<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 2, 1996.
THE RIVAL COMPANY
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-0794462
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Commission file number 0-20274
-------
800 E. 101st Terrace, Kansas City, MO 64131
------------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
(816) 943-4100
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
-----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed from last report)
<PAGE>
Item 2. ACQUISITION OF ASSETS
On April 2, 1996 the Company, through its indirect wholly-owned Canadian
Subsidiary, RC Acquisition Inc., (the "Offeror"), paid for and took up the
shares of Bionaire, Inc. ("Bionaire") which had been validly deposited under a
tender offer which was commenced on March 4, 1996. A total of 14,284,911 common
shares, representing 95% of the issued and outstanding common shares of Bionaire
were tendered. On April 2, 1996, the Offeror also deposited sufficient funds
with the stock transfer agent, Montreal Trust Company to acquire the balance of
the issued and outstanding shares of Bionaire and circulated a Compulsory
Acquisition Notice Pursuant to the Provisions of Section 206 of The Canada
Business Corporations Act to the remaining shareholders.
Bionaire, which is headquartered in Lachine, Quebec develops, manufactures and
markets products designed to improve the environment and air quality in homes
and offices, including air purifiers, humidifiers and related accessories such
as replacement filters. Bionaire has annual sales of approximately $57 million.
Approximately 60% of its products are sold in the U.S., 25% are sold in Canada
and the balance is sold elsewhere, primarily in Europe. The Company intends to
continue to use the assets of Bionaire for the manufacture and distribution of
air cleaners, humidifiers and related accessories.
The Company paid CDN $2.25 per share for the Common Stock of Bionaire (U.S.
$24,993,000 in the aggregate). The source of the funds used by the Company to
effect the acquisition was borrowings under its $75 Million Revolving Credit
Agreement together with a $15 Million bridge loan through NationsBank of Texas,
N.A. The Company has commitments under an unsecured Note Purchase Agreement for
the issuance of $50 Million in notes with a ten year average life. It is
anticipated that these securities will be issued in April and the proceeds will
be used, in part, to retire the bridge loan.
The acquisition will be accounted for as a purchase, and accordingly, the
purchase price will be allocated to Bionaire's assets and liabilities based upon
their respective fair values.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
-----------------------------------------
Audited financial statements of Bionaire as of and for the year ended December
31, 1995 and as of and for the ten months ended December 31, 1994 are attached
hereto as Exhibit 2 and incorporated herein by reference.
(b) Pro Forma Financial Information (Unaudited)
-------------------------------------------
The following unaudited pro forma consolidated balance sheet as of December 31,
1995 gives effect to the acquisition as though it had occurred on December 31,
1995. The unaudited pro forma statements of earnings for the fiscal year ended
June 30, 1995 and the six months ended December 31, 1995 give effect to the
acquisition as if it had occurred at the beginning of the periods presented.
The financial statements utilized in the fiscal year pro forma information are
for the year ended December 31, 1995 for Bionaire. The financial statements of
Bionaire utilized in the pro forma interim financial information presented are
for the six months ended December 31, 1995. The unaudited pro forma financial
statements were prepared utilizing available information and certain assumptions
that management believes are reasonable. The unaudited pro forma financial
statements may not be indicative of the Company's financial position or results
of operations had the acquisition actually occurred on the dates indicated.
The business of Bionaire is highly seasonal. Historically, shipments during
April through June represent only approximately ten percent of their annual
volume, resulting in significant losses during this period. The Company believes
that operations of Bionaire will reduce consolidated operating income by
approximately $1.5 million and earnings per share by approximately $0.15 during
the quarter ending June 30, 1996.
2
<PAGE>
THE RIVAL COMPANY
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Fasco (1) Pro Forma
ASSETS Rival Pro Forma Bionaire (2) Adjustments Pro Forma
----- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash 461 0 0 0 461
Accounts Receivable 86,612 6,211 22,386 0 115,209
Merchandise Inventories 74,092 7,694 11,870 0 93,656
Other Current Assets 1,481 981 911 0 3,373
----------------------------------------------- -------
Total Current Assets 162,646 14,886 35,167 0 212,699
Property, Plant and Equipment, net 27,096 9,314 4,655 0 41,065
Goodwill 47,374 0 0 11,325 (3) 58,699
Other Assets 2,784 4,000 0 0 6,784
----------------------------------------------- -------
239,900 28,200 39,822 11,325 319,247
=============================================== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable 53,900 23,532 11,152 (21,629) (4) 66,955
Current Portion of Long-Term Debt 4,000 0 739 (739) 4,000
Accounts Payable 31,947 3,602 10,773 850 (5) 47,172
----------------------------------------------- -------
Total Current Liabilities 89,847 27,134 22,664 (21,518) 118,128
Long - Term Debt 42,000 0 1,054 48,946 (4) 92,000
Other 226 0 0 0 226
Deferred Taxes 2,372 1,066 0 0 3,438
----------------------------------------------- -------
Total Liabilities 134,445 28,200 23,718 27,428 213,792
Shareholders' Equity 105,455 0 16,103 (16,103) (6) 105,455
----------------------------------------------- -------
239,900 28,200 39,823 11,325 319,247
=============================================== =======
</TABLE>
Notes:
1) The Company acquired 100% of the common stock of Fasco Consumer Products,
Inc. on January 2, 1996. The pro forma balance sheet presented above
reflects the impact of the Fasco acquisition as well as that of Bionaire.
2) The audited financial statements attached hereto as Exhibit 2 are expressed
in Canadian Dollars. The Balance Sheet of Bionaire presented above is
expressed in U.S. Dollars using the December 31, 1995 exchange rate of
1.364 Canadian Dollars per U.S. Dollar.
3) Recognition of the acquisition cost in excess of the fair value of net
assets acquired. The acquisition cost includes the purchase price for the
common stock together with the expenses incurred related to the purchase.
4) Recognition of approximately $26.6 million in indebtedness incurred by Rival
to finance the acquisition. Additionally, a pro forma adjustment has been
presented to reflect the refinancing of $50 million in short term borrowings
as a result of commitments in place under which the Company intends to issue
$50 million in unsecured notes with a ten year average maturity.
5) Recognition of estimated expenses involved in the closing of the Bionaire's
New York facility.
6) Elimination of stockholders' equity accounts of Bionaire.
3
<PAGE>
THE RIVAL COMPANY
Unaudited Pro Forma Consolidated Statement of Earnings
Year ended June 30, 1995
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Rival Fasco (1) Bionaire (2) Pro Forma
Historical Pro Forma Historical Adjustments Pro Forma
---------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales 231,711 40,726 56,662 329,099
Cost of Sales 168,406 29,484 39,928 (947) (3) 236,871
------------------------------------------------- ----------
Gross Profit 63,305 11,242 16,734 947 92,228
Selling Expenses 26,019 7,600 13,996 (3,563) (4) 44,052
General and Administrative Expenses 8,589 1,396 5,536 (2,939) (5) 12,582
Goodwill Amortization 1,327 0 0 378 (6) 1,705
Amortization of Non-compete
Agreements 300 500 0 0 800
------------------------------------------------- ----------
Operating Income 27,070 1,746 (2,798) 7,071 33,089
------------------------------------------------- ----------
Interest Expense 4,216 1,645 1,561 1,100 (7) 8,522
Other (Income) Expenses 120 0 0 120
------------------------------------------------- ----------
Total Other Expenses 4,336 1,645 1,561 1,100 8,642
------------------------------------------------- ----------
Earnings before Income Taxes 22,734 101 (4,359) 5,971 24,447
Income Tax Expense 8,749 50 (251) 621 (8) 9,169
------------------------------------------------- ----------
Net Earnings 13,985 51 (4,108) 5,350 15,278
================================================= ==========
Weighted Average Common and
Common Equivalent Shares
Outstanding 9,505 9,505
================================================= ==========
Net Earnings Per Share 1.47 1.61
================================================= ==========
</TABLE>
Notes:
1) The Company acquired 100% of the common stock of Fasco Consumer Products,
Inc. on January 2, 1996. The fiscal 1995 pro forma consolidated statement
of earnings presented above includes the pro forma operating results of
Fasco for the year ended December 31, 1995.
2) Bionaire operating results are for the year ended December 31, 1995. The
audited financial statements attached hereto as Exhibit 2 are expressed in
Canadian Dollars. The Bionaire statement of earnings presented above is
expressed in U.S. Dollars using the average 1995 exchange rate of 1.3725
Canadian Dollars per U.S. Dollar.
3) Savings from reductions in overhead in the Montreal manufacturing facility
based upon personnel reductions which have occurred.
4) Recognition of savings which will result from 1) integration of the U.S.
sales force including reductions in salesmen wages, commissions and travel
expenses; 2) reduction in sales administration expenses from the
consolidation of order processing and customer service functions; 3)
closing the New York sales office and distribution center.
5) Recognition of savings which result from 1) closing the administrative
office in West Palm Beach, Florida; 2) personnel reductions resulting from
the consolidation of certain finance and data processing functions; 3)
reductions in professional fees and insurance costs.
6) Amortization of the goodwill resulting from the acquisition over 30 years.
7) Elimination of the historical interest expense of Bionaire and recognition
of pro forma interest resulting from indebtedness associated with the
transaction (such interest assumed to bear a rate of 7.0%).
8) Income taxes are provided at a rate of 38.5% of the pro forma net income of
Bionaire less the refundable tax credits recognized in the historical
Bionaire financial statements.
4
<PAGE>
THE RIVAL COMPANY
Unaudited Pro Forma Consolidated Statement of Earnings
Six months ended December 31, 1995
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Rival Fasco (1) Bionaire (2) Pro Forma
Historical Pro Forma Historical Adjustments Pro Forma
---------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales 171,347 19,995 38,727 230,069
Cost of Sales 122,621 15,530 27,072 (473) (3) 164,750
---------------------------------------------------- -------
Gross Profit 48,726 4,465 11,655 473 65,319
Selling Expenses 18,573 4,065 8,193 (1,937) (4) 28,894
General and Administrative Expenses 5,383 642 2,421 (1,379) (5) 7,067
Goodwill Amortization 812 0 0 189 (6) 1,001
Amortization of Non-compete
Agreements 150 250 0 0 400
---------------------------------------------------- -------
Operating Income 23,808 (492) 1,041 3,600 27,957
---------------------------------------------------- -------
Interest Expense 3,160 820 872 598 (7) 5,450
Other (Income) Expenses 144 0 0 0 144
---------------------------------------------------- -------
Total Other Expenses 3,304 820 872 598 5,594
---------------------------------------------------- -------
Earnings before Income Taxes 20,504 (1,312) 169 3,002 22,363
Income Tax Expense 7,955 (513) (254) 1,221 (8) 8,409
---------------------------------------------------- -------
Net Earnings 12,549 (799) 423 1,781 13,954
==================================================== =======
Weighted Average Common and
Common Equivalent Shares
Outstanding 9,931 9,931
==================================================== =======
Net Earnings Per Share 1.26 1.41
==================================================== =======
</TABLE>
Notes:
1) The Company acquired 100% of the common stock of Fasco Consumer Products,
Inc. on January 2, 1996. The pro forma consolidated statement of earnings
presented above includes the operating results of Fasco for the six months
ended December 31, 1995.
2) Bionaire operating results are for the six months ended December 31, 1995.
These results are expressed in U.S. Dollars using the average exchange rate
for the period of 1.3558 Canadian Dollar per U.S. Dollar.
3) Savings from reductions in overhead in the Montreal manufacturing facility
based upon personnel reductions which have occurred.
4) Recognition of savings which will result from 1)integration of the U.S.
sales force including reductions in salesmen wages, commissions and travel
expenses; 2) reduction in sales administration expenses from the
consolidation of order processing and customer service functions; 3)
closing the New York sales office and distribution center.
5) Recognition of savings which result from 1) closing the administrative
office in West Palm Beach, Florida; 2) personnel reductions resulting from
the consolidation of certain finance and data processing functions; 3)
reductions in professional fees and insurance costs.
6) Amortization of the goodwill resulting from the acquisition over 30 years.
7) Elimination of the historical interest expense of Bionaire and recognition
of pro forma interest resulting from indebtedness associated with the
transaction (such interest assumed to bear a rate of 7.0%)
8) Income taxes are provided at a rate of 38.5% of the pro forma net income of
Bionaire less the refundable tax credits recognized in the historical
Bionaire financial statements.
5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE RIVAL COMPANY
Date: April 12, 1996
By: /s/ Thomas K. Manning
---------------------------------------------------------------
Thomas K. Manning
President and Chief Executive Officer
Duly Authorized Officer
6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
1 Offer to purchase all of the Common Shares of Bionaire Inc.
(Offering Circular) dated March 5, 1995.
2 Audited Financial Statements of Bionaire, Inc. as of and for the
year ended December 31, 1995 and as of and for the ten months
ended December 31, 1994.
7
<PAGE>
EXHIBIT 1
OFFER TO PURCHASE
all of the Common Shares of
BIONAIRE INC.
at a price of
$2.25 CASH PER COMMON SHARE
by
RC ACQUISITION INC.
an indirect wholly-owned subsidiary of
THE RIVAL COMPANY
THE OFFER BY RC ACQUISITION INC. (THE "OFFEROR") WILL EXPIRE, UNLESS
WITHDRAWN OR EXTENDED, AT 5:00 P.M., MONTREAL TIME, ON MONDAY, APRIL 1, 1996.
The Offer is conditional upon, among other things, not less than 90% of the
issued and outstanding common shares at the time of expiry of the Offer ("Common
Shares") of Bionaire Inc. ("Bionaire") (calculated on a diluted basis), being
validly deposited under the Offer and not withdrawn. The conditions of the
Offer are described in Section 5 of the Offer to Purchase, "Conditions of the
Offer".
Shareholders of Bionaire who wish to accept the Offer must deposit the
certificates representing such holder's Common Shares, together with the
accompanying Letter of Acceptance and Transmittal or a manually executed
facsimile thereof, properly completed and duly executed, at one of the offices
of the Depositary specified in the Letter of Acceptance and Transmittal, in
accordance with the Instructions in the Letter of Acceptance and Transmittal.
The Offer may also be accepted by a holder by following the procedures for
guaranteed delivery set forth in Section 3 of the Offer to Purchase, "Manner of
Acceptance". A Shareholder whose Common Shares are held in the name of a
nominee should request the broker, dealer, bank, trust company or other nominee
to effect the transaction for such holder.
The Common Shares are listed and posted for trading on The Montreal
Exchange and The Toronto Stock Exchange.
Questions and requests for assistance may be directed to the Dealer Manager
or the Depositary. Additional copies of this document, of the Letter of
Acceptance and Transmittal and the Notice of Guaranteed Delivery may be obtained
without charge upon request from the Dealer Manager or the Depositary at their
respective offices shown in the Letter of Acceptance and Transmittal.
The Dealer Manager for the Offer is:
THOMSON KERNAGHAN & CO. LTD.
(514) 393-9191
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU
ARE IN ANY DOUBT AS TO HOW TO DEAL WITH IT, YOU SHOULD CONSULT YOUR INVESTMENT
DEALER, STOCKBROKER, BANK MANAGER, LAWYER OR OTHER PROFESSIONAL ADVISOR.
ALL CURRENCY AMOUNTS EXPRESSED HEREIN, UNLESS OTHERWISE INDICATED, ARE
EXPRESSED IN CANADIAN DOLLARS.
March 5, 1996
<PAGE>
NOTICE TO UNITED STATES SHAREHOLDERS
THIS OFFER IS MADE FOR THE SECURITIES OF A CANADIAN ISSUER AND WHILE
THE OFFER IS SUBJECT TO CANADIAN DISCLOSURE REQUIREMENTS, SHAREHOLDERS SHOULD BE
AWARE THAT SUCH REQUIREMENTS ARE DIFFERENT FROM THOSE OF THE UNITED STATES.
THE ENFORCEMENT BY SHAREHOLDERS OF CIVIL LIABILITIES UNDER THE UNITED
STATES FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BY THE FACT THAT THE
OFFEROR IS INCORPORATED UNDER THE LAWS OF CANADA.
SHAREHOLDERS SHOULD BE AWARE THAT THE OFFEROR OR ITS AFFILIATES OR
ASSOCIATES, DIRECTLY OR INDIRECTLY, MAY BID FOR OR MAKE PURCHASES OF BIONAIRE'S
SECURITIES SUBJECT TO THE OFFER DURING THE PERIOD OF THE OFFER, AS PERMITTED BY
APPLICABLE CANADIAN LAWS OR PROVINCIAL LAWS OR REGULATIONS.
NOTICE TO NON-NORTH AMERICAN SHAREHOLDERS
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION TO ANY
PERSON IN ANY JURISDICTION OUTSIDE OF CANADA OR THE UNITED STATES IN WHICH SUCH
OFFER OR SOLICITATION IS UNLAWFUL. THE OFFER IS NOT BEING MADE TO, NOR WILL
DEPOSITS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF COMMON SHARES IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE OFFER WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, THE OFFEROR MAY, IN ITS
SOLE DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY TO EXTEND THE OFFER
TO HOLDERS OF COMMON SHARES IN SUCH JURISDICTION.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................................................... 4
SUMMARY................................................................... 5
OFFER TO PURCHASE......................................................... 8
1. The Offer....................................................... 8
2. Time for Acceptance............................................. 8
3. Manner of Acceptance............................................ 8
4. Extension and Variation of the Offer............................ 10
5. Conditions of the Offer......................................... 11
6. Right to Withdraw Deposited Common Shares....................... 13
7. Payment for Deposited Common Shares............................. 15
8. Return of Common Shares......................................... 15
9. Mail Service Interruption....................................... 16
10. Dividends and Distributions; Liens.............................. 16
11. Notice and Delivery............................................. 16
12. Right of Compulsory Acquisition................................. 17
13. Market Purchases................................................ 17
14. Other Terms..................................................... 18
OFFERING CIRCULAR......................................................... 19
THE OFFEROR.......................................................... 19
BIONAIRE............................................................. 19
BACKGROUND, PURPOSE OF THE OFFER AND PLANS FOR BIONAIRE.............. 20
MATERIAL AGREEMENTS.................................................. 23
SOURCE OF FUNDS FOR PAYMENT.......................................... 24
BENEFICIAL OWNERSHIP OF SECURITIES OF BIONAIRE....................... 24
TRADING IN SECURITIES OF BIONAIRE.................................... 24
ARRANGEMENTS OR AGREEMENTS........................................... 24
PRICE RANGE AND VOLUME OF TRADING OF COMMON SHARES................... 25
REGULATORY MATTERS................................................... 26
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS................... 27
DEPOSITARY........................................................... 29
SOLICITING DEALER GROUP.............................................. 29
DIRECTORS' APPROVAL.................................................. 30
OFFEREES' STATUTORY RIGHTS........................................... 30
CONSENT.............................................................. 31
CERTIFICATE.......................................................... 32
</TABLE>
3
<PAGE>
DEFINITIONS
In the Offer to Purchase and the Offering Circular, unless otherwise indicated
or the context otherwise requires, each of the following terms shall have the
meaning set forth below:
(a) "ACT" means the Income Tax Act (Canada), as amended;
(b) "AFFILIATE" has the meaning ascribed thereto in the Securities Act (Quebec)
or the CBCA as the circumstances may require;
(c) "ASSOCIATE" has the meaning ascribed thereto in the Securities Act (Quebec)
or the CBCA as the circumstances may require;
(d) "BIONAIRE" means Bionaire Inc., a corporation governed by the CBCA;
(e) "BIONAIRE AGREEMENT" means the agreement dated March 4, 1996 between the
Offeror and Bionaire;
(f) "BOARD OF DIRECTORS" means the board of directors of Bionaire;
(g) "BUSINESS DAY" means any day, other than a Saturday, Sunday or Canadian
federal or Quebec provincial holiday or any other day when banks in
Montreal, Canada, are not open for business;
(h) "CBCA" means the Canada Business Corporations Act;
(i) "COMMON SHARES" mean the common shares of Bionaire issued and outstanding
on the Termination Date;
(j) "DEALER MANAGER" means Thomson Kernaghan & Co. Ltd.;
(k) "DEPOSITARY" means Montreal Trust Company;
(l) "DILUTED BASIS" means, with respect to the number of outstanding Common
Shares at any time, such number of outstanding Common Shares calculated
assuming that all outstanding securities convertible into Common Shares,
including options to purchase Common Shares, are exercised;
(m) "ELIGIBLE INSTITUTION" means a Canadian Chartered Bank, a trust company in
Canada, a Caisse populaire, a commercial bank or trust company having an
office, branch or agency in the United States or a member firm of a
recognized stock exchange in Canada, of the Investment Dealers Association
of Canada, of a national securities exchange in the United States or of the
National Association of Securities Dealers, Inc.;
(n) "LETTER OF ACCEPTANCE AND TRANSMITTAL" means the accompanying letter of
acceptance and transmittal prepared for use in connection with the Offer;
(o) "NBCA" means the Business Corporations Act (New Brunswick);
(p) "NOTICE OF GUARANTEED DELIVERY" means the accompanying notice of guaranteed
delivery prepared for use in connection with the Offer;
(q) "OFFER" means the offer to purchase all of the Common Shares made hereby,
the terms and conditions of which are set forth in the Offer to Purchase,
the Offering Circular, the accompanying Letter of Acceptance and
Transmittal and the Notice of Guaranteed Delivery;
(r) "OFFERING CIRCULAR" means the attached Offering Circular;
(s) "OFFEROR" means RC Acquisition Inc., a corporation incorporated under the
NBCA and an indirect wholly-owned subsidiary of Rival;
(t) "OSC" means the Ontario Securities Commission;
(u) "POLICY 9.1" means OSC Policy Statement No. 9.1;
(v) "POLICY Q-27" means QSC Policy Q-27;
(w) "QSC" means the Commission des valeurs mobilieres du Quebec;
(x) "RIVAL" means The Rival Company;
(y) "SHAREHOLDER" means a holder of Common Shares;
(z) "SOLICITING DEALER" has the meaning set forth under "Soliciting Dealer
Group" in the Offering Circular; and
(aa) "TERMINATION DATE" means 5:00 p.m., Montreal time, on Monday, April 1,
1996, unless the Offer is extended, in which event the Termination Date
shall mean the latest time and date on which the Offer as so extended
expires or is withdrawn.
4
<PAGE>
SUMMARY
The following is a summary only and is qualified by the detailed provisions
contained elsewhere in the Offer to Purchase and the Offering Circular. The
information concerning Bionaire contained in the Offer to Purchase and the
Offering Circular has been taken from or based upon publicly available documents
and records on file with Canadian securities regulatory authorities and other
public sources.
THE OFFER
The Offeror is offering to purchase, upon the terms and subject to the
conditions described herein, all of the issued and outstanding Common Shares (on
a diluted basis) not already owned, directly or indirectly, by the Offeror or an
affiliate or an associate, at a price of $2.25 in cash for each Common Share.
THE OFFEROR AND RIVAL
The Offeror is a wholly-owned subsidiary of Rival Manufacturing Co. of
Canada Ltd., itself a company wholly owned by Rival. Rival is a leading
designer, manufacturer and marketer of small household appliances, fans,
personal care appliances and sump, well and utility pumps. Rival was
incorporated under the laws of the State of Delaware on April 7, 1986 for the
purpose of acquiring Rival Manufacturing Company. The registered office of
Rival is located at 800 E. 101/st/ Terrace, Kansas City, Missouri 64131.
Rival's total consolidated revenues for the 12 months ended June 30, 1995 were
US$232 million and net income was US$14 million.
BIONAIRE
Bionaire develops, manufactures and markets products designed to improve
the environment and air quality in homes and offices, including air purifiers,
humidifiers and related accessories such as replacement filters. Bionaire sells
its products in over 40 countries. Over 75% of total volume is sold outside
Canada, the United States accounting for approximately 65% of its total sales.
PURPOSE OF THE OFFER AND PLANS FOR BIONAIRE
The purpose of the Offer is to enable the Offeror to acquire all of the
Common Shares. Rival believes that this is a strategic acquisition which will
significantly benefit both its brands and Bionaire brands of products. Rival
intends to have Bionaire continue to operate in Canada as an autonomous
organization while reviewing Bionaire's United States and European operations.
In all areas however, Rival's management will continue to evaluate the Bionaire
business and will make such changes as determined appropriate following the
Offeror's acquisition of the Common Shares.
TIME FOR ACCEPTANCE
The Offer is open for acceptance until 5:00 p.m. Montreal time, on Monday,
April 1, 1996, or such later time and date to which the Offer may be extended by
the Offeror in its sole discretion unless withdrawn by the Offeror.
5
<PAGE>
CONDITIONS OF THE OFFER
The Offeror reserves the right to withdraw the Offer and not take up and
pay for any Common Shares deposited under the Offer, unless the conditions
described in Section 5 of the Offer to Purchase, "Conditions of the Offer", are
satisfied or waived. The Offer is conditional upon, among other things:
1. there being validly deposited and not withdrawn under the Offer not
less than 90% of the Common Shares (calculated on a diluted basis),
excluding Common Shares which are held by or on behalf of the Offeror,
its affiliates or associates;
2. there shall not have occurred any material change in the business,
operations or financial condition of Bionaire or any of its
subsidiaries which is materially adverse to Bionaire and its
subsidiaries, taken as a whole; and
3. any required governmental or regulatory approvals which if not received
would have a material adverse effect on the business or prospects of
Bionaire and its subsidiaries on a consolidated basis, shall have been
obtained or waived on terms satisfactory to the Offeror, acting
reasonably.
BIONAIRE AGREEMENT
On March 4, 1996, the Offeror and Bionaire entered into the Bionaire
Agreement, pursuant to which Bionaire agreed to pay the Offeror a fee of
$1,203,243, being equal to $0.08 per Common Share (which for the computation
thereof includes any Common Shares which may be issued pursuant to the exercise
of outstanding options that are "in the money" relative to the Offer price per
Common Share of $2.25 (the "Option Shares"), payable forthwith upon the
Termination Date, if the Offer is not successfully completed as a result of a
higher competing bid having been launched for the Common Shares or as a result
of any action on the part of Bionaire in violation of the conditions of the
Offer, and the Offeror determines not to take up any Common Shares under the
Offer and to terminate its Offer. Alternatively, pursuant to the Bionaire
Agreement, Bionaire has agreed that it will pay to the Offeror a fee of
$250,000, payable forthwith upon the Termination Date, if upon such date, the
number of Common Shares tendered to the Offer and not withdrawn represents less
than 66 2/8% of the Common Shares including as outstanding the Option Shares,
and the Offeror determines not to take up any Common Shares under the Offer and
terminates its Offer.
MANNER OF ACCEPTANCE
Holders of Common Shares who wish to accept the Offer must deposit the
certificate(s) representing their Common Shares, together with the Letter of
Acceptance and Transmittal or a manually executed facsimile thereof, properly
completed and duly executed, prior to the Termination Date, at one of the
offices of the Depositary specified in the Letter of Acceptance and Transmittal,
in accordance with the Instructions in the Letter of Acceptance and Transmittal.
A holder whose Common Shares are held in the name of a nominee should request
the broker, dealer, bank, trust company or other nominee to effect the
transaction for such holder. A holder of Common Shares wishing to accept the
Offer and whose certificates are not immediately available, may do so by
following the procedures for guaranteed delivery set forth in Section 3 of the
Offer to Purchase, "Manner of Acceptance".
RIGHT TO WITHDRAW DEPOSITED COMMON SHARES
All deposits of Common Shares under the Offer are irrevocable except as
provided in Section 6 of the Offer to Purchase, "Right to Withdraw Deposited
Common Shares".
6
<PAGE>
PAYMENT
If all the conditions referred to in Section 5 of the Offer, "Conditions of
the Offer", are satisfied or waived, the Offeror will be obligated (i) to take
up Common Shares validly deposited and not withdrawn under the Offer not later
than ten days after the Termination Date and (ii) to pay for the Common Shares
taken up as soon as possible, but in any event not later than three days after
taking up the Common Shares. Any Common Shares deposited under the Offer after
the first date on which Common Shares have been taken up and paid for by the
Offeror will be taken up and paid for within ten days of such deposit. See
Section 7 of the Offer to Purchase, "Payment for Deposited Common Shares".
ACQUISITION OF COMMON SHARES NOT DEPOSITED
If the Offeror takes up and pays for Common Shares validly deposited under
the Offer and acquires not less than 90% of the issued and outstanding Common
Shares, other than Common Shares held on the date of the Offer by or on behalf
of the Offeror or its affiliates and associates, the Offeror intends to acquire
the remainder of the Common Shares pursuant to the compulsory acquisition
provisions of the CBCA. If the statutory right of acquisition described above
is not available, then the Offeror anticipates that it will propose an
amalgamation, statutory arrangement or other transaction as a consequence of
which the interest of a Shareholder may be terminated without the consent of the
Shareholder. See "Background, Purpose of the Offer and Plans for Bionaire -
Acquisition of Common Shares Not Deposited".
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
A Shareholder who is resident or deemed resident in Canada and who sells or
is deemed to sell Common Shares for cash will be required to report the sale as
a taxable transaction for Canadian income tax purposes and may thereby realize a
capital gain or capital loss. See "Certain Canadian Federal Income Tax
Considerations" of the Offering Circular.
DEPOSITARY
Montreal Trust Company is acting as depositary under the Offer. The
Depositary will receive deposits of Common Shares and accompanying documentation
at the offices specified in the Letter of Acceptance and Transmittal. The
Depositary will also be responsible for giving notices, if required, and for
making payment for all Common Shares purchased by the Offeror under the Offer.
DEALER MANAGER
The Offeror has retained Thomson Kernaghan & Co. Ltd. to serve as Dealer
Manager for the Offer and to form a soliciting dealer group comprising members
of the Investment Dealers Association of Canada and members of Canadian stock
exchanges to solicit acceptances of the Offer. See "Soliciting Dealer Group" of
the Offering Circular.
ALL CURRENCY AMOUNTS EXPRESSED HEREIN, UNLESS OTHERWISE INDICATED, ARE
EXPRESSED IN CANADIAN DOLLARS.
7
<PAGE>
OFFER TO PURCHASE
TO: THE HOLDERS OF COMMON SHARES OF BIONAIRE INC.
1. THE OFFER
The Offeror hereby offers, upon the terms and subject to the conditions set
forth in this Offer to Purchase, the attached Offering Circular, the
accompanying Letter of Acceptance and Transmittal and the Notice of Guaranteed
Delivery (which together constitute the "Offer"), to purchase all of the Common
Shares (on a diluted basis) not already owned, directly or indirectly by the
Offeror or its affiliates and associates, at a price of $2.25 in cash for each
Common Share.
The Offer is made only for Common Shares and is not made for any options or
rights to purchase Common Shares or for any securities convertible or
exercisable into Common Shares. Any holder of such securities who wishes to
accept the Offer with respect to Common Shares issuable upon conversion or
exercise of such securities should exercise such conversion or exercise rights
in order to obtain certificates representing Common Shares and then deposit such
Common Shares under the Offer.
The Offeror will pay all charges and expenses of the Dealer Manager.
This Offer to Purchase and the Offering Circular, which are incorporated
into and form part of this Offer, constitute the take-over bid circular required
under Canadian provincial securities legislation and the CBCA.
2. TIME FOR ACCEPTANCE
The Offer will expire, unless withdrawn or extended at the Offeror's sole
discretion, at 5:00 p.m., Montreal time, on Monday, April 1, 1996.
3. MANNER OF ACCEPTANCE
In order for a Shareholder to accept the Offer, the following documents
must be received by the Depositary at one of the offices specified in the Letter
of Acceptance and Transmittal on or prior to the Termination Date:
(a) the certificate(s) representing the Common Shares in respect of which
this Offer is being accepted;
(b) a properly completed and duly executed copy of the Letter of
Acceptance and Transmittal in the accompanying form, or a manually
signed facsimile thereof; and
(c) any other relevant document required by the Instructions set out in
the Letter of Acceptance and Transmittal.
Except as otherwise provided in the Instructions to the Letter of
Acceptance and Transmittal, the signature on the Letter of Acceptance and
Transmittal must be guaranteed by an Eligible Institution.
If a Letter of Acceptance and Transmittal is executed by a person other
than the registered holder of the certificates evidencing Common Shares
deposited therewith, the certificates must be endorsed or accompanied by share
transfer powers of attorney duly and properly completed by the registered
holder, with the signature on the endorsement or share transfer powers of
attorney guaranteed by an Eligible Institution.
8
<PAGE>
Shareholders who cannot comply on a timely basis with the foregoing
procedures for acceptance of the Offer may nevertheless accept the procedures
for acceptance of the Offer by following the procedures set forth below for
guaranteed delivery.
PROCEDURE FOR GUARANTEED DELIVERY
If a Shareholder wishes to accept the Offer and (i) the certificate(s)
representing the Common Shares are not immediately available, or (ii) the
Shareholder is not able to deliver the certificates and all other required
documents to one of the offices of the Depositary at or prior to the Termination
Date, such Common Shares may nevertheless be deposited, provided that all of the
following conditions are met:
(a) such deposit is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery in the accompanying form or a facsimile thereof, duly
completed and executed is received by the Depositary at one of
the offices specified in the Notice of Guaranteed Delivery at or
prior to the Termination Date; and
(c) the certificate(s) representing such deposited Common Shares, in
proper form for transfer, together with a properly completed and
duly executed Letter of Acceptance and Transmittal or a manually
signed facsimile thereof, covering such Common Shares with any
required signature guarantees and any other required documents
are received by the Depositary at the same office prior to 4:30
p.m., Montreal time, on the third trading day on The Montreal
Exchange after the Termination Date.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telecopier or mailed to the Depositary and must include a signature
guaranteed by an Eligible Institution in the form set out therein.
GENERAL
In all cases, payment for Common Shares deposited and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of the certificate(s) representing beneficial ownership of such Common Shares,
together with a properly completed and duly executed copy of the Letter of
Acceptance and Transmittal in respect of such Common Shares or a manually
executed facsimile thereof covering such Common Shares and any other required
documents.
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING COMMON SHARES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE DEPOSITING
SHAREHOLDER. THE OFFEROR RECOMMENDS THAT ALL SUCH DOCUMENTS BE DELIVERED BY
HAND TO THE DEPOSITARY AND A RECEIPT OBTAINED OR, IF MAILED, THAT REGISTERED
MAIL (RETURN RECEIPT REQUESTED) BE USED AND PROPER INSURANCE BE OBTAINED.
Shareholders whose Common Shares are registered in the name of a nominee
should contact such holder's broker, dealer, bank, trust company or other
nominee for assistance in depositing such Common Shares.
All questions as to the validity, form, eligibility (including timely
receipt) and acceptance of any Common Shares deposited pursuant to the Offer,
including the propriety and effect of the execution of the Letter of Acceptance
and Transmittal, will be determined by the Offeror in its sole discretion.
Depositing Shareholders agree that such determination shall be final and
binding. The Offeror reserves the absolute right to reject any and all deposits
which it determines not to be in proper form or which, in the opinion of its
counsel, may be unlawful to accept under the laws of any jurisdiction. The
Offeror reserves the absolute right to waive any defects or irregularities in
the deposit of any Common Shares. There shall be no obligation on the part of
the Offeror, the
9
<PAGE>
Dealer Manager, the Depositary or any other person to give notice of any defects
or irregularities in any deposit and no liability shall be incurred by any of
them for failure to give any such notice. The Offeror's interpretation of the
terms and conditions of this Offer to Purchase, the Offering Circular, the
Letter of Acceptance and Transmittal and the Notice of Guaranteed Delivery will
be final and binding.
The deposit of Common Shares pursuant to the procedures herein will
constitute a binding agreement between the depositing Shareholder and the
Offeror upon the terms and subject to the conditions of the Offer, including the
depositing Shareholder's representation and warranty that (i) such Shareholder
has full power and authority to deposit, sell, assign and transfer the Common
Shares being deposited, (ii) such Shareholder owns the Common Shares being
deposited within the meaning of applicable securities laws, (iii) the deposit of
such Common Shares complies with applicable securities laws, and (iv) when such
Common Shares are taken up and paid for by the Offeror, the Offeror will acquire
good title thereto free and clear of all liens, restrictions, charges,
encumbrances, claims and equities.
The Offeror reserves the right to permit the Offer to be accepted in a
manner other than that set out above.
4. EXTENSION AND VARIATION OF THE OFFER
The Offer is open for acceptance until, but not after, the Termination
Date.
The Offeror expressly reserves the right, in its sole discretion, at any
time while the Offer is open for acceptance, to extend the period of time during
which the Offer is open or to vary the Offer, by giving oral or written notice
of such extension or variation to the Depositary at its principal office in
Montreal, and by causing the Depositary to provide as soon as practicable
thereafter a copy of such notice to all Shareholders in the manner set forth in
Section 11 of the Offer to Purchase, "Notice and Delivery". The Offeror shall,
forthwith after giving notice to the Depositary of an extension or variation,
make a public announcement of the extension or variation and provide a copy of
the notice thereof to The Montreal Exchange and The Toronto Stock Exchange. In
the case of an extension, such announcement shall be made not later than 9:00
a.m., Montreal time, on the next business day after the previously scheduled
Termination Date. Any notice of extension or variation will be deemed to have
been given and be effective on the day on which it is delivered or otherwise
communicated in writing to the Depositary at its principal office in Montreal.
Notwithstanding the foregoing, the Offer may not be extended by the Offeror
if all the terms and conditions of the Offer have been complied with, except
those waived by the Offeror, unless the Offeror first takes up and pays for all
Common Shares validly deposited under the Offer and not withdrawn.
Where the terms of the Offer are varied, the period during which Common
Shares may be deposited pursuant to the Offer shall not expire before ten days
after the notice of variation has been given to Shareholders unless otherwise
permitted by applicable law. During any such extension or in the event of any
variation, all Common Shares previously deposited and not taken up or withdrawn
will remain subject to the Offer and may be accepted for purchase by the Offeror
in accordance with the terms hereof, subject to Section 6 of the Offer to
Purchase, "Right to Withdraw Deposited Common Shares". An extension of the
Termination Date or a variation of the Offer does not constitute a waiver by the
Offeror of its rights under Section 5 of the Offer to Purchase, "Conditions of
the Offer".
If, prior to the Termination Date, a variation in the terms of the Offer
increases the consideration offered to holders of Common Shares by the Offeror
in its sole discretion, such increase shall be applicable to all holders whose
Common Shares are taken up pursuant to the Offer.
10
<PAGE>
5. CONDITIONS OF THE OFFER
The Offeror (i) shall not be required to take up and accept for payment or
pay for any Common Shares deposited under the Offer, (ii) may postpone the
taking up and acceptance for payment of, or payment for, any Common Shares
deposited under the Offer, and (iii) may, in its sole discretion, withdraw or
amend the Offer if, at or prior to the time that Common Shares would otherwise
be taken up and accepted for payment, any of the following conditions have not
been satisfied or waived:
(a) there being validly deposited and not withdrawn under the Offer not
less than 90% of the Common Shares (calculated on a diluted basis),
excluding Common Shares which are held by or on behalf of the Offeror,
its affiliates or associates;
(b) the Director of Investigation and Research (the "Director") appointed
under the Competition Act (Canada) shall not have opposed or
threatened to oppose the acquisition of any of the Common Shares under
the Offer nor make or threaten to make an application under Part VIII
of the Competition Act (Canada) in respect of the purchase or
acquisition of any of the Common Shares;
(c) the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (United States) shall have expired or have
been earlier terminated and Bionaire shall have cooperated in any
filing required thereunder;
(d) any required governmental or regulatory approvals other than as
referred to in subparagraph 5 (b), which if not received would have a
material adverse effect on the business or prospects of Bionaire and
its subsidiaries on a consolidated basis, shall have been obtained or
waived on terms satisfactory to the Offeror, acting reasonably;
(e) (i) no act, action, suit or proceedings shall have been taken before
or by any domestic or foreign court or tribunal or governmental agency
or other regulatory authority or administrative agency or commission
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, or (ii) no law, regulation or policy shall have been
proposed, enacted, promulgated or applied:
(A) to cease trade, enjoin, prohibit or impose material limitations
or conditions on the purchase or acquisition by or the sale to
the Offeror of the Common Shares or the right of the Offeror to
own or exercise full rights of ownership of the Common Shares or
to enjoin, prohibit or impose material limitations or conditions
on an amalgamation; or
(B) which, in the sole judgment of the Offeror acting reasonably in
the circumstances, if the Offer were consummated would materially
and adversely affect or result in the imposition of substantial
damages against the Offeror or Bionaire and its subsidiaries
considered on a consolidated basis;
(f) from and after March 4, 1996, except with the prior written approval
of the Offeror, there shall not have occurred, or Bionaire or any
subsidiary of Bionaire shall not have authorized or proposed, or shall
not have entered into any agreement, arrangement or understanding with
respect to:
(i) any merger, amalgamation, plan of arrangement, reorganization or
other business combination (other than pursuant to the Offer);
11
<PAGE>
(ii) any acquisition of a material amount of assets or securities;
(iii) any disposition of a material amount of assets or securities;
(iv) any material change in its capitalization (including, but not
limited to, any material increase in the amount of its borrowings
or any material conversion of short-term borrowings into long-
term borrowings) except in accordance with a condition of the
Offer;
(v) any combination of any or all of the transactions referred to in
paragraphs (ii), (iii) and (iv) above which individually are not
material, but in the aggregate are material;
(vi) declaring or paying any dividend or declaring, authorizing or
making any distribution of or on any of its securities whether
payable in cash, securities or otherwise other than (A) regular
cash dividends in amounts fixed by their terms or consistent with
past practice or (B) any dividend or distribution by a subsidiary
of Bionaire to Bionaire;
(vii) its senior officers or employees, except agreements or
arrangements (other than agreements or arrangements in respect of
share options or other rights or entitlements to acquire
authorized and unissued Common Shares or relating to severance or
termination or other rights related to a change of control) in
the ordinary course of business and consistent with past practice
and except in accordance with a condition of the Offer;
(viii) any release or relinquishment not in the ordinary course of
business of any material contractual rights;
(ix) the amendment of its articles or by-laws, or the issuance or
purchase or other acquisition of any shares of its capital stock
of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible
securities (other than pursuant to the exercise in accordance
with their current terms, or pursuant to a condition set out in
this Offer, of employee stock options or share purchase rights
currently outstanding, if any, or in connection with the
conversion of any currently outstanding convertible securities,
if any);
(x) the guarantee of payment of any material indebtedness other than
in the ordinary course of business and consistent with past
practice; or
(xi) instituting, cancelling or modifying any pension plans or other
employee benefit arrangements;
(g) from and after March 4, 1996, there shall not have occurred or arisen
(or, if there shall have previously occurred or arisen, there shall
not have been disclosed generally or to the Offeror in writing, prior
to the commencement to the Offer), any change (or any condition, event
or development involving a prospective change) in the business,
operations, affairs, assets, liabilities (including any contingent
liabilities that may arise through outstanding, pending or threatened
litigation or otherwise), capitalization, financial condition,
licenses, permits, rights or privileges, whether contractual or
otherwise, or prospects of Bionaire or any of its subsidiaries
considered on a consolidated basis which, in the sole judgement of the
Offeror, acting reasonably in the circumstances, has or may have a
material adverse effect either on the value of Bionaire or any of its
subsidiaries considered on a consolidated basis or on the value of the
Common Shares to the Offeror;
12
<PAGE>
(h) Bionaire and its subsidiaries shall have cooperated in taking all
steps required to meet regulatory requirements, provided that such
steps would not have adverse consequences to the holders of Common
Shares or to Bionaire or any of its subsidiaries if the Offer were not
completed; and
(i) the Board of Directors shall have suspended as of March 1, 1996 the
purchase of shares under the Employee Stock Ownership Plan of Bionaire
and such Plan shall have been terminated by the Board of Directors
upon the Offeror taking up any Common Shares under the Offer.
The foregoing conditions are for the exclusive benefit of the Offeror and
may be asserted by the Offeror regardless of the circumstances (including any
action or inaction by the Offeror) giving rise to any such assertion or may be
waived by the Offeror in its sole discretion, in whole or in part, at any time
and from time to time without prejudice to any of the rights which the Offeror
may have under the Offer. The failure by the Offeror at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time. Any determination by the Offeror concerning the
events described in this Section 5 of the Offer to Purchase will be final and
binding upon all parties.
Any waiver of a condition or the withdrawal of the Offer shall be effective
upon oral or written notice by the Offeror to that effect to the Depositary at
its principal office in Montreal. The Offeror, forthwith after giving any such
notice, shall make a public announcement of such waiver or withdrawal, shall
cause the Depositary as soon as practicable thereafter to notify the
Shareholders in the manner set forth in Section 11 of the Offer to Purchase and
shall provide a copy of the aforementioned notice to The Montreal Exchange and
The Toronto Stock Exchange. If the Offer is withdrawn, the Offeror shall not be
obligated to take up or pay for any Common Shares deposited under the Offer and
the Depositary will promptly return all certificates for deposited Common
Shares, Letters of Acceptance and Transmittal, Notices of Guaranteed Delivery
and related documents to the parties by whom they were deposited.
6. RIGHT TO WITHDRAW DEPOSITED COMMON SHARES
Except as otherwise stated in this Section 6 of the Offer, all deposits of
Common Shares pursuant to the Offer are irrevocable. Any Common Shares
deposited in acceptance of the Offer may be withdrawn by or on behalf of the
depositing Shareholder:
(a) at any time before midnight, local time, on March 26, 1996;
(b) at any time before the expiration of the tenth day after the date upon
which either:
(i) a notice of change relating to a change which has occurred in the
information contained in the Offer, which change is one that
would reasonably be expected to affect the decision of a holder
of Common Shares to accept or reject the Offer (other than a
change that is not within the control of the Offeror or of any
affiliate of the Offeror) in the event that such change occurs
before the Termination Date or after the Termination Date but
before the expiry of all rights of withdrawal in respect of the
Offer, or
(ii) a notice of variation concerning a variation in the terms of the
Offer, including any extension of the period during which Common
Shares may be deposited hereunder (other than a variation
consisting solely of an increase in the consideration offered for
the Common Shares where the time for deposit is not extended for
a period greater than ten days and other than a variation
consisting solely of the waiver of a condition of the Offer)
13
<PAGE>
is mailed, delivered or otherwise properly communicated, but only if such
deposited Common Shares have not been taken up by the Offeror at the time
of the notice; and
(c) at any time after midnight, local time, on April 19, 1996, if the
Common Shares have not been taken up and paid for by the Offeror prior
to the receipt by the Depositary of the notice of withdrawal in
respect of such Common Shares.
Withdrawals of Common Shares deposited under the Offer must be effected by
a notice of withdrawal made by or on behalf of the depositing Shareholder and
must be received by the Depositary at the place of deposit of the applicable
Common Shares within the time limits indicated above.
A notice of withdrawal must:
(i) be in writing (which includes telegraphic communication or notice by
electronic means that produces a printed copy);
(ii) be signed by the person who signed the Letter of Acceptance and
Transmittal accompanying the Common Shares which are to be withdrawn
(or Notice of Guaranteed Delivery in respect thereof); and
(iii) specify such person's name, the number of Common Shares to be
withdrawn, the name of the registered holder and the certificate
number shown on each certificate representing the Common Shares to be
withdrawn.
The withdrawal shall take effect upon receipt of the written withdrawal
notice by the Depositary. Any signature on the withdrawal notice must be
guaranteed by an Eligible Institution, except in the case of Common Shares
deposited for the account of an Eligible Institution. None of the Offeror, the
Depositary, the Dealer Manager or any other person will be under any duty to
give notice of any defect or irregularity in any notice of withdrawal or shall
incur any liability for failure to give such notice.
Withdrawals may not be rescinded and any Common Shares withdrawn will
thereafter be deemed not validly deposited for purposes of the Offer. However,
withdrawn Common Shares may be redeposited at any time on or prior to the
Termination Date by again following one of the procedures described in Section 3
of the Offer to Purchase.
If the Offeror extends the Offer, is delayed in taking up or paying for
Common Shares or is unable to pick up or pay for Common Shares for any reason,
then, without prejudice to the Offeror's other rights, Common Shares may not be
withdrawn except to the extent that depositing Shareholders are entitled to
withdrawal rights as set forth in this Section 6 of this Offer to Purchase or
pursuant to applicable law.
In addition to the foregoing rights of withdrawal, Shareholders in certain
provinces of Canada are entitled to statutory rights of rescission in certain
circumstances. See "Statutory Rights" in the Offering Circular.
All questions as to the validity (including timely receipt) and forms of
notice of withdrawal shall be determined by the Offeror in its sole discretion,
and such determination shall be final and binding. None of the Offeror, a
Dealer Manager, a soliciting dealer, the Depositary or any other person will be
under any duty to give notification of any default or irregularity in any notice
of withdrawal nor shall they incur any liability for failure to give such
notification.
14
<PAGE>
7. PAYMENT FOR DEPOSITED COMMON SHARES
If all the conditions referred to under Section 5 of the Offer, "Conditions
of the Offer", have been satisfied or waived at the Termination Date, the
Offeror will become obligated to take up the Common Shares deposited under the
Offer and not withdrawn not later than ten days from the Termination Date and
pay for Common Shares taken up as soon as possible, but in any event not later
than three days after taking up the Common Shares.
Subject to applicable law, the Offeror expressly reserves the right in its
sole discretion to delay taking up and paying for any Common Shares or to
terminate the Offer and not take up or pay for any Common Shares if any
condition specified in Section 5 of the Offer, "Conditions of the Offer", is not
satisfied or waived, in whole or in part, by giving written notice thereof, or
other communication confirmed in writing, to the Depositary at one of its
offices set out in the Letter of Acceptance and Transmittal. The Offeror also
expressly reserves the right, in its sole discretion and notwithstanding any
other condition of the Offer, to delay taking up and paying for Common Shares in
order to comply, in whole or in part, with any applicable law, including without
limitation such period of time as may be necessary to obtain any required
regulatory approval. The Offeror will not, however, take up and pay for any
Common Shares deposited under the Offer unless it simultaneously takes up and
pays for all Common Shares then validly deposited under the Offer. Any Common
Shares deposited under the Offer after the first date on which Common Shares
have been taken up and paid for by the Offeror will be taken up and paid not
later than ten days after such deposit.
Subject to applicable law, the Offeror may, in its discretion, at any time
before the Termination Date if the applicable rights to withdraw any deposited
Common Shares have expired, take up and pay for all such Common Shares then
deposited under the Offer provided the Offeror agrees to take up and pay for all
additional Common Shares validly deposited thereafter.
The Offeror will pay for Common Shares validly deposited under the Offer
and not withdrawn, by providing the Depositary with sufficient funds (by bank
transfer or other means satisfactory to the Depositary) for transmittal to
depositing Shareholders. Under no circumstances will interest accrue or be paid
by the Offeror on the purchase price of Common Shares, regardless of any delay
in making such payment. The Depositary will act as the agent of persons who
have deposited Common Shares in acceptance of the Offer for the purposes of
receiving payment from the Offeror and transmitting payment to such persons, and
receipt of payment by the Depositary will be deemed to constitute receipt of
payment by persons depositing the Common Shares. The Depositary will forward
cheques by first-class mail to persons depositing Common Shares at the address
specified in the Letter of Acceptance and Transmittal, unless the depositing
Shareholder instructs the Depositary in the Letter of Acceptance and Transmittal
to hold the cheque for pick-up. If no address is specified, a cheque payable in
respect of registered Common Shares will be forwarded to the address of the
holder as shown on the share register of Bionaire. PERSONS DEPOSITING COMMON
SHARES WILL NOT BE OBLIGATED TO PAY BROKERAGE COMMISSIONS.
8. RETURN OF COMMON SHARES
Any deposited Common Shares not taken up and paid for by the Offeror will
be returned at the Offeror's expense promptly after the Termination Date by
returning the deposited certificates (and other relevant documents).
Certificates (and other relevant documents) will be forwarded by first-class
mail in the name of and to the address specified by the holders of Common Shares
in the Letter of Acceptance and Transmittal or, if such name or address is not
so specified, in such name and to such address as shown on the share register
maintained by Bionaire, as soon as practicable following the Termination Date.
15
<PAGE>
9. MAIL SERVICE INTERRUPTION
Notwithstanding the provisions of the Offer, cheques and certificates for
Common Shares to be mailed by the Depositary will not be mailed if the Offeror
determines that delivery thereof by mail may be delayed. A person entitled to a
cheque which is not mailed for the foregoing reason may take delivery thereof at
the office of the Depositary at which the deposited certificates for Common
Shares in respect of which the cheque is being issued were deposited, upon
application to the Depositary, until such time as the Offeror has determined
that delivery by mail will no longer be delayed. Notwithstanding Section 7 of
the Offer to Purchase, the deposit of cheques with the Depositary in such
circumstance shall constitute delivery to the persons entitled thereto and the
Common Shares shall be deemed to have been paid for immediately upon such
deposit. Notice of any determination regarding mail service delay or
interruption made by the Offeror shall be given in accordance with Section 11 of
the Offer to Purchase.
10. DIVIDENDS AND DISTRIBUTIONS; LIENS
If, on or after the date of the Offer, Bionaire should split, combine or
otherwise change any of the Common Shares or its capitalization, or disclose
that it has taken or intends to take any such action, then the Offeror may, in
its sole discretion, make such adjustments as it deems appropriate to reflect
such split, combination or other change in the purchase price and the other
terms of the Offer (including, without limitation, the type of securities
offered to be purchased and the amounts payable therefor).
Common Shares acquired pursuant to the Offer shall be acquired by the
Offeror free and clear of all liens, charges, encumbrances, claims and equities
and together with all rights and benefits arising therefrom including the right
to all dividends, distributions, payments, securities, rights, assets or other
interests which may be declared, paid, issued, distributed, made or transferred
on or in respect of the Common Shares purchased pursuant to the Offer.
If, on or after the date of the Offer, Bionaire should declare or pay any
cash or stock dividends or declare, make or pay any other payments or
distributions on, or declare, allot, reserve or issue any securities, rights,
assets or other interests with respect to, the Common Shares, payable or
distributable to holders of record on a date prior to the transfer of Common
Shares taken up pursuant to the Offer to the name of the Offeror or its nominee
or transferee on Bionaire's securities transfer records, then, without prejudice
to the Offeror's rights under Section 5 of the Offer to Purchase, (i) in the
case of any such cash dividend or cash distribution or payment that does not
exceed the price payable to a Shareholder pursuant to the Offer, the price
payable to the Shareholder pursuant to the Offer will be reduced by the amount
(the "Reduction Amount") of any such dividend, distribution or payment received
by the Shareholder, and (ii) in the case of any such cash dividend or cash
distribution or payment in an amount that exceeds the price to a Shareholder
pursuant to the Offer, or in the case of any other dividend, distribution,
payment or right, the whole of any such dividend, distribution, payment or right
will be received and held by the depositing Shareholder for the account of the
Offeror and shall be promptly remitted and transferred by the depositing
Shareholder to the Depositary for the account of the Offeror, accompanied by
appropriate documentation of transfer. Pending such remittance, the Offeror
will be entitled to all rights and privileges as the owner of any such dividend,
distribution, payment or right, and may withhold the entire purchase price
payable by the Offeror pursuant to the Offer or deduct from the purchase price
payable by the Offeror pursuant to the Offer the amount or value thereof, as
determined by the Offeror in its sole discretion.
11. NOTICE AND DELIVERY
Without limiting any other lawful means of giving notices, any notice which
the Offeror or the Depositary may give or cause to be given under the Offer will
be deemed to have been properly given to holders of Common Shares, as the case
may be, if it is mailed by prepaid, first-class mail to the registered holders
of such Common Shares at their respective addresses appearing in the share
register maintained by Bionaire and will be
16
<PAGE>
deemed to have been received on the first business day following the date of
mailing. These provisions apply notwithstanding any accidental omission to give
notice to any one or more Shareholders and notwithstanding any interruption of
mail service following mailing. In the event of any interruption of mail
service following mailing, the Offeror intends to make reasonable efforts to
disseminate the notice by other means such as publication. In the event that
post offices are not open for the deposit of mail, or there is reason to believe
there is or could be a disruption in all or any part of the postal service, any
notice which the Offeror or the Depositary may give or cause to be given under
this Offer will be deemed to have been properly given and to have been received
by Shareholders if it is given to The Montreal Exchange and The Toronto Stock
Exchange for dissemination through their facilities or if it is published in a
newspaper or newspapers generally circulated in Montreal and Toronto or if it is
given to the Dow Jones News Service.
This Offer to Purchase, the Offering Circular, the Letter of Acceptance and
Transmittal and the Notice of Guaranteed Delivery will be mailed to registered
holders of Common Shares and the Offeror will use its reasonable efforts to
furnish such documents to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the security holder list, or, if applicable,
who are listed as participants in a clearing agency's security position listing,
for subsequent transmission to beneficial owners of Common Shares when such list
or listing is received.
Wherever the Offer calls for documents to be delivered to the Depositary,
such documents will not be considered delivered unless and until they have been
received at one of the offices specified in the Letter of Acceptance and
Transmittal or Notice of Guaranteed Delivery, as applicable.
12. RIGHT OF COMPULSORY ACQUISITION
If the Offer is accepted by holders of not less than 90% of the Common
Shares, other than Common Shares held by or on behalf of the Offeror and its
affiliates and associates, the Offeror may, within 120 days after the date
hereof, acquire all the Common Shares held by each Shareholder who did not
accept the Offer, on the same terms and at the same price as the Common Shares
acquired under the Offer, pursuant to the compulsory acquisition provisions of
the CBCA. If the statutory right of acquisition described in the immediately
preceding sentence is not available, then the Offeror anticipates that it will
propose an amalgamation, or another transaction including a statutory
arrangement, as a direct or indirect consequence of which the interest of a
Shareholder may be terminated without the consent of that Shareholder. See
"Purpose of the Offer and Plans for Bionaire - Acquisition of Common Shares not
Deposited" in the Offering Circular.
13. MARKET PURCHASES
The Offeror has no present intention of acquiring beneficial ownership of
Common Shares while the Offer is outstanding other than as described in the
Offering Circular or the Offer to Purchase. However, the Offeror reserves the
right to, and may, acquire, or cause an affiliate to acquire, beneficial
ownership of Common Shares by making purchases through the facilities of The
Montreal Exchange and The Toronto Stock Exchange, subject to applicable law, at
any time prior to the Termination Date. In no event will the Offeror make any
such purchases of Common Shares until the third business day following the date
of the Offer. The aggregate number of Common Shares beneficially acquired by
the Offeror through the facilities of The Montreal Exchange or The Toronto Stock
Exchange while the Offer is outstanding shall not exceed 5% of the outstanding
Common Shares.
17
<PAGE>
14. OTHER TERMS
NO BROKER, DEALER OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE OFFEROR OTHER THAN AS
CONTAINED IN THE OFFER, AND, IF ANY SUCH INFORMATION OR REPRESENTATION IS GIVEN
OR MADE, IT MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Offer and all contracts resulting from the acceptance thereof shall be
governed by and construed in accordance with the laws of the Province of Quebec
and the laws of Canada applicable therein.
The Offeror, in its sole discretion, shall be entitled to make a final and
binding determination of all questions relating to the interpretation of the
Offer to Purchase, the Offering Circular, the Letter of Acceptance and
Transmittal and the Notice of Guaranteed Delivery, the validity of any
acceptance of the Offer and the validity of any withdrawals of Common Shares.
Dated: March 5, 1996
RC ACQUISITION INC.
Per: (Signed) Thomas K. Manning
President and Chief Executive Officer
18
<PAGE>
OFFERING CIRCULAR
This Offering Circular is furnished by the Offeror in connection with the
Offer to purchase all Common Shares dated March 5, 1996.
The terms and provisions of the Offer to Purchase are incorporated into and
form part of this Offering Circular and Shareholders should refer to the Offer
to Purchase for details of the terms and conditions of the Offer, including
details as to payment and withdrawal rights. Defined terms used in the Offer
are used in this Offering Circular with the same meaning unless the context
otherwise requires.
Except as otherwise indicated, the information concerning Bionaire
contained in the Offer to Purchase and this Offering Circular has been taken
from or based upon publicly available documents and records on file with
Canadian securities administrators and other public sources. Although the
Offeror has no knowledge that would indicate that any statements contained
herein relating to Bionaire or taken from or based on such documents and records
are untrue or incomplete, neither the Offeror nor its officers or directors
assumes any responsibility for the accuracy or completeness of the information
relating to Bionaire or contained in such documents and records, or for any
failure by Bionaire to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to the
Offeror.
THE OFFEROR
The Offeror was incorporated under the NBCA on March 1, 1996 for the
purpose of making the Offer. The Offeror has engaged in no activities to date
other than those relating to the acquisition of the Common Shares and making the
Offer. The Offeror's primary asset will be the Common Shares, if any, it
acquires pursuant to the Offer. The registered office of the Offeror is located
at 44 Chipman Hill, Saint John, New Brunswick E2L 2A9, Canada.
The Offeror is a wholly-owned subsidiary of Rival Manufacturing Co. of
Canada Ltd., itself a company wholly owned by Rival. Rival is a leading
designer, manufacturer and marketer of small household appliances, fans,
personal care appliances and sump, well and utility pumps. Rival was
incorporated under the laws of the State of Delaware on April 7, 1986 for the
purpose of acquiring Rival Manufacturing Company. The registered office of
Rival is located at 800 E. 101/st/ Terrace, Kansas City, Missouri 64131.
Rival's total consolidated revenues for the 12 months ended June 30, 1995 were
US$232 million and net income was US$14 million.
BIONAIRE
Bionaire was incorporated under the CBCA by Certificate of Incorporation
dated May 12, 1977, under the name of Biotech Electronic Engineering Ltd -
L'Ingenierie Electronique Biotech Ltee. The registered and principal office of
Bionaire is located at 2000 - 32nd Avenue, Lachine, Quebec H8T 3H7.
Bionaire develops, manufactures and markets products designed to improve
the environment and air quality in homes and offices, including air purifiers,
humidifiers and related accessories such as replacement filters. Bionaire sells
its products in over 40 countries. Over 75% of total volume is sold outside
Canada, the United States accounting for approximately 65% of its total sales.
19
<PAGE>
The authorized capital of Bionaire consists of an unlimited number of no
par value common shares of which 14,537,018 were issued and outstanding as at
March 4, 1996. Each common share carries one vote per share.
Bionaire is subject to the information and reporting requirements of the
CBCA, the securities laws of all of the provinces of Canada and the rules of The
Montreal Exchange and The Toronto Stock Exchange. Bionaire is therefore
required to file reports and other information with certain securities
regulatory authorities in Canada and with The Montreal Exchange and The Toronto
Stock Exchange relating to its business, financial statements and other matters.
Information as of particular dates concerning Bionaire's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Common Shares and any material interests of such persons in transactions with
Bionaire and other matters is required to be disclosed in proxy statements
distributed to shareholders and filed with certain of such securities regulatory
authorities and with The Montreal Exchange and The Toronto Stock Exchange.
BACKGROUND, PURPOSE OF THE OFFER AND PLANS FOR BIONAIRE
BACKGROUND OF THE OFFER
On October 10, 1995, Mr. Thomas K. Manning, President and Chief Executive
Officer of Rival, Mr. John E. Grimm, III and Mr. Todd Goodwin, both directors of
Rival, met with, among others, Mr. David Mahoney, a director of Bionaire and Mr.
Jean-Guy Gauthier, the President and Chief Executive Officer of Bionaire, to
inquire as to the possibility of Bionaire being sold.
On October 31, 1995, Rival signed a confidentiality agreement regarding
Bionaire.
On January 18, 1996, Mr. Manning and Mr. William L. Yager, Senior Vice-
President, Finance & Administration of Rival, together with Mr. Yvon Jeghers,
Vice-President of Bank of America Canada, and Mr. Chris Reale, Managing Director
of BA Partners, financial advisors to Rival, met with Mr. Gauthier and Mr. Gregg
Thomassin, Vice-President - Finance of Bionaire, among others, to discuss
financial and operation details of Bionaire.
From the period of January 18, 1996 to February 20, 1996, Bionaire provided
Rival selected information in the course of Rival's due diligence investigation
of Bionaire.
On February 7, 1996, the board of directors of Rival authorized Messrs.
Manning and Yager to take whatever actions necessary to negotiate and complete a
take-over bid for Bionaire.
On February 21, 1996, Messrs. Manning, Yager, Jeghers and Reale met with
Mr. Gauthier, a representative of Nesbitt Burns Inc. and Mr. F. Ross Johnson,
Chairman of Bionaire in Atlanta, Georgia, at which they discussed the interest
of Rival in making an offer to purchase all of the Common Shares at a price of
$2.25 per share, subject to Rival and Bionaire agreeing on break-up fees being
provided by Bionaire to Rival or its acquisition affiliate and on further
operational and financial due diligence investigations being made by Rival.
On February 28, 1996, Rival and Bionaire issued a joint press release
announcing that discussions were taking place between them regarding the
possibility of a take-over bid being made for the Common Shares at a price
expected to be $2.25 per share.
20
<PAGE>
On March 4, 1996, Rival was advised that the Board of Directors had
determined to recommend acceptance of the Offer to the Shareholders and had
approved the Bionaire Agreement. On the same day, the Offeror and Bionaire
executed the Bionaire Agreement. See "Material Agreements" of this Offering
Circular.
PURPOSE OF THE OFFER
The purpose of the Offer is to enable the Offeror to acquire all of the
Common Shares which are not currently owned by the Offeror. In the event that
the conditions of the Offer are satisfied and the Offeror takes up and pays for
the Common Shares validly tendered pursuant to the Offer, the Offeror intends to
acquire any Common Shares not tendered in the Offer by compulsory acquisition if
such statutory right is available to the Offeror. If such statutory right is
not available, the Offeror anticipates that it will propose an amalgamation,
statutory arrangement or other combination. See "Acquisition of Common Shares
Not Deposited" below.
PLANS FOR BIONAIRE
Rival believes that this is a strategic acquisition which will
significantly benefit both its brands and Bionaire brands. Rival intends to
have Bionaire continue to operate in Canada as an autonomous organization while
reviewing Bionaire's United States and European operations. In all areas
however, Rival's management will continue to evaluate the Bionaire business and
will make such changes as determined appropriate following the Offeror's
acquisition of the Common Shares.
If permitted by applicable law, subsequent to the completion of the Offer,
the Offeror intends to delist the Common Shares from The Montreal Exchange and
The Toronto Stock Exchange and to cause Bionaire to cease to be a reporting
issuer under Canadian securities laws.
ACQUISITION OF COMMON SHARES NOT DEPOSITED
If within 120 days after the date hereof, the Offer is accepted by holders
of not less than 90% of the Common Shares, other than the Common Shares held by
or on behalf of the Offeror and its affiliates and associates, and the Offeror
acquires such Common Shares, the Offeror intends, pursuant to the provisions of
Section 206 of the CBCA, to acquire all of the Common Shares held by each holder
of Common Shares (in each case, a "Dissenting Offeree") who did not accept the
Offer (and including any person who subsequently acquires any such Common
Shares) on the same terms and at the same price as Common Shares acquired under
the Offer. If this statutory right is available to the Offeror, it will seek to
acquire the remaining outstanding Common Shares by exercising such right in
respect of such Common Shares.
To exercise such statutory rights, the Offeror must give notice (the
"Offeror's Notice") to the Dissenting Offerees and to the Director under the
CBCA of such proposed acquisition on or before the earlier of 60 days from the
Termination Date and 180 days from the date of the Offer. Within 20 days of
giving such Offeror's Notice, the Offeror must pay to Bionaire the consideration
offered under the Offer for the Common Shares, as the case may be, not acquired
under the Offer, to be held in trust for the Dissenting Offerees. Within 20
days after receipt of the Offeror's Notice, each Dissenting Offeree must send
the certificates representing the Common Shares held by such Dissenting Offeree
to Bionaire, and may elect either to transfer such Common Shares to the Offeror
on the terms on which the Offeror acquired Common Shares under the Offer or to
demand payment of the fair value of such Common Shares held by such holder by so
notifying the Offeror. If a Dissenting Offeree has elected to demand payment of
the fair value of such Common Shares, the Offeror may apply to a court having
jurisdiction to hear such application to fix the fair value of such Common
Shares of that Dissenting Offeree. If the Offeror fails
21
<PAGE>
to apply to such court within 20 days after making the payment to Bionaire
referred to above, the Dissenting Offeree may then apply to the court within a
further period of 20 days to have the court fix the fair value of such Common
Shares. If there is no such application by the Dissenting Offeree within such
period, the Dissenting Offeree will be deemed to have elected to transfer such
Common Shares to the Offeror on the same terms that the Offeror acquired Common
Shares under the Offer.
THE FOREGOING IS A SUMMARY ONLY. REFERENCE IS MADE TO SECTION 206 OF THE
CBCA. THIS SECTION IS COMPLEX AND MAY REQUIRE STRICT ADHERENCE TO NOTICE AND
TIMING PROVISIONS, FAILING WHICH SUCH RIGHTS MAY BE LOST OR ALTERED. HOLDERS OF
COMMON SHARES WHO WISH TO BE BETTER INFORMED ABOUT THESE PROVISIONS SHOULD
CONSULT THEIR LEGAL ADVISORS.
If the foregoing statutory right of acquisition is not available, the
Offeror intends to pursue another method of acquiring all of the Common Shares
in accordance with applicable law, including an amalgamation, statutory
arrangement or other combination of Bionaire with the Offeror or an affiliate of
the Offeror, on such terms and conditions as the Offeror at the time believes to
be fair and equitable to Bionaire and the Shareholders. The timing and details
of any such transaction would necessarily depend upon a variety of factors,
including the number of Common Shares acquired pursuant to the Offer. If the
conditions of the Offer relating to the number of Common Shares deposited under
the Offer are satisfied, the Offeror will own sufficient Common Shares to
successfully complete the acquisition of all of the remaining Common Shares
provided that it offers a price equal to that offered under this Offer in such
subsequent transaction. In any such amalgamation, statutory arrangement or
other combination, the holders of Common Shares, other than the Offeror and its
affiliates, could receive cash, common shares, preferred shares, warrants, other
equity shares or debt or any combination thereof. Any such security or debt
could be immediately redeemed by the issuer for cash. It is expected that the
cash amount offered in any such transaction would be $2.25 per Common Share. In
any amalgamation, statutory arrangement or other combination, the holders of
Common Shares may have the right to dissent under the CBCA and to be paid fair
value for their Common Shares, with such fair value to be determined by a court.
Each of the methods of acquiring the remaining outstanding Common Shares
described above, other than the statutory rights of acquisition under the CBCA,
would be a "going private transaction" within the meaning of the regulations to
the Securities Act (Quebec) (the "Regulation"), Policy Q-27 and Policy 9.1 if
such method would result in the interest of a holder of Common Shares (the
"affected securities") being terminated without the consent of the holder and
without the substitution therefor of an interest of equivalent value in a
participating security of Bionaire, a successor to the business of Bionaire, a
person who controls Bionaire or a person who controls a successor to the
business of Bionaire. The transaction could also be a "related party
transaction" for purposes of Policy Q-27 and Policy 9.1.
Policy Q-27 and Policy 9.1 provide that, unless exempted, a person
proposing to carry out a going private transaction or a related party
transaction is required to prepare a valuation of the affected securities (and
any non-cash consideration being offered therefor) and provide to the holders of
the affected securities a summary of such valuation. An exemption from the
valuation requirement is generally available when the price offered to security
holders was arrived at within the 12 months immediately preceding the date of
the announcement of the going private transaction through an arm's length
transaction or negotiation with a selling security holder of a control block of
securities or a selling security holder of a sizeable block of securities where
the selling security holder had full knowledge and access to information
concerning the offeree issuer such that the underlying value of the offeree
issuer was a material factor considered by the selling security holder in
arriving at the price. If necessary, the Offeror will apply for an order from
the QSC and the OSC exempting the Offeror from the valuation requirement set out
in the Regulation, Policy Q-27 and Policy 9.1 for the possible going private
transaction or related party transaction following the Offer, on the basis that
although the Offeror has no agreement with a selling security holder of a
control block of securities or a selling security holder of a sizeable block of
securities, the price offered to holders of Common Shares is the same as if it
were arrived at through an arm's length transaction or negotiation with such
selling security holder.
22
<PAGE>
Policy Q-27 and Policy 9.1 would also require that, in addition to any
other required security holder approval, in order to complete a going private
transaction or a related party transaction, the approval of a simple or two-
thirds majority (depending on the nature of the transaction) of the votes cast
by minority shareholders of the affected securities be obtained. In the context
of this Offer and any subsequent going private or related party transactions,
holders of Common Shares would be entitled to vote separately unless the Offeror
is granted an exemption from this requirement.
Policy Q-27 and Policy 9.1 provide that the Offeror may treat Common Shares
acquired under the Offer as "minority" shares and vote them, or consider them
voted, in favour of such going private transaction or related party transaction
if the consideration per security in the going private transaction or related
party transaction is at least equal in value to the consideration paid under the
Offer and if the intent to effect the going private transaction or related party
transaction were disclosed at the time of the Offer. For purposes of this vote
of "minority" shareholders, Common Shares held or beneficially owned or over
which control or direction is exercised, directly or indirectly, by the Offeror
or any of its directors or senior officers, or any associate or affiliate of any
of them, or any person acting jointly or in concert with any of them in
connection with the Offer or the going private transaction or any "interested
party" (collectively, the "related parties") cannot be counted in the minority
vote. The Offeror intends that all of the Common Shares acquired under the
Offer from Shareholders, other than those owned by related parties, will be
included in the calculation of the minority approval of a going private
transaction or related party transaction, if any.
Canadian courts have, in a few instances prior to the adoption of Policy
Q-27 and Policy 9.1, granted preliminary injunctions to prohibit transactions
involving certain going private transactions. The current trend in both
legislation and in Canadian jurisprudence is toward permitting going private
transactions to proceed subject to compliance with procedural and substantive
fairness to the minority shareholders. The Offeror intends to comply with all
applicable requirements in respect of any going private transaction.
The Director under the CBCA released a policy stating, among other things,
that the Director is of the opinion that going private transactions are
permitted under the CBCA so long as the transaction is in compliance with the
requirements set forth in Policy Q-27 and Policy 9.1 and the transaction is not
oppressive or unfairly prejudicial to or unfairly disregards the interests of a
person whose interest in a participating security is being terminated without
his or her consent.
See "Certain Canadian Federal Income Tax Considerations" for a discussion
of the Canadian federal tax consequences to Shareholders under a going private
transaction.
MATERIAL AGREEMENTS
BIONAIRE AGREEMENT
On March 4, 1996, the Offeror and Bionaire entered into the Bionaire
Agreement, pursuant to which Bionaire agreed to pay the Offeror a fee of
$1,203,243, being equal to $0.08 per Common Share (which for the computation
thereof includes any Common Shares which may be issued pursuant to the exercise
of outstanding options that are "in the money" relative to the Offer price per
Common Share of $2.25 (the "Option Shares")), payable forthwith upon the
Termination Date, if the Offer is not successfully completed as a result of a
higher competing bid having been launched for the Common Shares or as a result
of any action on the part of Bionaire in violation of the conditions of the
Offer, and the Offeror determines not to take up any Common Shares under the
Offer and to terminate its Offer. Alternatively, pursuant to the Bionaire
Agreement, Bionaire has agreed that it will pay to the Offeror a fee of
$250,000, payable forthwith upon the Termination Date, if upon such date, the
number of Common Shares tendered to the Offer and not withdrawn represents less
than 66-2/3% of the Common Shares including as outstanding the Option Shares,
and the Offeror determines not to take up any Common Shares under the Offer and
terminates its Offer. The Bionaire Agreement does not restrict the ability of
Bionaire to solicit or
23
<PAGE>
receive expressions of interest for or to encourage competitive offers for
Bionaire nor the ability of the Shareholders to accept or reject the Offer.
SOURCE OF FUNDS FOR PAYMENT
The amount of cash required of the Offeror to purchase all Common Shares
under the Offer is $33.2 million. This amount, combined with the Offeror's
estimate of $950,000 as the amount required to pay the related fees and expenses
of the Offer, results in a total cash requirement of approximately $34.2
million. Rival has undertaken to advance these funds to the Offeror from
available cash on hand and amounts available under existing bank credit
facilities.
BENEFICIAL OWNERSHIP OF SECURITIES OF BIONAIRE
As at February 28, 1996, Mr. David J. Mahoney, a director of Bionaire
beneficially owned or exercised control over 1,549,818 common shares of
Bionaire representing approximately 10.7% of the outstanding common shares and
Mr. F. Ross Johnson, a director of Bionaire, beneficially owned, or exercised
control over 1,536,318 common shares representing approximately 10.6% of the
outstanding common shares. To the knowledge of the directors and officers of
Bionaire, no other person or corporation beneficially owned or exercised control
or direction over more than 10% of the outstanding common shares of Bionaire as
at February 28, 1996.
To the knowledge of the directors and senior officers of the Offeror after
reasonable enquiry, no securities of Bionaire are owned by any associate or
affiliate of the Offeror, or by any director or senior officer of the Offeror or
any associate of them or by any person or company holding more than 10% of any
class of equity securities of the Offeror, except 100 Common Shares acquired as
a result of an asset purchase agreement entered into in April 1995 with Patton
Electric Company Inc.
TRADING IN SECURITIES OF BIONAIRE
To the knowledge of the directors and senior officers of the Offeror after
reasonable enquiry, neither the Offeror nor any person or company acting jointly
or in concert with the Offeror, nor the Offeror's directors or senior officers
or their respective associates, have traded any securities of Bionaire during
the six-month period preceding the date of the Offer.
ARRANGEMENTS OR AGREEMENTS
There are no arrangements or agreements made or proposed to be made between
the Offeror and any of the directors or senior officers of Bionaire and no
payments or other benefits are proposed to be made or given by the Offeror by
way of compensation for loss of office or as to such directors or senior
officers remaining in or retiring from office. There are no contracts or
arrangements between the Offeror and any security holder of Bionaire with
respect to the Offer or between the Offeror and any person or company with
respect to any securities of Bionaire in relation to the Offer except as
described in the Offering Circular under "Material Agreements".
24
<PAGE>
PRICE RANGE AND VOLUME OF TRADING OF COMMON SHARES
The Common Shares are listed and posted for trading on The Montreal
Exchange and The Toronto Stock Exchange. The following tables set forth, for
the periods indicated, the reported high and low sales prices and the volume of
trading of the Common Shares on The Montreal Exchange and The Toronto Stock
Exchange.
THE MONTREAL EXCHANGE
<TABLE>
<CAPTION>
HIGH LOW VOLUME
---- ---- -------
<S> <C> <C> <C>
1995
- ----
September........... 1.50 1.30 124,100
October............. 1.40 0.95 316,750
November............ 1.15 0.87 293,500
December............ 0.91 0.70 627,673
1996
- ----
January............. 1.50 0.85 323,833
February............ 2.00 0.90 833,049
March (to March 4).. 2.15 1.85 195,800
</TABLE>
THE TORONTO STOCK EXCHANGE
<TABLE>
<CAPTION>
HIGH LOW VOLUME
---- ---- -------
<S> <C> <C> <C>
1995
- ----
September........... 1.50 1.32 20,978
October............. 1.40 0.95 135,775
November............ 1.05 0.86 61,710
December............ 0.91 0.74 122,350
1996
- ----
January............. 1.50 0.81 142,977
February............ 2.00 0.95 347,950
March (to March 4).. 2.15 1.90 93,200
</TABLE>
On March 1, 1996, the business day prior to the public announcement of the
Offeror's intention to make the Offer, the closing price of the Common Shares on
The Montreal Exchange was $1.98 and on The Toronto Stock Exchange, $1.95.
25
<PAGE>
REGULATORY MATTERS
COMPETITION ACT (CANADA)
The merger provisions of the Competition Act (Canada) permit the Director
of Investigation and Research appointed under the Competition Act (Canada) (the
"Director") to apply to the Competition Tribunal (the "Tribunal") to seek relief
in respect of merger transactions (including share acquisitions) which are
likely to prevent or lessen competition substantially. The relief that may be
ordered by the Tribunal includes, in the case of a proposed merger transaction,
prohibiting completion of the transaction. Proceedings under the merger
provisions of the Competition Act (Canada) may be instituted by the Director for
a period of three years after a merger transaction has been substantially
completed.
The Competition Act (Canada) requires that a pre-merger notification filing
be submitted to the Director in respect of merger transactions which exceed
certain prescribed size thresholds. The acquisition contemplated by the Offer
does not exceed the size threshold applicable to share acquisitions. As a
result, the Offeror does not intend to submit to the Director a premerger
notification filing in respect of this transaction pursuant to Part IX of the
Competition Act (Canada).
INVESTMENT CANADA ACT
Under the Investment Canada Act the acquisition by a non-Canadian of
control of a Canadian business which exceeds certain size thresholds is
reviewable and subject to approval by the Minister of Industry (the "Minister").
Such approval is to be granted where the Minister is satisfied that the
acquisition is likely to be of net benefit to Canada. The acquisition of
control contemplated by the Offer does not exceed the applicable size threshold
and therefore only a notice of the acquisition need be given to the Minister by
the Offeror within 30 days thereof.
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 (UNITED STATES)
Under the United States Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations that have been promulgated
thereunder by the United States Federal Trade Commission (the "FTC")
(collectively the "HSR Act"), certain transactions may not be consummated until
certain information and documentary materials have been furnished to the
Antitrust Division and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Common Shares pursuant to the Offer is subject to
such requirements and the Offeror is filing a Premerger Notification and Report
Form with the Antitrust Division and the FTC in connection with the Offer (the
"HSR Filing").
Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Common Shares pursuant to the Offer may not be consummated until
the expiration or early termination by the FTC and the Antitrust Division of a
15 calendar day waiting period following the HSR Filing by the Offeror. If,
within the 15 day waiting period, either the Antitrust Division or the FTC
issues a request for additional information or documentary materials (a "Second
Request"), the waiting period will be extended for an additional period of 10
calendar days following the date of substantial compliance by the Offeror with
such Second Request.
If the Offeror's acquisition of Shares is delayed by the issuance of a
Second Request, the Offer may be extended. In any event, the purchase of and
payment for Common Shares must be deferred until 10 days after the Offeror
substantially complies with such Second Request or until the additional waiting
period is earlier terminated by the FTC and the Antitrust Division. Only one
extension of the waiting period pursuant to a Second Request is authorized by
the HSR Act and, thereafter, the waiting period can be extended only by
voluntary agreement with the FTC or the Antitrust Division. Under the terms of
the HSR Act, the Offeror may not take up and pay for
26
<PAGE>
Common Shares tendered pursuant to the Offer unless and until the filing and
waiting period requirements of the HSR Act applicable to the Offer have been
satisfied.
The Antitrust Division and the FTC may scrutinize the legality under the
U.S. antitrust laws of transactions such as the Offeror's acquisition of Common
Shares pursuant to the Offer. At any time before or after the Offeror's
purchase of the Common Shares, the Antitrust Division or the FTC could take such
action under the antitrust laws as either deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of any transaction
or to require the divestiture of substantial assets of the Offeror or Bionaire.
Private parties as well as state attorneys general may also bring legal actions
under the U.S. antitrust laws under certain circumstances.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Desjardins Ducharme Stein Monast, general partnership,
counsel to the Offeror, the following is a summary of certain considerations
under the Act generally applicable to a holder of Common Shares who sells his,
her or its Common Shares pursuant to the Offer.
This summary applies only to Shareholders who, for purposes of the Act,
hold Common Shares as capital property and deal at arm's length with the
Offeror. The Common Shares will generally be considered capital property of a
Shareholder for purposes of the Act unless the Shareholder holds such Common
Shares in the course of carrying on a business or acquired such Common Shares in
a transaction or transactions considered to be an adventure in the nature of
trade. Certain Shareholders who are resident in Canada and whose Common Shares
might not otherwise qualify as capital property may be entitled to obtain such
qualification by making the election permitted by subsection 39(4) of the Act.
Under proposed amendments to the Act, certain Shareholders, including certain
financial institutions, registered securities dealers and corporations
controlled by one or more of the foregoing, will, subject to transitional rules,
generally be precluded from treating Common Shares as capital property.
This summary is based upon the current provisions of the Act and the
Regulations thereunder, all specific proposals to amend the Act publicly
announced by the Minister of Finance (Canada) prior to the date hereof and upon
counsel's understanding of the current published administrative practices of
Revenue Canada ("RC"). This summary is not exhaustive of all Canadian federal
income tax considerations. Except as referred to above, this summary does not
take into account or anticipate changes in income tax law or published
administrative practices, nor does it take into account provincial, territorial
or foreign tax considerations, which considerations may differ significantly
from those discussed herein.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO CONSTITUTE,
NOR SHOULD IT BE CONSTRUED TO CONSTITUTE, LEGAL OR TAX ADVICE TO ANY PARTICULAR
HOLDER OF COMMON SHARES. HOLDERS OF COMMON SHARES ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR INCOME TAX CONSEQUENCES TO THEM ON THE
SALE OF COMMON SHARES PURSUANT TO THE OFFER.
I. THE OFFER
(A) SHAREHOLDERS RESIDENT IN CANADA
A Shareholder who is resident or deemed to be resident in Canada for
purposes of the Act and who sells or is deemed to sell Common Shares for cash
pursuant to the Offer will realize a capital gain (or capital loss) equal to the
amount by which the cash received by the Shareholder exceeds (or is less than)
the adjusted cost base to the Shareholder of the Common Shares for purposes of
the Act and any reasonable costs of disposition. In general, a Shareholder is
required to include in computing income for tax purposes three-quarters of the
amount of any
27
<PAGE>
resulting capital gain (the "taxable capital gain") and is generally entitled to
deduct three-quarters of the amount of any resulting capital loss (the
"allowable capital loss") against taxable capital gains realized by the
Shareholder in the year of sale. Allowable capital losses may be carried back
and deducted in any of the three years preceding the year of sale or carried
forward and deducted in any year following the year of sale to the extent and
under the circumstances prescribed in the Act.
In the case of a Shareholder that is a corporation, the amount of any
capital loss otherwise determined may be reduced by the amount of dividends
received in respect of such Common Shares to the extent and under the
circumstances prescribed by the Act; analogous rules apply where the corporation
is a member of a partnership or beneficiary of a trust that owns Common Shares.
Proposed amendments to the Act will introduce a refundable tax of 6-2/3% on
investment income (other than dividends deductible in computing taxable income)
earned by a Canadian controlled private corporation. For this purpose,
investment income will include interest and taxable capital gains. This new tax
is proposed to apply for taxation years that end after June 1995 and will be
pro-rated for a taxation year beginning before July 1995.
The acceptance of the Offer by a Shareholder who has included his Common
Shares in a Quebec Stock Saving Plan ("QSSP") will give rise to the withdrawal
of such Common Shares from the individual's QSSP. Shareholders should consult
their tax advisors to determine whether an amount is includable in income as a
result of this withdrawal. Shareholders may wish to consider the opportunity of
purchasing qualifying shares eligible for inclusion in a QSSP in order to avoid
the potential income inclusion, if any, associated with the withdrawal of the
Common Shares from a QSSP.
The full amount of capital gains must be included in a Canadian resident's
individual adjusted taxable income for the purposes of computing such
individual's liability under the Act for the alternative minimum tax.
(B) SHAREHOLDERS NOT RESIDENT IN CANADA
A Shareholder who is not resident and not deemed to be resident in Canada
for purposes of the Act will not be subject to tax under the Act in respect of a
capital gain realized upon the disposition of a Common Shares unless the Common
Shares constitutes or is deemed to constitute "taxable Canadian property" for
purposes of the Act. The definition of "taxable Canadian property" would
include any Common Share held by a Shareholder if, at any time during part of
the five-year period immediately preceding the disposition of the Common Share,
not less than 25% of the issued Common Shares of any class of Common Shares of
Bionaire belonged to the particular Shareholder, to persons with whom the
particular Shareholder did not deal at arm's length or to any combination
thereof. Taxable Canadian property would also include any Common Share held by
a Shareholder if the Shareholder has used or has been deemed to use this Common
Share in carrying on a business (other than an insurance business) in Canada or,
if the Shareholder is a non-resident and an insurer, any Common Share used or
held by the Shareholder in the year of sale in the course of carrying on an
insurance business in Canada. Furthermore, Common Shares will constitute
taxable Canadian property of a former Canadian resident who made an election
under the Act in respect of such Common Shares on the Shareholder's departure
from Canada.
Even if a Common Shares constitutes or is deemed to constitute taxable
Canadian property to a particular Shareholder and its disposition would give
rise to a capital gain, an exemption from income tax under the Act may be
available under the terms of any applicable international tax treaty to which
Canada is a party.
II. GOING PRIVATE TRANSACTION
If the statutory right of acquisition described under "Acquisition of
Common Shares Not Deposited" is not available, the Offeror intends to pursue
another method of acquiring all of the Common Shares in accordance with
28
<PAGE>
applicable law, including an amalgamation. In this respect, the Offeror would
be continued under the CBCA and amalgamated with Bionaire to become the
amalgamated corporation ("Amalco").
Pursuant to the amalgamation of the Offeror and Bionaire, Shareholders who
exchanged or were deemed to have exchanged Common Shares of Bionaire would
receive shares of Amalco in exchange for their Common Shares of Bionaire. For
purposes of the Act, a Shareholder will be deemed to have disposed of the
Shareholder's Common Shares of Bionaire for proceeds of disposition equal to the
adjusted cost base to the Shareholder of such Common Shares of Bionaire
immediately before the amalgamation and will be deemed to have acquired the
shares of Amalco at a cost for purposes of the Act equal to the same amount.
A Shareholder who dissents will be entitled to receive the fair value of
the Shareholder's Common Shares. Under the current published administrative
practice of RC, the amount so received would be treated as proceeds of
disposition giving rise to a capital gain or capital loss. The calculation and
tax treatment of any such capital gain or capital loss will be as described
above under "The Offer -- Shareholders Resident in Canada".
A Shareholder who is not resident and is not deemed to be resident in
Canada will not be subject to tax under the Act in respect of any such capital
gain unless the Common Shares constitute or are deemed to constitute "taxable
Canadian property" for purposes of the Act. See the description under "The
Offer - Shareholders Not Resident in Canada" for a definition of "taxable
Canadian property". Even if the Common Shares constitute taxable Canadian
property and the non-resident Shareholder realizes a capital gain, an exemption
from tax under the Act may be available under the terms of any applicable
international tax treaty to which Canada is a party.
DEPOSITARY
The Offeror has engaged Montreal Trust Company as depositary for the
receipt of certificates in respect of Common Shares and related Letters of
Acceptance and Transmittal and Notices of Guaranteed Delivery deposited under
the Offer, for giving notice, if required, and for making the payment for Common
Shares purchased by the Offeror pursuant to the Offer. The Depositary will
receive reasonable and customary compensation from the Offeror for its services
in connection with the Offer, will be reimbursed for certain out-of-pocket
expenses and will be indemnified against certain liabilities, including
liabilities under securities laws and expenses in connection therewith.
SOLICITING DEALER GROUP
The Offeror has engaged the services of Thomson Kernaghan & Co. Ltd. to act
as Dealer Manager and to solicit acceptances of the Offer in Canada. The Dealer
Manager has undertaken to form a soliciting dealer group comprising members of
the Investment Dealers Association of Canada and members of the stock exchanges
in Canada to solicit acceptances of the Offer. Each member of the soliciting
dealer group, including the Dealer Manager, is referred to herein as a
"Soliciting Dealer". The Offeror has agreed to pay to the Dealer Manager a fee
of $25,000 for forming and managing the soliciting dealer group and for related
matters and a fee of $50,000 if the Offeror takes up and pays for any of the
Common Shares pursuant to the Offer. The Offeror has also agreed to pay to each
Soliciting Dealer whose name appears in the appropriate space in the Letter of
Acceptance and Transmittal accompanying a deposit of Common Shares a fee of
$0.03 for each such Common Share deposited and taken up by the Offeror under the
Offer. In the absence of indication of a Soliciting Dealer in the Letter of
Acceptance and Transmittal, the fee will be paid to the Dealer Manager. The
aggregate amount payable to a Soliciting Dealer with respect to any single
depositing holder of Common Shares will be not less than $75, in the event that
200 or more Common Shares are deposited by a particular Shareholder, nor more
than $1,500. The Offeror may require the Soliciting Dealer to furnish evidence
of such beneficial ownership satisfactory to the Offeror at the time of the
deposit.
29
<PAGE>
The Dealer Manager will be indemnified against certain liabilities,
including liabilities under securities laws.
No fee or commission will be payable by any holders of Common Shares who
transmit such Common Shares directly to the Depositary or who make use of the
facilities of a Soliciting Dealer to accept the Offer. Except as set forth
above, the Offeror will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Common Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies and other nominees will,
upon request, be reimbursed by the Offeror for customary clerical and mailing
expenses incurred by them in forwarding materials to their customers.
Questions and requests for assistance concerning the Offer should be
directed to the Dealer Manager or the Depositary.
DIRECTORS' APPROVAL
The contents of the Offer to Purchase and this Offering Circular have been
approved, and the sending thereof to the holders of the Common Shares has been
authorized, by the board of directors of the Offeror.
OFFEREES' STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of
Canada provides holders of Common Shares with, in addition to any other rights
they may have at law, rights for rescission or to damages, or both, if there is
a misrepresentation in a circular or notice that is required to be delivered to
the holders of Common Shares. Such rights must be exercised within prescribed
time limits. Holders of Common Shares should refer to the applicable provisions
of the securities legislation of their province or territory for the particulars
of those rights or consult with a lawyer.
30
<PAGE>
CONSENT
CONSENT OF CANADIAN COUNSEL
TO: The Directors of RC Acquisition Inc.
We hereby consent to the reference to our opinion contained under "Certain
Canadian Federal Income Tax Considerations" in the Offering Circular
accompanying the Offer dated March 5, 1996 made by RC Acquisition Inc. to the
holders of Common Shares of Bionaire Inc.
(Signed) Desjardins Ducharme Stein Monast
(general partnership)
Montreal, Canada
March 5, 1996
31
<PAGE>
CERTIFICATE
March 5, 1996
The contents of the Offer to Purchase and the Offering Circular have been
approved, and the sending, communication or delivery thereof to Shareholders of
Bionaire has been authorized by the board of directors of the Offeror. The
foregoing does not contain any misrepresentation likely to affect the value or
the market price of the Common Shares. The foregoing contains no untrue
statement of a material fact and does not omit to state a material fact that is
required to be stated or that is necessary to make a statement not misleading in
the light of the circumstances in which it was made.
RC ACQUISITION INC.
<TABLE>
<CAPTION>
<S> <C>
(Signed) Thomas K. Manning (Signed) William L. Yager
President and Chief Executive Officer Vice-President, Finance and Chief Financial Officer
</TABLE>
On behalf of the Board of Directors
(Signed) William S. Endres (Signed) Stanley D. Biggs
Director Director
32
<PAGE>
[LOGO OF KPMG] EXHIBIT 2
Consolidated Financial Statements of
BIONAIRE INC.
Year ended December 31, 1995 and period from March 1, 1994
to December 31, 1994
<PAGE>
[LETTERHEAD OF KPMG]
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Bionaire Inc. as at December
31, 1995 and 1994 and the consolidated statements of loss, deficit and changes
in financial position for the periods then ended. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
1995 and 1994 and the results of its operations and the changes in its financial
position for the periods then ended in accordance with generally accepted
accounting principles.
/s/ KPMG Peat Marwick Thorne
Chartered Accountants
Montreal, Canada
February 23, 1996
<PAGE>
<TABLE>
<CAPTION>
BIONAIRE INC.
Consolidated Balance Sheets
December 31, 1995, with comparative figures for 1994
=============================================================================
1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Accounts receivable $30,535,417 $29,438,906
Income taxes receivable 592,154 126,592
Inventories (note 2) 16,190,015 25,544,129
Prepaid expenses and other assets 650,916 525,033
---------------------------------------------------------------------------
47,968,502 55,634,660
Capital assets (note 3) 6,350,107 5,531,630
- -----------------------------------------------------------------------------
$54,318,609 $61,166,290
=============================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness (notes 4 and 5) $15,212,070 $16,622,020
Accounts payable and accrued liabilities 14,695,379 12,908,255
Current portion of long-term debt (note 5) 1,008,000 1,820,705
---------------------------------------------------------------------------
30,915,449 31,350,980
Long-term debt (note 5) 1,438,000 2,446,000
Deferred income taxes -- 50,000
Shareholders' equity:
Share capital (note 6) 26,634,240 26,350,208
Retained earnings (deficit) (4,669,080) 969,102
---------------------------------------------------------------------------
21,965,160 27,319,310
Commitments and contingent liabilities (note 12)
- -----------------------------------------------------------------------------
$54,318,609 $61,166,290
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
Director
- -----------------------
Director
- -----------------------
<PAGE>
BIONAIRE INC.
Consolidated Statements of Loss
Periods ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
====================================================================
1995 1994
- --------------------------------------------------------------------
(12 months) (10 months)
<S> <C> <C>
Net sales $77,768,077 $69,055,166
Cost of sales 54,801,146 42,553,686
- --------------------------------------------------------------------
Gross margin 22,966,931 26,501,480
Operating expenses:
Sales and marketing 19,209,408 16,951,443
Research and development (note 7) 1,613,999 1,151,778
Administration 5,983,863 5,056,383
- --------------------------------------------------------------------
26,807,270 23,159,604
Restructuring and other costs (note 8) -- 2,169,040
- --------------------------------------------------------------------
Operating income (loss) (3,840,339) 1,172,836
Interest and debt expense, net 2,142,843 1,008,686
- --------------------------------------------------------------------
Income (loss) before income taxes (5,983,182) 164,150
Income taxes (note 9):
Current (295,000) 198,000
Deferred (50,000) (122,000)
- --------------------------------------------------------------------
(345,000) 76,000
- --------------------------------------------------------------------
Net income (loss) $(5,638,182) $ 88,150
====================================================================
Earnings (loss) per common share:
Basic $(0.39) $ 0.01
Fully diluted (0.39) 0.01
====================================================================
Weighted average common shares outstanding
during the period 14,449,386 14,076,842
====================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BIONAIRE INC.
Consolidated Statements of Deficit
Periods ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
=======================================================================
1995 1994
- -----------------------------------------------------------------------
(12 months) (10 months)
<S> <C> <C>
Retained earnings, beginning of period $ 969,102 $880,952
Net income (loss) (5,638,182) 88,150
- ----------------------------------------------------------------------
Retained earnings (deficit), end of period $(4,669,080) $969,102
======================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BIONAIRE INC.
Consolidated Statements of Changes in Financial Position
Periods ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
=========================================================================================
1995 1994
- -----------------------------------------------------------------------------------------
(12 months) (10 months)
<S> <C> <C>
Cash provided by (used in):
Operations:
Net income (loss) $ (5,638,182) $ 88,150
Add (deduct) items not affecting cash:
Deferred income taxes (50,000) (122,000)
Depreciation and amortization 1,858,523 1,836,900
Net change in non-cash working capital balances (note 10) 9,453,282 (20,118,680)
- -----------------------------------------------------------------------------------------
5,623,623 (18,315,630)
Investment:
Net purchase of fixed assets (2,677,000) (2,381,214)
Financing:
Proceeds from the issue of common shares 284,032 1,117,331
Increase (decrease) in long-term debt (1,820,705) 520,000
- -----------------------------------------------------------------------------------------
(1,536,673) 1,637,331
- -----------------------------------------------------------------------------------------
Increase (decrease) in cash during the period 1,409,950 (19,059,513)
Cash (bank indebtedness), beginning of period (16,622,020) 2,437,493
- -----------------------------------------------------------------------------------------
Bank indebtedness, end of period $(15,212,070) $(16,622,020)
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements
Periods ended December 31, 1995 and 1994
===============================================================================
Bionaire Inc. (the "Corporation") operates under the Canada Business
Corporations Act. Its principal business activities include designing,
manufacturing and marketing environmental air products. In 1994, the
Corporation prospectively changed its year-end to December 31 from February
28 to bring its financial reporting in line with its major customers and
competitors, and with the reporting period customarily used in industry
statistics.
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Principles of consolidation:
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in Canada and
include the accounts of the Corporation and its wholly-owned
subsidiary companies, Bionaire Corporation and Bionaire Worldwide
Management, Inc. (in the U.S.A.) and Bionaire International B.V. (in
Europe).
(b) Foreign exchange:
Monetary assets and liabilities denominated in foreign currencies are
translated at the rates of exchange at the balance sheet dates. Other
balance sheet items are translated at the rates prevailing at the
respective transaction dates. Income and expenses are translated at
average rates prevailing during the year, except for depreciation and
amortization which are translated at the same rates as the assets to
which they relate. Gains or losses on foreign exchange are recorded in
the statements of income.
The foreign subsidiaries are considered to be integrated foreign
operations and their accounts have been translated using the temporal
method.
(c) Inventories:
Raw materials are valued at the lower of cost and replacement cost.
Finished goods are valued at the lower of cost (first in, first out)
and net realizable value.
(d) Capital assets:
Capital assets are recorded at cost. Depreciation is calculated using
the following annual rates:
<TABLE>
<CAPTION>
==========================================================================
Asset Basis Rate
- --------------------------------------------------------------------------
<S> <C> <C>
Tooling and moulds Straight-line 20%
Machinery and equipment Declining balance 20%
Furniture and fixtures Declining balance 20%
==========================================================================
</TABLE>
Leasehold improvements are amortized over the terms of the related
leases.
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 2
Periods ended December 31, 1995 and 1994
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Concentration of credit risk:
Approximately 42% (1994 - 33%) of the Corporation's sales were made to
five unrelated companies, one of whom alone represented 20% (1994 -
12%) of the year's sales.
Credit risk results from the possibility that a loss may occur from
the failure of another party to perform according to the terms of the
contract. The Corporation regularly monitors the credit risk exposures
and takes steps, such as obtaining credit insurance, to mitigate the
likelihood of these exposures resulting in actual loss.
The Corporation's extension of credit is based on an evaluation of the
customer's financial condition. Credit losses are provided for in the
financial statements and have been within management's expectations.
<TABLE>
<CAPTION>
2. INVENTORIES:
====================================================================================================
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 6,128,653 $ 6,553,092
Finished goods 10,061,362 18,991,037
- ----------------------------------------------------------------------------------------------------
$16,190,015 $25,544,129
====================================================================================================
</TABLE>
3. CAPITAL ASSETS:
<TABLE>
<CAPTION>
====================================================================================================
1995 1994
- ----------------------------------------------------------------------------------------------------
Accumulated
depreciation Net book Net book
Cost and amortization value value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tooling and moulds $ 7,629,707 $3,058,020 $4,571,687 $3,844,111
Machinery and
equipment 1,708,472 1,186,290 522,182 616,295
Furniture and fixtures 3,016,529 1,900,576 1,115,953 985,048
Leasehold
improvements 668,428 528,143 140,285 86,176
- ----------------------------------------------------------------------------------------------------
$13,023,136 $6,673,029 $6,350,107 $5,531,630
====================================================================================================
</TABLE>
During 1995, an amount of $2,542,000 (1994 - Nil) of fully depreciated
tooling and moulds was written off.
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 3
Periods ended December 31, 1995 and 1994
=================================================================
4. BANK INDEBTEDNESS:
Included in bank indebtedness is $15,073,000 (US$11,050,000) (1994 -
$6,654,000 (US$4,747,000)) which is repayable in US funds.
5. LONG-TERM DEBT:
<TABLE>
<CAPTION>
=================================================================
1995 1994
-----------------------------------------------------------------
<S> <C> <C>
Bank term loans $ 2,446,000 $ 4,266,705
Less amounts due within one year (1,008,000) (1,820,705)
-----------------------------------------------------------------
$ 1,438,000 $ 2,446,000
=================================================================
</TABLE>
Interest on long-term debt for the period amounted to approximately
$345,000 (ten months ended December 31, 1994 - $205,000).
The bank term loans bear interest at a rate of 1% above the bank's prime
rate and are repayable over various terms to December 1998. The bank term
loans and bank indebtedness outstanding under the Corporation's operating
line are secured by a general assignment of book debts, inventories and
fire insurance. In addition, the Corporation has granted security under a
first rank deed of moveable hypothec charging the universality of all of
the assets of the Corporation, including the pledging of all the shares of
the Corporation's subsidiaries.
The aggregate payments of principal to meet debt obligations in each of the
next three years are as follows:
<TABLE>
<CAPTION>
=================================================================
<S> <C>
1996 $1,008,000
1997 950,000
1998 488,000
-----------------------------------------------------------------
$2,446,000
=================================================================
</TABLE>
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 4
Periods ended December 31, 1995 and 1994
==============================================================================
6. SHARE CAPITAL:
<TABLE>
<CAPTION>
=====================================================================================
1995 1994
-------------------------------------------------------------------------------------
Book Book
Shares value Shares value
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Authorized:
Unlimited number of no par
value common shares
Issued:
Total outstanding,
beginning of period 14,324,383 $26,350,208 13,876,384 $25,232,877
Shares issued under
employee share
ownership plan (a) 102,635 109,032 93,499 252,331
Shares issued on
exercise of options (b) 110,000 175,000 354,500 865,000
-------------------------------------------------------------------------------------
Total outstanding, end
of period 14,537,018 $26,634,240 14,324,383 $26,350,208
=====================================================================================
</TABLE>
(a) The Corporation has an employee share ownership plan in which employees
can elect to have funds set aside up to a maximum of 10% of their
employment income to purchase shares at 90% of the market value at given
dates.
(b) The Corporation has a stock option plan applicable to senior executives
and directors of the Corporation. The options under the plan are granted at
the then current market price of the common shares of the Corporation and
expire at the earlier of a predetermined date or within ninety days
following termination of employment. No options may be granted under this
plan subsequent to November 9, 1997. The plan provides that the number of
common shares reserved by the Board of Directors for issuance upon the
exercise of options granted under this plan, combined with those shares
reserved for under the employee share ownership plan, is limited to
1,400,000 common shares.
Changes in outstanding options were as follows:
<TABLE>
<CAPTION>
=====================================================================================
<S> <C>
Options outstanding, February 28, 1994 885,054
Exercised --
Cancelled or expired (25,000)
Granted 94,400
-------------------------------------------------------------------------------------
Options outstanding, December 31, 1994 954,454
Exercised (110,000)
Cancelled or expired (185,600)
Granted 220,000
-------------------------------------------------------------------------------------
Options outstanding, December 31, 1995 878,854
=====================================================================================
</TABLE>
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 5
Periods ended December 31, 1995 and 1994
================================================================================
6. SHARE CAPITAL (CONTINUED):
As at December 31, 1995, options outstanding were as follows:
<TABLE>
<CAPTION>
============================================================================
Options Exercise Expiry
outstanding price date
----------------------------------------------------------------------------
<S> <C> <C>
18,500 $1.85 December 3, 1997
10,000 1.75 May 23, 1999
20,000 1.65 June 1, 1999
15,000 1.00 May 4, 2000
34,860 2.20 March 25, 2002
6,000 3.00 June 16, 2002
519,494 2.43 December 1, 2002
25,000 3.60 May 17, 2003
10,000 3.38 April 4, 2004
220,000 1.75 May 25, 2005
----------------------------------------------------------------------------
878,854
============================================================================
</TABLE>
7. RESEARCH AND DEVELOPMENT:
Research and development expenses are net of tax credits of $155,000 (ten
months ended December 31, 1994 - $150,000) recognized in the period.
8. RESTRUCTURING AND OTHER COSTS:
The 1994 restructuring and other costs include approximately $1,200,000
relating to the closure and relocation of a sales and marketing office, and
approximately $1,000,000 incurred in the settlement of a patent lawsuit.
9. INCOME TAXES:
Details of the components of the income tax provision are as follows:
<TABLE>
<CAPTION>
================================================================================
1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Combined basic Canadian federal and provincial income
taxes $(2,274,000) $ 63,000
Increase (decrease) in income taxes resulting from:
Manufacturing and processing profit deduction 321,000 (32,000)
Federal income tax surcharge -- 4,000
Effect of lower provincial income taxes -- (1,000)
Permanent differences and other 45,000 42,000
Non-recognition of potential benefit of loss carry
forwards and unclaimed deductions 1,563,000 --
--------------------------------------------------------------------------------
Income taxes (recovery) $ (345,000) $ 76,000
================================================================================
</TABLE>
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 6
Periods ended December 31, 1995 and 1994
================================================================================
9. INCOME TAXES (CONTINUED):
As at December 31, 1995, the Corporation has approximately $1.4 million of
losses carried forward which can be used to reduce Canadian taxable income
in the future. These losses expire in 2002. In addition, the Corporation
has deducted approximately $1.2 million of expenses for accounting purposes
in excess of amounts deducted for Canadian federal income tax purposes. The
related income tax benefits of the available loss carry forwards and
unclaimed deductions will be recorded when realized.
As at December 31, 1995, the Corporation has approximately $1,700,000 of
investment tax credits, the benefit of which has not been recorded, which
may be carried forward to reduce future Canadian federal income taxes
payable. These credits expire as follows:
============================================================================
1999 $128,000
2000 218,000
2001 140,000
2002 233,000
2003 339,000
2004 273,000
2005 369,000
----------------------------------------------------------------------------
$1,700,000
============================================================================
The Corporation's U.S. subsidiaries have approximately $900,000 of losses
carried forward which will expire in the year 2010. The benefit of these
losses will be recognized when realized.
10. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES:
============================================================================
1995 1994
----------------------------------------------------------------------------
Accounts receivable $(1,096,511) $(14,842,713)
Income taxes receivable (465,562) (132,976)
Inventories 9,354,114 (7,705,720)
Prepaid expenses and other assets (125,883) (31,972)
Accounts payable and accrued liabilities 1,787,124 2,594,701
----------------------------------------------------------------------------
$ 9,453,282 $(20,118,680)
============================================================================
11. SEGMENTED INFORMATION:
The Corporation operates in one industry segment - environmental air
products. Export sales to the United States amounted to $46,749,000 (ten
months ended December 31, 1994 - $43,169,000) and to other international
markets amounted to $11,807,000 (ten months ended December 31, 1994 -
$8,813,000).
<PAGE>
BIONAIRE INC.
Notes to Consolidated Financial Statements, page 7
Periods ended December 31, 1995 and 1994
================================================================================
12. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) Future minimum payments under operating leases relating primarily to
office space and equipment are approximately as follows:
============================================================================
1996 $1,894,000
1997 1,842,000
1998 1,810,000
1999 1,466,000
2000 1,247,000
Thereafter 3,772,000
----------------------------------------------------------------------------
$12,031,000
============================================================================
(b) The Corporation is a defendant to an action commenced by five former
shareholders. The action is against twenty-four individuals and the
Corporation. In their action as it relates to the Corporation, the plaintiffs
allege that, during the course of negotiations for the sale of their shares of
the Corporation to certain of the defendants, the Corporation gave them
insufficient or misleading information concerning its business and financial
position. The plaintiffs sought to recover from the defendants approximately
$9,000,000. Some defendants, including the Corporation, are being sued for
the total amount.
Judgment was rendered on February 15, 1990 dismissing the action against
all defendants except two of the Corporation's directors, one shareholder and
the Corporation. The total condemnation was for approximately $200,000 plus
interest which all four defendants were jointly and severally liable to pay.
Both the plaintiffs and defendants have appealed this judgment. Both parties
have produced their factum and are awaiting a court date. The amount of the
claim by the plaintiffs has been reduced to approximately $3,000,000 plus
interest and costs. Management maintains that the Corporation's defense is
good and valid.
Generally accepted accounting principles in Canada would currently permit
the recording of any loss from the resolution of this matter as a prior period
adjustment. This accounting principle has been changed to require, subsequent
to December 31, 1996, that any future loss would be accounted for as a charge
to income in the year of settlement.
