EXHIBIT (d)(1)
SUPPORT AGREEMENT
BETWEEN
BLACKFRIARS CORP.
AND
2022841 ONTARIO INC.
AND
EMCO LIMITED
DATED AS OF FEBRUARY 19, 2003
TABLE OF CONTENTS
TABLE OF CONTENTS
ARTICLE 1 - THE OFFER.................................................... 1
1.1 Interpretation...................................................... 1
1.2 The Offer........................................................... 3
1.3 Mailing the Offer................................................... 3
1.4 SEC Filings......................................................... 3
1.5 Expiry of the Offer................................................. 4
1.6 Modification of the Offer........................................... 4
1.7 Approval of the Offer............................................... 4
1.8 Directors' Circular................................................. 4
1.9 Shareholder Lists................................................... 5
1.10 Directors........................................................... 5
1.11 Subsequent Acquisition Transaction.................................. 5
1.12 OSC Rule 61-501 Order............................................... 6
1.13 Guarantee........................................................... 6
ARTICLE 2 - Representations and warranties............................... 6
2.1 Representations and Warranties....................................... 6
ARTICLE 3 - COVENANTS RELATING TO CONDUCT OF BUSINESS ................... 6
3.1 Conduct of Business by the Company.................................. 6
3.2 No Solicitation..................................................... 9
3.3 Existing Take-over Proposals; Third Party Standstill Agreements ....11
ARTICLE 4 - ADDITIONAL AGREEMENTS........................................11
4.1 Access to Information...............................................11
4.2 Indemnification; Directors and Officers Insurance...................12
4.3 Notification of Certain Matters.....................................12
4.4 Fees................................................................13
4.5 Company Stock Options...............................................13
4.6 Reasonable Commercial Efforts.......................................13
4.7 Public Announcements................................................14
4.8 Take Up and Payment.................................................14
4.9 Employment Contracts and Benefit Plans..............................14
4.10 Transfer Agent......................................................14
ARTICLE 5 - CONDITIONS PRECEDENT TO THE OFFER ...........................15
5.1 Conditions to Bidco's Obligation to Make the Offer..................15
5.2 Conditions to Bidco's Obligation to Complete the Offer..............15
ARTICLE 6 - TERMINATION, AMENDMENT AND WAIVER............................18
6.1 Termination.........................................................18
6.2 Effect of Termination...............................................19
6.3 Amendment...........................................................19
6.4 Waiver..............................................................19
ARTICLE 7 - GENERAL PROVISIONS ..........................................19
7.1 Notices.............................................................20
7.2 Counterparts........................................................20
7.3 Currency............................................................21
7.4 Time of the Essence.................................................21
7.5 Entire Agreement; No Third-Party Beneficiaries......................21
7.6 Governing Law.......................................................21
7.7 Assignment..........................................................21
7.8 Severability........................................................21
7.9 Enforcement of this Agreement.......................................21
SCHEDULE "A"............................................................. 1
Part 1 - Representations and Warranties of Parent and Bidco ............. 1
1.1 Organization.................................................. 1
1.2 Authority..................................................... 1
1.3 No Violation.................................................. 1
1.4 Financing the Offer........................................... 2
1.5 Litigation, etc .............................................. 2
Part 2 - Representations and Warranties of the Company .................. 2
2.1 Organization.................................................. 2
2.2 Capitalization................................................ 2
2.3 Authority .................................................... 3
2.4 No Violation.................................................. 3
2.5 Absence of Changes............................................ 4
2.6 No Material Misrepresentation................................. 4
2.7 Financial Statements.......................................... 4
2.8 Litigation, etc............................................... 4
2.9 Tax Matters................................................... 5
2.10 Pension and Termination Benefits.............................. 6
2.11 Fairness Opinion.............................................. 6
2.12 Severance and Employment Agreements........................... 6
2.13 Compliance with Laws.......................................... 6
2.14 Insurance..................................................... 7
2.15 Directors and Officers Insurance.............................. 7
2.17 TD Fee........................................................ 7
2.18 Foreign Private Issuer........................................ 7
SUPPORT AGREEMENT
-----------------
THIS AGREEMENT is made as of February 19, 2003
BETWEEN:
BLACKFRIARS CORP., a corporation existing under the laws of
Delaware ("PARENT"),
-and-
2022841 ONTARIO INC., a corporation existing under the laws
of Ontario, a wholly owned subsidiary of Parent ("BIDCO"),
-and-
EMCO LIMITED, a company existing under the laws of Ontario
(the "Company"),
WHEREAS Parent, through Bidco, proposes to make an offer (the "OFFER")
to purchase all of the common shares of the Company (the "COMMON SHARES") at a
price of $16.60 per Common Share in cash;
AND WHEREAS the Offer is the result of a comprehensive process of
reviewing strategic alternatives conducted by an independent committee of the
Company's board of directors, with the assistance of professional financial and
legal advisors;
AND WHEREAS the Board of Directors of the Company has determined,
after receiving legal, financial and other advice, that it would be in the best
interests of the Company to support the Offer and to recommend acceptance of the
Offer to the Shareholders;
AND WHEREAS in order to induce Parent and Bidco to enter into this
Agreement, concurrently herewith Masco Corporation has agreed to enter into a
Lock-up Agreement dated as of the date hereof (the "LOCK-UP AGREEMENT") in the
form of the attached Schedule "B" pursuant to which Masco Corporation has
agreed, subject to the terms and conditions of such agreement, to deposit
6,621,334 Common Shares in acceptance of the Offer;
NOW, THEREFORE, in consideration of the covenants, representations and
warranties herein contained, the parties agree as follows:
ARTICLE 1 - THE OFFER
---------------------
1.1 INTERPRETATION
--------------
(1) When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
(2) "EXCHANGE ACT" means the United States Securities Exchange Act of 1934,
as amended.
(3) "SUBSIDIARY" means any corporation, partnership, limited liability
company, joint venture or other legal entity of which Parent or the Company, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
limited liability company, joint venture or other legal entity.
(4) "KNOWLEDGE OF THE COMPANY" means the actual knowledge of the directors
and officers of the Company after having made reasonable enquiry.
(5) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when used
with respect to the Company, Parent or Bidco, as the case may be, any change or
effect that is or could reasonably be expected to be materially adverse to the
business, operations, assets, liabilities, employee relationships, customer or
supplier relationships, earnings or results of
operations, business conditions or prospects (financial or otherwise), of the
Company and its Subsidiaries, or Parent and its Subsidiaries, taken as a whole,
as the case may be.
(6) "PERSON" means an individual, partnership, association, body corporate,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, trustee, executor, administrator, or other legal
representative.
(7) "OPTIONS" means all currently outstanding options to purchase Common
Shares under the Company's 1991 Long-Term Incentive Plan, or other compensation
arrangements.
(8) "SEC" means the United States Securities and Exchange Commission.
(9) "SHAREHOLDERS" means, collectively, all holders of Common Shares.
(10) A calculation made on a "FULLY-DILUTED BASIS" means a calculation made
on a fully-diluted basis after excluding therefrom all impact of converting the
Company's 6-1/2% convertible unsecured subordinated debentures.
(11) "CONFIDENTIALITY AGREEMENT" means the confidentiality agreement dated
as of September 25, 2002 between an affiliate of Parent and the Company.
(12) "DISCLOSURE LETTER" means the disclosure letter dated the date of this
Agreement from the Company to Parent and Bidco.
(13) "$" means the lawful currency of Canada.
1.2 THE OFFER
---------
Subject to the terms and conditions set forth below, Parent shall cause
Bidco to make the Offer to purchase all of the issued and outstanding Common
Shares, including all Common Shares issued on the exercise of outstanding
Options, at a price of $16.60 per Common Share in cash in accordance with all
applicable securities legislation, including the Exchange Act. The term "OFFER"
shall include any amendments to the Offer made in accordance with the terms of
this Agreement, including removing or waiving any condition or extending the
period during which Common Shares may be deposited. The Offer shall be subject
to there being validly deposited under the Offer and not withdrawn at the expiry
thereof such number of Common Shares which constitutes at least 66-2/3% of the
Common Shares outstanding (on a Fully-Diluted Basis) (the "MINIMUM TENDER
CONDITION") and shall be subject to the other conditions set forth in Article 5.
If the Company has declared, set aside or paid any dividend on, or made any
other actual, constructive or deemed distribution in respect of, any of its
Common Shares, or otherwise made any payments to its shareholders in their
capacity as such, Bidco may reduce the amount of the Offer price per Common
Share by any amount they determine in their sole discretion, provided that such
amount shall not exceed the amount of such dividend or distribution received per
Common Share.
1.3 MAILING THE OFFER
-----------------
Subject to Section 5.1, Bidco shall mail the Offer and accompanying
take-over bid circular (collectively, the "TAKE-OVER BID CIRCULAR") in
accordance with applicable law to all registered Shareholders as soon as
reasonably practicable and, in any event, not later than 11:59
p.m. (Toronto time) on March 14, 2003 (such time on such date being referred to
herein as the "LATEST MAILING TIME"); provided, however, that if the mailing of
the Offer is delayed by reason of an injunction or order made by a court or
regulatory authority of competent jurisdiction, then, provided that such
injunction or order is being contested or appealed, then the Latest Mailing Time
shall be extended to the earlier of 11:59 p.m. (Toronto time) on April 7, 2003
and 11:59 p.m. (Toronto time) on the fifth business day following the date on
which such injunction or order ceases to be in effect. The Company and its
counsel shall be given an opportunity to review and comment upon the Take-over
Bid Circular prior to mailing, recognizing that whether or not such comments are
appropriate will be determined by Bidco, acting reasonably.
1.4 SEC FILINGS
-----------
As soon as practicable on the date of commencement of the Offer, Parent
and Bidco shall file or cause to be filed with the SEC a Tender Offer Statement
on Schedule TO (together with any supplements or amendments thereto, the
"SCHEDULE TO") with respect to the Offer which shall contain (as an exhibit) or
shall incorporate by reference the Take-over Bid Circular and related letter of
transmittal, as well as other ancillary Offer documents and instruments.
1.5 EXPIRY OF THE OFFER
-------------------
The Offer shall expire not earlier than 5:00 p.m. (Toronto time) on the
36th day after the date that the Offer is first commenced within the meaning of
the Securities Act (Ontario), subject to the right of Bidco to extend the period
during which Common Shares may be deposited under the Offer (the "EXPIRY TIME").
1.6 MODIFICATION OF THE OFFER
-------------------------
It is understood and agreed that Bidco shall not, without the prior
consent of the Company, amend the terms of the Offer other than to increase the
consideration per Common Share payable under the Offer, to extend the expiry of
the Offer or to waive any conditions of the Offer.
1.7 APPROVAL OF THE OFFER
---------------------
The Company represents and warrants to and in favour of Bidco and
Parent and acknowledges that Bidco and Parent are relying upon such
representations and warranties in entering into this Agreement, that, as of the
date hereof, the Board of Directors of the Company, following consultation with
its financial and legal advisors, has determined unanimously that the Offer is
fair to the Shareholders and that it is in the best interests of the Company and
the Shareholders for this Agreement to be entered into, the Offer to be made and
the Board of Directors of the Company to support the making of the Offer and,
accordingly, has approved the entering into of this Agreement and the making of
a recommendation that Shareholders accept the Offer. After reasonable enquiry,
the Board of Directors has been advised and believes that each of the directors
of the Company intends to tender under the Offer all Common Shares of which he
is the beneficial owner.
1.8 DIRECTORS' CIRCULAR
-------------------
(1) The Company covenants to cooperate with Bidco and Parent and to
take all reasonable action to support the Offer and to provide to Bidco and
Parent on a confidential basis, a draft copy of any directors' circular (each, a
"DIRECTORS' CIRCULAR") to be issued in respect of the Offer, prior to the
mailing thereof, and to provide Bidco and Parent with a reasonable opportunity
to review and provide comments thereon, recognizing that whether or not such
comments are appropriate will be determined by the Company, acting reasonably.
The Directors' Circular will reflect the determinations referred to in Section
1.7 and the Company will mail the Directors' Circular concurrently with the
mailing by Bidco of the Take-over Bid Circular to the Shareholders.
(2) The Company shall file with the SEC, contemporaneously with the filing
by Parent and Bidco of the Schedule TO, a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with any supplements or amendments thereto, the
"SCHEDULE 14D-9") containing the recommendation of the Board of Directors of the
Company in favour of the Offer and the approval of this Agreement.
1.9 SHAREHOLDER LISTS
-----------------
(1) The Company shall cause its transfer agent to provide Bidco, within
three business days of the execution and delivery of this Agreement, with a list
of the registered holders of Common Shares and a list of participants in
book-based nominee registrants such as CDS & Co. and CEDE & Co. who hold Common
Shares, together with their addresses and respective holdings of Common Shares.
The Company shall concurrently provide Bidco with the names, addresses and
holdings of all persons having rights to acquire Common Shares and the details
of such rights. The Company shall from time to time furnish Bidco with such
additional information, including updated or additional lists of Shareholders,
mailing labels and lists of securities positions and other assistance as Bidco
may reasonably request in order to be able to communicate the Offer to the
Shareholders and to such other persons as are entitled to receive the Offer
under applicable law.
(2) The Company will make such enquiries as counsel shall advise are
necessary to determine to the extent feasible the number of Shareholders in the
United States in order to confirm the availability of exemptions for the Offer
from U.S. laws respecting tender offers.
1.10 DIRECTORS
---------
The Company agrees and represents that its Board of Directors has
determined unanimously to use its and their respective reasonable efforts to
enable Bidco to elect or appoint all of the directors of the Company as soon as
possible after Bidco takes up and pays for in excess of 66-2/3% of the Common
Shares (on a Fully-Diluted Basis) pursuant to the Offer. If Bidco takes up and
pays for such number of Common Shares as represents at least a majority of the
outstanding Common Shares (on a Fully-Diluted Basis) but less than 66-2/3% (on a
Fully-Diluted Basis), the Company acknowledges that Bidco shall be entitled to
designate such number of members of the Board of Directors, and any committees
thereof, as is proportionate to the percentage of the outstanding Common Shares
owned by Bidco and the Company shall cooperate with Bidco, subject to applicable
law, to enable Bidco's designees to be elected or appointed to the Board of
Directors and to constitute a majority of the Board of Directors, including at
the request of Bidco, by its reasonable efforts to expand the Board of Directors
and/or secure the resignations of such number of directors as is necessary to
enable Bidco's designees to be elected or appointed to the Board of Directors.
1.11 SUBSEQUENT ACQUISITION TRANSACTION
----------------------------------
If, within 120 days after the date of the Offer, the Offer has been
accepted by holders of not less than 90% of the outstanding Common Shares, Bidco
shall use its reasonable best efforts, to the extent permitted by applicable
law, to acquire the remainder of the Common Shares from those Shareholders who
have not accepted the Offer pursuant to Section 188 of the Business Corporations
Act (Ontario) (the "OBCA") at the same price as in the Offer. If that statutory
right of acquisition is not available, Bidco may pursue other means of acquiring
the remaining Common Shares not tendered to the Offer. In the event Bidco takes
up and pays for Common Shares under the Offer representing at least 66-2/3% of
the Common Shares (on a Fully-Diluted Basis), the Company agrees to cooperate
with Bidco and to use its reasonable best efforts to enable Bidco to acquire the
remaining Common Shares by way of amalgamation,statutory arrangement, capital
reorganization or other transaction involving the Company and Bidco or an
Affiliate (as defined in the Securities Act (Ontario)) of Bidco (a "Subsequent
Acquisition Transaction"), provided that the consideration offered in connection
with the Subsequent Acquisition Transaction is at least equivalent in value to
the consideration offered under the Offer.
1.12 OSC RULE 61-501 ORDER
---------------------
The Company acknowledges that Parent and/or its affiliates may, if
determined necessary or desirable in their sole discretion, apply for an order
under section 4.8(1)1 or section 9.1 of Rule 61-501 of the Ontario Securities
Commission (and equivalent provisions in other jurisdictions) to confirm that,
as contemplated in section 2.3(2) of Policy 61-501CP of the Ontario Securities
Commission, Masco Corporation is not, by virtue of entering into the Lock-up
Agreement, acting jointly or in concert with Parent or its affiliates and thus
will be able to be counted as part of the minority for the purposes of any
second step going private transaction, and for greater certainty, the Company
will support such efforts in such application or before the Court and elsewhere
in the event that it is challenged.
1.13 GUARANTEE
---------
Parent hereby irrevocably and unconditionally guarantees the timely
performance by Bidco of all its obligations under this Agreement, including the
making of the Offer and the taking up and paying for of the Common Shares
properly deposited thereunder, subject to the terms and conditions of this
Agreement.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
------------------------------------------
2.1 REPRESENTATIONS AND WARRANTIES
------------------------------
Certain representations and warranties from Parent and Bidco to the
Company and from the Company to Parent and Bidco are set out in Schedule "A".
The representations and warranties in this Agreement (including those set out in
Schedule "A") shall terminate at the Effective Time.
ARTICLE 3 - COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------------------
3.1 CONDUCT OF BUSINESS BY THE COMPANY
----------------------------------
Except as expressly permitted by clauses (a) through (s) of this
Section 3.1, during the period from the date of this Agreement to the earlier of
the time (the "EFFECTIVE TIME") of the appointment or election to the Board of
Directors of the Company of persons designated by Bidco who represent a majority
of the directors of the Company and the termination of this Agreement in
accordance with its terms, the Company shall, and shall cause each of its
Subsidiaries to, in all material respects carry on its and their businesses in
the ordinary course of its and their businesses as currently conducted and, to
the extent consistent therewith, use reasonable commercial efforts to preserve
intact its and their current business organizations, keep available the services
of its and their current officers and employees and preserve its and their
relationships with customers, suppliers and others having business dealings with
it and them to the end that its and their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement or
in the Disclosure Letter, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(a) (A) split, combine or reclassify any of its or their shares or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for its or their shares or (B) purchase, redeem
or otherwise acquire, or offer to purchase, redeem or otherwise
acquire, any shares of the Company or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities, in each case, other than intercompany transactions
involving the Company and its Subsidiaries and other than purchases of
Common Shares pursuant to the Company's Employee Stock Purchase Plan;
(b) issue, deliver, sell, pledge, dispose of, or otherwise encumber, any of
its or their shares, any other voting securities or equity equivalent
or any securities convertible into, or any rights, warrants or options
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than the issuance of Common Shares upon
the exercise of Options outstanding on the date of this Agreement or
upon the conversion of 6-1/2% convertible unsecured subordinated
debentures;
(c) amend its or their certificate of incorporation, articles,
by-laws or other charter documents;
(d) acquire or agree to acquire by merging, amalgamating or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any person or other
business organization or division thereof or otherwise acquire or agree
to acquire any assets, other than acquisitions of inventory or fixed
assets in the ordinary course of business consistent with past
practice, including capital expenditures previously authorized in the
Company's most recent budget as disclosed in the Company's data room;
(e) pledge, encumber, sell, lease or otherwise dispose of, or agree to
pledge, encumber, sell, lease or otherwise dispose of, any of its or
their assets, other than in the ordinary course of business consistent
with past practice;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than indebtedness,
guarantees, loans, advances, capital contributions and investments (i)
between the Company and any of its wholly-owned Subsidiaries in the
ordinary course of business consistent with past practice and (ii)
other than borrowings under the Company's existing revolving credit
facilities or master lease arrangements in the ordinary course of
business consistent with past practice;
(g) alter (through merger, liquidation, reorganization, restructuring or in
any other fashion) the corporate structure or ownership of the Company
or any of its Subsidiaries;
(h) enter into or amend any material written employment, consulting or
severance agreement with any management level employee or any
consultant or the equivalent or any compensation agreement, benefit
plan, retention plan, severance plan or bonus plan or grant any
bonuses, salary increases, pension benefits, retirement allowances,
retention, severance or termination pay to any management level
employee or any consultant other than pursuant to and in accordance
with written agreements in effect on the date hereof;
(i) violate or fail to perform any material obligation or duty imposed
upon it or any of its Subsidiaries by any applicable law;
(j) make any change to accounting policies or procedures (other than
changes required to be made by Canadian generally accepted accounting
principles);
(k) prepare or file any Returns inconsistent with past practice or, on any
such Returns, take any position, make any election, or adopt any method
that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Returns in prior periods;
(l) make or rescind any express or deemed Tax election related to Taxes or
change any of its or their methods of reporting income or deductions
for Tax purposes or make a request for a Tax ruling or enter into any
agreement with any taxing authority;
(m) commence any litigation or proceeding or settle or compromise any
litigation except in the ordinary course of business consistent with
past practice and except for any settlement or compromise having an
aggregate cost to the Company of not more than $500,000;
(n) enter into or amend any agreement or contract material to the Company
and its Subsidiaries, taken as a whole, other than in the ordinary
course of business consistent with past practice (and other than as
contemplated by this Agreement) or purchase any real property;
(o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the December 31,
2002 audited financial statements (or the notes thereto) of the
Company and its Subsidiaries or incurred in the ordinary course of
business consistent with past practice or arising under applicable
law;
(p) directly or indirectly (i) reduce the stated capital of the Company or
any of its Subsidiaries, or (ii) reorganize, merge, amalgamate or
consolidate the Company or any of its Subsidiaries with any person;
(q) allow its current insurance (or re-insurance) policies to be cancelled
or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such cancellation, termination 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;
(r) in the case of employees who are not management level employees, take
any action other than in the ordinary course of business consistent
with past practice, with respect to entering into or amending any
employment, severance, collective bargaining, benefit or similar
agreements, policies or arrangements or with respect to the grant of
any bonuses, salary increases, pension benefits, retirement allowances,
deferred compensation, retention, severance or termination pay or any
other form of compensation or profit sharing or with respect to any
increase of benefits otherwise payable; or
(s) authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
3.2 NO SOLICITATION
---------------
(1) Except with the prior written consent of Parent, the Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any officer, director or employee of or any financial advisor, attorney or other
advisor or representative or agent of, the Company or any of its Subsidiaries
to, (i) solicit, initiate or encourage inquiries or the submission of any
Take-over Proposal (as hereafter defined), (ii) enter into any agreement with
respect to or approve or recommend any Take-over Proposal or (iii) participate
in any negotiations regarding, or furnish to any person any information with
respect to the Company or any of its Subsidiaries in connection with the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Take-over Proposal; provided, however, that nothing contained in this Section
3.2 shall prohibit the Company, its directors or its professional advisors from
referring a third party to this Section 3.2 or making a copy of this Section 3.2
available to any third party; and, provided, further, that if the Board of
Directors of the Company reasonably determines (after consultation with its
financial advisors) that an unsolicited bona fide written Take-over Proposal
constitutes a Superior Proposal (as defined below), then, to the extent required
by the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by a
majority thereof after receiving a written opinion of its outside counsel, or
advice of its outside counsel that is reflected in the minutes of the meeting of
the Board of Directors of the Company, to such effect, the Company may, in
response to an unsolicited request therefor, (i) furnish information with
respect to the Company and its Subsidiaries to any person pursuant to a
customary confidentiality agreement (as determined by the Company's counsel)
and, (ii) negotiate with the third party and enter into an agreement with
respect to a Superior Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any officer or director of the Company or any of its Subsidiaries or any
financial advisor, attorney or other advisor or representative of the Company or
any of its Subsidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its Subsidiaries or otherwise, shall be deemed
to be a breach of this Section 3.2(1) by the Company.
(2) For purposes of this Agreement, "TAKE-OVER PROPOSAL" means any proposal
or offer from any other person, or other business organization whatsoever
(including any of the Company's officers or directors) relating to any
recapitalization, merger, amalgamation, acquisition, arrangement or other
business combination involving the Company or any of its Subsidiaries or any
proposal or offer from any such person to acquire in any manner, directly or
indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement, and "SUPERIOR PROPOSAL" means a
Take-over Proposal on terms which a majority of the members of the Board of
Directors of the Company determines, at a duly constituted meeting of the Board
of Directors or by unanimous written consent, in its reasonable good faith
judgment to be more favourable to the Shareholders than the Offer (after
consultation with the Company's financial, legal and other advisors) and for
which financing, to the extent required, is then committed or which, in the
reasonable good faith judgment of a majority of such members, as expressed in a
resolution adopted at a duly constituted meeting of such members (after
consultation with the Company's financial, legal and other advisors), is
reasonably capable of being obtained by such third party.
(3) The Company shall advise Parent orally and in writing of (i) any
Take-over Proposal or any inquiry with respect to or which could lead to any
Take-over Proposal received by any officer or director of the Company or, to the
Knowledge of the Company, any financial advisor, attorney or other advisor or
representative or agent of the Company on or after the date hereof, (ii) the
material terms of such Take-over Proposal (including a copy of any written
proposal), and (iii) the identity of the person making any such Take-over
Proposal or inquiry no later than 24 hours following receipt of such Take-over
Proposal or inquiry. If the Company intends to furnish any person with any
information with respect to any Take-over Proposal in accordance with Section
3.2(1), the Company shall advise Parent orally and in writing of such intention
and shall provide the Parent with a copy of all such information not less than
one business day in advance of providing any such information to such person.
The Company will not, except in the usual and ordinary course of business and
pursuant to Section 3.2(1) in the case of a Superior Proposal, provide any
information about the Company or its Subsidiaries to any third party, including
any party making a Take-over Proposal. The Company will keep Parent fully
informed of the status and details of any such Take-over Proposal or inquiry.
(4) The Company covenants and agrees that it will not enter into any
agreement (a "PROPOSED AGREEMENT"), other than a confidentiality agreement as
contemplated by Section 3.2(1), with any third party providing for or to
facilitate any Take-over Proposal that, pursuant to Section 3.2(1), the Board of
Directors reasonably determines constitutes a Superior Proposal
unless the Company shall have provided Parent and Bidco with a copy of any
Proposed Agreement not less than three business days prior to its proposed
execution by the Company, together with a written notice from the Board of
Directors of the Company regarding the value in financial terms that the Board
has in consultation with its financial advisors determined should be ascribed to
any non-cash consideration offered under the Proposed Agreement. During such
three business day period, the Company acknowledges and agrees that the Parent
and Bidco shall have the opportunity but not the obligation, to offer to amend
the terms of this Agreement in order to provide for financial terms at least
equivalent to those in the Proposed Agreement. The Board of Directors of the
Company shall review any offer by Parent and Bidco to amend the terms of this
Agreement to determine, acting in good faith and in accordance with its
fiduciary duties, whether Bidco's amended Offer would be at least as favourable
to the Shareholders as the Take-over Proposal provided for in the Proposed
Agreement. If the Board of Directors of the Company so determines, the Company
will enter into an amended agreement with Parent and Bidco reflecting the
amended Offer. If the Board of Directors of the Company continues to believe,
acting in good faith and in the proper discharge of its fiduciary duties and
after consultation with its financial, legal and other advisors, that the
Take-over Proposal provided for in the Proposed Agreement continues to be a
Superior Proposal with respect to the amended Offer, and therefore rejects the
amended Offer, the Company shall be entitled to enter into the Proposed
Agreement following payment to the Parent of all amounts payable pursuant to
Section 4.4. The Company acknowledges and agrees that each successive
modification of any Take-over Proposal shall constitute a new Take-over Proposal
for purposes of the requirement of this Section 3.2(4) and will initiate an
additional three business day notice period.
3.3 EXISTING TAKE-OVER PROPOSALS; THIRD PARTY STANDSTILL AGREEMENTS
---------------------------------------------------------------
(1) Except with the prior written consent of Parent, the Company shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any parties (other than Parent and Bidco) with respect to any
potential Take-over Proposal. The Company will immediately demand the return or
destruction of all confidential information provided at the date hereof to any
third parties in connection with any potential Take-over Proposal and will use
all reasonable efforts to ensure that such information is returned. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Parent or a Superior Proposal). During such
period, the Company agrees to enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreements, including obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof.
(2) The Company will ensure that the officers and directors of the Company
and its Subsidiaries and any investment bankers or other advisors or
representatives or agents retained by the Company are aware of the provisions of
these Sections 3.1, 3.2 and 3.3, and the Company will be responsible for any
breach of such sections by such bankers, advisors or representatives.
ARTICLE 4 - ADDITIONAL AGREEMENTS
---------------------------------
4.1 ACCESS TO INFORMATION
---------------------
Subject to currently existing contractual and legal restrictions
applicable to the Company or any of its Subsidiaries, the Company shall, and
shall cause each of its Subsidiaries to, afford to the accountants, counsel,
financial advisors and other representatives of Parent reasonable access to, and
permit them to make such inspections as they may reasonably require of, during
the period from the date of this Agreement through the Effective Time, all of
their respective properties, books, contracts, commitments and records
(including tax returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants, which the
Company shall use reasonable commercial efforts to obtain) and, during such
period, the Company shall, and shall cause each of its Subsidiaries to, (i)
furnish promptly to Parent a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal, provincial or other securities laws, (ii) furnish
promptly to Parent all other information concerning its business, properties and
personnel as Parent may reasonably request and (iii) promptly make available to
Parent all personnel of the Company and its Subsidiaries knowledgeable about
matters relevant to such inspections. No investigation pursuant to this Section
4.1 shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained by Parent or Bidco pursuant to this Section 4.1 shall be
kept confidential in accordance with the Confidentiality Agreement as if Parent
was a party thereto, and, for this purpose, Bidco shall be deemed to be bound by
all obligations of Parent under such Confidentiality Agreement as if it was a
party thereto in the place and in the stead of Parent.
4.2 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
-------------------------------------------------
(1) From and after the Effective Time, Parent shall cause the Company or
any successor to the Company to indemnify and hold harmless all past and present
officers and directors of the Company and of its Subsidiaries to the same extent
and in the same manner such persons are indemnified as of the date of this
Agreement by the Company and its Subsidiaries pursuant to their respective
governing laws and the articles, by-laws or other constating documents of the
Company and its Subsidiaries and existing indemnity agreements for acts or
omissions occurring at or prior to the Effective Time.
(2) Notwithstanding Section 3.1, the Company intends to purchase run-off
insurance, for such term as may be considered reasonable by it (but which in any
event shall not exceed six years from the Effective Time), for its past and
present directors and officers in respect of all matters relating to the period
when they were directors and/or officers.
(3) In the absence of the run-off insurance described in Section 4.2(2),
Parent shall cause the Company or any successor to the Company to provide, for
an aggregate period of not less than six years from the Effective Time, the
Company's current and former directors and officers an insurance and
indemnification policy that provides coverage for events occurring prior to the
Effective Time that is substantially similar to the Company's existing policy if
such a policy is available at a reasonable cost.
4.3 NOTIFICATION OF CERTAIN MATTERS
-------------------------------
Parent and Bidco shall use their reasonable best efforts to give prompt
notice to the Company, and the Company shall use its reasonable best efforts to
give prompt notice to Parent and Bidco, of: (i) the occurrence, or
non-occurrence, of any event which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement and made by it to be
untrue or inaccurate or (y) any covenant, condition or agreement
contained in this Agreement and made by it not to be complied with or satisfied,
(ii) any failure of Parent, Bidco or the Company, as the case may be, to comply
in a timely manner with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder or (iii) any change or event which
would be reasonably likely to have a Material Adverse Effect on Parent, Bidco or
the Company, as the case may be; provided, however, that the delivery of any
notice pursuant to this Section 4.3 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
4.4 FEES
----
Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated by the Company pursuant to Section 6.1(i) or, by
Parent pursuant to Section 6.1 (h) or (j), then the Company shall (without
prejudice to any other rights of Parent against the Company) pay to Parent $6
million in cash (the "TERMINATION FEE"), such payment to be made by the Company
concurrently with such termination if the termination is by the Company, or no
later than the second business day following such termination if the termination
is by Parent.
4.5 COMPANY STOCK OPTIONS
---------------------
On the date of this Agreement, the Board of Directors of the Company
shall pass a resolution accelerating the vesting of all Options. The Company
shall promptly notify the holders of Options of such resolution and shall permit
holders of Options to either (i) make a "cashless" exercise whereby they will
receive shares of the Company with a value equal to any in-the-money amount, or
(ii) be paid any in-the-money value of the Option in cash, in each case,
conditional upon Bidco taking up and paying for Common Shares under the Offer.
4.6 REASONABLE COMMERCIAL EFFORTS
-----------------------------
(1) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable commercial efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to make, in the most expeditious manner practicable, the
Offer and to consummate the other transactions contemplated by the Offer and
this Agreement, including: (i) the obtaining of all necessary actions or
non-actions, waivers, consents and approvals from any domestic (federal, state,
provincial or territorial), foreign or supranational court, commission,
governmental body, quasi-governmental entity, body or authority of any kind
whatsoever, regulatory agency, authority, stock exchange or tribunal
("GOVERNMENTAL ENTITY") and the making of all necessary registrations and
filings (including filings with Governmental Entities) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity (including those in
connection with the Competition Act (Canada)), (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by this Agreement. No party to this Agreement
shall consent to any voluntary delay of the making of the Offer or the taking up
and paying
for the Common Shares deposited under the Offer at the behest of any
Governmental Entity without the consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld.
(2) Each party shall use all reasonable commercial efforts not to take
any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
4.7 PUBLIC ANNOUNCEMENTS
--------------------
None of the parties will issue any press release with respect to the
transactions contemplated by this Agreement or otherwise issue any written
public statements with respect to such transactions without prior consultation
with the other parties, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Toronto Stock Exchange or
NASDAQ. Moreover, in any event, each party agrees to give prior notice to the
others of any public announcement relating to the Offer or the Lock-up Agreement
and agrees to consult with each other prior to issuing each such public
announcement. The Company agrees that, promptly after the entering into of this
Agreement, it shall issue a press release in the form attached as Schedule "B".
Nothwithstanding the foregoing, the Company agrees not to issue any press
release or other public disclosure with a description of Parent or Bidco without
the consent of Parent.
4.8 TAKE UP AND PAYMENT
-------------------
Subject to the terms and conditions hereof and of the Offer, Bidco
agrees to take up the Common Shares deposited under the Offer and pay for such
Common Shares in accordance with the Offer and applicable securities laws. Bidco
covenants that, in the event Bidco increases the consideration per Common Share
offered under the Offer, Bidco will pay such increased consideration to each
Shareholder in respect of all Common Shares tendered, notwithstanding that such
shares have previously been taken up and paid for by Bidco.
4.9 EMPLOYMENT CONTRACTS AND BENEFIT PLANS
--------------------------------------
Bidco and Parent shall permit the Company to honour and comply with the
terms of all existing employment and change of control contracts entered into by
the Company or any of its Subsidiaries and with the terms of all pension and
benefit plans to which the Company or any of its Subsidiaries is a party or by
which it is bound (other than stock option or similar plans).
4.10 TRANSFER AGENT
--------------
The Company consents to its transfer agent mailing the Take-over Bid
Circular to the Shareholders and to acting as depositary under the Offer.
ARTICLE 5 - CONDITIONS PRECEDENT TO THE OFFER
---------------------------------------------
5.1 CONDITIONS TO BIDCO'S OBLIGATION TO MAKE THE OFFER
--------------------------------------------------
The obligation of Bidco to make the Offer and mail the Take-over Bid
Circular is conditional upon the satisfaction of the following conditions at or
prior to the Latest Mailing Time, all of which conditions are included for the
sole benefit of Bidco and any or all of which may be waived by Bidco in whole or
in part in its sole discretion without prejudice to any other rights it may have
under this Agreement.
(a) No Termination. The obligations of Bidco and Parent hereunder
shall not have been terminated under Article 6.
(b) No Impossibility. No circumstance shall exist that would render it
unlikely, in the reasonable opinion of Bidco and Parent, for any
one or more of the conditions set out in Section 5.2 to be
satisfied.
(c) Lock-up Agreement. Masco Corporation shall have entered into the
Lock-up Agreement in a form satisfactory to Parent.
(d) Board of Directors Recommendation. The Board of Directors of the
Company shall have unanimously recommended that Shareholders accept the
Offer and shall not have withdrawn such recommendation or changed such
recommendation in a manner that has substantially the same effect as
the withdrawal thereof.
(e) No Prohibition. No cease trade order, injunction or other prohibition
at law shall exist against Bidco making the Offer or taking up or
paying for Common Shares deposited under the Offer.
(f) Directors' Circular. The Board of Directors of the Company shall have
prepared and approved in final form, for mailing by the Company on the
date the Takeover Bid Circular is mailed, the Directors' Circular,
which circular shall contain the recommendation that Shareholders
accept the Offer and a copy of the opinion from the Company's financial
advisor, TD Securities Inc., that, as of the date hereof, the Offer is
fair, from a financial point of view, to Shareholders.
5.2 CONDITIONS TO BIDCO'S OBLIGATION TO COMPLETE THE OFFER
------------------------------------------------------
Notwithstanding any other provisions of the Agreement, Bidco shall have
the right to withdraw or terminate the Offer and not take up and pay for any
Common Shares deposited under the Offer, unless all of the following conditions
are satisfied or waived by Bidco at or prior to the Expiry Time:
(a) Minimum Tender Condition. The Minimum Tender Condition shall have
been satisfied.
(b) Competition Act. Bidco and the Company shall each have filed all
notices and information required to be filed under Part IX of the
Competition Act, except if such requirement shall have been waived
pursuant to paragraph 113(c) of the Competition Act, and any
information Bidco elects to file with the Competition Commissioner in
its sole discretion under the Competition Act, including, without
limiting the foregoing, a competitive impact statement and (i) Bidco
shall have received an advance ruling certificate in accordance with
section 102 of the Competition Act from the Competition Commissioner in
connection with the transactions contemplated by this Agreement, or
(ii) the Competition Commissioner shall have confirmed, in writing,
that he has no
intention to file an application under Part VIII of the Competition
Act in connection with the transactions contemplated by this
Agreement.
(c) Investment Canada Act. Bidco shall have received evidence satisfactory
to it that any requisite approvals to the completion of the
transactions contemplated by this Agreement shall have been granted or
deemed to have been granted under the Investment Canada Act on terms
satisfactory to Bidco in its commercially reasonable discretion.
(d) Approvals. All other authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of
waiting periods imposed by a Governmental Entity (including any stock
exchange or other securities regulatory authority and including under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976) that are
necessary to make the Offer or to effect any of the transactions
contemplated hereby shall have been obtained, shall have been made or
shall have occurred, each on terms satisfactory to Bidco and Parent,
acting reasonably.
(e) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries,
shall have enacted, issued, promulgated, enforced or entered any law,
rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect
and has the effect of making the Offer or any of the transactions
contemplated hereby (including taking up and paying for any Common
Shares deposited under the Offer and completing any compulsory
acquisition or subsequent acquisition transaction) illegal.
(f) Performance of Obligations, Representations and Warranties. The Company
shall have performed each of its agreements contained in this Agreement
required to be performed on or prior to the Expiry Time (including, for
certainty, its obligations under Section 3.1) in all material respects,
each of the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on
and as of the Expiry Time as if made on and as of such time (other than
representations and warranties which address matters only as of a
certain date which shall be true and correct as of such certain date)
and Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer and its Chief Financial Officer
to such effect.
(g) Performance of Obligations by Masco Corporation. Masco Corporation
shall have performed each of its agreements contained in the
Lock-up Agreement required to be performed on or prior to the
Expiry Time.
(h) Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change with respect to the
Company.
(i) No Untrue Statement. Bidco shall not have become aware of any material
misstatement, untrue statement of a material fact, or an omission to
state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the
circumstances in which it was made and at the date it was made (after
giving effect to all subsequent filings in relation to all maters
covered in earlier filings) in any document filed by or on behalf of
the Company with any securities regulatory authority.
(j) No Withdrawal of Recommendation. The Board of Directors of the Company
shall not have withdrawn its recommendation that holders of Common
Shares accept the Offer or changed such recommendation in a manner that
has substantially the same effect.
(k) No Action. (A) No act, action, suit or proceeding shall have been taken
before or by any domestic or foreign court or other Governmental Entity
or by any elected or appointed public official or private person
(including, without limitation, any individual, corporation, firm,
group or other entity) in Canada or elsewhere, whether or not having
the force of law, and (B) no law, regulation or policy shall have been
proposed, enacted, promulgated or applied, in either case:
(i) to cease trade, enjoin, prohibit or impose material limitations or
conditions on the purchase by or the sale to Bidco of the Common
Shares or the right of Bidco to own or exercise full rights of
ownership of the Common Shares; or
(ii)which, if the Offer were consummated, could, in Bidco's judgment,
acting reasonably, materially adversely affect Bidco's ability to
effect a Subsequent Acquisition Transaction or have a Material
Adverse Change with respect to the Company.
The foregoing conditions are for the exclusive benefit of Bidco and
Bidco may waive any of the foregoing conditions in whole or in part at any time
and from time to time without prejudice to any other rights which Bidco may
have. The failure by Bidco at any time to exercise any of the foregoing rights
will not be deemed to be a waiver of any such right and each such right shall be
deemed to be an ongoing right which may be asserted at any time and from time to
time.
ARTICLE 6 - TERMINATION, AMENDMENT AND WAIVER
---------------------------------------------
6.1 TERMINATION
-----------
This Agreement may be terminated at any time prior to the Expiry Time:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party (in the case of
Parent, including Bidco) shall have failed to comply with any of its
covenants or agreements contained in this Agreement required to be
complied with prior to the date of such termination, which failure to
comply has not been cured within five business days following receipt
by such other party of written notice of such failure to comply;
(c) by either Parent or the Company if there has been a breach by the other
party (in the case of Parent, including any breach by Bidco) of any
representation or warranty which has the effect of making such
representation or warranty not true and correct in all material
respects and which breach has not been cured within five business days
following the breaching party becoming aware of such breach or the
receipt by the breaching party of written notice of the breach from the
other party;
(d) by the Company if the Take-over Bid Circular has not been mailed by the
Latest Mailing Time; provided, however, that the right to
terminate this Agreement pursuant to this Section 6.1 (d) shall not be
available if the Company has failed to fulfill any of its obligations
contained in this Agreement, or has been a cause of the failure of the
Take-over Bid Circular to have been mailed or the Offer to have been
completed on or prior to the aforesaid time and date, respectively;
(e) by either Company or the Parent if Bidco has not become legally
obligated to accept and take-up any Common Shares pursuant to the Offer
by May 15, 2003;
(f) by either Parent or the Company if any court or other Governmental
Entity having jurisdiction over a party hereto shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
(g) by Parent if any condition of making the Offer set out in Section 5.1
has not been satisfied or waived prior to the Latest Mailing Time or if
any condition of the Offer set out in Section 5.2 has not been
satisfied or waived prior to the Expiry Time;
(h) by Parent if (i) the Board of Directors of the Company qualifies,
modifies or withdraws its recommendation in favour of the Offer, (ii)
the Board of Directors of the Company recommends to the Shareholders
any Take-over Proposal other than the Offer or (iii) the Board of
Directors of the Company resolves to do anything referred to in (i) or
(ii) of this paragraph;
(i) by the Company if it proposes to enter into a merger, acquisition or
other agreement to effect a Superior Proposal; but only if Parent and
Bidco have not exercised their right to match the Superior Proposal as
set out in Section 3.2(4); or
(j) by Parent if any person or group of persons acting jointly or in
concert acquires 50% or more of the outstanding Common Shares.
The right of any party hereto to terminate this Agreement pursuant to
this Section 6.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
6.2 EFFECT OF TERMINATION
---------------------
(1) In the event of any termination of this Agreement by either Parent or
the Company in accordance with the provisions of Section 6.1, Bidco may
terminate or withdraw the Offer without any liability or obligation on its or
Parent's part under this Agreement; provided, however, that nothing contained in
this Section 6.2 shall relieve any party hereto from any liability for any
wilful breach of a representation or warranty contained in this Agreement or the
breach of any covenant contained in this Agreement
(2) Any termination of this Agreement pursuant to the sections referred to
in Section 4.4 shall not affect the obligation of the Company, if any, to pay
the Termination Fee set out in Section 4.4.
6.3 AMENDMENT
---------
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
6.4 WAIVER
------
At any time prior to the Expiry Time, the parties hereto may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained herein
which may legally be waived. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 7 - GENERAL PROVISIONS
------------------------------
7.1 Notices
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally, one day after being delivered
to an overnight courier or when telecopied (with a confirmatory copy sent by
overnight courier) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Parent or Bidco, to:
Blackfriars Corp.
000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxx Xxxxx, Treasurer and Assistant Secretary
Facsimile No.: (000) 000-0000
and to:
Stikeman Elliott LLP
0000 Xxxxxxxx Xxxxx Xxxx
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
If to the Company, to:
Emco Limited
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx
Vice President, General Counsel and Secretary
Facsimile: 000-000-0000
with a copy to:
XxXxxxxx Xxxxxxxx XXX
Xxxxx 0000, Xxxxxxx Xxxxxxxx Xxxx Xxxxx
Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx P.C. Gow
Facsimile: 000-000-0000
7.2 COUNTERPARTS
------------
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
7.3 CURRENCY
--------
All references to currency herein are to lawful money of Canada.
7.4 TIME OF THE ESSENCE
-------------------
Time is of the essence in this Agreement.
7.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
----------------------------------------------
This Agreement, together with the Confidentiality Agreement,
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement, except for the provisions of Sections 4.2
and 4.9, is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
7.6 GOVERNING LAW
-------------
This Agreement shall be governed by, and construed in accordance with,
the laws of the Province of Ontario and the laws of Canada applicable therein.
7.7 ASSIGNMENT
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
7.8 SEVERABILITY
------------
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
terms, conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
7.9 ENFORCEMENT OF THIS AGREEMENT
-----------------------------
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific wording or were otherwise breached. It is
accordingly agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof (but any such proceeding shall be brought
exclusively in the Superior Court of Ontario), such remedy being in addition to
any other remedy to which any party is entitled at law or in equity. Each party
hereto waives any right to a trial by jury in connection with any such action,
suit or proceeding and waives any objection based on forum non conveniens or any
other objection to venue thereof.
IN WITNESS WHEREOF, Parent, Bidco and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
BLACKFRIARS CORP.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
Title: Treasurer and Assistant
Secretary
2022841 ONTARIO INC.
By: /s/ Xxxxxxxxxxx Xxxxx
--------------------------
Name: Xxxxxxxxxxx Xxxxx
Title: Director
EMCO LIMITED
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman of the Board
By: /s/ D. Xxxxx Xxxxxxxx
--------------------------
Name: D. Xxxxx Xxxxxxxx
Title: Chairman of the Independent
Committee of the Board
SCHEDULE "A"
PART 1 - REPRESENTATIONS AND WARRANTIES OF PARENT AND BIDCO
Parent and Bidco hereby jointly and severally represent and warrant to
the Company as follows:
1.1 ORGANIZATION
------------
Each of Parent and Bidco has been duly incorporated or formed under
applicable law, is validly existing and has full corporate or legal power and
authority to own its properties and conduct its businesses as currently owned
and conducted.
1.2 AUTHORITY
---------
Parent and Bidco have the requisite corporate power and authority to
enter into this Agreement and to perform their respective obligations hereunder.
The execution and delivery of this Agreement by Parent and Bidco and the
consummation by Parent and Bidco of the transactions contemplated by this
Agreement have been duly authorized by the board of directors of Parent and
Bidco and no other corporate proceedings on the part of Parent or Bidco are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Bidco and
constitutes a valid and binding obligation of Parent and Bidco, enforceable
against Parent and Bidco in accordance with its terms subject to bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and other laws
relating to or affecting creditors' rights generally and to general principles
of equity.
1.3 NO VIOLATION
------------
Except as disclosed in writing to the Company prior to the date
hereof, the execution and delivery by Parent and Bidco of this Agreement and
performance by it of its obligations hereunder and (subject to satisfying the
conditions to the completion of the Offer specified in Section 5.2(b) of this
Agreement with respect to subparagraph (a)(ii) below) the completion of the
Offer and the transactions contemplated thereby, will not:
(a) result in a violation or breach of, require any consent to be obtained
under or give rise to any termination rights under any provision of:
(i) its certificate of incorporation, articles, by-laws or
other charter documents;
(ii) any law, regulation, order, judgment or decree; or
(iii) any material contract, agreement, license, franchise or
permit to which Parent or Bidco is bound or is subject or
is the beneficiary;
(b) give rise to any right of termination or acceleration of indebtedness,
or cause any indebtedness to come due before its stated maturity or
cause any available credit to cease to be available; or
(c) result in the imposition of any encumbrance, charge or lien upon any
of its material assets, or restrict, hinder, impair or limit the
ability of Parent or Bidco to carry on the business of Parent or Bidco
as and where it is now being carried on or as and where it may be
carried on in the future.
1.4 FINANCING THE OFFER
-------------------
As at the time the Offer is first commenced within the meaning of the
Securities Act (Ontario), Bidco shall have made all necessary arrangements to
ensure that the required funds are available to effect payments in full for all
of the Common Shares that Bidco shall have offered to acquire under the Offer.
1.5 LITIGATION, ETC.
----------------
Except as disclosed in writing to the Company prior to the date
hereof, there is no claim, action, proceeding or investigation pending or, to
the knowledge of Parent or Bidco, threatened against or relating to Parent or
Bidco that, if adversely determined, is likely to prevent or materially delay
consummation of the transactions contemplated by this Agreement or the Offer,
and Parent and Bidco are not aware of any basis for any such claim, action,
proceeding or investigation. Neither Parent or Bidco is subject to any
outstanding order, writ, injunction or decree that is likely to prevent or
materially delay consummation of the transactions contemplated by this Agreement
or the Offer.
PART 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Bidco as follows:
2.1 ORGANIZATION
------------
Each of the Company and each of its Subsidiaries has been duly
incorporated or formed under applicable law, is validly existing and has full
corporate or legal power and authority to own its properties and conduct its
businesses as currently owned and conducted. All of the outstanding shares and
other ownership interests of the Subsidiaries are validly issued, fully paid and
non-assessable and, except as disclosed in the Disclosure Letter, all such
shares and other ownership interests are owned directly or indirectly by the
Company free and clear of all liens, claims or encumbrances, other than for a
security interest in favour of the Company's lenders. Except as disclosed in the
Disclosure Letter, there are no outstanding options, rights, entitlements,
understandings or commitments (contingent or otherwise) regarding the right to
acquire any shares or other ownership interests in any of the Subsidiaries from
the Company or any of its Subsidiaries. The Disclosure Letter contains a list of
all subsidiaries of the Company and their respective jurisdictions of
incorporation.
2.2 CAPITALIZATION
--------------
The authorized capital of the Company consists of an unlimited number
of Common Shares and an unlimited number of preference shares, and 15,874,822
Common Shares and no preference shares have been validly issued and are
outstanding as fully paid and nonassessable. There is no contract, option or any
other right of another binding upon or which at any time in the future may
become binding upon the Company or any Subsidiary to allot or issue any of its
unissued shares or to create any additional class of shares, other than
1,613,660 Common Shares issuable upon exercise of the Options, Common Shares
issuable pursuant to the Company's Employee Share Purchase Plan and 3,498,734
Common Shares issuable upon the conversion, at a conversion price of $19.75, of
the Company's outstanding $69.1 million principal amount of 6 1/2% convertible
unsecured subordinated debentures.
2.3 AUTHORITY
---------
The Company has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other laws relating to or affecting creditors' rights generally and to general
principles of equity.
2.4 NO VIOLATION
------------
Except as disclosed in the Disclosure Letter, the execution and
delivery by the Company of this Agreement and performance by it of its
obligations hereunder and (subject to satisfying the conditions to the
completion of the Offer specified in Section 5.2(b) of this Agreement with
respect to subparagraph (a)(ii) below) the completion of the Offer and the
transactions contemplated thereby, will not:
(a) result in a violation or breach of, require any consent to be obtained
under or give rise to any termination rights, rights of first refusal
or rights of first offer under any provision of:
(i) its or any Subsidiary's certificate of incorporation, articles,
by-laws or other charter documents, including any unanimous
shareholder agreement or any other agreement or understanding
with any party holding an ownership interest in any Subsidiary;
(ii) any law, regulation, order, judgment or decree; or
(iii) any material contract, agreement, license, franchise or
permit to which the Company or any Subsidiary is bound or
is subject or is the beneficiary;
(b) give rise to any right of termination or acceleration of indebtedness,
or cause any indebtedness to come due before its stated maturity or
cause any available credit to cease to be available, other than the
outstanding 6.5% redeemable convertible debentures which may go into
default if the Company Shares cease to be listed on an exchange; or
(c) result in the imposition of any encumbrance, charge or lien upon any
of its material assets or the material assets of any Subsidiary, or
restrict, hinder, impair or limit the ability of the Company or any
Subsidiary to carry on the business of the Company or any Subsidiary
as and where it is now being carried on or as and where it may be
carried on in the future.
2.5 ABSENCE OF CHANGES.
------------------
Since December 31, 2002, and except as has been publicly disclosed (i)
the Company and the Subsidiaries have conducted their respective businesses only
in the ordinary course, (ii) no material liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise) material to the Company or
any Subsidiary has been
incurred, other than in the ordinary course of business, and (iii) there has not
been any Material Adverse Change in the Company.
2.6 NO MATERIAL MISREPRESENTATION.
------------------------------
The Company has filed all documents required to be filed by it under
the Securities Act (Ontario) or other applicable securities laws, including the
Exchange Act, and no such filings have been made on a confidential basis. As at
their respective dates, all documents filed by the Company under the Securities
Act (Ontario) or other applicable securities laws were in compliance in all
material respects with such applicable securities laws and did not contain any
material misstatement or any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
2.7 FINANCIAL STATEMENTS.
---------------------
The audited consolidated financial statements for the Company as at
and for each of the fiscal years ended on December 31, 2002, December 31, 2001
and December 31, 2000, including the notes thereto and the report by the
Company's auditors thereon, have been, and all financial statements of the
Company which are publicly disseminated by the Company in respect of any
subsequent periods will be, prepared in accordance with Canadian generally
accepted accounting principles applied on a basis consistent with prior periods
(other than to the extent the result of changes in such generally accepted
accounting principles disclosed in such financial statements) and present fairly
(or will present fairly), in all material respects, the consolidated financial
position and results of operations of the Company and its Subsidiaries, taken as
a whole, as of the respective dates thereof and for the respective periods
covered thereby.
2.8 LITIGATION, ETC.
----------------
Except as disclosed in the Disclosure Letter, there is no claim,
action, proceeding or investigation pending or, to the Knowledge of the Company,
threatened against or relating to the Company or any Subsidiary or affecting any
of their properties or assets before any court or governmental or regulatory
authority or body that, if adversely determined, is likely to have a Material
Adverse Change with respect to the Company, or prevent or materially delay
consummation of the transactions contemplated by this Agreement or the Offer,
and the Company is not aware of any basis for any such claim, action, proceeding
or investigation. Neither the Company nor any Subsidiary is subject to any
outstanding order, writ, injunction or decree that has had or may have a
Material Adverse Change with respect to the Company or prevent or materially
delay consummation of the transactions contemplated by this Agreement or the
Offer.
2.9 TAX MATTERS.
------------
(a) DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:
(i) The term "TAXES" shall mean all taxes, however
denominated, including any interest, penalties or other
additions that may become payable in respect thereof,
imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision
of any such government, which taxes shall include all
income or profits taxes (including federal income taxes
and provincial income taxes), payroll and employee
withholding taxes, unemployment insurance, social
insurance taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation and other
governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, which the
Company or any of its Subsidiaries is required to pay,
withhold or collect.
(ii) The term "RETURNS" shall mean all reports, estimates,
declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection
with, any Taxes.
(b) RETURNS FILED AND TAXES PAID. All Returns required to be filed by or
on behalf of the Company or any Subsidiaries have been duly filed on a
timely basis and such Returns are true, complete and correct in all
material respects. All Taxes shown to be payable on the Returns or on
subsequent assessments with respect thereto have been paid in full on
a timely basis, and no other Taxes are payable by the Company or any
material Subsidiaries with respect to items or periods covered by such
Returns.
(c) TAX RESERVES. The Company has paid or provided adequate accruals in
its financial statements for the year ended dated December 31, 2002
for Taxes, including income taxes and related deferred taxes, owing in
respect of the period ending on such date, in conformity with
generally accepted accounting principles applicable in Canada.
(d) TAX DEFICIENCIES; AUDITS; STATUTES OF LIMITATIONS. Except as disclosed
in the Disclosure Letter, no deficiencies exist, or have been asserted
and remain outstanding, with respect to Taxes of the Company or any
Subsidiary. Neither the Company nor any Subsidiary is a party to any
action or proceeding for assessment or collection of Taxes, nor has
any such action or proceeding been asserted or, to the Knowledge of
the Company, threatened against the Company or any Subsidiary or any
of their respective assets which remains outstanding. No waiver or
extension of any statute of limitations is in effect with respect to
Taxes or Returns of the Company or any Subsidiary. Except as has been
disclosed in the Disclosure Letter, no audit of the Returns of the
Company or any Subsidiary by a government or taxing authority is in
process, pending or, to the Knowledge of the Company, threatened.
2.10 PENSION AND TERMINATION BENEFITS.
---------------------------------
Other than as disclosed in the Disclosure Letter, the Company has
provided accruals adequate under Canadian generally accepted accounting
principles in its financial statements for the year ended December 31, 2002 (or
such amounts are fully funded) for all pension or other employee benefit
obligations of the Company to such date arising under or relating to each of the
pension or retirement income plans or other employee benefit plans or agreements
or policies maintained by or binding on the Company or any of its Subsidiaries
as well as for any other payment required to be made by the Company to such date
in connection with the termination of
employment or retirement of any employee of the Company or any Subsidiary.
Except as set out in the Disclosure Letter, all contributions or premiums
required to be made by the Company under the terms of the pension or retirement
income plans or other employee benefit plans or by applicable law have been made
and the Company does not have any contribution, premium, reimbursement or
funding liabilities in respect of such plans.
2.11 FAIRNESS OPINION.
-----------------
The Company has received an opinion from its financial advisors, TD
Securities Inc., that, as of the date hereof, the consideration received
pursuant to the Offer is fair, from a financial point of view, to Shareholders.
2.12 SEVERANCE AND EMPLOYMENT AGREEMENTS.
------------------------------------
Except as disclosed in the Disclosure Letter, neither the Company nor
any of its Subsidiaries has entered into any written agreement relating to
employment, compensation, severance, retention, change of control, termination
or the provision of other benefits, with any directors or senior management.
2.13 COMPLIANCE WITH LAWS.
---------------------
The Company and each of its Subsidiaries have conducted their
respective businesses in compliance, in all material respects, with all
applicable laws and regulations and the terms and conditions of all of their
respective licenses and the Company and each of its Subsidiaries is currently in
compliance, in all material respects, with all such laws, regulations and
licenses.
2.14 INSURANCE.
----------
Policies of insurance in force as of the date hereof naming the
Company or any of its Subsidiaries as an insured adequately cover all risks
reasonably and prudently foreseeable in the operation of the businesses of the
Company and its Subsidiaries.
2.15 DIRECTORS AND OFFICERS INSURANCE.
---------------------------------
There have been no claims within the past two years made by the
Company or any of its Subsidiaries or any of their respective officers or
directors under any directors or officers insurance policies obtained by the
Company or any of its Subsidiaries and the Company is not aware of any basis for
any such claims.
2.16 TD FEE.
-------
The fees and disbursements owing to TD Securities in connection with
its engagement to review strategic alternatives relating to Emco shall not
exceed $2 million.
2.17 FOREIGN PRIVATE ISSUER.
------------------------
The Company is a "foreign private issuer" within the meaning of Rule
3b-4(c) under the Exchange Act.
