STILE ACQUISITION CORP.
AND
MASONITE INTERNATIONAL CORPORATION
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SECOND AMENDED AND RESTATED COMBINATION AGREEMENT
DATED
FEBRUARY 17, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION...........................................................1
1.1 Definitions....................................................................................1
1.2 Certain Rules of Interpretation................................................................9
1.3 Entire Agreement..............................................................................10
1.4 Schedules.....................................................................................11
1.5 Accounting Matters............................................................................11
1.6 Knowledge.....................................................................................11
ARTICLE 2 THE TRANSACTION.......................................................................................11
2.1 Articles of Arrangement.......................................................................11
2.2 Implementation Steps by the Company...........................................................12
2.3 Implementation Steps by Acquisitionco.........................................................13
2.4 Interim Order.................................................................................13
2.5 The Company Circular..........................................................................13
2.6 Closing Matters...............................................................................14
2.7 Preparation of Filings, etc...................................................................14
2.8 Disclosure Letter.............................................................................15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES........................................................................15
3.1 Representations and Warranties of the Company.................................................15
3.2 Representations and Warranties of Acquisitionco...............................................15
3.3 Survival......................................................................................15
ARTICLE 4 COVENANTS.............................................................................................15
4.1 Retention of Goodwill.........................................................................15
4.2 Covenants of the Company......................................................................15
4.3 Covenants of Acquisitionco....................................................................21
4.4 Covenants of the Company Regarding Non-Solicitation...........................................22
4.5 Notice of Superior Proposal Determination.....................................................24
4.6 Access to Information.........................................................................25
4.7 Financing.....................................................................................25
4.8 Indemnification...............................................................................25
ARTICLE 5 CONDITIONS............................................................................................26
5.1 Mutual Conditions Precedent...................................................................26
5.2 Additional Conditions Precedent to the Obligations of Acquisitionco...........................26
5.3 Additional Conditions Precedent to the Obligations of the Company.............................29
5.4 Satisfaction of Conditions....................................................................30
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TABLE OF CONTENTS
(continued)
PAGE
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ARTICLE 6 AMENDMENT AND TERMINATION.............................................................................30
6.1 Amendment.....................................................................................30
6.2 Termination...................................................................................31
6.3 Termination and Other Payments................................................................32
6.4 Effect of Termination Payment.................................................................33
6.5 Remedies......................................................................................33
ARTICLE 7 GENERAL...............................................................................................34
7.1 Notices.......................................................................................34
7.2 Assignment....................................................................................35
7.3 Further Assurances............................................................................35
7.4 Expenses......................................................................................35
7.5 Public Notices................................................................................35
7.6 Execution and Delivery........................................................................35
7.7 No Recourse...................................................................................36
7.8 No Third Party Beneficiaries..................................................................36
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SECOND AMENDED AND RESTATED COMBINATION AGREEMENT
THIS AGREEMENT is made the 17th day of February, 0000
X X X X X X N :
STILE ACQUISITION CORP.
a corporation governed by the laws of Ontario
("ACQUISITIONCO")
- and -
MASONITE INTERNATIONAL CORPORATION
a corporation governed by the laws of Ontario
(the "COMPANY")
RECITALS:
A. Acquisitionco and the Company wish to propose a Transaction the result
of which, together with other transactions relating thereto, will
result in the acquisition of all of the shares of the Company by
Acquisitionco.
B. The Transaction will be effected by means of an arrangement involving
the Company, the Company's Shareholders and Acquisitionco.
C. The Parties entered into a combination agreement dated December 22,
2004 to set out their agreements in respect of the Transaction.
D. The Parties entered into an amended and restated combination agreement
dated January 16, 2005.
E. The Parties wish to further amend and restate the combination agreement
on the terms set out in this Agreement.
THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings respectively:
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"1933 ACT" means the United States Securities Act of 1933;
"ACCOUNTS RECEIVABLE" has the meaning ascribed to it in Section (i) of Schedule
3.1;
"ACQUISITION PROPOSAL" means any proposal or offer with respect to any merger,
amalgamation, arrangement, business combination, liquidation, dissolution,
recapitalization, take-over bid, tender offer, purchase of any assets
representing greater than 20% of the fair market value of the Transaction, or
purchase of more than 20% of the equity (or rights thereto) of the Company or a
Subsidiary of the Company, or similar transactions or series of transactions
involving the Company or any Subsidiary of the Company, excluding the
Transaction;
"ACT" means the Business Corporations Act (Ontario), the governing corporate
statute of the Company;
"AFFILIATE" has the meaning ascribed to it under the Securities Act;
"AGREEMENT" means this second amended and restated agreement, including all
schedules, and all amendments or restatements as permitted, and references to
"Article", "Section" or "Schedule" mean the specified Article, Section or
Schedule of this agreement.
"ARM'S LENGTH" has the meaning ascribed to it for purposes of the Tax Act;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of the Company in
respect of the Transaction that are required by the Act to be filed with the
Director under the Act after the Final Order is made in order to effect the
Transaction;
"BALANCE SHEET" means the consolidated balance sheet of the Company as at
December 31, 2003, forming part of the Financial Statements;
"BUSINESS DAY" means any day on which commercial deposit taking banks are
generally open for business in Toronto, Ontario and New York, New York other
than a Saturday, a Sunday or a day observed as a holiday in such locations under
applicable Laws;
"CASHED-OUT OPTION" means each Company Option in respect of which a Cash
Election (as defined in the Company Stock Option Plan) has been duly made by a
Holder of Company Options prior to the Effective Time in accordance with the
terms and conditions of the Company Stock Option Plan;
"CERTIFICATE OF ARRANGEMENT" means the Certificate of Arrangement to be issued
by the Director in respect of the Articles of Arrangement to be filed by the
Company to give effect to the Transaction contemplated by this Agreement;
"CLOSING TIME" has the meaning ascribed to it in Section 2.6;
"CODE" means the United States Internal Revenue Code of 1986;
"COMMITMENT LETTERS" means the amended equity commitment letter from KKR
Millennium Fund (Overseas) Limited Partnership and the debt commitment letter
from
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Xxx Xxxx xx Xxxx Xxxxxx, respectively, copies of which were provided by
Acquisitionco to the Company on February 17, 2005 and December 22, 2004,
respectively;
"COMPANY BENEFIT PLANS" means all "employee benefit plans" (within the meaning
of Section 3(3) of ERISA) and all equity-based, severance, employment, change in
control, collective bargaining, bonus, incentive, deferred compensation,
supplemental retirement and all other employee benefit plans, arrangements,
agreements, programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or unregistered,
whether or not subject to ERISA, under which (i) any employees or former
employees (or any spouses, dependants, survivors or beneficiaries of any such
employees or former employees), directors or officers, individuals working on
contract with the Company or its Subsidiaries or other individuals providing
services to it of a kind normally provided by employees or eligible dependants
of any of the foregoing Persons has any present or contingent right to benefits
which are contributed to, sponsored by or maintained by the Company or any of
its Subsidiaries or (ii) under which the Company or any of its Subsidiaries has
any present or contingent liability;
"COMPANY CIRCULAR" means the notice of the Company Meeting and accompanying
management information circular, including all appendices thereto, prepared in
accordance with this Agreement, to be sent to the Company Shareholders in
connection with the Company Meeting;
"COMPANY DOCUMENTS" has the meaning ascribed to it in Section (v) of Schedule
3.1;
"COMPANY IP" means (i) all domestic, foreign, registered and pending
applications for patents, trademarks, service marks, copyrights, trade names,
domain names and all material licenses running to or from the Company or any of
its Subsidiaries relating to the Company's or any of its Subsidiaries'
businesses or owned by the Company or any of its Subsidiaries, (ii) all material
common law trademarks, service marks, copyrights and copyrightable works
(including databases, software and Internet site content), trade names,
websites, URLs, brand names and logos; and (iii) all trade secrets, inventions,
formulae, data, improvements, know-how, confidential information, material
computer programs (including any source code and object code) documentation,
engineering and technical drawings, processes, methodologies, trade dress, and
all other proprietary technology utilized in or incidental to the businesses of
the Company and its Subsidiaries and all common law rights relating to the
foregoing.
"COMPANY MEETING" means the special meeting of the Company Shareholders,
including any adjournment or postponement thereof, to be called and held in
accordance with the Interim Order to consider and, if deemed advisable, approve
the Transaction;
"COMPANY OPTIONS" means the options granted under the Company Stock Option Plan
to purchase Company Shares that remain outstanding on the Effective Date;
"COMPANY SECURITYHOLDERS" means the Holders of Company Shares and Company
Options;
"COMPANY SHAREHOLDERS" means Holders of Company Shares;
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"COMPANY SHARES" means the common shares of the Company;
"COMPANY STOCK OPTION PLAN" means the Masonite International Corporation Share
Option Plan, amended and restated as of March 16, 2004 as amended to the date
hereof;
"CONTRACT" means a contract, lease, instrument, note, bond, debenture, mortgage,
agreement, arrangement or understanding, written or oral, to which a Party, or
any of its Subsidiaries, is a party or under which a Party or any of its
Subsidiaries is bound, has unfulfilled obligations or contingent liabilities or
is owed unfulfilled obligations, whether known or unknown, and whether asserted
or not;
"COURT" means the Superior Court of Justice (Ontario);
"DEPOSITARY" means Computershare Investor Services Inc., being the depositary
appointed by the Company for the purpose, amongst other things, of exchanging
certificates representing Company Shares for cash;
"DIRECTOR" means the Director appointed pursuant to the Act;
"DISCLOSURE LETTER" means the disclosure letter provided by the Company to
Acquisitionco prior to the execution of the Agreement;
"DISSENT RIGHTS" means the rights of dissent in respect of the Transaction as
described in the Plan of Arrangement;
"DISSENTING SHAREHOLDER" means any Company Shareholder who has properly
exercised its Dissent Rights and has not withdrawn or been deemed to have
withdrawn such Dissent Rights;
"DSU" means deferred share units granted to management and certain key employees
of the Company pursuant to the Company's 2002 Deferred Share Plan effective as
of October 21, 2003, as amended, and the Company's 2004 Full Value Incentive
Plan dated as of March 23, 2004, as amended, and the deferred share units
granted to directors of the Company pursuant to the Directors' Deferred Unit
Plan dated as of March 23, 2004, as amended;
"EFFECTIVE DATE" means the date shown on the Certificate of Arrangement to be
issued under the Act giving effect to the Transaction, which date shall be
determined in accordance with Section 2.6;
"EFFECTIVE TIME" has the meaning ascribed to it in the Plan of Arrangement;
"ELIGIBLE PROPERTIES" means any non-depreciable capital property for the
purposes of the Tax Act held by the Company on the Effective Date;
"EMPLOYEE ROLLOVER AGREEMENT" means a written agreement between Acquisitionco
(or one of its Affiliates) and an officer or employee of the Company or its
subsidiaries in a form acceptable to the board of directors of the Company, (i)
pursuant to which (A) Acquisitionco (or one of its Affiliates) has agreed to
acquire, and such officer or employee has agreed to sell, that number of the
Company Shares held by such officer or
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employee stipulated in the agreement (if any) for consideration not exceeding
$42.25 per Company Share, which consideration consists of shares in the capital
of Acquisitionco (or such Affiliate), except that cash may be paid in lieu of
issuing fractional shares and/or (B) such officer or employee has agreed to
dispose of that number of the Company Options held by such officer or employee
stipulated in the agreement (if any) for consideration consisting solely of
Replacement Options and for which the total In-the-Money Amount of such
Replacement Options shall, at the time of granting of such Replacement Options,
equal (subject to rounding down to take into account fractional shares) the
total In-the-Money Amount of the Company Options exchanged for such Replacement
Options; (ii) which has been entered into prior to the Effective Time but is to
be completed immediately after the Effective Time in the case of a transaction
referred to in (i)(A) or to occur contemporaneously with the transfer of Company
Shares pursuant to section 3.1(f) of the Plan of Arrangement in the case of a
transaction referred to in (i)(B); (iii) under which all conditions to closing
(other than completion of the Arrangement) have been satisfied or waived as of
the Effective Time; and (iv) which has not been terminated by such officer or
employee or by Acquisitionco (or one of its Affiliates) as of the Effective
Time;
"EMPLOYEE ROLLOVER OPTIONS" means Company Options which are to be disposed of in
exchange for Replacement Options pursuant to an Employee Rollover Agreement;
"EMPLOYEE ROLLOVER SHARES" means Company Shares which are to be acquired
pursuant to an Employee Rollover Agreement;
"ENVIRONMENTAL LAWS" means all applicable Laws relating to the environment,
natural resources or employee health or safety, including any such Laws and
applicable, enforceable guidelines, policies and codes published by a
Governmental Authority relating to Hazardous Substances including the storage,
generation, use, handling, control, manufacture, processing, labelling, deposit,
disposal, transport, remediation, discharge or release of Hazardous Substances;
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended;
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934;
"EXISTING CREDIT FACILITIES" means the credit facilities of the Company or its
Subsidiaries listed in section 3.1(j)(iv) of the Disclosure Letter;
"FINAL ORDER" means the final order of the Court approving the Transaction as
such order may be amended by the Court at any time prior to the Effective Date
or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or
as amended on appeal;
"FINANCIAL STATEMENTS" means the audited consolidated financial statements of
the Company for the fiscal year ended December 31, 2003, including the notes to
such statements and the unaudited consolidated financial statements of the
Company for the nine months ended September 30, 2004, including the notes to
such statements;
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"GOVERNMENTAL AUTHORITY" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau or agency, domestic or foreign, (b) self-regulatory organization or stock
exchange including without limitation the NYSE and the TSX, (c) subdivision,
agent, commission, board, or authority of any of the foregoing, or (d)
quasi-governmental or private body exercising any regulatory, expropriation or
taxing authority under or for the account of any of the foregoing;
"HAZARDOUS SUBSTANCE" means any hazardous, dangerous or toxic substance,
including petroleum (including crude oil or any fraction thereof), petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
radon, toxic mould, urea-formaldehyde solvent, chemical and any other material,
substance or thing that is regulated pursuant to any Environmental Law or that
could result in liability under any Environmental Law, and shall include any
contaminant, pollutant, waste, hazardous waste, special waste or dangerous good
as defined under Environment Laws;
"HOLDERS" means (a) when used with reference to the Company Shares, the holders
thereof shown from time to time in the register of holders of Company Shares
maintained by or on behalf of the Company and, where the context so provides,
includes joint holders of such Company Shares, (b) when used with reference to
the Company Options, means the holders thereof shown from time to time in the
register maintained by or on behalf of the Company in respect of Company Options
and (c) when used with reference to the RSUs and/or DSUs, means the holders
thereof shown from time to time in the registers maintained by or on behalf of
the Company in respect of the RSUs and/or DSUs;
"IN-THE-MONEY AMOUNT" means, (i) for each Company Option, the difference between
the Purchase Price and the exercise price of that Company Option, and (ii) for
each Replacement Option, the difference, if any, between the fair market value
of each share issuable upon the exercise of such Replacement Option and the "per
share" exercise price of that Replacement Option, provided that, where more than
one share is issuable upon the exercise of a Replacement Option, the
In-the-Money Amount of such Replacement Option will be the difference as so
determined multiplied by the number of shares issuable;
"INTERIM ORDER" means the interim order of the Court, as the same may be
amended, in respect of the Transaction, as contemplated by this Agreement;
"LAWS" means all applicable laws (including common law), statutes, regulations,
statutory rules, by-laws, orders, ordinances, directives and the terms and
conditions of any approvals, permits, licences or judgements of any Governmental
Authority, together with any applicable enforceable published notes, guidelines
or policies, and the term "applicable", with respect to such Laws and in the
context that refers to one or more Persons, means such Laws that apply to such
Person or Persons or its or their business, undertaking, property or securities
and that emanate from a Governmental Authority having jurisdiction over the
Person or Persons or its or their business, undertaking, property or securities;
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"LEASED REAL PROPERTY" has the meaning ascribed to it in Section (t) of Schedule
3.1;
"MATERIAL ADVERSE CHANGE", when used in connection with the Company, means any
change, effect, event or occurrence with respect to the condition (financial or
otherwise), properties, assets, liabilities, obligations (whether absolute,
accrued, conditional or otherwise), businesses, operations or results of
operations or prospects of the Company or its Subsidiaries that is, or would
reasonably be expected to be, material and adverse to the Company and its
Subsidiaries on a consolidated basis. For certainty, "MATERIAL ADVERSE CHANGE"
does not include any change, effect, event or occurrence caused by or arising
from (a) changes in the markets in which the Company and its Subsidiaries
operate (other than changes in reaction to the announcement of the Transaction)
or (b) macroeconomic factors, interest rates, general financial market
conditions, war, terrorism or hostilities, except, in each case, to the extent
any change, effect, event or occurrence has had a disproportionate effect on the
Company and its Subsidiaries as compared to other Persons in the industry in
which the Company and its Subsidiaries operate.
"MATERIAL ADVERSE EFFECT" when used in connection with the Company, means any
effect of a Material Adverse Change relating to the Company;
"MATERIAL CONTRACTS" has the meaning ascribed to it in Section (j) of Schedule
3.1;
"MATERIAL FACT" has the meaning ascribed to it under the Securities Act;
"NOTICE PERIOD" has the meaning ascribed to it in Section 4.5;
"NYSE" means the New York Stock Exchange;
"OSC" means the Ontario Securities Commission;
"OUTSIDE DATE" means April 29, 2005 or such later date as may be mutually agreed
by the Parties;
"OWNED REAL PROPERTY" has the meaning ascribed to it in Section (t) of Schedule
3.1;
"PARTY" means Acquisitionco or the Company and "PARTIES" means Acquisitionco and
the Company, collectively;
"PERSON" includes any individual, sole proprietorship, partnership, firm,
entity, limited partnership, limited liability company, unlimited liability
company, unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body, corporation, or Governmental Authority, and any group
(as defined in Section 13(d)(3) of the Exchange Act) comprised of more than one
Person and, where the context requires, any of the foregoing when they are
acting as trustee, executor, administrator or other legal representatives;
"PLAN OF ARRANGEMENT" means the plan of arrangement substantially in the form
and content of Schedule 1.1A and any amendments or variations made thereto in
accordance with this Agreement or the Plan of Arrangement or made at the
direction of the Court;
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"PRE-EFFECTIVE DATE PERIOD" means the period from December 22, 2004 until the
Closing Time, subject to the earlier termination of this Agreement in accordance
with its terms;
"PUBLICLY DISCLOSED BY THE COMPANY" means disclosed by the Company in a public
filing made by it with the OSC on the SEDAR system or with the SEC on the XXXXX
system prior to the date hereof;
"PURCHASE PRICE" means $42.25 cash per Company Share;
"QUALIFYING COMPANY SHAREHOLDER" means a Company Shareholder but, for greater
certainty, does not include (i) a Dissenting Shareholder or (ii) Acquisitionco
or any Affiliate of Acquisitionco;
"REAL PROPERTY" has the meaning ascribed to it in Section (t) of Schedule 3.1;
"REAL PROPERTY LEASES" has the meaning ascribed to it in Section (t) of Schedule
3.1;
"REGULATORY APPROVALS" means those sanctions, rulings, consents, orders,
exemptions, permits and other approvals (including the lapse, without objection,
of a prescribed time under a statute or regulation that states that a
Transaction may only be implemented if a prescribed time lapses following the
giving of notice without an objection being made) of any Governmental Authority,
as set out in Schedule 2.5;
"REPLACEMENT OPTIONS" means options to acquire shares of Acquisitionco (or one
of its Affiliates) granted in exchange for Company Options pursuant to an
Employee Rollover Agreement;
"RSU" means restricted share units granted to management and certain key
employees of the Company pursuant to the Company's 2002 Restricted Share Bonus
Plan dated as of October 21, 2003 as amended on March 23, 2004 and the Company's
2004 Full Value Incentive Plan dated as of March 23, 2004, as amended;
"SEC" means the U.S. Securities and Exchange Commission;
"SECURITIES ACT" means the Securities Act (Ontario) and the rules, regulations
and policies made thereunder, as they may be amended from time to time prior to
the Effective Date;
"SENIOR MANAGEMENT" means the senior officers of the Company, including the
senior executives identified in Schedule 5.2, but excluding the non-executive
Chairman of the Board of Directors;
"SUBSIDIARY" means, with respect to a specified body corporate, any other body
corporate of which more than 50% of the outstanding shares ordinarily entitled
to elect a majority of the board of directors thereof (whether or not shares of
any other class or classes shall or might be entitled to vote upon the happening
of any event or contingency) are at the time owned directly or indirectly by
such specified body corporate, and shall include also any partnership, joint
venture or other entity over which the specified body corporate is entitled to
exercise similar direction or control;
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"SUPERIOR PROPOSAL" means any bona fide written Acquisition Proposal
that, in the good faith determination of the board of directors of the
Company after consultation with its financial advisors and with outside
counsel, (a) is reasonably likely to be completed, taking into account
all legal, financial, regulatory and other aspects of such proposal and
the Person making such proposal, and (b) would, if consummated in
accordance with its terms be more favourable to the Company
Shareholders from a financial point of view than the Transaction;
"TAX" and "TAXES" have the respective meanings ascribed to such terms
in Section (p) of Schedule 3.1;
"TAX ACT" means the Income Tax Act (Canada);
"TAX RETURNS" includes all returns, reports, declarations, elections,
notices, filings, forms, statements and other documents (whether in
tangible, electronic or other form) and including any amendments,
schedules, attachments, supplements, appendices and exhibits thereto,
made, prepared, filed or required to be made, prepared or filed by Law
in respect of Taxes;
"TERMINATION PAYMENT" has the meaning ascribed to it by Section 6.3(1);
"TRANSACTION" means the arrangement of the Company under Section 182 of
the Act on the terms and subject to the conditions set out in the Plan
of Arrangement, subject to any amendments or variations thereto made in
accordance with this Agreement or the Plan of Arrangement or made at
the direction of the Court;
"TRANSACTION RESOLUTION" means the special resolution of the Company
Shareholders approving the Transaction, to be substantially in the form
and content of Schedule 1.1B;
"TSX" means The Toronto Stock Exchange; and
"WARN" has the meaning ascribed to it in Section 4.2(a)(viii)(C).
1.2 CERTAIN RULES OF INTERPRETATION
In this Agreement:
(a) CURRENCY - Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
(b) GOVERNING LAW - This Agreement is a contract made under and
shall be governed by and construed in accordance with the laws
of the Province of Ontario and the federal laws of Canada
applicable in the Province of Ontario. Each Party hereby
irrevocably attorns to the jurisdiction of the courts of the
Province of Ontario in respect of all matters arising under or
in relation to this Agreement.
(c) HEADINGS - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
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(d) INCLUDING - Where the word "including" or "includes" is used
in this Agreement, it means "including (or includes) without
limitation".
(e) NO STRICT CONSTRUCTION - The language used in this Agreement
is the language chosen by the Parties to express their mutual
intent, and no rule of construction to the effect that any
ambiguity is to be resolved against the drafting Party shall
be applied against either Party.
(f) NUMBER AND GENDER - Unless the context otherwise requires,
words importing the singular include the plural and vice versa
and words importing gender include all genders.
(g) SEVERABILITY - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall,
as to such jurisdiction, be ineffective only to the extent of
such restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement and
without affecting the validity or enforceability of such
provision in any other jurisdiction or without affecting its
application to other Parties or circumstances.
(h) STATUTORY REFERENCES - A reference to a statute includes all
rules and regulations made pursuant to such statute and,
unless otherwise specified, the provisions of any statute or
regulation or rule which amends, supplements or supersedes any
such statute or any such regulation or rule.
(i) TIME - Time is of the essence in the performance of the
Parties' respective obligations.
(j) TIME PERIODS - 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 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.
(k) SUBSIDIARIES - To the extent any representations, warranties,
covenants or agreements contained herein relate, directly or
indirectly, to a Subsidiary of any Party, each such provision
shall be construed as a covenant by such Party to cause (to
the fullest extent to which it is legally capable) such
Subsidiary to perform the required action.
1.3 ENTIRE AGREEMENT
This Agreement, together with the agreements and other documents
required to be delivered pursuant to this Agreement, constitutes the entire
agreement between the Parties and sets out all the covenants, promises,
warranties, representations, conditions, understandings and agreements between
the Parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
or written. No reliance has been made upon, and there are no covenants,
promises, warranties, representations, conditions, understandings or other
agreements, oral or written, between the
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Parties in connection with the subject matter of this Agreement except as
specifically set forth in this Agreement and any document required to be
delivered pursuant to this Agreement. There shall be no liability, either in
tort or in contract or otherwise, assessed in relation to any such warranty,
representation, opinion, advice or assertion of fact, not reduced to writing as
part of this Agreement.
1.4 SCHEDULES
The Schedules to this Agreement, as listed below, are an integral part
of this Agreement:
SCHEDULE DESCRIPTION
-------- -----------
1.1A Plan of Arrangement
1.1B Transaction Resolution
2.5 Regulatory Approvals
3.1 Representations and Warranties of the Company
3.2 Representations and Warranties of Acquisitionco
5.2 Senior Executives
1.5 ACCOUNTING MATTERS
Unless otherwise stated, all accounting terms used in this Agreement
shall have the meanings attributable thereto under Canadian generally accepted
accounting principles and all determinations of an accounting nature required to
be made shall be made in a manner consistent with Canadian generally accepted
accounting principles.
1.6 KNOWLEDGE
Any reference to the knowledge of a Party shall mean, unless otherwise
specified, to the best of the knowledge, information and belief of such Party's
senior officers after reviewing all relevant records and making reasonable
inquiries regarding the relevant matter of such Party's directors and senior
officers. For these purposes the senior officers of the Company are the persons
so designated in the Disclosure Letter.
ARTICLE 2
THE TRANSACTION
2.1 ARTICLES OF ARRANGEMENT
The Articles of Arrangement shall provide, with such other matters as
are necessary to effect the Transaction, for the implementation of the Plan of
Arrangement, as a result of which:
(a) each Cashed-out Option will be cancelled by the Company in
exchange for a cash payment by the Company in an amount equal
to the In-the-Money Amount of such Cashed-out Option (and, for
greater certainty the Company shall withhold any required
withholding Taxes);
(b) each Company Option issued and outstanding immediately prior
to the Effective Time, other than a Cashed-out Option or an
Employee Rollover Option, will cease to represent a right to
receive any Company Shares. Instead, beginning
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immediately after the Effective Time, the sole entitlement of
a Holder of such a Company Option will be to receive, upon
exercise of the Company Option, a cash payment from the
Company equal to the In-the-Money Amount of such Company
Option (and, for greater certainty the Company shall be
entitled to withhold any required withholding Taxes);
(c) each RSU and DSU will be cancelled by the Company in exchange
for a cash payment by the Company in the amount of $42.25 per
RSU or DSU, as applicable (and, for greater certainty the
Company shall withhold any required withholding Taxes);
(d) the outstanding Company Shares (excluding Employee Rollover
Shares) held by Qualifying Company Shareholders shall be
transferred by the Holders thereof to Acquisitionco without
any further authorization, act or formality, in exchange for
cash in the amount of the Purchase Price per Company Share,
and Acquisitionco will be deemed to be the legal and
beneficial owner thereof, free and clear of all liens,
charges, claims and encumbrances.
(e) the transactions contemplated by section (i)(B) of the
definition of Employee Rollover Agreement shall be deemed to
occur contemporaneously with the transfers in paragraph
2.1(d).
2.2 IMPLEMENTATION STEPS BY THE COMPANY
The Company shall:
(a) as soon as reasonably practicable, apply in a manner
acceptable to Acquisitionco, acting reasonably, under the Act
for an order approving the Arrangement and in connection with
such application the Company shall file and diligently
prosecute an application for an Interim Order providing for
the calling and holding of the Company Meeting for the purpose
of considering, and if deemed advisable, approving the
Transaction;
(b) subject to Section 2.5, convene and hold the Company Meeting
by March 31, 2005 or as soon as practicable thereafter, or
such other date as the Parties may mutually agree to, for the
purpose of considering the Transaction Resolution and, with
the consent of Acquisitionco, for any other proper purpose as
may be set out in the notice for such meeting;
(c) except as required for quorum purposes, not adjourn, postpone,
cancel (or propose the adjournment, postponement or
cancellation of) or fail to call the Company Meeting without
Acquisitionco's prior written consent, except as required by
Laws;
(d) use commercially reasonable efforts to solicit from the
Company Shareholders proxies in favour of the approval of the
Transaction Resolution, including if so requested by
Acquisitionco using the services of dealers and proxy
solicitation services, and take all other action that is
necessary or desirable to secure the approval of the
Transaction by the Company Shareholders;
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(e) subject to obtaining the approvals as are required by the
Interim Order, use its best efforts to diligently pursue the
application to the Court for the Final Order; and
(f) subject to obtaining the Final Order and the satisfaction or
waiver of the other conditions herein contained in favour of
each Party, on the date contemplated in Section 2.6 send to
the Director, for endorsement and filing by the Director, the
Articles of Arrangement and such other documents as may be
required in connection therewith under the Act to give effect
to the Transaction.
2.3 IMPLEMENTATION STEPS BY ACQUISITIONCO
Acquisitionco shall, subject to obtaining the Final Order and the
satisfaction or waiver of the other conditions precedent contained in this
Agreement in its favour, on or before the Effective Date deposit or cause to be
deposited with the Depositary, immediately available funds equal to the
aggregate cash consideration payable for Company Shares under the Transaction.
2.4 INTERIM ORDER
The application referred to in Section 2.2(a) shall request that the
Interim Order provide:
(a) for the class of Persons to whom notice is to be provided in
respect of the Plan of Arrangement and the Company Meeting and
for the manner in which such notice is to be provided;
(b) that the requisite approval for the Transaction Resolution
shall be, (i) 662/3 % of the votes cast on the Transaction
Resolution by the Company Shareholders present in person or by
proxy at the Company Meeting, and (ii) a simple majority of
the votes cast on the Transaction Resolution by the Company
Shareholders present in person or by proxy at the Company
Meeting, excluding Company Shares held by Senior Management;
(c) that, in all other respects, the terms, restrictions and
conditions of the by-laws and articles of the Company,
including quorum requirements and all other matters, shall
apply in respect of the Company Meeting; and
(d) for the grant of the Dissent Rights.
2.5 THE COMPANY CIRCULAR
As promptly as reasonably practicable after the execution of this
Agreement, the Company shall prepare and complete, in consultation with
Acquisitionco, the Company Circular (and any amendments thereto) together with
any other documents required by the Securities Act, the 1933 Act and Exchange
Act and other applicable Laws in connection with the Company Meeting and the
Transaction. As promptly as reasonably practicable thereafter, and after
obtaining the Interim Order, but subject to obtaining any required Regulatory
Approvals in connection with mailing the Company Circular, the Company shall
cause the Company Circular and other documentation required in connection with
the Company Meeting to be sent to each Company Shareholder and to be filed with
applicable Governmental Authorities, as required by the Interim Order and
applicable Laws. The Company shall permit Acquisitionco to review and
-14-
comment on drafts of the Company Circular and other documentation referred to
above in the course of its preparation and shall not file or amend such
documentation without the consent of Acquisitionco, not to be unreasonably
withheld or delayed.
2.6 CLOSING MATTERS
The Effective Date shall be the third Business Day following the latest
of the date of the Company Meeting, the date of issuance of the Final Order
(unless appealed in which case, the Effective Date shall be the date such appeal
is delivered or withdrawn) and the date upon which the last Regulatory Approval
is obtained, or such other date as the Parties may agree. Closing shall take
place at the office of Osler, Xxxxxx & Harcourt LLP in Toronto, Ontario at 11:00
a.m. on the Effective Date or at such other place, date and time as the Parties
shall agree (the "CLOSING TIME"). Each of Acquisitionco and the Company shall
deliver, at the closing of the Transaction, such customary certificates,
resolutions and other closing documents as may be required by the other Party,
acting reasonably.
2.7 PREPARATION OF FILINGS, ETC.
(a) Each of Acquisitionco and the Company shall furnish to the
other all information that may be required under Law to be
provided concerning such Party and its shareholders for the
Company Circular and the implementation of the other actions
described in Section 2.5. Each Party covenants with the other
that information to be furnished by it (to its knowledge in
the case of information concerning its shareholders) in
connection with such Company Circular, actions or otherwise in
connection with the consummation of the Transaction will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated in any such
document or which is necessary in order to make any
information so furnished for use in any such document not
misleading in the light of the circumstances in which it is
furnished.
(b) Acquisitionco and the Company shall each promptly notify the
other if, at any time before the Closing Time, it becomes
aware that the Company Circular or any application for an
order hereunder contains any untrue statement of a material
fact or omits to state a material fact required to be stated
therein or which is necessary to make the statements contained
therein not misleading in light of the circumstances in which
they are made, or that otherwise requires an amendment or
supplement to the Company Circular or such application. In any
such event, Acquisitionco and the Company shall cooperate in
the preparation of a supplement or amendment to the Company
Circular or such application, as required and as the case may
be, and, if required, shall cause the same to be distributed
to Company Shareholders and/or filed with the relevant
Governmental Authorities.
(c) The Company shall ensure that the Company Circular complies in
all material respects with all applicable Laws. Without
limiting the generality of the foregoing, the Company shall
ensure that the Company Circular provides Company Shareholders
with information in sufficient detail to permit them to form a
reasoned judgement concerning the matters to be placed before
them at the Company Meeting.
-15-
2.8 DISCLOSURE LETTER
Notwithstanding anything in the Disclosure Letter to the contrary, all
disclosures in the Disclosure Letter must reference or be associated with a
particular section in this Agreement (including the Schedules) but will also be
interpreted to relate to or modify other sections of this Agreement (including
the Schedules) if the intention to so relate or modify is readily apparent on
the face of such disclosure. The inclusion of any item in the Disclosure Letter
shall not be construed as an admission by the Company of the materiality of such
item.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represented and warranted on December 22, 2004 to and in
favour of Acquisitionco as set out in Schedule 3.1 and acknowledges that
Acquisitionco is relying upon such representations and warranties in connection
with the matters contemplated by this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF ACQUISITIONCO
Acquisitionco represented and warranted on December 22, 2004 to and in
favour of the Company as set out in Schedule 3.2 and acknowledges that the
Company is relying upon such representations and warranties in connection with
the matters contemplated by this Agreement.
3.3 SURVIVAL
The representations and warranties of the Company and Acquisitionco
contained herein shall survive the execution and delivery of this Agreement but
shall terminate on the earlier of the termination of this Agreement in
accordance with its terms and as of the Effective Date. Any investigation by a
Party or its advisors shall not mitigate, diminish or affect the representations
and warranties of the other Party.
ARTICLE 4
COVENANTS
4.1 RETENTION OF GOODWILL
During the Pre-Effective Date Period, the Company shall continue to
carry on the business of the Company and its Subsidiaries in a manner consistent
with prior practice in all material respects, using commercially reasonable
efforts to preserve the attendant goodwill of such entities and to contribute to
retention of that goodwill to and after the Effective Date, but subject to the
following provisions of this Article 4. The provisions of Section 4.2(a) are
intended to be in furtherance of this general commitment.
4.2 COVENANTS OF THE COMPANY
(a) The Company covenants and agrees that, during the
Pre-Effective Date Period, except (I) with the consent of
Acquisitionco to any deviation therefrom (such consent not to
be unreasonably withheld or delayed taking into account
-16-
Acquisitionco's financing structure and its plans for the
Company); (II) as set out in the Disclosure Letter; (III) with
respect to any matter expressly contemplated by this
Agreement; or (IV) as expressly required by Law, the Company
will, and will cause its Subsidiaries to:
(i) continue to carry on its business in the ordinary
course consistent with past practice in all material
respects and use commercially reasonable efforts to
preserve intact its present business organization,
and its relationships with those having material
business dealings with it, to the end that its
goodwill and business shall be maintained;
(ii) not split, consolidate or reclassify any of the
outstanding shares of the Company or of any
Subsidiary of the Company, nor declare, set aside or
pay any dividends on or make any other distributions
on or in respect of the outstanding shares of the
Company or of any Subsidiary of the Company;
(iii) not amend the articles or by-laws of the Company or
amend the articles or by-laws of any Subsidiary of
the Company that is not wholly-owned in a manner that
would affect its ownership or control by the Company;
(iv) not sell, pledge, encumber, allot, reserve, set aside
or issue, or purchase or redeem, any shares in its
capital or of any Subsidiary of the Company or any
class of securities convertible or exchangeable into,
or rights, warrants or options to acquire, or
financial instruments the performance of which is
based upon any such shares or other securities having
a right to vote or convertible or exchangeable into
such shares or securities, except (I) for pledges
required to be made by the terms of the Existing
Credit Facilities, (II) issuances of Company Shares
pursuant to the exercise of previously granted
Company Options and (III) to carry out existing
shareholder and similar agreements relating to
non-wholly-owned Subsidiaries as set forth in the
Disclosure Letter;
(v) not amend, vary or modify the Company Stock Option
Plans, or the Company Options or the Company Benefit
Plans involving Company Shares or phantom equity;
(vi) not reorganize, amalgamate or merge the Company or
any of its Subsidiaries with any other Person, nor
acquire or agree to acquire by amalgamating, merging
or consolidating with, or purchasing a substantial
equity interest or substantial portion of the
business of, any business or Person;
(vii) not sell, lease, encumber or otherwise dispose of any
material assets except (A) transactions between two
or more wholly-owned Subsidiaries of the Company or
between a wholly-owned Subsidiary of the Company and
the Company; (B) with respect to the sale of
inventory of the Company or any Subsidiary of the
Company in the ordinary course of
-17-
business consistent with past practice; or (C)
encumbrances granted pursuant to the Existing Credit
Facilities.
(viii) not:
(A) in the case of directors and senior or
executive officers of the Company, enter
into or modify any Company Benefit Plans or
other employment, retention, severance, or
similar agreements, policies or arrangements
with, or grant any bonuses, salary
increases, pension or supplemental pension
benefits, profit sharing, retirement
allowances, deferred compensation, incentive
compensation, retention, severance or
termination pay to or any other form of
compensation to, or increase of benefits
payable to, or make any loan to, any
officers or directors of the Company or any
Subsidiary of the Company other than as
contemplated by this Agreement or required
under the terms of a Company Benefit Plan or
written employment agreement in effect prior
to December 22, 2004;
(B) in the case of employees who are not senior
or executive officers or directors of the
Company or any Subsidiary of the Company,
take any action with respect to the entering
into or modification of any Company Benefit
Plans or other employment, retention,
severance, collective bargaining or similar
agreements, policies or arrangements or
grant any bonuses, salary increases, pension
or supplemental pension benefits, profit
sharing, retirement allowances, deferred
compensation, incentive compensation,
retention, severance or termination pay or
any other form of compensation that are
individually or in the aggregate material to
the Company and its Subsidiaries on a
consolidated basis or any increase of
benefits payable, other than as required by
Law, or as contemplated by this Agreement or
as required by under the terms of a Company
Benefit Plan or written employment agreement
or collective bargaining agreement in effect
prior to December 22, 2004 or for annual
increases in salary in the ordinary course
of business consistent with past practice or
in connection with promotions in the
ordinary course of business consistent with
past practice; or
(C) at any time within the 90-day period prior
to the Effective Date, effectuate a "plant
closing" or "mass layoff" as those terms are
defined in the Worker Adjustment and
Retraining Notification Act ("WARN") or any
similar Laws, affecting in whole or in part
any site of employment, facility, operating
unit or employee of the Company or its
Subsidiaries;
(ix) not guarantee the payment of material indebtedness of
another Person or enter into any "keep well" or other
agreement having the economic effect
-18-
of the foregoing (other than in respect of a
wholly-owned Subsidiary or pursuant to contractual
obligations in effect prior to December 22, 2004;
(x) not incur indebtedness for money borrowed or issue or
sell any debt securities or warrants or other rights
to acquire debt securities other than (A) in
connection with the renewal or replacement (on
substantially equivalent terms) of the Existing
Credit Facilities; or (B) for short term indebtedness
incurred in the ordinary course of business
consistent with past practice (provided, however,
that the Company shall not be prohibited from making
draw-downs under the Existing Credit Facilities in
the ordinary course of business consistent with past
practice);
(xi) not, except in the ordinary course of business
consistent with past practice: (A) satisfy or settle
any claims or liabilities substantially prior to the
same being due, except such as have been reserved
against in the Financial Statements, which are,
individually or in the aggregate, material to the
Company and its Subsidiaries on a consolidated basis;
(B) grant any waiver, exercise any option or
relinquish any contractual rights which are,
individually or in the aggregate, material to the
Company and its Subsidiaries on a consolidated basis;
or (C) enter into any interest rate, currency equity
or commodity swaps, xxxxxx or other similar financial
instruments;
(xii) use its reasonable commercial efforts (and cause each
of its Subsidiaries to use reasonable commercial
efforts) to cause its current insurance (or
re-insurance) policies not to be cancelled or
terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies
underwritten by insurance and re-insurance companies
of nationally recognized standing providing coverage
equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and
effect;
(xiii) not make any loan, advances or capital contributions
to, or investments in, any other Person, except for:
(A) loans or investments by the Company or a
wholly-owned Subsidiary of the Company to or
in any wholly-owned Subsidiary of the
Company; and
(B) advances made to employees (other than
officers) for travel and moving expenses in
the ordinary course of business consistent
with past practice.
(xiv) incur or commit to capital expenditures only in the
ordinary course of business consistent with past
practice and in accordance with the capital plan for
2005 provided to Acquisitionco prior to the date
hereof;
-19-
(xv) not make any changes to existing accounting practices
relating to the Company or any Subsidiary of the
Company, except as required by Law or a Governmental
Authority or required by applicable generally
accepted accounting principles, or make any tax
election other than, in either case, those that would
not have a significant impact on the Financial
Statements or the financial statements of each of the
Company's Subsidiaries;
(xvi) not (A) rescind or change any election relating to
Taxes, annual Tax accounting period or method of Tax
accounting in any material respect, other than, in
each case, rescissions or changes made in the
ordinary course of business consistent with prior
practice, (B) enter into any closing agreement
relating to Taxes, (C) settle any material Tax claim
or assessment, (D) surrender any right to claim a Tax
refund or (E) amend any of its transfer pricing
policies;
(xvii) not take any action or enter into any transaction
that would preclude Eligible Properties from becoming
properties of Acquisitionco in a manner such that the
cost to Acquisitionco of the Eligible Properties
determined in accordance with subsection 88(1) of the
Tax Act including the addition to that cost
determined under paragraph 88(1)(d) of the Tax Act,
will be the fair market value of the Eligible
Properties on the Effective Date;
(xviii) not enter into, renew or revise any Material
Contract; and
(xix) not authorize, agree or propose to take any actions
prohibited by this Section 4.2(a).
(b) The Company shall and shall cause its Subsidiaries to:
(i) perform all obligations required to be performed by
the Company or any of its Subsidiaries under this
Agreement and co-operate with Acquisitionco in
connection therewith, in order to consummate and make
effective, as soon as reasonably practicable, the
Transaction;
(ii) use commercially reasonable efforts to obtain the
requisite approvals of the Company Shareholders to
the Transaction including participating in joint
presentations to the Company Shareholders;
(iii) advise Acquisitionco as reasonably requested, and on
a daily basis on each of the last seven Business Days
prior to the Company Meeting, as to the aggregate
tally of the proxies and votes received in respect of
the Company Meeting and all matters to be considered
at such meeting;
(iv) apply for and use commercially reasonable efforts to
obtain all Regulatory Approvals relating to the
Company or any of its Subsidiaries and, in doing so,
keep Acquisitionco informed as to the status of the
proceedings related to obtaining the Regulatory
Approvals, including providing Acquisitionco with
copies of all related applications and notifications
in draft form
-20-
(except that commercially confidential information of
the Company may be expurgated in Acquisitionco's copy
and shall be provided to Acquisitionco's counsel on
an external counsel basis), in order for
Acquisitionco to provide its reasonable comments and
providing Acquisitionco with copies of all material
correspondence;
(v) use commercially reasonable efforts to effect all
necessary registrations, filings and submissions of
information required by Governmental Authorities from
the Company or any of its Subsidiaries relating to
the Transaction;
(vi) use commercially reasonable efforts to obtain all
necessary waivers, consents and approvals required to
be obtained by the Company or a Subsidiary of the
Company in connection with the Transaction from other
parties to any material leases, licences or
contracts, including the consents set forth in
section 3.1(c)(iv)(A)(III) of the Disclosure Letter;
(vii) carry out the terms of the Interim Order and the
Final Order applicable to it and use commercially
reasonable efforts to comply promptly with all
requirements which applicable Laws may impose on the
Company or its Subsidiaries with respect to the
Transaction;
(viii) use all commercially reasonable efforts to defend all
lawsuits and other legal, regulatory or other
proceedings to which it is a party, challenging or
affecting this Agreement or the consummation of the
Transaction;
(ix) use all commercially reasonable efforts to have
lifted or rescinded any injunction or restraining
order relating to the Company or other order which
may adversely affect the ability of the Parties to
consummate the Transaction;
(x) provide Acquisitionco with a copy of any purported
exercise of the Dissent Rights and written
communications with any Holders exercising or
purporting to exercise Dissent Rights; and not settle
or compromise any claim brought by any present,
former or purported Holder of any of its securities
in connection with the Transaction without the
consent of Acquisitionco;
(xi) promptly advise Acquisitionco orally and, if then
requested, in writing:
(A) of any event occurring subsequent to
December 22, 2004 that would render any
representation or warranty of the Company
contained in this Agreement (except any such
representation or warranty which speaks
solely as of a date prior to the occurrence
of such event), if made on or as of the date
of such event or the Closing Time, untrue or
inaccurate in any material respect;
(B) of any Material Adverse Change in respect of
the Company; and
-21-
(C) of any material breach by the Company of any
covenant or agreement contained in this
Agreement;
(xii) use its commercially reasonable efforts to cause all
employees who are entitled to any change of control
payments arising as a result of the Transaction, to
waive such entitlement; and
(xiii) use commercially reasonable efforts to cause at least
US$8 million of cash from Xxxxxxx Universal Doors
Inc. and other non-wholly owned Subsidiaries and at
least US$20 million from Specialty Building Products
Ltd., respectively, to be distributed to the Company.
4.3 COVENANTS OF ACQUISITIONCO
Acquisitionco covenants and agrees to:
(a) perform all obligations required to be performed by it under
this Agreement and to co-operate with the Company in
connection therewith in order to consummate and make
effective, as soon as reasonably practicable, the transactions
contemplated by this Agreement;
(b) apply for and use commercially reasonable efforts to obtain
all Regulatory Approvals relating to Acquisitionco and, in
doing so, to keep the Company informed as to the status of the
proceedings related to obtaining the Regulatory Approvals,
including, but not limited to, providing the Company with
copies of all related applications and notifications, in draft
form (except that commercially confidential information of
Acquisitionco may be expurgated in the Company's copy and
shall be provided to the Company's counsel on an external
counsel basis), in order for the Company to provide its
reasonable comments and providing the Company with copies of
all material correspondence;
(c) use commercially reasonable efforts to effect all necessary
registrations, filings and submissions of information required
by Governmental Authorities from Acquisitionco or its
Subsidiaries relating to the Transaction;
(d) carry out the terms of the Interim Order and Final Order
applicable to it and use commercially reasonable efforts to
comply promptly with all requirements which applicable Laws
may impose on Acquisitionco or its Subsidiaries with respect
to the Transaction;
(e) use all commercially reasonable efforts to defend all lawsuits
or other legal, regulatory or other proceedings, to which it
is a party, challenging or affecting this Agreement or the
consummation of the Transaction;
(f) use all commercially reasonable efforts to have lifted or
rescinded any injunction or restraining order or other order
relating to Acquisitionco which may adversely affect the
ability of the Parties to consummate the Transaction;
(g) promptly advise the Company orally and, if then requested, in
writing:
-22-
(i) of any event occurring subsequent to December 22,
2004 that would render any representation or warranty
of Acquisitionco contained in this Agreement (except
any such representation or warranty which speaks
solely as of a date prior to the occurrence of such
event), if made on or as of the date of such event or
the Closing Time, untrue or inaccurate in any
material respect; and
(ii) of any material breach by Acquisitionco of any
covenant or agreement contained in this Agreement;
and
(h) use all commercially reasonable efforts to obtain and
effectuate the financing contemplated by the Commitment
Letters on the terms set forth therein.
4.4 COVENANTS OF THE COMPANY REGARDING NON-SOLICITATION
(1) The Company shall, and shall cause the officers, directors, employees,
representatives (which term includes for greater certainty any
investment banker, lawyer or accountant) and agents of the Company and
its Subsidiaries to, cease immediately all current discussions and
negotiations regarding any proposal that constitutes, or may reasonably
be expected to lead to, an Acquisition Proposal, and request and
enforce the return or destruction of all confidential information
provided in connection therewith. The Company shall not release any
Person from any confidentiality agreement or standstill agreement.
Prior to the Closing Time, the Company shall confirm to Acquisitionco
that all Persons with whom it has discussed any Acquisition Proposal in
the last six months have either returned such confidential information
or have certified its destruction.
(2) The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of
its Subsidiaries or otherwise, (i) solicit, initiate, knowingly
encourage or otherwise facilitate (including by way of furnishing
information or entering into any form of agreement, arrangement or
understanding) the initiation of any inquiries or proposals regarding
an Acquisition Proposal, (ii) participate in any discussions or
negotiations regarding, or provide any confidential information with
respect to, any Acquisition Proposal, (iii) approve or recommend, or
publicly propose to approve or recommend, any Acquisition Proposal;
(iv) accept or enter into, or publicly propose to accept or enter into,
any letter of intent, agreement, arrangement or understanding related
to any Acquisition Proposal; or (v) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Acquisitionco
the approval or recommendation of the board of directors of the Company
or any committee thereof of the Transaction.
(3) Notwithstanding Section 4.4(2), the board of directors of the Company
shall be permitted to (i) comply with the Company's disclosure
obligations under applicable Laws with regard to an Acquisition
Proposal, (ii) take any other action with regard to an Acquisition
Proposal to the extent ordered or otherwise mandated by any court of
competent jurisdiction; and (iii) respond to a bona fide request for
information that could reasonably be expected to lead to an Acquisition
Proposal, solely by advising that no information can be provided unless
a bona fide written Acquisition Proposal is made, and then only in
compliance with Section 4.4(4).
-23-
(4) Notwithstanding Section 4.4(2), if the Company receives an unsolicited,
bona fide written Acquisition Proposal the board of directors of the
Company shall be permitted to:
(a) consider, participate in any discussions or negotiations, or
enter into a confidentiality agreement and provide information
pursuant to Section 4.4(6), or
(b) withdraw, modify, change or qualify (or publicly propose to
withdraw, modify or qualify), in a manner adverse to
Acquisitionco, the approval or recommendation of the
Transaction by the Company,
if and only to the extent that, in the case of clause (a) and (b):
(i) the Company Meeting shall not have occurred;
(ii) the Company shall have complied with Sections 4.4(5)
and 4.4(6);
(iii) the board of directors concludes in good faith, after
consultation with its outside legal and financial
advisors, that it would be necessary to take such
action in order to fulfill its fiduciary duties;
and, the board of directors of the Company concludes in good faith,
after consultation with its outside legal and financial advisors, (A)
in the case of clause (a), that such Acquisition Proposal is or is
reasonably likely to be a Superior Proposal, or (B) in the case of
clause (b), that such Acquisition Proposal is a Superior Proposal.
(5) The Company shall forthwith notify Acquisitionco of any Acquisition
Proposal and any inquiry that could lead to an Acquisition Proposal, or
any amendments to the foregoing, or any request for non-public
information relating to the Company or any Subsidiary of the Company in
connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any Subsidiary of the
Company by any Person. Such notice shall include a description of the
material terms and conditions of any proposal, the identity of the
Person making such proposal, inquiry or contact and provide such other
details of the proposal, inquiry or contact as Acquisitionco may
reasonably request. The Company shall keep Acquisitionco reasonably
informed of the status of any such Acquisition Proposal or inquiry in a
timely manner.
(6) If the Company receives a request for material non-public information
from a Person who has made an unsolicited bona fide written Acquisition
Proposal and the Company is permitted, subject to and as contemplated
under Section 4.4(4), to negotiate the terms of such Acquisition
Proposal, then, and only in such case, the board of directors of the
Company may, subject to the execution by such Person of a
confidentiality agreement containing employee non-solicitation and
standstill provisions substantially similar to those contained in the
Confidentiality Agreement, provide such Person with access to
information regarding the Company; provided that, (i) the Company sends
a copy of any such confidentiality agreement to Acquisitionco promptly
upon its execution, (ii) Acquisitionco is provided with a complete list
of all information provided to such Person on a timely basis, and (iii)
Acquisitionco is provided on a timely basis with similar access to
information (to the extent not previously provided to Acquisitionco) to
that which such Person was provided.
-24-
(7) The Company shall ensure that its officers, directors and employees and
its Subsidiaries and their officers, directors and employees and any
representatives or agents retained by it or its Subsidiaries are aware
of the provisions of this Section 4.4, and the Company shall be
responsible for any breach of this Section 4.4 by its and its
Subsidiaries' officers, directors, employees, representatives or
agents.
(8) Nothing contained in this Section 4.4 shall limit in any way the
obligation of the Company to convene and hold the Company Meeting in
accordance with Section 2.2 of this Agreement unless this Agreement is
terminated in accordance with Article 6. Nothing in this Section 4.4
shall permit the Company to terminate this Agreement (except as
specifically provided in Article 6).
4.5 NOTICE OF SUPERIOR PROPOSAL DETERMINATION
The Company shall not accept, approve or recommend or enter into any
agreement in respect of an Acquisition Proposal on the basis that it constitutes
a Superior Proposal (or change or withdraw its recommendation in favour of the
Transaction) unless: (a) it has promptly provided Acquisitionco with a copy of
the Acquisition Proposal document which has been determined to be a Superior
Proposal; (b) five Business Days (the "NOTICE PERIOD") shall have elapsed from
the date Acquisitionco received notice of the determination to accept, approve
or recommend an agreement in respect of such Acquisition Proposal; and (c)
before entering into any agreement with respect to a Superior Proposal, this
Agreement shall have been terminated pursuant to Section 6.2(3)(d). During the
Notice Period, the Company shall provide a reasonable opportunity to
Acquisitionco to consider, discuss and offer such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with its
recommendation to the Company Shareholders with respect to the Transaction;
provided, however, that any such adjustment shall be at the discretion of
Acquisitionco at the time. The board of directors of the Company will review in
good faith any offer made by Acquisitionco to amend the terms of this Agreement
in order to determine, as part of its exercising its fiduciary duties, whether
the proposed amendments would, upon acceptance, result in such Superior Proposal
ceasing to be a Superior Proposal (and whether it will change or withdraw its
recommendation in favour of the Transaction). If a majority of the board of
directors of the Company determines that the Superior Proposal would cease to be
a Superior Proposal, the Company will so advise Acquisitionco and will accept
the offer by Acquisitionco to amend the terms of this Agreement and the Parties
agree to take such actions and execute such documents as are necessary to give
effect to the foregoing. If the board of directors of the Company continues to
believe, in good faith and after consultation with financial advisors and
outside counsel, that such Superior Proposal remains a Superior Proposal and
therefore rejects the amendments offered by Acquisitionco, then the Company may,
subject to the terms of this Agreement, accept, approve, recommend or enter into
an agreement, understanding or arrangement in respect of such Superior Proposal
(and change or withdraw its recommendation in favour of the Transaction). Each
successive material modification of any Acquisition Proposal or a Superior
Proposal shall constitute a new Acquisition Proposal for the purposes of this
Section 4.5 and shall require a three Business Day Notice Period from the date a
copy of such amendment is provided to Acquisitionco (other than an amendment to
improve upon a Superior Proposal in respect of which Acquisitionco has been
provided with an opportunity to amend the terms of this Agreement and such
Superior Proposal has not ceased to be a Superior Proposal prior to the proposed
amendment). If the Company provides Acquisitionco with the notice contemplated
in this Section on a date that is less than
-25-
seven calendar days prior to the Company Meeting, if requested by Acquisitionco,
the Company shall adjourn the Company Meeting to a date that is not less than
seven calendar days and not more than ten calendar days after the date of such
notice.
4.6 ACCESS TO INFORMATION
Subject to applicable Laws, upon reasonable notice, the Company shall
(and shall cause each of its Subsidiaries to) afford Acquisitionco's officers,
employees, counsel, accountants and other authorized representatives and
advisors access, during normal business hours from December 22, 2004 and until
the earlier of the Effective Date or the termination of this Agreement, to its
and its Subsidiaries' properties, books, contracts and records as well as to its
management personnel and its accountants and use commercially reasonable efforts
to afford such access to its other advisors, and, during such period, the
Company shall (and shall cause each of its Subsidiaries to) furnish promptly to
Acquisitionco all information concerning the Company's and its Subsidiaries'
businesses, properties and personnel as Acquisitionco may reasonably request,
other than information in respect of which the Company is under an enforceable
obligation to a third party to maintain confidentiality after the Company has
used its commercially reasonable efforts to obtain a waiver of such obligation.
4.7 FINANCING
Prior to the Effective Date, the Company shall provide, and shall cause
its Subsidiaries to, and shall use its commercially reasonable efforts to cause
the respective officers, employees, representatives and advisors, including
legal and accounting, of the Company and its Subsidiaries to, provide all
cooperation reasonably requested by Acquisitionco in connection with the
financing of the transactions contemplated by this Agreement, including, without
limitation, using commercially reasonable efforts to cause (i) appropriate
officers and employees to be available on a customary basis to meet with
prospective lenders and investors in presentations, meetings, road shows and due
diligence sessions, to assist with the preparation of disclosure documents in
connection therewith, to execute and deliver any pledge and security documents,
other definitive financing documents, or other certificates, legal opinions or
documents as may be reasonably requested by Acquisitionco, and (ii) its
independent accountants and counsel to provide assistance to Acquisitionco,
including providing consent to Acquisitionco to prepare and use their audit
reports relating to the Company and its Subsidiaries and, at the cost of
Acquisitionco, to provide any necessary "comfort letters".
4.8 INDEMNIFICATION
(1) Acquisitionco agrees that all rights to indemnification or exculpation
existing in favour of the directors or officers of the Company or any
Subsidiary of the Company as provided in the Company's articles or
by-laws as at the date of the Confidentiality Agreement shall survive
the Transaction and shall continue in full force and effect for a
period of not less than six years from the Closing Time.
(2) There shall be maintained in effect, for not less than six years from
the Closing Time, coverage substantially equivalent to that in effect
under the current policies of the directors' and officers' liability
insurance maintained by the Company, which is no less advantageous, and
with no gaps or lapses in coverage with respect to matters occurring
prior to the Closing Time; provided that in no event shall
Acquisitionco be required to
-26-
expend in any one year an amount in excess of 300% of the annual amount
currently paid by the Company and if the annual premiums of such
insurance coverage exceed such amount, Acquisitionco shall be obligated
only to obtain a substantially similar policy with the greatest
coverage available (as to quantum and events) for such maximum cost.
Alternatively, at Acquisitionco's option, it may cause the Company to
purchase "run-off" directors' and officers' liability insurance
providing coverage substantially as favourable to such directors and
officers as that in effect under such current policies to cover prior
events during such six year period or the balance thereof.
ARTICLE 5
CONDITIONS
5.1 MUTUAL CONDITIONS PRECEDENT
The respective obligations of the Parties to complete the Transaction
shall be subject to the satisfaction, on or before the Closing Time, of the
following conditions precedent, each of which may only be waived by the mutual
consent of Acquisitionco and the Company:
(a) the Transaction Resolution shall have been approved by (i) 66
2/3% of the votes cast on the Transaction Resolution by the
Company Shareholders present in person or by proxy at the
Company Meeting, and (ii) a simple majority of the votes cast
on the Transaction Resolution by the Company Shareholders
present in person or by proxy at the Company Meeting,
excluding Company Shares held by Senior Management;
(b) the Transaction shall have been approved at the Company
Meeting in accordance with any conditions in addition to those
set out in Section 5.1(a) which may be imposed by the Interim
Order;
(c) the Interim Order and the Final Order shall each have been
obtained on terms consistent with this Agreement and in a form
satisfactory to the Parties, acting reasonably, and shall not
have been set aside or modified in a manner unacceptable to
such Parties, acting reasonably, on appeal or otherwise;
(d) the Articles of Arrangement shall be in content consistent
with this Agreement and in form satisfactory to the Parties
acting reasonably;
(e) there shall not be in force any Law, final and non-appealable
injunction, order or decree prohibiting, restraining or
enjoining the consummation of the Transaction;
(f) the Regulatory Approvals shall have been obtained or satisfied
on terms and conditions satisfactory to the Parties acting
reasonably; and
(g) this Agreement shall not have been terminated pursuant to
Article 6.
5.2 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUISITIONCO
(1) The obligations of Acquisitionco to complete the Transaction shall also
be subject to the fulfilment of each of the following conditions
precedent (each of which is for Acquisitionco's exclusive benefit and
may be waived by Acquisitionco):
-27-
(a) all covenants of the Company under this Agreement to be
performed on or before the Closing Time shall have been duly
performed by the Company in all material respects and
Acquisitionco shall have received a certificate of the Company
addressed to Acquisitionco and dated the Effective Date,
signed on behalf of the Company by two senior executive
officers of the Company (on the Company's behalf and without
personal liability), confirming the same as at the Effective
Date;
(b) (i) the representations and warranties of the Company
contained in Sections (b), (c) (i), (ii) and (iii) and (s)(iv)
of Schedule 3.1 shall have been true and correct on December
22, 2004; (ii) the representations and warranties of the
Company that are qualified by references to materiality or
Material Adverse Effect shall have been true and correct on
December 22, 2004; and (iii) the representations and
warranties of the Company not so qualified (other than those
contained in Sections (b), (c) (i), (ii) and (iii) and (s)(iv)
of Schedule 3.1) shall have been true and correct in all
material respects on December 22, 2004;
(c) (i) the representations and warranties of the Company that are
qualified by references to materiality or Material Adverse
Effect shall be true and correct; and (ii) the representations
and warranties of the Company not so qualified shall be true
and correct in all material respects, in each case as of the
Closing Time as if made on and as of such time (except to the
extent such representations and warranties speak solely as of
an earlier date, in which event such representations and
warranties shall be true and correct to such extent as of such
earlier date); and Acquisitionco shall have received a
certificate of the Company addressed to Acquisitionco and
dated the Effective Date, signed on behalf of the Company by
two senior executive officers of the Company (on the Company's
behalf and without personal liability), confirming the same as
at the Effective Date;
(d) the board of directors of the Company shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have been taken by the Company and its
Subsidiaries to permit the consummation of the Transaction;
(e) during the Pre-Effective Date Period, there shall not have
occurred or have been disclosed to the public if previously
undisclosed to the public, a Material Adverse Change to the
Company;
(f) there shall not be pending or threatened in writing any suit,
action or proceeding by any Governmental Authority: (i)
seeking to prohibit or restrict the acquisition by
Acquisitionco of any Company Shares, seeking to restrain or
prohibit the consummation of the Transaction or seeking to
obtain from the Company or Acquisitionco any material damages
directly or indirectly in connection with the Transaction,
(ii) seeking to prohibit or materially limit the ownership or
operation by Acquisitionco of the Company or any material
portion of the business or assets of the Company or any of its
Subsidiaries or to compel Acquisitionco to dispose of or hold
separate any portion of the business or assets of the Company
or any of its Subsidiaries, (iii) seeking to impose
limitations on the ability of Acquisitionco to acquire or
hold, or exercise full rights of ownership of, any Company
Shares, including the right to vote the Company Shares to be
acquired by them on all
-28-
matters properly presented to the shareholders of the Company,
(iv) seeking to prohibit Acquisitionco from effectively
controlling in any material respect the business or operations
of the Company or any of its Subsidiaries or (v) which, if
successful, in the judgement of Acquisitionco is reasonably
likely to have a Material Adverse Effect on the Company or
Acquisitionco;
(g) Holders of Company Shares representing in excess of 15% of the
outstanding Company Shares shall not have exercised dissent or
similar rights, or have instituted proceedings to exercise
dissent or similar rights, in connection with the Transaction;
(h) (i) none of the senior executives identified in Schedule 5.2
shall have resigned; (ii) each of the senior executives
identified in Schedule 5.2 shall have waived their entitlement
(if any) to any change of control payments arising as a result
of the Transaction; (iii) each of the senior executives
identified in Schedule 5.2 shall have made an equity
investment in Acquisitionco (or its direct or indirect parent)
in the amounts set forth opposite their respective names; and
(iv) the aggregate equity investment of employees and officers
of the Company (including the senior executives identified in
Schedule 5.2) in Acquisitionco (or its direct or indirect
parent) shall be not less than US$25,000,000;
(i) Acquisitionco shall have received the funds in the amount
contemplated by the Commitment Letters to be delivered as of
the Effective Date on the terms and conditions set forth
therein;
(j) all consents and waivers from any Persons (other than
Governmental Authorities) required under the terms of any of
the contracts of the Company or its Subsidiaries listed in
section 3.1(c)(iv)(A)(III) of the Disclosure Letter with
respect to the acquisition of control by Acquisitionco, shall
have been duly obtained or given, as the case may be, at or
before the Closing Time on terms satisfactory to Acquisitionco
acting reasonably except for any which the failure to obtain
or provide does not and would not reasonably be expected to
constitute, individually or in the aggregate, a Material
Adverse Effect on the Company;
(k) other than the Regulatory Approvals, all other consents,
waivers, permits, orders and approvals of any Governmental
Authority, and the expiry of any waiting periods, in
connection with, or required to permit, the consummation of
the Transaction, the failure of which to obtain would render
completion of the Transaction unlawful, shall have been
obtained or satisfied on terms that would not reasonably be
expected to have a Material Adverse Effect on Acquisitionco
and/or the Company;
(l) the board of directors of the Company shall not have approved
or recommended any Acquisition Proposal;
(m) all of the directors of the Company shall have resigned from
the Company effective as of the Closing Time;
-29-
(n) there shall not have occurred any actual change or amendment
to (or any proposal by or on behalf of the Minister of Finance
(Canada) or Internal Revenue Service to change or amend) the
Tax Act or Code, as applicable, or to any applicable
provincial tax legislation or to the regulations thereunder or
any published administrative position, which individually or
in the aggregate, directly or indirectly, has or could
reasonably be expected to have any material adverse effect
with respect to the Transaction or Acquisitionco's ownership
of the Company, and which was not publicly announced or
proposed on or prior to December 22, 2004;
(o) no Person other than Acquisitionco shall have entered into a
definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Proposal;
(p) Acquisitionco shall have been provided with "payoff" letters
from the providers of the Existing Credit Facilities in form
and content satisfactory to Acquisitionco; and
(q) no more than 350,000 Company Shares shall have been issued
under the Company Stock Option Plan between December 22, 2004
and the Effective Date.
(2) Acquisitionco may not rely on the failure to satisfy any of the
conditions precedent in Section 5.1 or Section 5.2 if the condition
precedent was not satisfied solely as a result of a material default by
Acquisitionco in complying with its obligations under this Agreement.
5.3 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
(1) The obligations of the Company to complete the Transaction shall also
be subject to the following conditions precedent (each of which is for
the exclusive benefit of the Company and may be waived by the Company):
(a) all covenants of Acquisitionco under this Agreement to be
performed on or before the Closing Time shall have been duly
performed by Acquisitionco in all material respects, and the
Company shall have received a certificate of Acquisitionco
addressed to the Company and dated the Effective Date, signed
on behalf of Acquisitionco by two senior executive officers of
Acquisitionco (on Acquisitionco's behalf and without personal
liability), confirming the same as at the Effective Date;
(b) all representations and warranties of Acquisitionco under this
Agreement shall have been true and correct on December 22,
2004;
(c) (i) the representations and warranties of Acquisitionco that
are qualified by references to materiality or Material Adverse
Effect shall be true and correct; and (ii) the representations
and warranties of Acquisitionco not so qualified shall be true
and correct in all material respects, in each case as of the
Closing Time as if made on and as of such time; and the
Company shall have received a certificate of Acquisitionco
addressed to the Company and dated the Effective Date, signed
on behalf of Acquisitionco by two senior executive officers of
Acquisitionco (on
-30-
Acquisitionco's behalf and without personal liability),
confirming the same as at the Effective Date;
(d) the board of directors of Acquisitionco shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have been taken by Acquisitionco to permit the
consummation of the Transaction; and
(e) Acquisitionco shall have deposited the aggregate cash purchase
price payable under the Transaction for the Company Shares and
Company Options with the Depositary or the Company, as
applicable.
(2) The Company may not rely on the failure to satisfy any of the
conditions precedents in Section 5.1 or Section 5.3 if the condition
precedent was not satisfied solely as a result of a material default by
the Company in complying with its obligations in this Agreement.
5.4 SATISFACTION OF CONDITIONS
The conditions precedent set out in Sections 5.1, 5.2 and 5.3 shall be
conclusively deemed to have been satisfied, waived or released when, with the
agreement of Acquisitionco and the Company, a Certificate of Arrangement in
respect of the Transaction is issued by the Director.
ARTICLE 6
AMENDMENT AND TERMINATION
6.1 AMENDMENT
(1) This Agreement and the Plan of Arrangement may, at any time and from
time to time before or after the holding of the Company Meeting but not
later than the Effective Date, be amended by mutual written agreement
of the Parties, and any such amendment may without further Shareholder
approvals, subject to applicable Laws and any applicable order of the
Court, without limitation:
(a) change the time for performance of any of the obligations or
acts of the Parties;
(b) waive any inaccuracies or modify any representation or
warranty contained herein or in any document delivered
pursuant hereto;
(c) waive compliance with or modify any of the covenants herein
contained and waive or modify performance of any of the
obligations of the Parties; and/or
(d) waive compliance with or modify any conditions precedent
herein contained.
(2) Prior to the date of the Company Meeting, Acquisitionco may propose
actions or transactions, including (i) a reorganization of the
Company's Irish operations, (ii) settlement of indebtedness held by
1535638 Ontario Limited, (iii) the winding-up of Castlegate Entry
Systems Inc., and (iv) structures to enable senior officers of the
Company to transfer all or a portion of their Company Shares and/or
Company Options to Acquisitionco (or one of its Affiliates) in exchange
for shares and/or options of Acquisitionco (or such Affiliate), on a
tax-efficient basis to the extent that the same (A)
-31-
shall not prejudice the Company Securityholders and (B) are either to
be completed immediately prior to or contemporaneously with the Closing
Time, or can be unwound without adversely affecting the Company and its
Subsidiaries. The Company shall take such actions or undertake such
transactions and, if necessary, the Plan of Arrangement shall be
modified accordingly. The Parties will ensure that such planning
activities do not impede the progress of the Transaction in any
material way. If, at the request of Acquisitionco, the Company effects
any transaction before the Effective Date for such purposes,
Acquisitionco will be responsible for any structuring and unwinding
costs if the Transaction is not consummated.
6.2 TERMINATION
(1) If any condition contained in Section 5.1 or 5.2 is not satisfied at or
before the Closing Time, then Acquisitionco may, subject to Section
5.2(2), by notice to the Company terminate this Agreement and the
obligations of the Parties hereunder (except as otherwise herein
provided, including under Section 6.3).
(2) If any condition contained in Section 5.1 or 5.3 is not satisfied at or
before the Closing Time, then the Company may, subject to Section
5.3(2) by notice to Acquisitionco terminate this Agreement and the
obligations of the Parties hereunder (except as otherwise herein
provided, including under Section 6.3).
(3) This Agreement may be terminated:
(a) by the mutual agreement of the Company and Acquisitionco (and
for greater certainty, without further action on the part of
the Company Shareholders if terminated after the holding of
the Company Meeting);
(b) by either the Company or Acquisitionco if there shall be
passed any Law that makes consummation of the Transaction
illegal or otherwise prohibited;
(c) by Acquisitionco, if (i) the board of directors of the Company
shall have failed to recommend or shall have withdrawn,
modified or changed in a manner adverse to Acquisitionco its
approval or recommendation of this Agreement, the Transaction
or the Transaction Resolution; (ii) the board of directors of
the Company shall have approved or recommended any Acquisition
Proposal; (iii) the Company shall have breached Section 4.4;
or (iv) an Acquisition Proposal shall have been publicly made,
publicly announced or otherwise publicly disclosed by any
Person prior to the Company Meeting and the board of directors
shall not have (A) in the case of an Acquisition Proposal in
the form of a take-over bid, sent to the Company Shareholders,
within ten days after such take-over bid is made, a statement
disclosing that the board of directors of the Company
re-affirms its recommendation of the Transaction; or (B) in
the case of an Acquisition Proposal in any other form, issued
a press release within ten days after such Acquisition
Proposal is publicly made, publicly announced or otherwise
publicly disclosed, disclosing that the board of directors of
the Company re-affirms its recommendation of the Transaction;
-32-
(d) by the Company, provided that the Company is not then in
breach or default of Section 4.4, in order to enter into a
definitive agreement with respect to a Superior Proposal in
accordance with Section 4.4, subject to the prior payment by
the Company of the amounts payable to Acquisitionco under
Section 6.3;
(e) by either Acquisitionco or the Company, if the Company
Shareholders do not approve the Transaction at the Company
Meeting in the manner required by the Interim Order;
(f) by Acquisitionco, if (i) any of the representations and
warranties of the Company herein become untrue or inaccurate
such that the condition contained in Section 5.2(1)(c) would
not be satisfied, or (ii) there has been a breach on the part
of the Company of any of its covenants or agreements herein
such that the condition in Section 5.2(1)(a) would not be
satisfied; or
(g) by Acquisitionco if the Company Meeting has not occurred on or
before April 15, 2005,
in each case, prior to the Closing Time.
(4) If the Effective Date has not occurred on or prior to the Outside Date,
then, unless otherwise agreed in writing by the parties, this Agreement
shall terminate provided that in the event that the condition set forth
in Section 5.1(f) above shall not have been satisfied by the date which
is five Business Days prior to the Outside Date, either Party may
unilaterally extend the Outside Date for a period of 30 days upon
written notice to the other given no later than the Outside Date, in
which case the Outside Date shall be deemed for all purposes to be the
date as so extended. The right to terminate this Agreement pursuant to
this Section 6.2(4) shall not be available to the Party seeking to
terminate if any action of such Party or its Affiliates or the failure
of such Party or its Affiliates to perform any of its obligations under
this Agreement required to be performed at or prior to the Closing Time
shall have resulted in the conditions contained in Section 5.1, 5.2 or
5.3 (as applicable) not having been satisfied prior to the Outside
Date.
(5) If this Agreement is terminated in accordance with the foregoing
provisions of this Section 6.2, no Party shall have any further
liability to perform its obligations under this Agreement except as
provided in Section 6.3 and as otherwise expressly contemplated by this
Agreement, and provided that neither the termination of this Agreement
nor anything contained in this Section 6.2(5) shall relieve any Party
from any liability for breach of its obligations under this Agreement
or for an intentional or wilful breach of its representations and
warranties prior to termination.
6.3 TERMINATION AND OTHER PAYMENTS
(1) If:
(a) Acquisitionco shall terminate this Agreement pursuant to
Section 6.2(3)(c); or
(b) the Company shall terminate this Agreement pursuant to Section
6.2(3)(d),
-33-
then in any such case the Company shall pay to Acquisitionco (or as
Acquisitionco may otherwise direct) $27,400,000 (the "TERMINATION
PAYMENT") in immediately available funds to an account designated by
Acquisitionco. Such payment shall be made (i) in the case of a
termination by Acquisitionco, within one Business Day after written
notice of termination by Acquisitionco, and (ii) in the case of a
termination by the Company, immediately prior to such termination. The
Company shall not be obligated to make more than one payment pursuant
to this Section 6.3(1).
(2) If this Agreement is terminated pursuant to Section 6.2(3)(e), the
Company shall pay to Acquisitionco (or as Acquisitionco may otherwise
direct) US$20,000,000 (the "HEDGING COST REIMBURSEMENT") in immediately
available funds to an account designated by Acquisitionco as payment of
Acquisitionco's hedging costs in connection with the Transaction. Such
payment shall be made (i) in the case of a termination by
Acquisitionco, within one Business Day after written notice of
termination by Acquisitionco, and (ii) in the case of a termination by
the Company, immediately prior to such termination. The Company shall
not be obligated to make more than one payment pursuant to this Section
6.3(1).
(3) If Acquisitionco or the Company terminates this Agreement pursuant to
Section 6.2(3)(e), 6.2(3)(f)(i) (as a result of an intentional or
wilful breach of a representation or warranty), 6.2(3)(f)(ii) or
6.2(3)(g) and concurrently with such termination or within 12 months
following the date of such termination, the Company enters into, or
submits to the shareholders of the Company for approval, an agreement
with respect to an Acquisition Proposal, or an Acquisition Proposal is
consummated, then the Company shall also pay Acquisitionco (or as
Acquisitionco may otherwise direct) immediately upon the occurrence of
such event the Termination Payment.
(4) In the event that the Company fails to pay the Termination Payment or
the Hedging Cost Reimbursement on the date as required by this Section,
the unpaid amount shall bear interest at a rate equal to 8% per annum.
6.4 EFFECT OF TERMINATION PAYMENT
If the Company pays to Acquisitionco the amounts required by Section
6.3(1) as a result of the occurrence of any of the events giving rise to a right
of termination referred to therein (except for a breach of Section 4.4),
Acquisitionco shall have no other remedy with respect to the occurrence of such
event.
6.5 REMEDIES
Subject to Section 6.4, the Parties acknowledge and agree that an award
of money damages would be inadequate for any breach of this Agreement by any
Party or its representatives and any such breach would cause the non-breaching
Party irreparable harm. Accordingly, the Parties agree that, in the event of any
breach or threatened breach of this Agreement by one of the Parties, the
non-breaching Party will also be entitled, without the requirement of posting a
bond or other security, to equitable relief, including injunctive relief and
specific performance. Such remedies will not be the exclusive remedies for any
breach of this Agreement but will be in addition to all other remedies available
at law or equity to each of the Parties.
-34-
ARTICLE 7
GENERAL
7.1 NOTICES
Any notice, consent or approval required or permitted to be given in
connection with this Agreement (in this Section referred to as a "NOTICE") shall
be in writing and shall be sufficiently given if delivered (whether in person,
by courier service or other personal method of delivery), or if transmitted by
facsimile or email:
(a) If to Acquisitionco, at:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co.
0 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx, XXX
000000
Attention: Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Osler, Xxxxxx & Xxxxxxxx XXX
00xx Xxxxx, 0 First Canadian Place
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
(b) If to the Company at:
Masonite International Corporation
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
Attention: Harley Ulster
Telecopier No.: (000) 000-0000
with a copy to:
Davies Xxxx Xxxxxxxx & Xxxxxxxx LLP
44th Floor, 0 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxx X. Xxxx
Telecopier No.: (000) 000-0000
-35-
Any Notice delivered or transmitted to a Party as provided above shall
be deemed to have been given and received on the day it is delivered or
transmitted, provided that it is delivered or transmitted on a Business Day
prior to 5:00 p.m. local time in the place of delivery or receipt. However, if
the Notice is delivered or transmitted after 5:00 p.m. local time or 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 Party may, from time to time, change its address by giving Notice
to the other Party in accordance with the provisions of this Section.
7.2 ASSIGNMENT
Neither this Agreement nor any rights or obligations under this
Agreement shall be assignable by either Party without the prior written consent
of the other Party, except that Acquisitionco may assign all or part of its
rights or obligations, including without limitation the rights to acquire the
Company Shares, without reducing its own obligations hereunder, to an Affiliate.
Subject thereto, this Agreement shall enure to the benefit of and be binding
upon the Parties and their respective successors (including any successor by
reason of amalgamation of any Party) and permitted assigns.
7.3 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
Transaction, and each Party shall provide such further documents or instruments
required by the other Party as may be reasonably necessary or desirable to
effect the purpose of this Agreement and carry out its provisions.
7.4 EXPENSES
Subject to Section 6.3, the Parties agree that all costs and expenses
of the Parties relating to the Transaction and the transactions contemplated
hereby, including legal fees, accounting fees, financial advisory fees,
regulatory filing fees, stock exchange fees, all disbursements of advisors and
printing and mailing costs, shall be paid by the Party incurring such expenses.
7.5 PUBLIC NOTICES
All public notices to third parties and all other publicity concerning
the transactions contemplated by this Agreement shall be jointly planned and
co-ordinated by the Parties and neither Party shall act unilaterally in this
regard without the prior approval of the other Party, such approval not to be
unreasonably withheld, unless such disclosure shall be required to meet timely
disclosure obligations of any Party under applicable securities laws and stock
exchange rules in circumstances where prior consultation with the other Party is
not practicable.
7.6 EXECUTION AND DELIVERY
This Agreement may be executed by the Parties in counterparts and may
be executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
-36-
7.7 NO RECOURSE
(1) Notwithstanding anything that may be expressed or implied in this
Agreement, except as provided in Section 7.2, the Company covenants,
agrees and acknowledges that no recourse under this Agreement shall be
had against any current or future Affiliates, shareholders or agents of
Acquisitionco, as such, or any current or former director, officer,
employee, member, general or limited partner or shareholder of any of
the foregoing, as such, whether by the enforcement of any assessment or
by any legal or equitable proceeding, or by virtue of any Law, it being
expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on or otherwise be incurred by any current
or future Affiliate, shareholder or agent of Acquisitionco, as such, or
any current or future director, officer, employee, member, general or
limited partner or shareholder of any of the foregoing, as such, for
any obligation of Acquisitionco under this Agreement.
(2) Notwithstanding anything that may be expressed or implied in this
Agreement, Acquisitionco covenants, agrees and acknowledges that no
recourse under this Agreement shall be had against any current or
future Affiliates, shareholders or agents of the Company, as such, or
any current or former director, officer, employee or shareholder of any
of the foregoing, as such, whether by the enforcement of any assessment
or by any legal or equitable proceeding, or by virtue of any Law, it
being expressly agreed and acknowledged that no personal liability
whatsoever shall attach to, be imposed on or otherwise be incurred by
any current or future Affiliate, shareholder or agent of the Company,
as such, or any current or future director, officer, employee or
shareholder of any of the foregoing, as such, for any obligation of the
Company under this Agreement.
7.8 NO THIRD PARTY BENEFICIARIES
Other than Section 4.8 and Section 7.7, this Agreement is not intended
to confer on any Person other than the Parties any rights or remedies.
-37-
IN WITNESS WHEREOF the Parties have executed this Combination
Agreement as of the date first written above.
STILE ACQUISITION CORP.
By: (Signed) Xxxxx Xxxxxxx
------------------------------------
Vice-President
MASONITE INTERNATIONAL CORPORATION
By: (Signed) Xxxx Xxxxxx
------------------------------------
Authorized Signing Officer
SCHEDULE 1.1A
PLAN OF ARRANGEMENT
Under section 182 of the Business Corporations Act (Ontario)
concerning
STILE ACQUISITION CORP.
- and -
MASONITE INTERNATIONAL CORPORATION
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
Wherever used in this Plan of Arrangement, unless there is something
inconsistent in the subject matter or context, the following words and terms
shall have the respective meanings set out below and grammatical variations of
such terms shall have corresponding meanings:
"ACQUISITIONCO" means Stile Acquisition Corp., a corporation existing under the
OBCA;
"AFFILIATE" has the meaning ascribed to it in the Securities Act;
"ARRANGEMENT" means the arrangement under the provisions of section 182 of the
OBCA on the terms and conditions set out in this Plan of Arrangement subject to
any amendments or variations hereto made in accordance with section 6.1 of the
Combination Agreement, section 6.1 of this Plan of Arrangement or made at the
direction of the Court in accordance with the Final Order;
"ARRANGEMENT RESOLUTION" means the special resolution of the Company
Shareholders approving the Plan of Arrangement, to be considered at the Company
Meeting, substantially in the form and content of Schedule 1.1B of the
Combination Agreement;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of the Company in
respect of the Arrangement, required by the OBCA to be filed with the Director
after the Final Order is made in order for the Arrangement to become effective;
"BUSINESS DAY" means any day on which commercial deposit taking banks are
generally open for business in Toronto, Ontario and New York, New York other
than a Saturday, a Sunday or a day observed as a holiday in such locations under
applicable laws;
"CASHED-OUT OPTION" means each Company Option in respect of which a Cash
Election (as defined in the Company Stock Option Plan) has been duly made by a
Holder of Company Options prior to the Effective Time in accordance with the
terms and conditions of the Company Stock Option Plan;
"CERTIFICATE OF ARRANGEMENT" means the certificate of arrangement issued by the
Director pursuant to subsection 183(2) of the OBCA after the Articles of
Arrangement have been filed;
"COMBINATION AGREEMENT" means the second amended and restated combination
agreement dated as of February 17, 2005, between Acquisitionco and the Company,
as the same may be amended in accordance with section 6.1 thereof, providing
for, among other things, the Arrangement;
"COMPANY" means Masonite International Corporation, a corporation existing under
the OBCA;
"COMPANY CIRCULAR" has the meaning ascribed to it in the Combination Agreement;
"COMPANY CREDIT FACILITY" means the Amended and Restated Credit Agreement dated
July 31, 2002, as amended on January 23, 2004, June 1, 2004 and June 23, 2004,
among Masonite
Holdings, Inc., the Company, the lenders party thereto and SunTrust Bank, as
Administrative Agent;
"COMPANY CREDIT FACILITY PAYOFF LOANS" has the meaning ascribed to it in section
3.1(a);
"COMPANY MEETING" means the special meeting of the Company Shareholders,
including any adjournment or postponement thereof, to be called and held in
accordance with the Interim Order to consider, and if deemed advisable, approve
the Arrangement;
"COMPANY OPTIONS" means the options granted under the Company Stock Option Plan
to purchase Company Shares that remain outstanding on the Effective Date;
"COMPANY SECURITYHOLDERS" means Holders of Company Shares and Company Options;
"COMPANY SHAREHOLDERS" means Holders of Company Shares;
"COMPANY SHARES" means the common shares of the Company;
"COMPANY STOCK OPTION PLAN" means the Masonite International Corporation Share
Option Plan, amended and restated as of March 16, 2004 as amended to the date
hereof;
"COURT" means the Superior Court of Justice (Ontario);
"DEPOSITARY" means Computershare Investor Services Inc., being the depositary
appointed by the Company for the purpose, amongst other things, of exchanging
certificates representing Company Shares for cash;
"DIRECTOR" means the Director appointed under section 278 of the OBCA;
"DISSENT RIGHTS" has the meaning ascribed to it in section 5.1;
"DISSENTING SHAREHOLDER" means any Company Shareholder who has properly
exercised its Dissent Rights and has not withdrawn or been deemed to have
withdrawn such Dissent Rights;
"DSU" means deferred share units granted to management and certain key employees
of the Company pursuant to the Company's 2002 Deferred Share Plan effective as
of October 21, 2003, as amended, and the Company's 2004 Full Value Incentive
Plan dated as of March 23, 2004, as amended, and the deferred share units
granted to directors of the Company pursuant to the Directors' Deferred Unit
Plan dated as of March 23, 2004, as amended;
"EFFECTIVE DATE" has the meaning ascribed to it in the Combination Agreement;
"EFFECTIVE TIME" means 11:30 a.m. on the Effective Date;
"EMPLOYEE ROLLOVER AGREEMENT" means a written agreement between Acquisitionco
(or one of its Affiliates) and an officer or employee of the Company or its
subsidiaries in a form acceptable to the board of directors of the Company, (i)
pursuant to which (A) Acquisitionco (or one of its Affiliates) has agreed to
acquire, and such officer or employee has agreed to sell, that number of the
Company Shares held by such officer or employee stipulated in the agreement (if
any) for consideration not exceeding $42.25 per Company Share, which
consideration consists of shares
in the capital of Acquisitionco (or such Affiliate), except that cash may be
paid in lieu of issuing fractional shares and/or (B) such officer or employee
has agreed to dispose of that number of the Company Options held by such officer
or employee stipulated in the agreement (if any) for consideration consisting
solely of Replacement Options and for which the total In-the-Money Amount of
such Replacement Options shall, at the time of granting of such Replacement
Options, equal (subject to rounding down to take into account fractional shares)
the total In-the-Money Amount of the Company Options exchanged for such
Replacement Options; (ii) which has been entered into prior to the Effective
Time but is to be completed immediately after the Effective Time in the case of
a transaction referred to in (i)(A) or to occur contemporaneously with the
transfer of Company Shares pursuant to section 3.1(f) of this Plan of
Arrangement in the case of a transaction referred to in (i)(B); (iii) under
which all conditions to closing (other than completion of the Arrangement) have
been satisfied or waived as of the Effective Time; and (iv) which has not been
terminated by such officer or employee or by Acquisitionco (or one of its
Affiliates) as of the Effective Time;
"EMPLOYEE ROLLOVER OPTIONS" means Company Options which are to be disposed of in
exchange for Replacement Options pursuant to an Employee Rollover Agreement;
"EMPLOYEE ROLLOVER SHARES" means Company Shares which are to be acquired
pursuant to an Employee Rollover Agreement;
"FINAL ORDER" means the final order of the Court approving the Arrangement as
such order may be amended by the Court at any time prior to the Effective Date
or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or
as amended on appeal;
"GOVERNMENTAL AUTHORITY" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau or agency, domestic or foreign, (b) self-regulatory organization or stock
exchange including without limitation the New York Stock Exchange and the
Toronto Stock Exchange, (c) subdivision, agent, commission, board, or authority
of any of the foregoing, or (d) quasi-governmental or private body exercising
any regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"HOLDERS" means (a) when used with reference to the Company Shares, the holders
thereof shown from time to time in the register of holders of Company Shares
maintained by or on behalf of the Company and, where the context so provides,
includes joint holders of such Company Shares, (b) when used with reference to
the Company Options, means the holders thereof shown from time to time in the
register maintained by or on behalf of the Company in respect of Company Options
and (c) when used with reference to the RSUs and/or DSUs, means the holders
thereof shown from time to time in the registers maintained by or on behalf of
the Company in respect of the RSUs and/or DSUs;
"IN-THE-MONEY AMOUNT" means, (i) for each Company Option, the difference between
the Purchase Price and the exercise price of that Company Option, and (ii) for
each Replacement Option, the difference, if any, between the fair market value
of each share issuable upon the exercise of such Replacement Option and the "per
share" exercise price of that Replacement Option, provided that, where more than
one share is issuable upon the exercise of a Replacement Option, the
In-the-Money Amount of such Replacement Option will be the difference as so
determined multiplied by the number of shares issuable;
"INTERIM ORDER" means the interim order of the Court, as the same may be
amended, in respect of the Arrangement;
"ITA" means the Income Tax Act (Canada), as amended;
"LETTER OF TRANSMITTAL" means the letter of transmittal for use by the Company
Shareholders, in the form accompanying the Company Circular;
"OBCA" means the Business Corporations Act (Ontario), as amended;
"OPTION PAYMENT LOAN" has the meaning ascribed to it in section 3.1(a);
"PERSON" includes any individual, sole proprietorship, partnership, firm,
entity, limited partnership, limited liability company, unlimited liability
company, unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body, corporation, or Governmental Authority, and any group
(as defined in section 13(d)(3) of the United States Securities Exchange Act of
1934) comprised of more than one Person and where the context requires any of
the foregoing when they are acting as trustee, executor, administrator or other
legal representatives;
"PLAN OF ARRANGEMENT", "HEREOF', "HEREIN", "HEREUNDER", and similar expressions
refer to this Plan of Arrangement and not to any particular Article, section or
other portion hereof and includes any agreement or instrument supplementary or
ancillary hereto;
"PURCHASE PRICE" has the meaning ascribed to it in section 3.1(f);
"QUALIFYING COMPANY SHAREHOLDER" means a Company Shareholder but, for greater
certainty, does not include (i) a Dissenting Shareholder or (ii) Acquisitionco
or any Affiliate of Acquisitionco;
"REPLACEMENT OPTIONS" means options to acquire shares of Acquisitionco (or one
of its Affiliates) granted in exchange for Company Options pursuant to an
Employee Rollover Agreement;
"RSU" means restricted share units granted to management and certain key
employees of the Company pursuant to the Company's 2002 Restricted Share Bonus
Plan dated as of October 21, 2003 as amended on March 23, 2004 and the Company's
2004 Full Value Incentive Plan dated as of March 23, 2004, as amended;
"RSU/DSU PAYMENT LOAN" has the meaning ascribed to it in section 3.1(a);
"SECURITIES ACT" means the Securities Act (Ontario), as amended; and
"TAX" and "TAXES" have the meanings ascribed thereto in the Combination
Agreement.
1.2 HEADINGS AND REFERENCES
The division of this Plan of Arrangement into Articles and sections and
the insertion of headings are for convenience of reference only and do not
affect the construction or
interpretation of this Plan of Arrangement. Unless otherwise specified,
references to Articles and sections are to Articles and sections of this Plan of
Arrangement.
1.3 TIME PERIODS
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 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.
1.4 CURRENCY
All sums of money which are referred to in this Plan of Arrangement are
expressed in lawful money of Canada unless otherwise specified. 1.5 TIME
Unless otherwise indicated, all times expressed herein or in any Letter
of Transmittal are to local time, Xxxxxxx, Xxxxxxx.
1.6 CONSTRUCTION
In this Plan of Arrangement:
(a) unless the context otherwise requires, words importing the
singular include the plural and vice versa and words denoting
any gender include all genders;
(b) the word "including" or "includes" shall mean "including (or
includes) without limitation"; and
(c) any reference to a statute includes all rules and regulations
made pursuant to such statute and, unless otherwise specified,
the provisions of any statute or regulation or rule which
amends, supplements or supersedes any such statute or any such
regulation or rule.
1.7 GOVERNING LAW
This Plan of Arrangement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
ARTICLE 2
PURPOSE AND EFFECT OF THE PLAN OF ARRANGEMENT
2.1 ARRANGEMENT
This Plan of Arrangement is made pursuant to, is subject to the
provisions of and forms part of, the Combination Agreement.
2.2 EFFECTIVENESS
This Plan of Arrangement, upon filing the Articles of Arrangement and
the issuance of the Certificate of Arrangement, will become effective and will
be binding without any further authorization, act or formality on the part of
the Court, the Director, Acquisitionco (or its Affiliates), the Company, or the
Company Securityholders, from and after the Effective Time. Other than as
expressly provided in Article 3, no portion of this Plan of Arrangement shall
take effect with respect to any Person until the Effective Time.
ARTICLE 3
THE ARRANGEMENT
3.1 ARRANGEMENT
Pursuant to the Arrangement the following transactions shall occur and
shall be deemed to occur at the Effective Time (unless otherwise specified), in
the following order:
(a) Acquisitionco (or one of its Affiliates) will provide (i) one
or more loans (the "COMPANY CREDIT FACILITY PAYOFF LOANS") to
the Company (and/or one of its subsidiaries) in an aggregate
amount equal to the aggregate of all amounts owing under the
Company Credit Facility, (ii) a loan to the Company equal to
the aggregate amount payable by the Company under section
3.1(c) (the "OPTION PAYMENT LOAN") and (iii) a loan to the
Company equal to the aggregate amount payable by the Company
under section 3.1(e) (the "RSU/DSU PAYMENT LOAN"). The Company
Credit Facility Payoff Loans, the Option Payment Loan and the
RSU/DSU Payment Loan will be evidenced by demand promissory
notes issued by the Company (or the applicable subsidiary of
the Company) to the lender thereof.
(b) The Company and its subsidiaries will, immediately upon
receipt of the Company Credit Facility Payoff Loans, repay in
full all amounts owing under the Company Credit Facility.
(c) Each Cashed-out Option will be cancelled by the Company in
exchange for a cash payment by the Company in an amount equal
to the In-the-Money Amount of such Cashed-out Option (and, for
greater certainty the Company shall withhold any required
withholding Taxes).
(d) Each Company Option issued and outstanding immediately prior
to the Effective Time, other than a Cashed-out Option or an
Employee Rollover Option, will cease to represent a right to
receive any Company Shares. Instead, beginning immediately
after the Effective Time, the sole entitlement of a Holder of
such a Company Option will be to receive, upon exercise of the
Company Option, a cash payment from the Company equal to the
In-the-Money Amount of such Company Option (and, for greater
certainty the Company shall be entitled to withhold any
required withholding Taxes).
(e) Each RSU and DSU will be cancelled by the Company in exchange
for a cash payment by the Company in the amount of $42.25 per
RSU or DSU, as applicable
(and, for greater certainty the Company shall withhold any
required withholding Taxes).
(f) Two minutes after the completion of the immediately preceding
step, the outstanding Company Shares (excluding Employee
Rollover Shares) held by Qualifying Company Shareholders shall
be transferred by the Holders thereof to Acquisitionco without
any further authorization, act or formality, in exchange for
cash in the amount of $42.25 per Company Share (the "PURCHASE
PRICE"), and Acquisitionco will be deemed to be the legal and
beneficial owner thereof, free and clear of all liens,
charges, claims and encumbrances.
(g) The transactions contemplated by section (i)(B) of the
definition of Employee Rollover Agreement shall be deemed to
occur contemporaneously with the transfers in the immediately
preceding step.
ARTICLE 4
PAYMENT
4.1 DELIVERY OF CASH
At or before the Effective Time, Acquisitionco shall deposit or cause
to be deposited with the Depositary, for the benefit of each Company
Shareholder, the cash, in Canadian dollars, to which each such Company
Shareholder is entitled pursuant to section 3.1 upon the transfer of the Company
Shares to Acquisitionco. Upon surrender by a Company Shareholder to the
Depositary of a certificate which immediately prior to the Effective Time
represented one or more Company Shares, together with a duly completed and
executed Letter of Transmittal, the Holder of such surrendered certificate(s) of
Company Shares shall be entitled to receive in exchange therefor, and the
Depositary shall deliver to such Company Shareholder, as soon as practicable
after the Effective Time, a cheque issued by the Depositary (or other form of
immediately available funds) representing that amount of cash which such Company
Shareholder has the right to receive, less any amounts withheld pursuant to
section 4.5 and any certificate(s) of Company Shares so surrendered shall
forthwith be cancelled. In addition, the Company shall deliver to each Holder of
Cashed-out Options, RSUs and/or DSUs, forthwith after the Effective Time, a
cheque issued by the Company (or other form of immediately available funds)
representing that amount of cash which such Holder of Cashed-out Options, RSUs
and/or DSUs has the right to receive, less any amounts withheld pursuant to
section 4.5. In the event of a transfer of ownership of Company Shares that is
not registered in the transfer records of the Company, a cheque representing the
proper amount of cash (or other form of immediately available funds) may be
delivered to the transferee if the certificate representing such Company Shares
is surrendered to the Depositary, accompanied by a duly completed and executed
Letter of Transmittal and all documents required to evidence and effect such
transfer. Until surrendered as contemplated by this section 4.1, each
certificate of Company Shares (excluding Employee Rollover Shares) shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender a cash payment as contemplated by this section 4.1,
less any amounts withheld pursuant to section 4.5.
4.2 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES
No dividends or other distributions declared or made after the
Effective Time with respect to Company Shares with a record date after the
Effective Time shall be paid to the Holder of any unsurrendered certificate
which immediately prior to the Effective Time represented outstanding Company
Shares that were transferred pursuant to section 3.1, and no cash payment
pursuant to section 3.1 shall be paid to any such Holder, unless and until the
Holder of such certificate shall surrender such certificate in accordance with
section 4.1. Subject to applicable laws, at the time of such surrender of any
such certificate, there shall be paid to the Holder of the certificates
representing Company Shares, without interest, the amount of cash to which such
Holder is entitled pursuant to section 3.1.
4.3 LOST CERTIFICATES
In the event any certificate which immediately prior to the Effective
Time represented one or more outstanding Company Shares that were transferred
pursuant to section 3.1 is lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed, the Depositary will issue in exchange for such lost, stolen
or destroyed certificate, a cheque (or other form of immediately available
funds) for the cash amount, deliverable in accordance with such Holder's Letter
of Transmittal. When authorizing such payment in exchange for any lost, stolen
or destroyed certificate, the Person to whom cash is to be delivered shall, as a
condition precedent to the payment thereof, give a bond satisfactory to
Acquisitionco and the Company and their respective transfer agents in such sum
as Acquisitionco and the Company may direct or otherwise indemnify Acquisitionco
and the Company in a manner satisfactory to Acquisitionco and the Company
against any claim that may be made against Acquisitionco or the Company with
respect to the certificate alleged to have been lost, stolen or destroyed.
4.4 EXTINCTION OF RIGHTS
Any certificate which immediately prior to the Effective Time
represented outstanding Company Shares that were transferred pursuant to section
3.1, and not deposited, with all other instruments required by section 4.1, on
or prior to the sixth anniversary of the Effective Date shall cease to represent
a claim or interest of any kind or nature as a shareholder of the Company or for
the receipt of cash. On such date, the cash to which the former Holder of the
certificate referred to in the preceding sentence was ultimately entitled shall
be deemed to have been surrendered for no consideration to Acquisitionco,
together with all entitlements to dividends, distributions and interest thereon
held for such former Holder. None of Acquisitionco or the Company shall be
liable to any Person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
4.5 WITHHOLDING RIGHTS
Acquisitionco, the Company or the Depositary shall be entitled to
deduct and withhold from any consideration payable to any Holder of Company
Shares or Company Options or RSUs or DSUs pursuant to section 3.1, such amounts
as Acquisitionco, the Company or the Depositary determines is required or
permitted to deduct and withhold with respect to such payment under the ITA, the
United States Internal Revenue Code of 1986 or any provision of federal,
provincial, territorial, state, local or foreign tax laws, in each case, as
amended. To the extent that amounts
are so withheld, such withheld amounts shall be treated for all purposes hereof
as having been paid to the Holder of the securities in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority.
ARTICLE 5
RIGHTS OF DISSENT
5.1 DISSENT RIGHTS
(a) Company Shareholders may exercise rights of dissent with
respect to their Company Shares pursuant to and in the manner
set forth in section 185 of the OBCA as modified by this
section 5.1 (the "DISSENT RIGHTS") in connection with the
Arrangement, as the same may be modified by the Interim Order
or the Final Order, provided that, (i) notwithstanding
subsection 185(6) of the OBCA, the written objection to the
Arrangement Resolution referred to in subsection 185(6) of the
OBCA must be received by the Company not later than 5:00 p.m.
(Toronto time) on the Business Day preceding the Company
Meeting; and (ii) notwithstanding section 185 of the OBCA,
Acquisitionco, and not the Company, shall be required to offer
to pay fair value for Company Shares held by Holders who duly
exercise Dissent Rights, and to pay the amount to which such
Holders may be ultimately entitled. Holders who duly exercise
Dissent Rights and who are ultimately entitled to be paid fair
value for their Company Shares, shall be deemed to have
transferred their Company Shares, contemporaneously with the
transfer of Company Shares pursuant to section 3.1(f), without
any further authorization, act or formality and free and clear
of all liens, charges, claims and encumbrances, to
Acquisitionco in consideration of a payment from Acquisitionco
equal to such fair value at the Effective Time.
(b) Company Shareholders who exercise, or purport to exercise,
Dissent Rights, and who are ultimately determined not to be
entitled, for any reason, to be paid fair value for their
Company Shares, shall be deemed to have participated in the
Arrangement on the same basis as any non-dissenting Company
Shareholder as at and from the Effective Time and shall
receive the cash on the basis set forth in Article 3.
5.2 HOLDERS
In no circumstances shall the Company, Acquisitionco or any other
Person be required to recognize a Person exercising Dissent Rights unless such
Person is a Holder of those Company Shares in respect of which such rights are
sought to be exercised.
5.3 RECOGNITION OF DISSENTING SHAREHOLDERS
Neither the Company nor Acquisitionco nor any other Person shall be
required to recognize a Dissenting Shareholder as a Holder or beneficial owner
of Company Shares at or after the Effective Time, and after the Effective Time
the names of such Dissenting Shareholders shall be deleted from the register of
Holders of Company Shares maintained by or on behalf of the Company.
5.4 DISSENT RIGHT AVAILABILITY
A Holder is not entitled to exercise Dissent Rights with respect to
Company Shares if such Holder votes (or instructs, or is deemed, by submission
of any incomplete proxy, to have instructed his, or her or its proxyholder to
vote) in favour of the Arrangement Resolution.
ARTICLE 6
AMENDMENTS
6.1 AMENDMENTS
(a) The Company reserves the right to amend, modify and/or
supplement this Plan of Arrangement at any time and from time
to time prior to the Effective Date provided that any such
amendment, modification, and/or supplement must be (i) set out
in writing, (ii) approved by Acquisitionco, (iii) filed with
the Court and, if made following the Company Meeting, approved
by the Court and (iv) communicated to Company Shareholders if
and as required by the Court.
(b) Any amendment, modification and/or supplement to this Plan of
Arrangement may be proposed by the Company at any time prior
to or at the Company Meeting (provided that Acquisitionco
shall have consented thereto) with or without any other prior
notice or communication and, if so proposed and accepted by
the Persons voting at the Company Meeting (other than as
required under the Interim Order), shall become part of this
Plan of Arrangement for all purposes.
(c) Any amendment, modification and/or supplement to this Plan of
Arrangement that is approved or directed by the Court
following the Company Meeting shall be effective only if (i)
it is consented to by each of the Company and Acquisitionco
and (ii) if required by the Court, it is consented to by the
Company Shareholders voting in the manner directed by the
Court.
(d) Any amendment, modification and/or supplement to this Plan of
Arrangement may be made following the Effective Date
unilaterally by Acquisitionco, provided that it concerns a
matter which, in the reasonable opinion of Acquisitionco, is
of an administrative nature required to better give effect to
the implementation of this Plan of Arrangement and is not
adverse to the financial or economic interests of any former
Holder.
ARTICLE 7
FURTHER ASSURANCES
7.1 Notwithstanding that the transactions and events set out herein shall
occur and be deemed to occur in the order set out in this Plan of
Arrangement without any further authorization, act or formality, each
of the parties to the Combination Agreement shall make, do and execute,
or cause to be made, done and executed, all such further acts, deeds,
agreements, transfers, assurances, instruments or documents as may
reasonably be required by any of them in order further to document or
evidence any of the transactions or events set out herein.
SCHEDULE 1.1B
TRANSACTION RESOLUTION
SPECIAL RESOLUTION OF SHAREHOLDERS
BE IT RESOLVED THAT:
1. The arrangement (the "ARRANGEMENT") under Section 182 of the Business
Corporations Act (Ontario) (the "OBCA") involving Masonite
International Corporation (the "COMPANY"), as more particularly
described and set forth in the Management Information Circular (the
"CIRCULAR") of the Company accompanying the notice of this meeting, as
the Arrangement may be modified or amended, is hereby authorized,
approved and adopted.
2. The plan of arrangement (the "PLAN OF ARRANGEMENT") involving the
Company, the full text of which is set out as Schedule 1.1A to the
second amended and restated Combination Agreement dated February 17,
2005 (the "AGREEMENT") made between Acquisitionco and the Company, as
the Plan of Arrangement may be modified or amended, is hereby
authorized, approved and adopted.
3. Notwithstanding that this resolution has been passed (and the Plan of
Arrangement adopted) by the shareholders of the Company or that the
Arrangement has been approved by the Superior Court of Justice
(Ontario) (the "Court"), the directors of the Company are hereby
authorized and empowered without further notice to or approval of the
shareholders of the Company (i) to amend the Agreement or the Plan of
Arrangement to the extent permitted by the Agreement in any manner not
inconsistent with an applicable order of the Court, and (ii) subject to
the terms of the Agreement, not to proceed with the Arrangement.
4. Any officer or director of the Company is hereby authorized and
directed for and on behalf of the Company to execute, under the seal of
the Company or otherwise, and to deliver articles of arrangement and
such other documents as are necessary or desirable to the Director
under the OBCA in accordance with the Agreement for filing.
5. Any officer or director of the Company is hereby authorized and
directed for and on behalf of the Company to execute or cause to be
executed, under the seal of the Company or otherwise, and to deliver or
cause to be delivered, all such other documents and instruments and to
perform or cause to be performed all such other acts and things as may
be necessary or desirable to give full effect to the foregoing
resolution and the matters authorized hereby.
SCHEDULE 2.5
REGULATORY APPROVALS
1. The timely making of any submissions, including any General Information
Notices, and the timely obtaining of any consents or administrative
rulings, including Remediation Agreement or No Further Action Letters,
required pursuant to the New Jersey Industrial Site Recovery Act,
N.J.S.A. Sections 13:1K-6 et seq.
2. Competition Act (Canada):
(a) the issuance of an advance ruling certificate ("ARC") pursuant
to section 102 of the Competition Act (Canada) (the
"COMPETITION ACT") by the Commissioner of Competition
appointed under the Competition Act (the "COMMISSIONER") to
the effect that she is satisfied that she would not have
sufficient grounds upon which to apply to the Competition
Tribunal for an order under section 92 of the Competition Act
with respect to the transactions contemplated by this
Agreement; or
(b) that:
(i) the waiting period under section 123 of the
Competition Act shall have expired, or the
Commissioner shall have waived the obligation to
notify and supply information under section 113(c) of
the Competition Act because substantially similar
information was previously supplied in relation to a
request for an ARC, and
(ii) Acquisitionco shall have been advised in writing by
the Commissioner that the Commissioner has determined
not to make an application for an order under section
92 of the Competition Act in respect of the
transactions contemplated by this Agreement and any
terms and conditions attached to any such advice
shall be acceptable to Acquisitionco and the Company;
3. Investment Canada - Approval or deemed approval pursuant to the
Investment Canada Act (Canada) by the applicable Minister;
4. Xxxx-Xxxxx-Xxxxxx - The waiting periods (and any extensions thereof)
applicable to the Transaction under the Xxxx-Xxxxx-Xxxxxx Anti-trust
Improvements Act of 1976, as amended, shall have been terminated or
shall have expired.
5. European Commission - All required approvals of the European Commission
applicable to the Transaction under the EC Merger Regulations shall
have been obtained or the waiting period thereunder shall have expired.
6. South Africa - Any required approval clearances or waiting period
required to consummate the Transaction pursuant to any South African
antitrust Law shall have been obtained, expired or been terminated.
SCHEDULE 3.1
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(a) Organization. Each of the Company and its Subsidiaries has
been duly incorporated or formed under all applicable Laws, is
validly existing and has all necessary corporate or legal
power and authority to own its property and assets and to
carry on its business as currently owned and conducted. Except
as set out in the Disclosure Letter, all Subsidiaries are
wholly-owned, directly or indirectly, by the Company. All of
the outstanding shares and other ownership interests of its
Subsidiaries which are held directly or indirectly by the
Company are validly issued, fully paid and non-assessable, and
except (i) pursuant to restrictions on transfer contained in
constating documents, (ii) pursuant to rights of first refusal
and similar rights restricting transfer contained in
shareholders, partnership, joint venture or similar agreements
as set forth in the Disclosure Letter, or (iii) for
encumbrances in connection with security granted by the
Company and its Subsidiaries to their respective lenders in
the ordinary course of business, all such shares and other
ownership interests are owned directly or indirectly by the
Company, free and clear of all liens, charges, claims or
encumbrances, and there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or
otherwise) regarding the right to acquire any such shares or
other ownership interests in any of its Subsidiaries. The
Disclosure Letter sets out the names and jurisdictions of
incorporation or formation of each of the Company's
Subsidiaries and each Person in which the Company or any
Subsidiary owns a direct or indirect equity interest.
(b) Capitalization. The authorized capital of the Company consists
of an unlimited number of Company Shares. As of December 21,
2004, there were: (i) 54,796,531 Company Shares issued and
outstanding; (ii) Company Options outstanding, entitling the
holders thereof to acquire an aggregate of 2,281,018 Company
Shares; (iii) 299,433 RSUs granted by the Company; and (iv)
167,443 DSUs granted by the Company. Except for the Company
Options, RSUs and DSUs described in the immediately preceding
sentence, there are no options, warrants, conversion
privileges or other rights, agreements, arrangements or
commitments (pre-emptive, contingent or otherwise) obligating
the Company or any Subsidiary of the Company to issue or sell
any shares of the Company or of any such Subsidiary or
securities or obligations of any kind convertible into or
exchangeable for any shares of the Company or any Subsidiary
of the Company, or to make any payment which is contingent on
the value of any shares of the Company. All outstanding
Company Shares have been duly authorized and are validly
issued and outstanding as fully paid and non-assessable
shares, free of pre-emptive rights. There are no outstanding
bonds, debentures or other evidences of indebtedness of the
Company or any of its Subsidiaries having the right to vote
(or that are convertible for or exercisable into securities
having the right to vote) with
-2-
the holders of the Company Shares on any matter. Except as set
forth in the Disclosure Letter, there are no outstanding
obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding
Company Shares or with respect to the voting or disposition of
any outstanding securities of the Company or any of its
Subsidiaries. No holder of securities issued by the Company or
any Subsidiary of the Company has any right to compel the
Company to register or otherwise qualify securities for public
sale in Canada, the United States or elsewhere.
(c) Authority and No Violation.
(i) The Company has the necessary corporate power and
authority to enter into this Agreement and to perform
its obligations under this Agreement. The execution
and delivery of this Agreement by the Company and the
consummation by the Company of the Transaction have
been duly authorized by its board of directors and no
other corporate proceedings on its part are necessary
to authorize this Agreement or the Transaction, other
than:
(A) with respect to the Company Circular and
other matters relating solely thereto, the
approval of the board of directors of the
Company; and
(B) with respect to the completion of the
Transaction, the approval of the Company
Shareholders as described in Article 2.
(ii) This Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and
binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy,
insolvency and other applicable Laws affecting
creditors' rights generally, and to general
principles of equity.
(iii) The board of directors of the Company (A) unanimously
determined as of December 22, 2004 that the
Transaction is fair to the Company Shareholders and
is in the best interest of the Company, (B) received
an opinion from Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Inc. to the effect that, as of December 22, 2004, the
consideration offered to the Company Shareholders
pursuant to the Transaction is fair from a financial
point of view to the Company Shareholders and (C)
unanimously determined as of December 22, 2004 to
recommend that the Company Shareholders vote in
favour of the resolution approving the Transaction.
As of December 22, 2004, all of the Company's
directors have advised the Company that they intend
to vote the Company Shares held by them in favour of
the resolution approving the Transaction.
(iv) The authorization of this Agreement, the execution
and delivery by the Company of this Agreement, the
performance by the Company of its
-3-
obligations under this Agreement and the completion
of the Transaction will not, except as set out in the
Disclosure Letter:
(A) result (with or without notice or the
passage of time) in a violation or breach
of, or constitute a default under, require
any consent to be obtained under or give
rise to any third party right of
termination, cancellation, acceleration,
penalty or payment obligation or right of
purchase or sale under, any provision of:
(I) the Company's or any of its
Subsidiary's certificate of
incorporation, articles, by-laws or
other charter documents or any
agreement with a shareholder;
(II) any Laws (subject to obtaining the
Regulatory Approvals); or
(III) any Material Contract, or material
licence, permit or government grant
to which the Company or any
Subsidiary of the Company is party
or by which it is bound or subject
or is the beneficiary;
(B) give rise to any right of termination or
acceleration of indebtedness of the Company
or any Subsidiary of the Company, or cause
any such indebtedness to come due before its
stated maturity, or cause any available
credit of the Company or any Subsidiary of
the Company to cease to be available;
(C) result in the imposition of any material
lien, charge, claim or encumbrance upon any
of the Company's assets or the assets of any
Subsidiary of the Company;
(D) restrict, hinder, impair or limit the
ability of the Company or any Subsidiary of
the Company to carry on the business of the
Company or any Subsidiary of the Company as
and where it is now being carried on in all
material respects (excluding such legal
restrictions, hindrances, impairments and
limitations applicable to the Company or any
Subsidiary of the Company due solely to the
Company having become a wholly owned
Subsidiary of Acquisitionco); or
(E) result in any payment (including retention,
severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due
to any director, officer or employee of the
Company or any Subsidiary of the Company, or
increase any benefits otherwise payable
under any Company Benefit Plan, or result in
the acceleration of the time of payment or
vesting of any such benefits, including the
time of exercise of stock options.
-4-
(v) No consent, approval, order or authorization of, or
declaration or filing with, any Governmental
Authority is required to be obtained by the Company
and its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation by
the Company of the Transaction other than (A) any
approvals required by the Interim Order, (B) the
Final Order, (C) filings under the Act contemplated
by this Agreement, (D) the Regulatory Approvals, (E)
filings under the Securities Act, stock exchange
rules and similar Laws as contemplated by this
Agreement, and (F) any other consents, approvals,
orders, authorizations, declarations or filings of or
with a Governmental Authority (excluding those
consents, approvals, orders, authorizations,
declarations or filings relating to the specific
character of Acquisitionco), which are set out in the
Disclosure Letter or which, if not obtained, would
not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the
Transaction.
(d) Financial Statements. The Financial Statements have been
prepared in accordance with generally accepted accounting
principles in Canada and in all material respects in
accordance with applicable Laws and have been reconciled to
generally accepted accounting principles in the United States
in accordance with such accounting principles and in all
material respects in accordance with applicable Laws. Such
Financial Statements present fairly, in all material respects,
the consolidated financial position and results of operations
of the Company as of the respective dates thereof and for the
respective periods covered thereby applied on a basis
consistent with prior periods and throughout the periods
indicated (except as may be indicated expressly in the notes
thereto). In the case of unaudited statements, this
representation is subject to normal, recurring year-end
adjustments that would be made in the course of an audit and
would not be material. Such Financial Statements reflect
appropriate and adequate reserves in respect of contingent
liabilities, if any, of the Company and its Subsidiaries on a
consolidated basis.
(e) Contingent Liabilities. Except as set forth in the Disclosure
Letter, or as Publicly Disclosed by the Company, neither the
Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) except (i) liabilities or obligations
set forth in the Balance Sheet or (ii) liabilities or
obligations incurred since the date of the Balance Sheet in
the ordinary course of business consistent with past practice,
none of which have had or would, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company.
(f) Absence of Certain Changes or Events. Except as set forth in
the Disclosure Letter or as Publicly Disclosed by the Company,
and except for the Transaction, since the date of the Balance
Sheet each of the Company and its Subsidiaries has conducted
its business only in the ordinary course of business
consistent with past practice and there has not occurred:
-5-
(i) (A) an amendment or proposed amendment to the
articles or by-laws (or other comparable governing
documents) of the Company; or (B) a material
amendment or proposed amendment to the articles and
by-laws (or other comparable governing documents) of
any of the Company's Subsidiaries;
(ii) a Material Adverse Change with respect to the
Company;
(iii) the filing of any material change reports with the
OSC or any other securities authority or regulator or
stock exchange which remain confidential;
(iv) any reorganization, amalgamation or merger of the
Company or any of its Subsidiaries with any other
Person;
(v) any material damage, destruction or loss not fully
covered by insurance (subject to normal deductibles);
(vi) any redemption, repurchase or other acquisition of
Company Shares by the Company or the Company Benefit
Plans, or any declaration, setting aside or payment
of any dividend or other distribution (whether in
cash, shares or property) with respect to Company
Shares;
(vii) any increase in or modification of the compensation
payable or to become payable by the Company or its
Subsidiaries to any of their respective directors,
officers or employees, or any grant to any such
director, officer or employee of any increase in
entitlements under, or general institution of,
retention, severance or termination programs or pay,
in each case, other than annual increases consistent
with past practice or as a result of promotions in
the ordinary course of business;
(viii) the adoption by the Company or its Subsidiaries of,
any increase in or modification of any bonus,
pension, retention, insurance or benefit arrangement
(including the granting of stock options, restricted
stock awards or stock appreciation rights) made to,
for or with any of their respective directors,
officers or employees, in each case, other than
annual increases consistent with past practice, as
required under Law or collective agreements, or as a
result of promotions in the ordinary course of
business;
(ix) any acquisition or sale of any business or division
of a business aggregating US$10 million or more;
(x) any change in policies with respect to the payment of
accounts payable or the material collection of
accounts receivable;
-6-
(xi) any entering into, or amendment of, any Material
Contract, other than in the ordinary course of
business with Arm's Length Persons consistent with
past practice;
(xii) any relinquishment, termination or non-renewal by it
of any Material Contract;
(xiii) any creation or assumption by it of any material
mortgage, pledge, security interest or lien or other
encumbrance on any asset except (A) in connection
with security granted by the Company and its
Subsidiaries to their lenders under the Existing
Credit Facilities and (B) to Arm's Length Persons, in
each case, in the ordinary course of business
consistent with past practice;
(xiv) any resolution to approve a split, consolidation or
reclassification of any of its outstanding shares;
(xv) any change in its accounting methods, policies or
practices, other than changes required by Canadian
generally accepted accounting principles or official
interpretations thereof and except for changes in
practices in the ordinary course of business;
(xvi) any guarantee of the payment of material indebtedness
or any incurrence of indebtedness for money borrowed
(except pursuant to the Existing Credit Facilities),
or any issue or sale of any debt securities or
securities convertible or exchangeable for debt
securities;
(xvii) any satisfaction or settlement of any claims or
liabilities, which are individually or in the
aggregate material, that were not reflected in the
Balance Sheet, other than settlement of liabilities
incurred in the ordinary course of business with
Arm's Length Persons consistent with past practice;
(xviii) except in the ordinary course of business and
consistent with past practice, the entering into of
any interest rate, currency or commodity swaps,
xxxxxx or other similar financial instruments;
(xix) the commencement, participation or agreement to
commence or participate in any bankruptcy, voluntary
liquidation, dissolution, winding up, examinership,
insolvency or similar proceeding;
(xx) the granting of any equity-based awards;
(xxi) the incurring or commitment to capital expenditures
except to the extent consistent with the capital plan
for 2005 provided to Acquisitionco prior to December
22, 2004; or
(xxii) any agreement by the Company to do any of the
foregoing.
-7-
(g) Books and Records. The financial books, records and accounts
of the Company and its Subsidiaries, in all material respects,
(i) have been maintained in accordance with good business
practices on a basis consistent with prior years, (ii) are
stated in reasonable detail and accurately and fairly reflect
the material transactions and dispositions of the assets of
the Company and its Subsidiaries and (iii) accurately and
fairly reflect the basis for the Financial Statements. The
Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance
with management's general or specific authorization; and (ii)
transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with
Canadian generally accepted accounting principles, or any
other criteria applicable to such statements and (B) to
maintain accountability for assets. The Company's and its
Subsidiaries' corporate records and minute books have been
maintained substantially in compliance with applicable Laws
and are complete and accurate in all material respects, and
full access thereto has been provided to Acquisitionco.
(h) Customers and Suppliers. The Company has delivered to
Acquisitionco, prior to the December 22, 2004, a complete list
of the Company's 15 largest customers (on a revenue basis) for
the fiscal year ended on December 31, 2003. Since the date of
the Balance Sheet, there has not been, and neither the Company
nor any of its Subsidiaries has received notice of, any
termination or cancellation of, or a material adverse
modification or change in, the business relationship with any
such customers.
(i) Accounts Receivable. All trade accounts receivable of the
Company that are reflected on the Balance Sheet or the
accounting records of the Company as of the Effective Date
(collectively, the "ACCOUNTS RECEIVABLE") represent or will
represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of
business. There is no material contest, claim, or right of
set-off, other than returns and adjustments in the ordinary
course of business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such
Accounts Receivable.
(j) Material Contracts. Except as set forth in the Disclosure
Letter, there is no Contract to which the Company or any of
its Subsidiaries is a party or by which any of them or their
respective properties or assets are bound, that (i) if
terminated, would reasonably be expected to have a Material
Adverse Effect on the Company, (ii) is a Contract or group of
related Contracts which involves payments to or by the Company
or any of its Subsidiaries of more than US$5,000,000 per annum
(other than Contracts with suppliers and customers entered
into in the ordinary course of business), (iii) is a Contract
that contains any non-competition obligation or otherwise
restricts in any material way the business of the Company or
any of its Subsidiaries, (iv) is a Contract under which the
Company or any of its Subsidiaries has borrowed any money
from, or issued any note, bond, debenture or other evidence of
indebtedness to, any Person (other than the Company or any
Subsidiary incorporated under the laws of, (A) any
-8-
jurisdiction within the United States, (B) Canada, (C) or any
province within Canada) or any other note, bond, debenture or
other evidence of indebtedness issued to any Person in excess
of US$5,000,000, (v) is a Contract under which (A) any Person
(including the Company or any of its Subsidiaries) has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of the Company or any of its Subsidiaries or (B)
the Company or any of its Subsidiaries has directly or
indirectly guaranteed indebtedness, liabilities or obligations
of any Person in an amount in excess of US$5,000,000 (in each
case other than endorsements for the purpose of collection in
the ordinary course of business), (vi) is a partnership or
joint venture agreement in which the Company or any of its
Subsidiaries participates as a general partner or joint
venturer, (vii) is a Contract with respect to factoring or
other general assignment of Accounts Receivable, or (viii) is
a Contract pursuant to which the Company or any of its
Subsidiaries provides an indemnification to any other Person
(other than the Company or a wholly owned Subsidiary), other
than Contracts with suppliers, distributors, sales
representatives and customers entered into in the ordinary
course of business or in an amount not in excess of
US$5,000,000 (the Contracts described in clauses (i) - (viii),
collectively, the "MATERIAL CONTRACTS"). Except as set forth
in the Disclosure Letter, all Material Contracts are legal,
valid, binding and in full force and effect and are
enforceable by the Company and its Subsidiaries in accordance
with their respective terms (subject to bankruptcy, insolvency
and other applicable Laws affecting creditors' rights
generally, and to general principles of equity), the Company
and its Subsidiaries have performed in all material respects
all respective obligations required to be performed by them to
date under the Material Contracts and are not, and are not
alleged to be (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material
respect thereunder and, to the knowledge of the Company, no
other party to any of the Material Contracts is (with or
without the lapse of time or the giving of notice or both) in
breach or default in any material respect thereunder. True and
correct copies of the Material Contracts (or in the case of
oral Material Contracts, accurate summaries of the material
terms of such Material Contracts) have been made available to
Acquisitionco. All of the Material Contracts listed in the
Disclosure Letter were entered into the ordinary course of
business.
(k) Litigation. Except as set forth in the Disclosure Letter, or
as Publicly Disclosed by the Company: (i) there is no claim,
action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or
any Subsidiary of the Company before any Governmental
Authority which if determined adversely to the Company would,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company; (ii) neither
the Company nor any Subsidiary of the Company, nor any of
their respective assets and properties, is subject to any
outstanding judgement, judicial or regulatory order, writ,
injunction or decree that involves or may involve, or requires
or may require an expenditure of a material amount of money as
a condition to or a necessity for the right or ability of the
Company or a Subsidiary of the Company, to conduct its
business in a manner in all material respects in which it
currently carries on such business or that could prevent or
materially
-9-
delay consummation of the Transaction; (iii) neither the
Company nor any Subsidiary of the Company is subject to any
warranty, negligence, performance or other claims or disputes
in respect of products or services currently being delivered
or previously delivered that if resolved adversely to the
Company would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, and
to the knowledge of the Company there are no events or
circumstances which would reasonably be expected to give rise
to any such claims or disputes or potential claims or
disputes.
(l) Restrictions on Business Activities. Except as set out in the
Disclosure Letter, or as Publicly Disclosed by the Company,
there is no Contract, judgement, injunction, order or decree
binding upon the Company or any Subsidiary of the Company that
has or would, individually or in the aggregate, reasonably be
expected to have the effect of prohibiting, materially
restricting or impairing any material business practice of the
Company or any Subsidiary of the Company, any material
acquisition of property by the Company or any Subsidiary of
the Company or the conduct of business by the Company or any
Subsidiary of the Company as currently conducted in all
material respects.
(m) Intellectual Property. The Disclosure Letter lists all
registrations or applications for registration of material
Company IP in all material jurisdictions. Except as set forth
in the Disclosure Letter, or as Publicly Disclosed by the
Company, (i) all rights in material Company IP are valid,
subsisting and enforceable in all material respects and the
Company or its Subsidiaries owns or has the right to use all
material Company IP, free and clear of all liens, charges,
claims and encumbrances, (except for any encumbrances in
connection with security granted by the Company or its
Subsidiaries under the Existing Credit Facilities); (ii) no
action is pending or, to the Company's knowledge, threatened
against or affecting the Company or any of its Subsidiaries or
any of their respective properties, which challenge the
validity or use of, or the ownership by, the Company and/or
its Subsidiaries of the Company IP and which, if determined
adversely, would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company;
(iii) the Company has no knowledge of any infringement or
infringing use of any of the Company IP or licences by any
Person which is having or would, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company; and (iv) to the Company's knowledge, no
infringement, misappropriation or violation of any
intellectual property right or other proprietary right of any
third party has occurred or will result from the conduct of
the business of the Company and its Subsidiaries or from the
signing and execution of this Agreement or the consummation of
the Transaction, and no written claim has been made to the
Company or any Subsidiary by any third party based upon an
allegation of any such infringement, in each case, which has
or would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(n) Employment Matters.
-10-
(i) Except as set forth in the Disclosure Letter or as
Publicly Disclosed by the Company, (A) neither the
Company nor any Subsidiary of the Company is a party
to any obligation, policy, plan, Contract or
understanding providing for severance or termination
payments to, or any employment agreement with, any
director, officer or employee, other than any common
law and statutory obligations of reasonable notice of
termination or pay in lieu thereof and any statutory
obligations, (B) neither the Company nor any of its
Subsidiaries has any liability under any benefit or
severance policy, practice, agreement, plan or
program which exists or arises, or may be deemed to
exist or arise, under any applicable Law or otherwise
as a result of or in connection with the Transaction
other than, in the case of (A) and (B), such
Contracts, policies, practices, agreements, plans or
programs which would not, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(ii) Except as set forth in the Disclosure Letter, neither
the Company nor any of its Subsidiaries is subject to
any collective bargaining agreements, or subject to
any application or to the knowledge of the Company
threatened or apparent union organizing campaigns for
employees not under a collective bargaining agreement
and no such campaigns have been conducted within the
past three years, ongoing, nor are there any current,
pending or, to the knowledge of the Company,
threatened strikes, work stoppages, lockouts, or
slowdowns at the Company or any Subsidiary and the
Company and its Subsidiaries have not experienced any
such strikes, work stoppages, lockouts, or slowdowns
within the past three years.
(iii) Except as set forth in the Disclosure Letter, neither
the Company nor any of its Subsidiaries is subject to
any claim, litigation, charge, inquiry,
investigation, grievance, arbitration or proceeding,
actual or to the knowledge of the Company threatened,
relating to its employees, prospective employees,
former employees, representatives of employees, or
independent contractors (including any termination of
such Persons) other than any of the foregoing which
would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect on the Company.
(iv) Except as set forth in the Disclosure Letter or as
are not material, the Company and its Subsidiaries
have operated in accordance with all applicable Laws,
agreements, policies, plans, and programs with
respect to employment and labour, including, but not
limited to, employment and labour standards, labour
risk prevention measures, social security and other
contributions, occupational health and safety,
employment equity, pay equity, workers' compensation,
equal employment opportunity, human rights and labour
relations, the applicable provisions of ERISA and the
Code and the provisions of the Worker Adjustment and
Retaining Notification Act of 1998 and similar Laws,
and there are no current, pending or, to the
Company's knowledge, threatened claims, litigation or
-11-
proceedings before any board, tribunal or other
Governmental Authority with respect to any of the
areas listed herein. To the knowledge of the Company,
nothing has occurred which might lead to a material
claim, litigation or proceeding under any such
applicable Laws, agreements, policies, plans, and
programs.
(v) Except as set forth in the Disclosure Letter, neither
the Company nor any Subsidiary is a party to, or
otherwise bound by, any consent decree in effect
with, or material citation by, any Governmental
Authority or other entity or Person, relating to
employees or employment practices.
(vi) Except as set forth in the Disclosure Letter, no
unfair labour practice charge or complaint is pending
or, to the knowledge of the Company, threatened
which, if adversely determined, would, individually
or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
(vii) Except as set forth in the Disclosure Letter or as
Publicly Disclosed by the Company, neither the
Company nor any Subsidiary has closed any plant or
facility, effectuated any mass layoffs of employees
or implemented any early retirement, separation or
window program within the past three years, nor has
the Company or any Subsidiary planned or announced
any such action or program for the future.
(o) Pension and Employee Benefits.
(i) The Disclosure Letter contains a true and complete
list of the material Company Benefit Plans and
indicates the country in which the plan is
maintained.
(ii) The Company has provided or made available to
Acquisitionco a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate
description) of each Company Benefit Plan and, to the
extent applicable: (A) any related trust agreement or
other funding instrument; (B) the most recent
determination letter, if applicable; (C) any summary
plan description and other written communications (or
a description of any oral communication) by the
Company or any of its Subsidiaries to any employee
concerning the extent of the benefits provided under
a Company Benefit Plan; (D) a summary of any proposed
amendments or changes anticipated to be made to the
Company Benefit Plans at any time within the twelve
months immediately following December 22, 2004; and
(E) for the most recent year (a) the annual report on
Form 5500 and attached schedules or such other form
as applicable, (b) audited financial statements, and
(c) actuarial valuation reports.
(iii) Except as set forth in the Disclosure Letter, no
Company Benefit Plan established or maintained for
the benefit of Canadian employees or former
-12-
Canadian employees of the Company or any of its
Subsidiaries is a pension, superannuation or savings
arrangement, including pension plans, supplemental
pensions, "registered pension plans" (as defined in
the Tax Act) and "retirement compensation
arrangements" (as defined in the Tax Act).
(iv) Except as set forth in the Disclosure Letter, the
Company and its Subsidiaries have complied with all
of their obligations under and in respect of the
Company Benefit Plans and with all applicable Laws,
in each case, in all material respects. Each Company
Benefit Plan is and has been established, registered
(where required), qualified, administered and
invested in all material respects in accordance with
the terms of such plans, any applicable collective
agreements and all applicable Laws, in each case, in
all material respects.
(v) Except as set forth in the Disclosure Letter, no
event has occurred or condition exists with respect
to any of the Company Benefit Plans or relating to
any employee of the Company or a Subsidiary which,
individually or in the aggregate, have had or would
reasonably be expected to have a Material Adverse
Effect on the Company.
(vi) Except as set forth in the Disclosure Letter, all of
the Company Benefit Plans are either (A) fully
insured or (B) fully funded in accordance with
applicable Laws on a going concern, solvency basis.
Neither the Company nor any of its Subsidiaries has
received, or applied for, any payment of surplus out
of any Company Benefit Plan. Except as set forth in
the Disclosure Letter, neither the Company nor its
Subsidiaries has taken any premium holidays under any
Company Benefit Plan except as permitted by
applicable Laws and the terms of the Company Benefit
Plan.
(vii) Except as set forth in the Disclosure Letter, no
event has occurred and no condition or circumstance
exists that has resulted in or would reasonably be
expected to result in any Company Benefit Plan being
ordered, or required to be, terminated or wound up in
whole or in part, having its registration under
applicable Laws refused or revoked, being placed
under the administration of any trustee or receiver
or regulatory authority or being required to pay any
material Taxes, penalties, payments or levies under
applicable Laws.
(viii) Except as set forth in the Disclosure Letter, there
are no material outstanding stock appreciation
rights, phantom equity, profit sharing plan or
similar rights, agreements, arrangements or
commitments payable to directors, officers,
consultants, or current or former employees of the
Company or any of its Subsidiaries and which are
based upon the revenue, value, income or any other
attribute of the Company or any Subsidiary of the
Company.
-13-
(ix) Except as set forth in the Disclosure Letter, no
Company Benefit Plan is subject to Title IV of ERISA
and neither the Company nor any of its Subsidiaries
(while directly or indirectly owned by the Company
nor, to the knowledge of the Company, prior to being
directly or indirectly owned by the Company) has at
any time sponsored or contributed to, or has had any
liability or obligation in respect of any such plan.
(x) Except as set forth in the Disclosure Letter and
except as are properly accrued on the Financial
Statements in accordance with Canadian generally
accepted accounting principles, neither the Company
nor any of its Subsidiaries has incurred or accrued
any current or projected material liability (whether
absolute or contingent) in respect of post-employment
or post-retirement health, medical or life insurance
benefits for current, former or retired employees of
the Company or any of its Subsidiaries, except as
required to avoid an excise tax under Section 4980B
of the Code or otherwise except as may be required
pursuant to any other applicable Law.
(xi) Except as set forth in the Disclosure Letter, no
Company Benefit Plan exists that, as a result of the
execution of this Agreement, shareholder approval of
this Agreement or the Transaction (whether alone or
in connection with any subsequent event(s)) will
entitle any current, former or retired employees,
officers or directors of the Company or any of its
Subsidiaries to (A) severance pay or any increase in
severance pay upon any termination of employment
after December 22, 2004, (B) accelerate the time of
payment or vesting of, or result in any payment
(through a grantor trust or otherwise) of
compensation or benefits under, any of the Company
Benefit Plans, (C) result in the acceleration of, or
an increase in, funding obligations in respect of,
any of the Company Benefit Plans, (D) limit or
restrict the right of the Company to merge, amend or
terminate any of the Company Benefit Plans (other
than solely resulting from becoming a wholly-owned
subsidiary of Acquisitionco) or (E) result in any
payments under any of the Company Benefit Plans which
would not be deductible under Section 280G of the
Code.
(xii) Any payments, distributions or withdrawals from or
transfers of assets to or from any Company Benefit
Plan have been made in all material respects in
accordance with the valid terms of such Company
Benefits Plan, applicable collective agreements and
all Laws and occurred with the consent of any
applicable Governmental Authority (where required).
(xiii) Except as set forth in the Disclosure Letter, none of
the Company Benefit Plans is a "multiemployer plan"
as defined in Section 3(37) of ERISA or any other
applicable Laws and neither the Company nor any of
its Subsidiaries has any liability or obligation in
respect of, any multiemployer.
-14-
(xiv) Each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code has heretofore been
determined by the Internal Revenue Service to so
qualify in all material respects, and each trust
created thereunder has heretofore been determined by
the Internal Revenue Service to be exempt from tax
under the provisions of Section 501(a) of the Code
and, nothing has occurred that would cause any such
Company Benefit Plan or trust to fail to qualify
under Section 401(a) or 501(a) of the Code.
(xv) Neither the Company nor any of its Subsidiaries has
engaged in, or is a successor or parent corporation
to an entity that has engaged in, a transaction
described in Sections 4069 or 4214(c) of ERISA. No
"reportable event" (as such term is defined in
Section 4043 of ERISA) that could reasonably be
expected to result in material liability or
"accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA and Section 412 of
the Code (whether or not waived)) has occurred with
respect to any Company Benefit Plan.
(xvi) With respect to any Company Benefit Plan, (A) no
material actions, suits or claims (other than routine
claims for benefits in the ordinary course) are
pending or to the knowledge of the Company threatened
(B) no liability to the Pension Benefit Guaranty
Corporation has been incurred (other than routine
premium payments) and (C) to the knowledge of the
Company, no facts or circumstances exist that could
give rise to any such action, suit, claim or
liability.
(p) Tax Matters. Except as set out in the Disclosure Letter or as
otherwise disclosed in writing by the Company to Acquisitionco
prior to December 22, 2004:
(i) The Company and each of its Subsidiaries has duly
filed, and timely made or prepared all Tax Returns
required to be made or prepared by it or caused to be
filed, all Tax Returns required to be filed by them
in the form and within the time prescribed under
applicable Laws for so doing (all of which Tax
Returns were correct and complete in all material
respects), and has paid all material amounts of Taxes
due and payable, in each case except for any such Tax
Returns or taxes the non-filing or non-payment of
which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect on the Company and the Financial Statements
contain an adequate provision in accordance with
Canadian generally accepted accounting principles for
all material amounts of Taxes payable in respect of
each period covered by such Financial Statements and
all prior periods to the extent such Taxes have not
been paid, whether or not due and whether or not
shown as being due on any Tax Returns. The Company
and each of its Subsidiaries has duly and timely paid
all instalments on account of Taxes for the current
year that are due and payable by it whether or not
assessed other than any non-payments that would not,
individually or in the aggregate, reasonably be
expected to
-15-
have a Material Adverse Effect on the Company. On a
consolidated basis, the Company has made adequate
provision in accordance with Canadian generally
accepted accounting principles in its books and
records for amounts at least equal to the amount of
all Taxes payable by the Company or any of its
Subsidiaries that will not be due and payable by the
Effective Date in respect of any period subsequent to
the period covered by such Financial Statements and
that relate to the periods ending on or prior to the
Effective Date.
(ii) Neither the Company nor any Subsidiary of the Company
has received any notification that any issues
involving a material amount of Taxes have been raised
(and are currently pending) by the Canada Revenue
Agency, the United States Internal Revenue Service or
any other taxing authority, including, without
limitation, any sales tax authority, in connection
with any of the Tax Returns filed or required to be
filed, and no waivers of statutes of limitations, or
objections to any assessments or reassessments, have
been given or requested or made with respect to the
Company or any Subsidiary of the Company. All
liability of the Company and its Subsidiaries in
Canada, the United States, the United Kingdom,
Ireland and France for Taxes has been assessed for up
to the fiscal years as set out in the Disclosure
Letter. To the best of the knowledge of the Company,
neither the Company nor any Subsidiary of the Company
has received (A) written notice from any taxing
authority to the effect that any Tax Return is being
examined for assessment or (B) a written proposal to
assess additional Taxes involving an amount of Taxes,
and neither the Company nor any Subsidiary of the
Company has knowledge or reason to believe that such
examination or assessment will be threatened. No Tax
liens exist for material amounts of Taxes of the
Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is a party to any
tax sharing or other similar agreement or arrangement
with any Person (other than with the Company or any
of its Subsidiaries) or any taxing authority pursuant
to which the Company or any of its Subsidiaries has
or could have any material liabilities in respect of
Taxes. Neither the Company nor any Subsidiary of the
Company has received a refund of any material amount
of Taxes to which it was not entitled. Neither the
Company nor any of its Subsidiaries has made an
election under Section 897(i) of the Code to be
treated as a domestic corporation for purposes of
Section 897, 1445 and 6039C of the Code.
(iii) Each of the Company and its Subsidiaries has duly and
timely withheld all Taxes and other amounts required
by Law to be withheld by it (including Taxes and
other amounts required to be withheld by it in
respect of any amount paid or credited or deemed to
be paid or credited by it to or for the account or
benefit of any Person, including any employees,
officers or directors and any non-resident Person),
and has duly and timely remitted to the appropriate
authority such Taxes and other amounts required by
Law to be remitted by it, except to the extent that
the failure to so withhold
-16-
or remit has not and would not, individually or in
the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
(iv) Each of the Company and its Subsidiaries has duly and
timely collected all amounts on account of any sales
or transfer taxes, including goods and services,
harmonized sales and provincial or territorial sales
taxes, required by Law to be collected by it and has
duly and timely remitted to the appropriate authority
any such amounts required by Law to be remitted by
it, except to the extent that such failure has or
would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
(v) Neither the Company nor any Subsidiary has been a
member of an affiliated or consolidated group (other
than the United States federal affiliated group to
which certain United States Subsidiaries are members
and to which Masonite Holdings, Inc. is the common
parent) filing a United States consolidated Tax
Return or has any liability for the Taxes of any
Person other than the Company and its Subsidiaries
under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as
a transferee or successor, by contract or otherwise.
The Company has delivered to Acquisitionco or made
available to Acquisitionco for inspection (A) copies
of such of its income Tax Returns, complete and
correct in all material respects, and the income Tax
Returns of its Subsidiaries, as have been requested
by Acquisitionco and (B) copies of all private letter
rulings, revenue agent reports, closing agreements,
settlement agreements, deficiency notices and any
similar documents requested by Acquisitionco
submitted by, received by or agreed to by or on
behalf of the Company or its Subsidiaries and
relating to material Taxes for such taxable periods,
complete and correct in all material respects.
(vi) The Company has commenced a comprehensive transfer
pricing study. If the transfer pricing methodology
resulting from such transfer pricing study had been
used by the Company and its Subsidiaries for the 2003
fiscal period, no material aggregate increase in the
amount of Taxes payable in respect of such period
would have resulted. There are no proceedings,
assessments, reassessments, investigations, audits or
claims now pending or, to the knowledge of the
Company, threatened against the Company or any of the
Subsidiaries in respect of any transfer pricing
matters and there are no matters under discussion,
audit or appeal with any Governmental Authority
relating to transfer pricing that would reasonably be
expected to result in a material amount of Taxes
being payable by the Company or any of its
Subsidiaries in respect of any period ending on or
prior to the Effective Date.
-17-
(vii) "TAX" and "TAXES" means, with respect to any entity,
all income taxes (including any tax on or based upon
net income, gross income, income as specially
defined, earnings, profits or selected items of
income, earnings or profits) and all capital taxes,
gross receipts taxes, environmental taxes, sales
taxes, use taxes, ad valorem taxes, value added
taxes, transfer taxes, franchise taxes, license
taxes, withholding taxes or other withholding
obligations, payroll taxes, employment taxes, Canada
or Quebec Pension Plan premiums, excise, severance,
social security premiums, workers' compensation
premiums, employment insurance or compensation
premiums, stamp taxes, occupation taxes, premium
taxes, property taxes, windfall profits taxes,
alternative or add-on minimum taxes, goods and
services tax, customs duties or other taxes of any
kind whatsoever, together with any interest and any
penalties or additional amounts imposed by any taxing
authority (domestic or foreign) on such entity or for
which such entity is responsible, and any interest,
penalties, additional taxes, additions to tax or
other amounts imposed with respect to the foregoing.
(viii) For purposes of this Section (p), the term "MATERIAL
AMOUNT OF TAXES" shall mean an amount of Taxes that
is material to the Company and its Subsidiaries taken
as a whole.
(q) Compliance with Laws. Except as set forth in the Disclosure
Letter, or as Publicly Disclosed by the Company, the Company
and its Subsidiaries have complied with and are not in
violation of any applicable Laws in all material respects,
other than Laws addressed in clauses (n), (o) and (p)
foregoing and (s) following. Without limiting the generality
of the foregoing, all securities of the Company (including,
all options, rights or other convertible or exchangeable
securities) have been issued in compliance with all applicable
securities Laws and all securities to be issued upon exercise
of any such options, rights and other convertible or
exchangeable securities will be issued in compliance with all
applicable securities Laws.
(r) Licences, Etc. Except as set forth in the Disclosure Letter,
or as Publicly Disclosed by the Company, the Company and each
Subsidiary of the Company owns, possesses, or has obtained and
is in compliance with, all licences, permits, certificates,
approvals, orders, grants and other authorizations of or from
any Governmental Authority necessary to conduct its businesses
substantially as now conducted, other than such failures to
own, possess, obtain or be in compliance with as would not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
(s) Environmental. Except as set forth in the Disclosure Letter:
(i) The Company, its Subsidiaries and their respective
operations are, and have been, in material compliance
with all Environmental Laws;
(ii) Neither the Company nor any Subsidiary of the
Company:
-18-
(A) is subject to any Environmental Laws, or to
the knowledge of the Company any pending or
proposed future Environmental Laws, or terms
of any current, or to the knowledge of the
Company any pending or proposed future,
environmental authorization, permit or
licence which requires or may require any
material work, repairs, construction, change
in business practices or operations, or
expenditures;
(B) is subject to any written claim, action,
proceeding, investigation, demand, notice or
order with respect to a material breach of
or material liability under any
Environmental Laws applicable to the Company
or any Subsidiary of the Company or under
any indemnity granted by the Company or any
Subsidiary to any other Person;
(C) has any liability or responsibility with
respect to, or has knowledge of, any
Hazardous Substance that has been generated,
transported, treated, stored, installed,
deposited, disposed of, arranged to be
deposited or disposed of, released,
discharged or emitted, or threatened to be
released discharged or emitted, at, on, from
or under any property or facility currently
or formerly owned, leased, used or otherwise
controlled by the Company or any of its
Subsidiaries, in violation of, or in a
manner or to a location that could give rise
to liability to the Company or any of its
Subsidiaries under or relating to, any
Environmental Laws or is present at, on, in,
or under such currently owned, leased, used
or controlled property or facility in a
condition or at a level or concentration
exceeding any remediation or decommissioning
standard set forth under Environmental Laws,
in any case, that would reasonably be
expected to be material; or
(D) has any material liability or responsibility
with respect to, or has knowledge of, any
Hazardous Substance that is migrating toward
any Real Property; and
(iii) None of the Company or any of its Subsidiaries has
assumed, contractually or by operation of Laws, any
liabilities or obligations of any other Person under
or relating to any Environmental Laws, in any case
that would, reasonably be expected to be material.
(iv) None of the products manufactured by the Company or
any of its Subsidiaries (or any of their respective
predecessors) or manufactured by a third party the
assets or stock of which were sold to the Company or
any of its Subsidiaries (or any of their respective
predecessors) contained asbestos, except as set forth
on the Disclosure Letter.
-19-
The representations and warranties in this paragraph(s) are
the only representations and warranties in this Agreement
dealing with Environmental Laws or environmental matters.
(t) Property. The Disclosure Letter contains a true and complete
list of (i) all the real property owned in fee by the Company
and its Subsidiaries (the "OWNED REAL PROPERTY") and (ii) all
leases, subleases and other agreements under which the Company
or any of its Subsidiaries leases, subleases, uses or occupies
or has the right to use or occupy, any real property with
annual rent in excess of $100,000 (collectively the "REAL
PROPERTY LEASES" and the property subject thereto the "LEASED
REAL PROPERTY", and together with the Owned Real Property, the
"REAL PROPERTY"). Except as set forth in the Disclosure
Letter, or except for failures of title that do not materially
adversely affect the operations of the business or the ability
to sell such property, the Company and each Subsidiary of the
Company have good and sufficient title to their respective
material Real Property interests, to either as owner in fee
simple of Owned Real Property or as holder of a valid
leasehold interest of Leased Real Property, in each case free
and clear of all liens, charges, claims or encumbrances
(except for liens, charges, claims or encumbrances permitted
under the Company's loan documents), and otherwise hold valid
easements, rights of way, permits or licences from land owners
or authorities required to permit the operation of their
businesses as presently conducted. Each Real Property Lease
constitutes the valid and legally binding obligation of the
Company or its Subsidiaries, enforceable against the Company
or its Subsidiaries, as applicable, in accordance with its
terms. With respect to each Real Property Lease there is no
default or event which, with notice or lapse of time or both,
would constitute a default on the part of Company or its
Subsidiaries, or, to the knowledge of the Company any other
party thereto, except for such defaults that would not
reasonably be expected to be material to the Company.
(u) Non-Arm's Length Transactions. Except as set forth in the
Disclosure Letter, or as Publicly Disclosed by the Company,
there are no Material Contracts or other transactions
currently in place between the Company or any of its
Subsidiaries, on the one hand, and (i) any officer or director
of the Company or any of its Subsidiaries, (ii) any holder of
record or beneficial owner of 5% or more of the voting
securities of the Company, or (iii) any Affiliate or associate
of any such officer, director or beneficial owner, on the
other hand.
(v) Reports. Since December 31, 2001, the Company has filed with:
(i) the OSC, by posting upon the SEDAR system, if required,
true and complete copies of all forms, reports, schedules,
statements and other documents required in accordance with
applicable securities Laws to be filed by it; and (ii) the
U.S. Securities and Exchange Commission, true and complete
copies of all forms, reports, schedules, statements and other
documents, required in accordance with applicable securities
Laws to be filed by it. (Such forms, reports, schedules,
statements and other documents, including any financial
statements or other documents, including any schedules
included therein, are referred to as the "COMPANY DOCUMENTS".)
The
-20-
Company Documents, at the time filed, (i) did not contain any
misrepresentation of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (ii) complied
in all material respects with the requirements of applicable
securities Laws. The Company has not filed any confidential
material change report with the OSC or any other securities
authority or regulator or any stock exchange or other
self-regulatory authority which at the date hereof remains
confidential.
(w) Fees. Other than agreements with soliciting dealers or proxy
solicitation firms that may be engaged by the Company in
connection with the Transaction on usual commercial terms, the
Company has delivered to Acquisitionco complete copies of all
agreements that could give rise to any claim for an advisory
fee, success fee, brokerage commission, finder's fee or other
like payment against the Company or any of its Subsidiaries in
connection with the Transaction.
(x) Absence of Certain Business Practices. The Company, has not,
directly or indirectly within the past five years, given or
agreed to give any gift or similar benefit to any customer,
supplier, government employee or other person who is or may be
in a position to help or hinder the business of the Company
(or to assist the Company with any actual or proposed
transaction) which might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
the Company.
(y) Insurance. The Company and its Subsidiaries maintain insurance
coverage with reputable insurers in such amounts and covering
such risks as the Company reasonably believes is in accordance
with normal industry practice for companies engaged in
businesses similar to that of the Company and its Subsidiaries
(taking into account the cost and availability of such
insurance, and the Company's ability to self-insure).
SCHEDULE 3.2
REPRESENTATIONS AND WARRANTIES OF ACQUISITIONCO
(a) Organization. Acquisitionco has been duly incorporated or
formed under all applicable Laws, is validly existing and has
all necessary corporate power, authority and capacity to own
its property and assets and to conduct its businesses as
currently owned and conducted. Acquisitionco was incorporated
for the purpose of acquiring the Company Shares pursuant to
the Transaction and has carried on no other business. As of
the Effective Date a majority of the board of directors of
Acquisitionco will have been nominated by an investment
vehicle formed at the direction of Kohlberg Kravis Xxxxxxx &
Co., L.P.
(b) Authority and No Violation.
(i) Acquisitionco has the necessary corporate power,
authority and capacity to enter into this Agreement
and to perform its obligations under this Agreement.
The execution and delivery of this Agreement by
Acquisitionco and the consummation by Acquisitionco
of the Transaction have been duly authorized by its
board of directors and no other corporate proceedings
on part of Acquisitionco are necessary to authorize
this Agreement or the Transaction.
(ii) This Agreement has been duly executed and delivered
by Acquisitionco and constitutes a legal, valid and
binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy,
insolvency and other applicable Laws affecting
creditors' rights generally, and to general
principles of equity.
(iii) The authorization of this Agreement, the execution
and delivery by Acquisitionco of this Agreement, the
performance by it of its obligations under this
Agreement and the completion of the Transaction will
not in respect of Acquisitionco:
(A) result (with or without notice or the
passage of time) in a violation or breach
of, constitute a default under, require any
consent to be obtained under or give rise to
any third party right of termination,
cancellation, acceleration, penalty or
payment obligation or right of purchase or
sale under, any provision of:
(I) its certificate of incorporation,
articles, by-laws or other charter
documents;
(II) any Laws (subject to obtaining the
Regulatory Approvals); or
(III) any material Contract, license,
permit or government grant to which
Acquisitionco is party or by which
it is bound or subject or is the
beneficiary;
-2-
(B) give rise to any right of termination or
acceleration of indebtedness of
Acquisitionco, or cause any such
indebtedness to come due before its stated
maturity or cause any available credit of
Acquisitionco to cease to be available;
(C) result in the imposition of any encumbrance,
charge or lien upon any of its assets; or
(D) restrict, hinder, impair or limit the
ability of Acquisitionco to carry on the
business of Acquisitionco as and where it is
now being carried on.
No consent, approval, order or authorization of, or
declaration or filing with, any Governmental
Authority is required to be obtained by Acquisitionco
in connection with the execution and delivery of this
Agreement or the consummation by Acquisitionco of the
Transaction other than (A) the Regulatory Approvals;
and (B) filings under the Securities Act, stock
exchange rules or similar laws as contemplated by
this Agreement.
(c) Financing. On December 22, 2004 and February 17, 2005,
Acquisitionco delivered to the Company a true and correct copy
of the Debt Commitment Letter and Equity Commitment Letter,
respectively.
SCHEDULE 5.2
SENIOR EXECUTIVES
AMOUNT INVESTED
---------------
7. Xxxxxx X. Xxxxxx - President and Chief Executive Officer US$7.5 million
8. Xxxx X. Xxxxxx - Executive Vice President, Strategic Development US$4.0 million
9. Xxxxx X. Xxxxxxxx - Executive Vice President and Group Chief Operating US$4.0 million
Officer
10. Xxxxxxxx X. Xxxxx - Executive Vice President and Group Chief Operating US$4.0 million
Officer
