the effect deleting the voting rights attaching to the Exchangeable Shares.
Couphar Covenants - Couphar is and shall at all times while Couphar owns
any Exchangeable Shares be controlled by ▇.▇. ▇▇▇▇▇▇▇▇. For the purposes of
ascertaining the control of Couphar, Couphar shall provide the Purchaser with
access to such corporate records with respect thereto on reasonable written
notice to Couphar by the Purchaser. Couphar shall not transfer or otherwise
dispose of any Exchangeable Shares to anyone other than a Member of the
Immediate Family (as defined in the Refusal
-54-
Agreement) who has executed and delivered to Cascade and the Purchaser all
such documentation as may be requested by either of them in order to preserve
and protect the rights and benefits of the agreements to which Couphar will
be a party hereunder with respect to the Exchangeable Shares.
Opinions - Immediately following Closing the Vendors are hereby authorized
to and shall instruct legal counsel in the United States, France, Italy and the
UK to deliver such opinions with respect to the relevant Kenhar Subsidiaries as
the Purchaser may reasonably request.
ARTICLE
INDEMNIFICATION
Mutual Indemnifications for Breaches of Covenants and Warranty, etc. - Each
of the Vendors hereby covenants and agrees with the Purchaser, and the Purchaser
covenants and agrees with each of the Vendors (the Party or Parties so
covenanting and agreeing to indemnify another Party being referred to in this
Section as the "Indemnifying Party" and the Party so to be indemnified being
called the "Indemnified Party") to indemnify and save harmless the Indemnified
Party, on an after-tax basis, effective as and from the Closing Time, from and
against all Claims which may be made or brought against the Indemnified Party or
which it may suffer or incur, directly or indirectly, as a result of, arising
out of or in connection with any non-fulfilment of any covenant or agreement on
the part of the Indemnifying Party under this Agreement or any incorrectness in
or breach of any representation or warranty of the Indemnifying Party contained
in this Agreement or in any certificate or other document furnished by the
Indemnifying Party pursuant to this Agreement. The foregoing obligation of
indemnification in respect of such Claims shall be subject to:
the limitation mentioned in Section 6.2 respecting the survival of the
representations and warranties of the Parties;
the requirement that the Indemnifying Party shall, in respect of any
Claim made by any third person, be afforded an opportunity at its sole
expense to resist, defend and compromise such Claim; and
the limitations that:
for Claims made in connection with any representation
or warranty, the Indemnifying Party (for purposes of this paragraph,
Indemnifying Party shall mean the Purchaser or all of the Vendors
collectively and Vendor shall include the Vendor's successors and
assigns) shall not be required to pay any such amount until the
aggregate of such Claims exceeds $500,000 and upon the aggregate of
such Claims exceeding $500,000 the Indemnifying Party shall be
required to pay the entire amount owing in respect of all of such
Claims;
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the liability of each Vendor for a Claim made by the
Purchaser shall be limited to such Vendor's Proportionate Share of
such Claim;
the first $10,000,000 of Claims against the Vendors hereunder
shall be satisfied and paid out from the amounts escrowed under the
Escrow Agreement;
the liability of each Vendor to the Purchaser shall be
limited to an amount equal to that portion of the Purchase Price
allocated to such Vendor; and
the liability of the Vendors shall, in the aggregate,
be limited to an amount equal to the Purchase Price.
Objection to Claim by Indemnifying Party -
Delivery of Objection Notice - In the event that the Indemnifying
Party objects in good faith to any Claim made by the Indemnified Party, the
Indemnifying Party shall so advise the Indemnified Party by delivery to the
Indemnified Party of a written notice (the "Objection Notice") within 30
days after the delivery to the Indemnified Party of the Claim. The
Objection Notice shall set out the reasons for the Indemnifying Party's
objection as well as the amount under dispute and reasonable details of the
calculation of such amount.
Agreement of Parties - In the event that the Parties agree on a
resolution of the dispute set out in the Objection Notice, the Parties
shall confirm this resolution in writing and shall thereafter be bound by
such resolution.
Arbitration - In the event that the Parties are unable to settle any
dispute with respect to the Claim within 30 days after the delivery by the
Indemnifying Party to the Indemnified Party of the Objection Notice, the
dispute shall forthwith, and in any event within 60 days after the delivery
by the Indemnifying Party to the Indemnified Party of the Objection Notice,
be referred to arbitration by a single arbitrator, if the Parties can agree
upon one arbitrator, or otherwise by three arbitrators, of whom one shall
be appointed by the Indemnified Party and one shall be appointed by a
representative of the Indemnifying Party and the third shall be chosen by
the first two named arbitrators. The arbitration and the appointment of
the arbitrator shall, except to the extent provided for in this Section, be
conducted in Toronto, Ontario in accordance with the Arbitrations Act
(Ontario). The Indemnified Party and the Indemnifying Party shall
cooperate in completing any arbitration as expeditiously as possible and
the arbitrators may hire such experts as may
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appear to be appropriate. If a single arbitrator is used, all of the
costs and expenses of the arbitration shall be borne equally by the
Parties or in such other manner as the arbitrator may determine to be
appropriate. If three arbitrators are used the costs and expenses of the
third arbitrator and of any experts engaged by such arbitrator shall be
borne equally by the Parties and each Party shall pay the costs and
expenses of the arbitrator appointed by it. Arbitration under this
Section shall be in substitution for and precludes the bringing of any
action in any court in connection with any objection made by the
Indemnified Party pursuant to this Section unless otherwise agreed to by
the Parties, it being understood that the Parties may agree to mediation
or to resort to the courts.
Determination of Arbitrator - The determination of the arbitrator(s)
shall be made within 30 days after the date on which the dispute was
referred to them and the determination of the arbitrator(s) shall be final
and binding on all Parties unless otherwise agreed to by the Parties.
Payment in Accordance with Determination - Within 5 days after
resolution, by agreement of the Parties, of the dispute which was the
subject of the Objection Notice or, failing such resolution, within 5 days
after the final determination of the arbitration, the Indemnifying Party
shall pay to the Indemnified Party by wire transfer, certified cheque or
bank draft the amount of the Claim determined as a result of such
resolution or final determination, it being understood that the first
$10,000,000 shall be paid out of the amounts escrowed under the Escrow
Agreement in respect of which payment the Vendors shall execute and deliver
the appropriate direction thereunder to give effect hereto and thereto.
Indemnification Procedures for Third Party Claims -
In the case of claims or demands or other actions taken or made by a
third party with respect to which indemnification is sought, the Party
seeking indemnification shall give prompt written notice, and in any event
within 20 days, to the other Party of any such claims or demands made upon
it, provided that in the event of a failure to give such notice, such
failure shall not preclude the Party seeking indemnification to obtain such
indemnification but its right to indemnification may be reduced to the
extent that such delay prejudiced the defense of the claim or demand or
increased the amount of liability or cost of defense and provided that,
notwithstanding anything else herein contained, no claim for indemnity in
respect of the breach of any representation or warranty contained herein
may be made unless notice of such claim has been given prior to the expiry
of the survival period applicable to such representation and warranty
pursuant to Section 6.2.
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The Indemnifying Party shall have the right, by notice to the
Indemnified Party given not later than 30 days after receipt of the notice
described in subsection (a) to assume the control of the defense,
compromise or settlement of the claim or demand, provided that such
assumption shall, by its terms, be without cost to the Indemnified Party
and provided the Indemnifying Party acknowledges in writing its obligation
to indemnify the Indemnified Party in accordance with the terms contained
in this Section in respect of that claim or demand.
Upon the assumption of control of any claim or demand by the
Indemnifying Party as set out in subsection (b), the Indemnifying Party
shall diligently proceed with the defence, compromise or settlement of the
claim or demand at its sole expense, including, if necessary, employment of
counsel reasonably satisfactory to the Indemnified Party and, in connection
therewith, the Indemnified Party shall cooperate fully, but at the expense
of the Indemnifying Party with respect to any out-of-pocket expenses
incurred, to make available to the Indemnifying Party all pertinent
information and witnesses under the Indemnified Party's control, make such
assignments and take such other steps as in the opinion of counsel for the
Indemnifying Party are reasonably necessary to enable the Indemnifying
Party to conduct such defence. The Indemnified Party shall also have the
right to participate in the negotiation, settlement or defence of any claim
or demand at its own expense.
Should the Indemnifying Party fail to give notice to the Indemnified
Party as provided in subsection (b), the Indemnified Party shall be
entitled to make such settlement of the claim or demand as in its sole
discretion may appear advisable, and such settlement or any other final
determination of the claim or demand shall be binding upon the Indemnifying
Party.
ARTICLE
GENERAL
Public Notices - All public notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by the Vendors and the Purchaser and no Party
shall act unilaterally in this regard without the prior approval of the other
Party, such approval not to be unreasonably withheld, except where required to
do so by law or by the applicable regulations or policies of any provincial,
state or federal or other regulatory agency of competent jurisdiction or any
stock exchange in circumstances where prior consultation with the other Party is
not practicable.
Expenses - Each of the Parties shall pay their respective legal,
accounting, and other professional advisory fees, costs and expenses incurred in
connection with the purchase and sale of the Purchased Shares and the
preparation, execution and delivery of this Agreement and all documents and
instruments executed pursuant to this
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Agreement and any other costs and expenses incurred. In particular, the
Vendors shall be responsible for any fees and expenses of any broker or
investment advisor retained in connection with the sale of the Purchased
Shares and such fees and expenses shall not constitute an obligation of the
Company or the Purchaser. The Purchaser on the one hand and the Vendors on
the other shall equally share the fees and expenses of the Deposit Agent and
the Escrow Agent.
Notices - Any notice or other writing required or permitted to be given
under this Agreement or for the purposes of this Agreement (in this Section
referred to as a "Notice") shall be in writing and shall be sufficiently given
if delivered, or if sent by prepaid registered mail or if transmitted by
facsimile or other form of recorded communication tested prior to transmission
to such Party:
in the case of a Notice to the Vendors or ▇.▇. ▇▇▇▇▇▇▇▇ or any of them
at:
prior to Closing:
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
after Closing:
Couphar Ltd.
c/o ▇. ▇. ▇▇▇▇▇▇▇▇
Kenhar Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Balyrobe Ltd.
▇/▇ ▇. ▇. ▇▇▇▇▇▇
▇. ▇. #▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: c/o Kenhar Corporation
(▇▇▇) ▇▇▇-▇▇▇▇
879185 Ontario Inc.
▇/▇ ▇. ▇. ▇▇▇▇▇▇
-▇▇-
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
568745 Ontario Inc.
▇/▇ ▇. ▇. ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Private & Confidential
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Advise ▇▇▇▇▇▇ at (▇▇▇) ▇▇▇-▇▇▇▇ if confidential
Penfund Partners and Company, Limited Partnership
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Bantor Company
TD Capital Group Limited
20th Floor, Ernst & Young Tower
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇.▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ & Berlis
BCE Place, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
in the case of a Notice to the Purchaser or Cascade at:
c/o Cascade Corporation
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇.▇.▇. ▇▇▇▇▇
Attention: Executive Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
1 First Canadian Place
Toronto, ON M5X 1B8
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the Party to whom such Notice is to be given shall
have last notified the Party giving the same in the manner provided in this
Section. Any Notice delivered to the Party to whom it is addressed as provided
above shall be deemed to have been given and received on the day it is so
delivered at such address, provided that if such day is not a Business Day then
the Notice shall be deemed to have been given and received on the next Business
Day. Any Notice sent by prepaid registered mail shall be deemed to have been
given and received on the fifth Business Day following the date of its mailing.
Any Notice transmitted by facsimile or other form of recorded communication
shall be deemed given and received on the first Business Day after its
transmission.
Assignment - The Purchaser shall be entitled, upon giving written notice to
the Vendors at any time not less than 10 days prior to the Closing Time, to
assign all or a
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portion of its rights and obligations under this Agreement to any Affiliate
of the Purchaser. In such case, such assignee shall have and may exercise
all the rights, and shall assume all of the obligations, of the Purchaser
under this Agreement, and any reference to the Purchaser in this Agreement
shall be deemed to refer to such assignee. In the event of such an
assignment, the Vendors and such assignee shall execute an agreement
confirming such assignment and such assumption of obligations shall be on the
basis that no such assignment shall release the Purchaser from liability for
its obligations as purchaser of the Purchased Shares under this Agreement.
Except as hereinbefore provided, neither this Agreement nor any benefits or
burdens under this Agreement shall be assignable by any Party without the
prior written consent of each of the other Parties. Subject to the
foregoing, this Agreement shall enure to the benefit of and be binding upon
the Parties and their respective heirs, successors (including any successor
by reason of amalgamation of any Party) and permitted assigns.
Further Assurances - The Parties shall, with reasonable diligence, do all
such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated by this Agreement, and each Party shall
provide such further documents or instruments required by any other Party as may
be reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closing.
Language - The Parties confirm that it is their wish that this Agreement,
as well as any other documents relating to this Agreement, including notices,
schedules and authorizations, have been and shall be drawn up in the English
language only. Les parties aux presentes confirment leur volonte que cette
convention, de meme que tous les documents, y compris tous avis, cedules et
autorisations s'y rattachant, soient rediges en anglais seulement.
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Counterparts - This Agreement may be executed by the Parties 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.
IN WITNESS WHEREOF the Parties have duly executed this Agreement.
COUPHAR LTD.
By:
BALYROBE LTD.
By:
879185 ONTARIO INC.
By:
568745 ONTARIO INC.
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (in trust)
By:
PENFUND PARTNERS AND COMPANY,
LIMITED PARTNERSHIP by its general
partner PENFUND PARTNERS INC.
By:
-63-
-64-
BANTOR COMPANY
By:
)
)
)
Witness ) ▇.▇. ▇▇▇▇▇▇▇▇
KENHAR CORPORATION
By:
CASCADE (CANADA) HOLDINGS INC.
By:
By:
CASCADE CORPORATION
By:
By: