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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported): June 10, 1997
Buckeye Cellulose Corporation
Commission File Number: 33-60032
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Delaware 62-1518973
Buckeye Cellulose Corporation
1001 Tillman Street
Memphis, TN 38112
901-320-8100
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1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 28, 1997, Buckeye Cellulose Corporation, a Delaware corporation (the
Company), announced that the Company's wholly-owned subsidiary, Buckeye
Acquisition Inc. (BAI), completed its acquisition of 27,280,541 common shares of
Merfin International Inc. (Merfin) for Cdn. $7.50 per share, representing
approximately 97.5% of the issued and outstanding common shares of Merfin.
Pursuant to section 255 of the Company Act (British Columbia), BAI has sent
notices to the remaining shareholders of Merfin informing them of its intent to
acquire the balance of Merfin's outstanding shares for Cdn. $7.50 per share.
Additionally, Merfin has applied to the Toronto Stock Exchange (TSE) to delist
the shares of Merfin from the TSE and will apply to the Munich Stock Exchange to
similarly delist the shares from there.
Merfin is one of the leading manufacturers of air-laid fabrics which are
used as ultra thin absorbent cores in feminine hygiene and adult incontinence
products. Other applications of air-laid fabrics include hot towels, baby wipes,
table top products and a variety of industrial wipes. Together with its
wholly-owned subsidiaries, Merfin manufactures, converts and distributes paper
products for commercial, industrial and institutional markets in North and South
America, Europe and the Pacific Rim countries of Japan, Korea, Taiwan, Hong Kong
and Singapore.
The purchase price in US dollars, assuming 100% of Merfin's stock is
acquired and including Merfin's debt as of the date of acquisition, is
approximately $200 million. The acquisition is being funded by borrowings from
the Company's new $275 million credit facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
To be filed by amendment. Pursuant to Item 7(a)(4) of Form 8-K, the
Registrant hereby indicates that the filing of such financial statements is
impracticable and undertakes to file such information on a Form 8K/A
Amendment to this Report no later than 60 days after June 12, 1997.
(b) Pro forma financial information.
To be filed by amendment. Pursuant to Item 7(b)(2) of Form 8-K, the
Registrant hereby indicates that the filing of such financial statements is
impracticable and undertakes to file such information on a Form 8-K/A
Amendment to this Report no later than 60 days after June 12, 1997.
Exhibits:
No. Description
=== ===========
2.1 Offer to Purchase for Cash all of the Common Shares of Merfin International
Inc. at a price of Cdn. $6.00 per Common Share by Buckeye Acquisition Inc.
dated March 25, 1997.
2.2 Notice of Variation of the Offer to Purchase for Cash all of the Common
Shares of Merfin International Inc. at a price of Cdn. $6.00 per Common
Share by Buckeye Acquisition, Inc. dated April 15, 1997.
2.3 Second Notice of Variation of the Offer to Purchase for Cash all of the
Common Shares of Merfin International Inc. at an increased price of Cdn.
$6.50 per Common Share by Buckeye Acquisition Inc. dated April 25, 1997.
2.4 Third Notice of Variation of the Offer to Purchase for Cash all of the
Common Shares of Merfin International Inc. at an increased price of $7.00
per Common Share by Buckeye Acquisition Inc. dated May 5, 1997.
2
<PAGE>
No. Description
=== ===========
2.5 Fourth Notice of Variation of the Offer to Purchase for Cash all of the
Common Shares of Merfin International Inc. at an increased price of $7.50
per Common Share by Buckeye Acquisition Inc. dated May 15, 1997.
SIGNATURES
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.
Buckeye Cellulose Corporation
By: /s/ DAVID H. WHITCOMB
--------------------------------
David H. Whitcomb
Vice President and Comptroller
Date: June 10, 1997
Exhibit 2.1
36 pages
March 25, 1997
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at a price of
Cdn. $6.00 per Common Share by
BUCKEYE ACQUISITION INC.
<PAGE>
This document is important and requires your immediate attention. If you
are in doubt as to how to deal with it, you should consult your investment
dealer, broker, bank manager, lawyer or other professional advisor.
March 25, 1997
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at a price of
Cdn. $6.00 per Common Share by
BUCKEYE ACQUISITION INC.
The Offer by Buckeye Acquisition Inc. (the "Offeror") to purchase all of
the issued and outstanding common shares, together with associated Poison Pill
Rights, (the "Common Shares") of Merfin International Inc. ("Merfin") will be
open for acceptance until 12:00 p.m. (midnight, Vancouver time) on April 15,
1997 (the "Expiry Time"), unless withdrawn or extended.
The Offer is conditional upon certain conditions which are described in
Section 3 of the Offer, "Conditions of the Offer", including without limitation,
the valid deposit of not less than 75% of the Common Shares, calculated on a
fully-diluted basis, which shares shall not have been withdrawn at the Expiry
Time and the redemption of all Poison Pill Rights or waiver of the application
of the Poison Pill to this Offer.
Holders of Common Shares who wish to accept the Offer must properly
complete and duly execute the accompanying Letter of Transmittal or a manually
executed facsimile thereof and deposit it, together with certificates
representing their Common Shares, at one of the offices of Montreal Trust
Company (the "Depositary") shown on the Letter of Transmittal in accordance with
the instructions in the Letter of Transmittal. Alternatively, a holder of Common
Shares who desires to deposit Common Shares and whose certificates for such
Common Shares are not immediately available may deposit certificates
representing such Common Shares by following the procedures for guaranteed
delivery set forth in Section 2 of the Offer, "Manner and Time of Acceptance".
Questions and requests for assistance may be directed to TD Securities Inc.
(the "Dealer Manager"), or the Depositary and additional copies of this
document, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
obtained, without charge, on request from those persons at their respective
offices shown on the Letter of Transmittal.
Persons whose Common Shares are registered in the name of a nominee should
contact their broker, investment dealer, bank, trust company or other nominee
for assistance.
Members of the Soliciting Dealer Group will be paid the fees described in
Section 19 of the Circular, "Soliciting Dealer Arrangements".
THE DEALER MANAGER FOR THE OFFER IS:
TD SECURITIES INC.
2.1-1
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY............................................................. 3
DEFINITIONS......................................................... 6
OFFER............................................................... 8
1. The Offer...................................................... 8
2. Manner and Time of Acceptance.................................. 8
3. Conditions of the Offer........................................ 10
4. Extension and Variation of the Offer........................... 13
5. Take-up and Payment for Deposited Common Shares................ 14
6. Withdrawal of Deposited Common Shares.......................... 14
7. Return of Deposited Common Shares.............................. 15
8. Changes in Capitalization, Distributions and Liens............. 15
9. Mail Service Interruption...................................... 16
10. Notice......................................................... 16
11. Acquisition of Common Shares Not Deposited..................... 17
12. Market Purchases............................................... 17
13. Other Terms of the Offer....................................... 17
CIRCULAR............................................................ 19
1. The Offeror and Buckeye........................................ 19
2. Merfin......................................................... 19
3. Background to the Offer, Purpose of the Offer and
the Offeror's Plans for Merfin................................. 20
4. Poison Pill.................................................... 21
5. Source of Funds................................................ 22
6. Previous Distributions......................................... 22
7. Dividend Record of Merfin...................................... 23
8. Effect of the Offer on Market and Listings..................... 23
9. Price Range and Trading Volume of Common Shares................ 24
10. Acquisition of Common Shares Not Deposited..................... 24
11. Regulatory Matters............................................. 27
12. Holdings of Securities of Merfin............................... 27
13. Trading in Securities of Merfin................................ 28
14. Commitments to Acquire Securities of Merfin.................... 28
15. Arrangements, Agreements or Understandings..................... 28
16. Acceptance of the Offer........................................ 28
17. Material Changes and Other Information......................... 28
18. Depositary..................................................... 28
19. Soliciting Dealer Arrangements................................. 28
20. Canadian Federal Income Tax Considerations..................... 29
21. Statutory Rights............................................... 33
CONSENT............................................................. 34
APPROVAL AND CERTIFICATE............................................ 35
2.1-2
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SUMMARY
The following is a summary only and is qualified in its entirety by the
detailed provisions contained in the Offer and the Circular. The information
concerning Merfin contained in the Offer and Circular has been taken from or is
based upon publicly available documents or records on file with Canadian
securities regulatory authorities and other public sources at the time of the
Offer, unless otherwise indicated. All currency amounts expressed herein, unless
otherwise indicated, are expressed in Canadian dollars. Shareholders are urged
to read the Offer and the Circular in their entirety.
The Offer
The Offeror is offering, during the Offer Period and on the terms and
subject to the conditions of the Offer, to purchase all of the issued and
outstanding Common Shares, together with associated Poison Pill Rights, at a
price of $6.00 in cash per Common Share.
Time for Acceptance
The Offer is open for acceptance until 12:00 p.m. (midnight, Vancouver
time) on April 15, 1997, subject to certain rights of extension and withdrawal.
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 3 of the Offer, "Conditions of the Offer", are satisfied or
waived by the Offeror, including, without limitation: (i) the valid deposit of
not less than 75% of the Common Shares, calculated on a fully-diluted basis,
which shares shall not have been withdrawn at the Expiry Time; and (ii) the
board of directors of Merfin shall have redeemed all outstanding Poison Pill
Rights or waived the application of the Poison Pill to the purchase of Common
Shares by the Offeror under the Offer, a Compulsory Acquisition and any
Subsequent Acquisition Transaction or the Offeror is otherwise satisfied that
the Poison Pill does not affect the Offer, a Compulsory Acquisition and any
Subsequent Acquisition Transaction proposed by the Offeror. See Section 3 of the
Offer, "Conditions of the Offer".
The Offeror and Buckeye
The Offeror is a wholly-owned subsidiary of Buckeye Cellulose Corporation.
Buckeye is a leading manufacturer and world-wide marketer of high-quality,
value-added specialty cellulose. Buckeye focuses on a wide array of technically
demanding niche markets in which its proprietary products and commitment to
customer technical service give it a competitive advantage. Buckeye is the
world's only manufacturer of both wood-based and cotton linter-based specialty
cellulose and, as such, produces the broadest range of specialty cellulose in
the industry.
Merfin
Merfin is one of the leading manufacturers of air-laid fabrics, which are
used as ultra thin absorbent cores in feminine hygiene and adult incontinence
products. Other important applications of air-laid fabrics include hot towels,
baby wipes, table top products and a variety of industrial wipes. Together with
its wholly-owned subsidiaries, Merfin manufactures, converts and distributes
paper products for commercial, industrial and institutional markets in North and
South America, Europe and the Pacific Rim countries of Japan, Korea, Taiwan,
Hong Kong and Singapore.
Purpose of the Offer
The purpose of the Offer is to enable the Offeror to acquire, directly or
indirectly, all of the issued and outstanding Common Shares. See Section 3 of
the Circular, "Background to the Offer, Purpose of the Offer and the Offeror's
Plans for Merfin".
2.1-3
<PAGE>
Manner of Acceptance
A Shareholder wishing to accept the Offer must deposit the certificate(s)
representing its Common Shares, together with a properly completed Letter of
Transmittal or a manually signed facsimile thereof and all other documents
required by the Letter of Transmittal, at any one of the offices of the
Depositary specified in the Letter of Transmittal not later than the Expiry
Time. Instructions are contained in the Letter of Transmittal which accompanies
the Offer. Shareholders whose Common Shares are registered in the name of a
broker, investment dealer, bank, trust company or other nominee must contact
their nominee holder to arrange for the deposit of their Common Shares.
In lieu of depositing certificates as aforesaid, Common Shares may be
deposited in accordance with the procedures for guaranteed delivery, as set
forth in Section 2 of the Offer, "Manner and Time of Acceptance".
Payment
Subject to the terms and conditions of the Offer, the Offeror will take up
and pay the Common Shares no later than 10 days after the Expiry Date. See
Section 5 of the Offer, "Take-up and Payment for Deposited Common Shares".
Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer are irrevocable, except
as provided in Section 6 of the Offer, "Withdrawal of Deposited Common Shares".
Acquisition of Common Shares Not Deposited
If the Offer has been accepted by the holders of not less than 90% of the
Common Shares, the Offeror currently intends to acquire the remaining Common
Shares pursuant to the compulsory acquisition provisions of section 279 of the
Company Act on the same terms on which the Offeror acquired Common Shares
pursuant to the Offer. If such statutory right of compulsory acquisition is not
available, the Offeror currently intends to use other means of acquiring all of
the Common Shares not deposited under the Offer for a price per Common Share
equal to the price under the Offer by way of an arrangement, amalgamation or
other transaction with similar effect. See Section 10 of the Circular,
"Acquisition of Common Shares Not Deposited".
Regulatory Matters
The acquisition of the Common Shares by the Offeror is subject to the
notice and waiting period requirements of the United States Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. See Section 11 of the Circular,
"Regulatory Matters".
Canadian Federal Income Tax Considerations
The sale of Common Shares under the Offer will be a taxable disposition for
Canadian federal income tax purposes. In general, Canadian residents will
realize a capital gain (or capital loss) to the extent that the proceeds of
disposition received for the Common Shares, net of disposition costs, exceed (or
are less than) the adjusted cost base thereof. See Section 20 of the Circular,
"Canadian Federal Income Tax Considerations".
Depositary
Montreal Trust Company is acting as Depositary under the Offer. The
Depositary will receive deposits of certificates representing the Common Shares
and accompanying Letters of Transmittal at the offices specified in the Letter
of Transmittal. The Depositary will also receive Notices of Guaranteed Delivery
at the offices specified therein. The Depositary is also responsible for giving
notices, if required, and for making payment on behalf of the Offeror for all
Common Shares purchased by the Offeror under the Offer. See Section 18 of the
Circular, "Depositary".
2.1-4
<PAGE>
Dealer Manager
TD Securities Inc. has been retained as the Dealer Manager for the Offer.
It will 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.
No brokerage fees or commissions will be payable by any holder of Common
Shares who deposits Common Shares directly with the Depositary or who uses the
services of the Dealer Manager or a member of the Soliciting Dealer Group to
accept the Offer. Shareholders should contact the Depositary, the Dealer Manager
or a broker or dealer for assistance in accepting the Offer and in depositing
Common Shares with the Depositary. See Section 19 of the Circular, "Soliciting
Dealer Arrangements".
NOTICE TO U.S. HOLDERS OF COMMON SHARES
This Offer is made for the securities of a Canadian issuer and 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, that some or all of its
officers and directors are residents of Canada, that the experts and the Dealer
Manager for the Offer are residents of Canada, and that all or a substantial
portion of the assets of the Offeror and said persons are located outside the
United States.
Shareholders should be aware that the Offeror or its affiliates or
associates, directly or indirectly, may bid for or make purchases of Merfin
securities subject to the Offer during the period of the Offer, as permitted by
applicable Canadian laws or provincial laws or regulations.
All currency amounts expressed herein, unless otherwise indicated, are
expressed in Canadian dollars.
2.1-5
<PAGE>
DEFINITIONS
In the Offer and the Circular, unless the subject matter or context is
inconsistent therewith, the following terms shall have the meanings set forth
below.
"affiliate" has the meaning ascribed thereto in the Securities Act (British
Columbia).
"associate" has the meaning ascribed thereto in the Securities Act (British
Columbia).
"Buckeye" means Buckeye Cellulose Corporation, a corporation existing under the
laws of Delaware.
"Business Day" means any day other than a Saturday, Sunday or a day on which
banking institutions in Vancouver, British Columbia are authorized or obligated
by law to close.
"Circular" means the take-over bid circular accompanying the Offer and forming
part hereof.
"Common Shares" means collectively all of the issued and outstanding common
shares in the capital of Merfin, as currently constituted, and all common shares
issued prior to the Expiry Time on the exercise of currently outstanding options
and rights (other than the Poison Pill Rights) to purchase Common Shares and on
conversion of Convertible Debentures and includes, as part of each Common Share,
the Poison Pill Right attached thereto pursuant to the Poison Pill;
"Company Act" means the Company Act (British Columbia), as amended.
"Compulsory Acquisition" has the meaning ascribed thereto in Section 10 of the
Circular, "Acquisition of Common Shares Not Deposited--Compulsory Acquisition".
"Convertible Debentures" means any convertible debentures of Merfin including
the redeemable convertible debentures referred to in Section 6 of the Circular,
"Previous Distributions".
"Dealer Manager" means TD Securities Inc.
"Depositary" means Montreal Trust Company at the offices specified in the Letter
of Transmittal.
"Eligible Institution" means a Canadian chartered bank, a trust company in
Canada, a commercial bank or trust company having an office, branch or agency in
the United States or a member firm of the TSE, the Montreal Exchange, the
Vancouver Stock Exchange or a national securities exchange in the United States
or the National Association of Securities Dealers, Inc. or similar European
institution acceptable to the Offeror.
"Expiry Date" means April 15, 1997 or such later date or dates as may be fixed
by the Offeror from time to time pursuant to Section 4 of the Offer, "Extension
and Variation of the Offer".
"Expiry Time" means 12:00 p.m. (midnight, Vancouver time) on the Expiry Date.
"fully-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 options and other rights (excluding the Poison Pill Rights)
to purchase or receive Common Shares are exercised.
"Letter of Transmittal" means, in respect of Common Shares, a letter of
transmittal in the form accompanying the Offer and Circular, or a facsimile
thereof.
"MSE" means the Munich Stock Exchange.
"Material Adverse Effect" has the meaning ascribed thereto in Section 3 of the
Offer, "Conditions of the Offer".
"Merfin" means Merfin International Inc., a company existing under the Company
Act.
"Notice of Guaranteed Delivery" means a notice of guaranteed delivery in the
form accompanying the Offer and Circular, or a facsimile thereof.
"Offer" means the offer to purchase Common Shares made hereby to Shareholders.
"Offer Period" means the period commencing on March 25, 1997 and ending at the
Expiry Time.
"Offeror" means Buckeye Acquisition Inc., a company incorporated under the
Company Act and a wholly-owned subsidiary of Buckeye.
2.1-6
<PAGE>
"Permitted Bid" has the meaning ascribed thereto in Section 4 of the Circular,
"Poison Pill".
"person" includes an individual, body corporate, partnership, syndicate or other
form of unincorporated association.
"Poison Pill" means the shareholder rights plan adopted on or about March 16,
1997 by the board of directors of Merfin subject to TSE approval and
ratification by Merfin's Shareholders.
"Poison Pill Rights" means the rights issued pursuant to the Poison Pill.
"public corporation" has the meaning ascribed thereto in the Tax Act.
"Shareholders" means the holders of Common Shares.
"Soliciting Dealer Group" means the soliciting dealer group to be formed by the
Dealer Manager for the purpose of soliciting acceptances of the Offer from
Shareholders.
"Subsequent Acquisition Transaction" has the meaning ascribed thereto in Section
10 of the Circular, "Acquisition of Common Shares Not Deposited".
"subsidiary" has the meaning ascribed thereto in the Securities Act (British
Columbia).
"TSE" means The Toronto Stock Exchange.
"Tax Act" means the Income Tax Act (Canada), as amended.
2.1-7
<PAGE>
OFFER
TO: THE HOLDERS OF COMMON SHARES OF MERFIN
1. The Offer
The Offeror hereby offers to purchase, during the Offer Period, and on the
terms and subject to the conditions hereinafter specified, all of the issued and
outstanding Common Shares, together with associated Poison Pill Rights, at a
price of $6.00 in cash per Common Share.
The Offer is made only for the Common Shares, together with associated
Poison Pill Rights, and is not made for any options, Convertible Debentures or
other rights, if any, to purchase or to receive Common Shares. Any holder of
such options, Convertible Debentures or other rights, other than Poison Pill
Rights, who wishes to accept the Offer must, to the extent permitted thereby and
hereby, exercise such options or rights or convert the Convertible Debentures in
order to obtain certificates representing Common Shares and deposit such Common
Shares in accordance with the Offer.
Depositing Shareholders will not be obliged to pay brokerage fees or
commissions if they accept the Offer by depositing their Common Shares directly
with the Depositary or if they use the services of the Dealer Manager or a
member of the Soliciting Dealer Group to accept the Offer. See Section 19 of the
Circular, "Soliciting Dealer Arrangements".
The accompanying Circular, Letter of Transmittal and Notice of Guaranteed
Delivery are incorporated into and form part of the Offer and contain important
information which should be read carefully before making a decision with respect
to the Offer.
Holders of Poison Pill Rights, when depositing their Common Shares, will be
deemed to have deposited the Poison Pill Rights associated with those Common
Shares. No additional payment will be made for the Poison Pill Rights.
2. Manner and Time of Acceptance
The Offer is open for acceptance until the Expiry Time, 12:00 p.m.
(midnight, Vancouver time) on April 15, 1997, or until such time and date to
which the Offer may be extended by the Offeror at its discretion unless
withdrawn by the Offeror.
Acceptance of Offer
The Offer may be accepted by delivering to the Depositary at any of the
offices listed in the Letter of Transmittal so as to arrive there not later than
the Expiry Time:
(a) the certificate or certificates representing the Common Shares in
respect of which the Offer is being accepted;
(b) the Letter of Transmittal or a manually signed facsimile thereof,
properly completed and duly executed as required by the instructions
set out in the Letter of Transmittal; and
(c) all other documents required by the instructions set out in the Letter
of Transmittal.
In lieu of depositing certificates, Common Shares may be deposited in
compliance with the procedure for guaranteed delivery as set forth below.
Except as provided in the Letter of Transmittal, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution. If a Letter
of Transmittal is executed by a person other than the registered holder of the
certificate(s) deposited therewith, the certificate(s) must be endorsed or be
accompanied by an appropriate securities transfer power duly and properly
completed by the registered holder, with the signature on the endorsement panel
or securities transfer power guaranteed by an Eligible Institution.
2.1-8
<PAGE>
Procedure for Guaranteed Delivery
If a Shareholder wishes to deposit Common Shares pursuant to the Offer and
(i) the certificates representing the Common Shares are not immediately
available, or (ii) such Shareholder is not able to deliver the certificates and
all other required documents to the Depositary prior to the Expiry Time, such
Common Shares may nevertheless be deposited pursuant to the Offer 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,
or a manually signed facsimile thereof, is received by the Depositary
at one of the offices set forth in the Notice of Guaranteed Delivery,
not later than the Expiry Time; and
(c) the certificates representing deposited Common Shares, in proper form
for transfer (as described below) together with a properly completed
and duly executed Letter of Transmittal, or a manually signed
facsimile thereof, relating to the Common Shares and all other
documents required by the Letter of Transmittal, are received by the
Depositary at the same office at which the Notice of Guaranteed
Delivery was originally deposited at or before 4:30 p.m. (local time)
on the third trading day on the TSE after the Expiry Date.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
General
In all cases, payment for the Common Shares deposited and taken up by the
Offeror will be made only after timely receipt by the Depositary of certificates
representing the Common Shares, together with a properly completed and duly
executed Letter of Transmittal, or a manually signed facsimile thereof, relating
to such Common Shares, with the signatures guaranteed by an Eligible
Institution, if required, in accordance with the instructions to the Letter of
Transmittal, and any other required documents.
The method of delivery of certificates representing the Common Shares, the
Letter of Transmittal and all other required documents is at the option and risk
of the person depositing the same. The Offeror recommends that such documents be
delivered by hand to the Depositary and a receipt obtained or, if mailed, that
registered mail, with return receipt requested, be used and that proper
insurance be obtained.
Shareholders whose Common Shares are registered in the name of a broker,
investment dealer, bank, trust company or other nominee must contact their
nominee holder to arrange for the deposit of their Common Shares.
All questions as to the validity, form, eligibility (including timely
receipt) and acceptance of any Common Shares deposited pursuant to the Offer
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 may be unlawful to accept under the
laws of any jurisdiction. The Offeror reserves the absolute right to waive any
defect or irregularity in the deposit of any Common Shares. There shall be no
duty or obligation on the Offeror, the Dealer Manager, the Depositary or any
other person to give notice of any defect or irregularity 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 the Offer (including
the Circular, the Letter of Transmittal and the Notice of Guaranteed Delivery)
shall be final and binding. The Offeror reserves the right to permit the Offer
to be accepted in a manner other than that set out herein.
Power of Attorney
The execution of a Letter of Transmittal irrevocably constitutes and
appoints the Depositary, and any officer of the Offeror, and each of them, and
any other person designated by the Offeror in writing, as the true and lawful
agent, attorney and attorney-in-fact and proxy of the holder of the Common
Shares covered by the Letter of Transmittal with respect to the Common Shares
2.1-9
<PAGE>
deposited under the Letter of Transmittal which are taken up and paid for under
the Offer (the "Purchased Securities") and with respect to any and all: (i)
dividends, distributions, payments, securities, rights, assets or other
interests declared, paid, issued, distributed, made or transferred on or in
respect of the Purchased Securities on or after the date hereof; and (ii) Poison
Pill Rights, whether or not separated from the Common Shares (collectively, the
"Other Securities").
The power of attorney granted irrevocably upon execution of the Letter of
Transmittal shall be effective on and after the date that the Offeror takes up
and pays for the Purchased Securities (the "Effective Date") with full power of
substitution, in the name and on behalf of such holder (such power of attorney
being deemed to be an irrevocable power coupled with an interest): (i) to
register or record, transfer and enter the transfer of Purchased Securities and
any Other Securities on the appropriate register of holders maintained by
Merfin; and (ii) to exercise any and all of the rights of the holder of the
Purchased Securities and Other Securities, including, without limitation, to
vote, execute and deliver any and all instruments of proxy, authorizations or
consents in respect of all or any of the Purchased Securities and Other
Securities, revoke any such instrument, authorization or consent given prior to,
on, or after the Effective Date, designate in any such instruments of proxy any
person or persons as the proxy holder or the proxy nominee or nominees of such
holder of Common Shares in respect of such Purchased Securities and such Other
Securities for all purposes including, without limitation, in connection with
any meeting (whether annual, special or otherwise and any adjournment thereof)
of holders of securities of Merfin, and execute, endorse and negotiate, for and
in the name of and on behalf of the registered holder of Purchased Securities
and Other Securities, any and all cheques or other instruments respecting any
distribution payable to or to the order of such holder in respect of such
Purchased Securities or Other Securities. Furthermore, a holder of Purchased
Securities or Other Securities who executes a Letter of Transmittal agrees,
effective on and after the Effective Date, not to vote any of the Purchased
Securities or Other Securities at any meeting (whether annual, special or
otherwise or any adjournment thereof) of Shareholders and not to exercise any or
all of the other rights or privileges attached to the Purchased Securities or
Other Securities and agrees to execute and deliver to the Offeror any and all
instruments of proxy, authorizations or consents in respect of the Purchased
Securities and Other Securities and to designate in any such instruments of
proxy the person or persons specified by the Offeror as the proxy holder or the
proxy nominee or nominees of the holder of the Purchased Securities and Other
Securities. Upon such appointment, all prior proxies given by the holder of such
Purchased Securities or Other Securities with respect thereto shall be revoked
and no subsequent proxies may be given by such person with respect thereto. A
holder of Purchased Securities or Other Securities who executes a Letter of
Transmittal covenants to execute, upon request, any additional documents
necessary or desirable to complete the sale, assignment and transfer of the
Purchased Securities and the Other Securities to the Offeror and acknowledges
that all authority therein conferred or agreed to be conferred shall, to the
extent permitted by law, survive the death or incapacity, bankruptcy or
insolvency of the holder and all obligations of the holder therein shall be
binding upon the heirs, personal representatives, successors and assigns of the
holder.
Depositing Shareholders'Representations and Warranties
The deposit of Common Shares pursuant to the procedures described above
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 person has
full power and authority to deposit, sell, assign and transfer the Common Shares
(and any Other Securities) being deposited; (ii) such Shareholder depositing the
Common Shares, or on whose behalf such Common Shares are being deposited, has
good title to and is the beneficial owner of the Common Shares (and any Other
Securities) being deposited within the meaning of applicable securities laws;
(iii) the deposit of such Common Shares (and any Other Securities) complies with
applicable securities laws; and (iv) when such Common Shares (and any Other
Securities) 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 rights of others.
3. Conditions of the Offer
Notwithstanding any other provision of the Offer, the Offeror reserves the
right to withdraw, amend or terminate the Offer and not take up and pay for, or
2.1-10
<PAGE>
to extend the Offer Period and postpone taking up and paying for, any Common
Shares deposited under the Offer unless all of the following conditions have
been satisfied or waived by the Offeror:
(a) there being validly deposited and not withdrawn under the Offer not
less than 75% of the Common Shares, calculated on a fully-diluted
basis;
(b) the Offeror shall have determined in its sole discretion that, on
terms satisfactory to the Offeror, (i) the board of directors of
Merfin shall have redeemed all outstanding Poison Pill Rights or
waived the application of the Poison Pill to the purchase of Common
Shares by the Offeror under the Offer, a Compulsory Acquisition and
any Subsequent Acquisition Transaction, (ii) a cease trading order or
an injunction shall have been issued that has the effect of
prohibiting or preventing the exercise of the Poison Pill Rights or
the issue of Common Shares or other security or property upon the
exercise of the Poison Pill Rights in relation to the Offer, a
Compulsory Acquisition and any Subsequent Acquisition Transaction,
which cease trading order or injunction shall be in full force and
effect, (iii) a court of competent jurisdiction shall have made a
final and binding order to the effect that the Poison Pill Rights are
illegal, of no force or effect or may not be exercised in relation to
the Offer, a Compulsory Acquisition and any Subsequent Acquisition
Transaction, (iv) the Poison Pill Rights and the Poison Pill shall
otherwise have been held unexercisable or unenforceable in relation to
the Offer, a Compulsory Acquisition and any Subsequent Acquisition
Transaction, or (v) the Poison Pill does not make it inadvisable for
the Offeror to proceed with the Offer and/or with taking up and paying
for all of the Common Shares under the Offer;
(c) there shall not have occurred (and there shall not have been generally
disclosed, if not previously disclosed generally and not disclosed to
the Offeror in writing) any event which would have a Material Adverse
Effect (as defined below);
(d) all government or regulatory consents or approvals (including in
Canada, the United States, Ireland or elsewhere) which the Offeror, in
its sole discretion, views as being necessary or desirable to enable
the Offeror to acquire Merfin shall have been received by the Offeror
on terms and conditions satisfactory to the Offeror including the
expiration or early termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;
(e) since May 15, 1996, there shall not have been, in the sole judgment of
the Offeror, any change of a material nature to the compensation paid
by Merfin to its officers or officers of its subsidiaries nor shall
Merfin have entered into or modified any agreement or arrangement with
any of its officers or officers of its subsidiaries, except in the
ordinary course of its business;
(f) (i) there shall not be any outstanding act, action, suit or proceeding
taken before or by any domestic or foreign arbitrator, 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, and (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 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
(B) which has had or would have a Material Adverse Effect (as defined
below); or
(C) which would prevent completion of the acquisition by the Offeror
of Common Shares pursuant to a Compulsory Acquisition or any
Subsequent Acquisition Transaction as construed under applicable
laws at the date hereof on the basis of a majority of minority
approval;
(g) there shall not exist any prohibition at law against the Offeror
making the Offer or taking up and paying for the Common Shares under
the Offer;
(h) the Offeror shall not have become aware of any untrue statement of
material fact, or an omission to state a material fact that is
required to be stated or that is necessary to make a statement not
2.1-11
<PAGE>
misleading in the light of the circumstances in which it was made and
at the date it was made (after giving effect to all subsequent filings
in relation to all matters covered in earlier filings), in any
document filed by or on behalf of Merfin with any securities
commission or similar securities regulatory authority in any of the
provinces of Canada prior to March 24, 1997, including without
limitation any annual information form, financial statement, material
change report or management proxy circular or in any document so filed
or released by Merfin to the public;
(i) no dividends shall have been declared or paid or other distributions
made in respect of the outstanding shares of Merfin, nor shall its
memorandum or articles have been amended;
(j) Merfin shall not have, or permitted any of its subsidiaries to have,
issued, authorized or proposed the issuance of, or purchased or
proposed the purchase 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;
(k) Merfin shall not have, or permitted any of its subsidiaries to have,
acquired or agreed to acquire by amalgamating, merging or
consolidating with, purchasing substantially all of the assets of or
otherwise, any business or a corporation, partnership, association or
other business organization or division thereof, which acquisition
would be material to the business or financial condition of Merfin;
(l) Merfin shall not have, or permitted any of its subsidiaries to have,
entered into any new agreements, commitments or undertakings of a
material nature or undertaken any other material action except in the
ordinary course of business;
(m) Merfin shall not have, or permitted any of its subsidiaries to have,
sold, leased or otherwise disposed of any of its assets that are
material, individually or in the aggregate, to its business or
financial condition;
(n) the Offeror shall have determined in its sole discretion that:
(A) no material right, franchise or license of Merfin or any of its
subsidiaries has been or may be impaired (which impairment has
not been cured or waived) or otherwise adversely affected,
whether as a result of the making of the Offer, the taking up and
paying for Common Shares deposited under the Offer or otherwise
which might make it inadvisable for the Offeror to proceed with
the Offer and/or with the taking up and paying for the Common
Shares under the Offer and/or completing a Compulsory Acquisition
or any Subsequent Acquisition Transaction; or
(B) no covenant, term or condition of any instrument or agreements of
Merfin or any of its subsidiaries exists which might make it
inadvisable for the Offeror to proceed with the Offer and/or with
the taking up and paying for the Common Shares under the Offer
(including without limitation, any default, acceleration or other
adverse event that may ensure as a result of the Offeror taking
up and paying for the Common Shares under the Offer and/or
completing a Compulsory Acquisition or any Subsequent Acquisition
Transaction);
(o) Merfin shall not, other than in the ordinary course of business and
consistently with past practices, have guaranteed, or permitted its
subsidiaries to guarantee, the payment of indebtedness or incur
indebtedness for money borrowed or issue or sell any debt securities;
and
(p) there shall not have occurred any change in the general economic,
industry, financial, currency exchange or securities market conditions
in Canada which, in the sole judgment of the Offeror, acting
reasonably in the circumstances, has or may have an adverse material
effect on the value to the Offeror of Merfin and its subsidiaries
considered on a consolidated basis.
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 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 other right which the Offeror may
have under the Offer. The failure by the Offeror at any time to exercise or
assert any of the foregoing rights shall not be deemed to constitute a waiver of
any such right and each such right shall be deemed an ongoing right which may be
2.1-12
<PAGE>
asserted at any time and from time to time by the Offeror. Any determination by
the Offeror concerning the foregoing conditions shall be final and binding on
all parties.
Any waiver of a condition or the withdrawal of the Offer shall be effective
upon written notice or other communication confirmed in writing by the Offeror
to that effect to the Depositary at its principal office in Montreal, Quebec.
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 10 of the Offer, "Notice", and shall provide a copy of the
aforementioned notice to the TSE. 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 all certificates for deposited Common Shares, Letters of Transmittal,
Notices of Guaranteed Delivery and related documents will be promptly returned
to the parties by whom they were deposited.
For the purposes of this Offer, the following terms denoted by initial
capital letters or as used above have the following meanings: (i) "disclosed to
the Offeror in writing" means disclosure set forth in Merfin's filings (other
than any filing made on a confidential basis) with the Ontario Securities
Commission made, and available generally to the public prior to March 24, 1997;
and (ii) "Material Adverse Effect" means any material adverse effect or material
adverse change (or any condition, event or development involving a prospective
material adverse change) individually or in the aggregate in the business,
affairs, operations, assets, capitalization, financial condition, results of
operations, or liabilities, whether contractual or otherwise, of Merfin and its
subsidiaries considered as a whole, other than any such effect or change
resulting from any change in general economic or industry conditions.
4. Extension and Variation of the Offer
The Offer is open for acceptance until but not after the Expiry Time,
unless withdrawn or extended.
The Offeror reserves the right, in its sole discretion, at any time and
from time to time prior to the Expiry Time (or otherwise as permitted by
applicable law), to extend the Offer Period by fixing a new Expiry Date or to
vary the Offer, in each case by giving written notice or other communication,
confirmed in writing, of such extension or variation to the Depositary at its
principal office in Montreal, Quebec. The Offeror, forthwith after giving any
such notice or communication, shall make a public announcement of the extension
or variation, shall cause the Depositary as soon as practicable thereafter to
provide a copy of such notice or communication in the manner set forth in
Section 10 of the Offer, "Notice", to all holders of Common Shares whose Common
Shares have not been taken up prior to the extension or variation and shall
provide a copy of the aforementioned notice to the TSE. Any notice of extension
or variation will be deemed to have been given and to be effective on the day on
which it is delivered or otherwise communicated to the Depositary at its
principal office in Montreal, Quebec.
If all of the terms and conditions of the Offer (except those waived by the
Offeror) have been fulfilled or complied with, the Offeror may not extend the
Offer after the Expiry Time unless the Offeror first takes up and pays for all
Common Shares deposited under the Offer and not withdrawn.
The Offer shall not expire before 10 days after the notice of variation in
respect of a variation has been given to Shareholders, unless otherwise
permitted by applicable law, and subject to abridgment or elimination of that
period of time pursuant to such orders as may be granted by Canadian securities
regulatory authorities.
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, among other provisions, Section 5 of the Offer,
"Take-up and Payment for Deposited Common Shares", and to Section 6 of the
Offer, "Withdrawal of Deposited Common Shares". An extension of the Offer Period
or a variation of the Offer does not constitute a waiver by the Offeror of its
rights under Section 3 of the Offer, "Conditions of the Offer".
If the consideration being offered for the Common Shares under the Offer is
increased, the increased consideration will be paid to all depositing
Shareholders whose Common Shares are taken up under the Offer, without regard to
when such Common Shares are taken up by the Offeror.
2.1-13
<PAGE>
5. Take-up and Payment for Deposited Common Shares
If all the conditions referred to under Section 3 of the Offer, "Conditions
of the Offer", have been satisfied or waived by the Offeror, the Offeror will,
pursuant to applicable law, (unless the Offeror shall have withdrawn or
terminated the Offer) become obligated to take up and pay for the Common Shares
deposited under the Offer and not withdrawn not later than 10 days from the
Expiry Date or 45 days from the date of the Offer, whichever is earlier. In
accordance with applicable law, the Offeror must furthermore, if it voluntarily
takes up Common Shares at any time prior to the 10th day following the Expiry
Date, take up and pay for any Common Shares subsequently deposited under the
Offer within 10 days of the deposit of such Common Shares.
Subject to applicable law, the Offeror expressly reserves the right in its
sole discretion to delay taking up or 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 3 of the Offer, "Conditions of the Offer", is not
satisfied or waived by the Offeror, in whole or in part, by giving written
notice thereof, or other communication, confirmed in writing, to the Depositary
at its principal office in Montreal, Quebec.
The Offeror will be deemed to have taken up and accepted for payment Common
Shares validly deposited and not withdrawn pursuant to the Offer if, as and when
the Offeror gives written notice, or other communication confirmed in writing,
to the Depositary at its principal office in Montreal, Quebec of its acceptance
for payment of such Common Shares pursuant to the Offer.
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 on the purchase
price of Common Shares purchased by the Offeror accrue or be paid by the Offeror
or the Depositary to persons depositing 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
Common Shares.
Settlement will be made by the Depositary issuing or causing to be issued a
cheque payable in Canadian funds in the amount to which that person is entitled.
Subject to the foregoing and unless otherwise directed by the Letter of
Transmittal, the cheque will be issued in the name of the registered holder of
the Common Shares so deposited. Unless the person depositing the Common Shares
instructs the Depositary to hold the cheque for pick-up by checking the
appropriate box in the Letter of Transmittal, a cheque will be forwarded by
first class mail to such person at the address specified in the Letter of
Transmittal. If no address is specified, cheques will be forwarded to the
address of the holder as shown on the registers maintained by Merfin.
Depositing Shareholders will not be obligated to pay any brokerage fees or
commissions if they accept the Offer by depositing their Common Shares directly
with the Depositary or if they use the services of the Dealer Manager or a
member of the Soliciting Dealer Group to accept the Offer. See Section 19 of the
Circular, "Soliciting Dealer Arrangements".
6. Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer are irrevocable,
provided that any Common Shares deposited in acceptance of the Offer may be
withdrawn by or on behalf of the depositing Shareholder (unless otherwise
required or permitted by applicable law):
(a) at any time before the Expiry Time;
(b) at any time before the expiration of the tenth day after the date upon
which either (i) a notice of change is delivered in accordance with
Section 10 of the Offer, "Notice", relating to a change which has
occurred in the information contained in this Offer or Circular or in
any notice of change or notice of variation delivered in connection
herewith (except any change that is not within the control of the
Offeror or an affiliate of the Offeror) that would reasonably be
expected to affect the decision of a Shareholder to accept or reject
the Offer, which change occurred prior to the Expiry Time or after the
2.1-14
<PAGE>
Expiry Time 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 is delivered in accordance with
Section 10 of the Offer, "Notice", unless such deposited Common Shares
have been taken up by the Offeror at the date of such notice of change
or variation, or in the case of a notice of variation, unless the
variation in the terms of the Offer consists solely of an increase in
the consideration offered for Common Shares and the time for deposit
is not extended for a period greater than 10 days or the variation in
the terms of the Offer consists solely of the waiver of a condition in
the Offer where the consideration offered for the Common Shares under
the Offer consists solely of cash; and
(c) at any time after May 9, 1997 provided that 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.
In order for any withdrawal to be made, notice of the withdrawal must be in
writing (which includes a telegraphic communication or notice by electronic
means that produces a printed copy), and must be actually received by the
Depositary at the place of deposit of the applicable Common Shares (or Notice of
Guaranteed Delivery in respect thereof) within the period permitted for
withdrawal. Any such notice of withdrawal must be: (i) signed by or on behalf of
the person who signed the Letter of Transmittal that accompanied the Common
Shares to be withdrawn (or Notice of Guaranteed Delivery in respect thereof) and
(ii) 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. Any signature on a
notice of withdrawal must be guaranteed by an Eligible Institution in the same
manner as in the Letter of Transmittal (as described in the instructions set out
in such Letter of Transmittal), except in the case of Common Shares deposited
for the account of an Eligible Institution. The withdrawal shall take effect
upon receipt of the written notice by the Depositary.
All questions as to the validity (including timely receipt) and form of
notices of withdrawal shall be determined by the Offeror, in its sole
discretion, and such determination shall be final and binding. There shall be no
duty or obligation on the Offeror, the Depositary, the Dealer Manager or any
other person to give notice of any defect or irregularity in any notice of
withdrawal and no liability shall be incurred by any of them for failure to give
any such notice.
Withdrawals may not be rescinded and any Common Shares withdrawn will be
deemed not validly deposited for the purposes of the Offer, but may be
redeposited at any subsequent time prior to the Expiry Time by following any of
the applicable procedures described in Section 2 of the Offer, "Manner and Time
of Acceptance".
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 Section 21 of the Circular, "Statutory Rights".
7. Return of Deposited Common Shares
Any deposited Common Shares not taken up and paid for by the Offeror will
be returned, at the expense of the Offeror, to the depositing Shareholder,
either by sending new certificates representing Common Shares not purchased or
returning the deposited certificates (and other relevant documents). The
certificates (and other relevant documents) will be forwarded by first class
mail in the name of and to the address specified by the depositing Shareholder
in the Letter of Transmittal or, if such name or address is not so specified, in
such name and to such address as shown on the registers maintained by Merfin as
soon as practicable following the Expiry Time or the withdrawal or termination
of the Offer. If certificates are submitted for more Common Shares than are
deposited, such certificates will be returned by the same process outlined for
Common Shares deposited and not taken up and paid for under the Offer.
8. Changes in Capitalization, Distributions and Liens
If on or after the date hereof and prior to the Expiry Date, Merfin should
reclassify, subdivide, consolidate or convert any of the Common Shares or make
any extraordinary distribution of securities on such Common Shares, the Offer
price may, at the Offeror's sole discretion, be correspondingly adjusted and the
2.1-15
<PAGE>
Offeror may make such adjustments as it considers appropriate to other terms of
the Offer (including, without limitation, the amounts payable for the securities
offered to be purchased) to reflect such reclassification, subdivision,
consolidation or conversion or such extraordinary distribution.
Common Shares acquired pursuant to the Offer shall be transferred by the
Shareholder and acquired by the Offeror free and clear of all liens,
restrictions, charges, encumbrances, claims and rights of others and together
with all rights and benefits arising therefrom, including the right to any and
all: (i) 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 on or after March 25, 1997; and (ii)
Poison Pill Rights, whether or not separated from the Common Shares.
If Merfin should declare or pay any cash dividend or stock dividend or make
any other distribution on or issue any rights with respect to any of the Common
Shares which is or are payable or distributable to the Shareholders of record on
a record date which is prior to both the Expiry Date and the date of transfer
into the name of the Offeror or its nominees and transferees on the registers
maintained by Merfin of such Common Shares following acceptance thereof for
purchase pursuant to the Offer then (i) in the case of any such cash dividend or
cash distribution that does not exceed the cash purchase price per Common Share,
the cash purchase price per Common Share payable by the Offeror pursuant to the
Offer will be reduced by the amount of any such dividend or distribution paid or
payable per Common Share in respect of which the dividend or distribution is
made; and (ii) in the case of any such cash dividend or cash distribution in an
amount that exceeds the cash purchase price per Common Share in respect of which
the dividend or distribution is made, or in the case of any other dividend,
distribution or right, the whole of any such dividend, distribution 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 owner of any such dividend,
distribution or right, and may withhold the entire purchase price payable by the
Offeror pursuant to this Offer or deduct from the purchase price payable by the
Offeror pursuant to this Offer the amount or value thereof, as determined by the
Offeror in its sole discretion.
The foregoing is subject to the Offeror's rights under Section 3 of the
Offer, "Conditions of the Offer."
9. Mail Service Interruption
Notwithstanding the provisions of the Offer, the Circular, the Letter of
Transmittal or the Notice of Guaranteed Delivery, cheques in payment for Common
Shares purchased pursuant to the Offer and certificates representing Common
Shares to be returned will not be mailed if the Offeror determines that delivery
thereof by mail may be delayed. Persons entitled to cheques which are not mailed
for the foregoing reason may take delivery thereof at the office of the
Depositary at which the deposited certificates representing Common Shares in
respect of which the cheques are 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. The Offeror shall provide notice of any such
determination not to mail made under this Section 9 as soon as reasonably
practicable after the making of such determination and in accordance with
Section 10 of the Offer, "Notice". Notwithstanding Section 5 of the Offer,
"Take-up and Payment for Deposited Common Shares", cheques not mailed for the
foregoing reason will be conclusively deemed to have been delivered on the first
day upon which they are available for delivery to the depositing Shareholder at
the office of the Depositary.
10. Notice
Without limiting any other lawful means of giving notice, any notice the
Offeror or the Depositary may give or cause to be given under the Offer will be
deemed to have been properly given if it is mailed by first class mail, postage
prepaid, to the registered holders of Common Shares at their respective
addresses as shown on the registers maintained by Merfin and will be deemed to
have been received on the first day following the date of mailing which is a
Business Day. These provisions apply notwithstanding any accidental omission to
give notice to any one or more holders of Common Shares and notwithstanding any
interruption of postal service following mailing. Except as otherwise required
or permitted by law, if post offices in Canada or elsewhere are not open for the
deposit of mail or there is reason to believe that there is or could be a
2.1-16
<PAGE>
disruption in all or part of the postal service, any notice which the Offeror or
the Depositary may give or cause to be given under the Offer, except as
otherwise provided herein, will be deemed to have been properly given and to
have been received by holders of Common Shares, as the case may be, if: (i) it
is given to the TSE for dissemination through their facilities; or (ii) it is
published once in a newspaper or newspapers generally circulated in Vancouver,
Toronto and Montreal.
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
physically received at one of the addresses listed for the Depositary in the
Letter of Transmittal or Notice of Guaranteed Delivery, as applicable. Wherever
the Offer calls for documents to be delivered to a particular office of the
Depositary, such documents will not be considered delivered unless and until
they have been physically received at that particular office at the address
listed in the Letter of Transmittal or Notice of Guaranteed Delivery, as
applicable.
11. Acquisition of Common Shares Not Deposited
If the Offer has been accepted by the holders of not less than 90% of the
Common Shares, other than Common Shares held on the date hereof by or on behalf
of the Offeror or its affiliates or associates, the Offeror currently intends to
acquire the remaining Common Shares pursuant to the compulsory acquisition
provisions of section 279 of the Company Act within five months following the
date of the Offer on the same terms and at the same price at which the Offeror
acquired Common Shares pursuant to the Offer. If such statutory right of
compulsory acquisition is not available, the Offeror currently intends to
consider other means of acquiring any Common Shares not acquired pursuant to the
Offer. Such alternatives may include an amalgamation involving the Offeror
and/or one or more of its affiliates and Merfin or an arrangement for the
purpose of enabling the Offeror to acquire all of the Common Shares not
deposited under the Offer for a price per Common Share equal to the price
offered under the Offer in a going private transaction. See Section 10 of the
Circular, "Acquisition of Common Shares Not Deposited".
12. Market Purchases
The Offeror has no current intention of acquiring any Common Shares while
the Offer is outstanding other than as described in the Circular and the Offer.
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 TSE, subject to applicable law, at any time and
from time to time prior to the Expiry Time. In no event will the Offeror make
any such purchases of Common Shares through the facilities of the TSE until the
third Business Day following the date of the Offer. The aggregate number of
Common Shares acquired by the Offeror through the facilities of the TSE during
the Offer Period shall not exceed 5% of the outstanding Common Shares as of the
date of the Offer and the Offeror will issue and file a press release containing
the information prescribed by law forthwith after the close of business of the
TSE on each day on which such Common Shares have been purchased. For the
purposes of this Section 12 of the Offer, "Offeror" includes the Offeror and any
person or company acting jointly or in concert with the Offeror.
Subject to applicable laws, the Offeror reserves the right to make or enter
into an arrangement, commitment or understanding during the Offer Period to sell
any Common Shares after the Offer Period, although the Offeror has no current
intention to do so.
13. Other Terms of the Offer
(a) The Offer and all contracts resulting from acceptance hereof shall be
governed by and construed in accordance with the laws of the Province
of British Columbia and the laws of Canada applicable therein. Each
party to any agreement resulting from the acceptance of the Offer
unconditionally and irrevocably attorns to the exclusive jurisdiction
of the courts of the Province of British Columbia.
(b) No broker, dealer or other person has been authorized to give any
information or make any representation on behalf of the Offeror not
ontained herein or in the Circular, and, if given or made, such
information or representation must not be relied upon as having been
2.1-17
<PAGE>
authorized. No broker, dealer or other person shall be deemed to be
the agent of the Offeror, the Depositary or the Dealer Manager for the
purposes of the Offer. In any jurisdiction in which the Offer is
required to be made by a licensed broker or dealer, the Offer shall be
made on behalf of the Offeror by brokers or dealers licensed under the
laws of such jurisdiction.
(c) The provisions of the Circular, the Letter of Transmittal and the
Notice of Guaranteed Delivery accompanying the Offer, including the
instructions contained therein, as applicable, form part of the terms
and conditions of the Offer.
(d) The Offeror shall, in its sole discretion, be entitled to make a final
and binding determination of all questions relating to the
interpretation of the Offer, the Circular and the Letter of
Transmittal, the validity of any acceptance of this Offer and any
withdrawals of Common Shares, including, without limitation, the
satisfaction or non-satisfaction of any condition, the validity, time
and effect of any deposit of Common Shares or notice of withdrawal of
Common Shares, the due completion and execution of the Letters of
Transmittal and the acceptance of securities other than as set out
herein. The Offeror reserves the right to waive any defect in
acceptance with respect to any particular Common Share or any
particular Shareholder. There shall be no obligation on the Offeror,
the Dealer Manager or the Depositary to give notice of any defects or
irregularities in acceptance and no liability shall be incurred by any
of them for failure to give any such notification.
(e) The Offeror reserves the right to transfer to one or more affiliated
companies the right to purchase all or any portion of the Common
Shares deposited pursuant to the Offer, but any such transfer will not
relieve the Offeror of its obligations under the Offer and will in no
way prejudice the rights of persons depositing Common Shares to
receive payment for Common Shares validly deposited and accepted for
payment pursuant to the Offer.
(f) This document does not constitute an offer or a solicitation to any
person in any jurisdiction 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 any 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 any such
jurisdiction.
The accompanying Circular together with the Offer constitute the take-over
bid circular required under the Company Act and Canadian provincial securities
legislation with respect to the Offer.
DATED March 25, 1997.
BUCKEYE ACQUISITION INC.
By: (Signed) Robert E. Cannon
President and
Chief Executive Officer
2.1-18
<PAGE>
CIRCULAR
The following information is supplied with respect to the accompanying
Offer dated March 25, 1997 by the Offeror to purchase all of the issued and
outstanding Common Shares and associated Poison Pill Rights (including Common
Shares issued on the exercise of currently outstanding options, Convertible
Debentures or rights (other than Poison Pill Rights) to acquire Common Shares).
The information concerning Merfin contained in the Offer and this Circular
has been taken from or based upon publicly available documents and records on
file with Canadian securities regulatory authorities and other public sources.
Except as described in the Offer or in the Circular, the Offeror has no
information that indicates that any material change has occurred in the affairs
of Merfin since the date of its last public financial statements, being its
unaudited quarterly financial statements for the nine months ended September 30,
1996. Although the Offeror has no knowledge that would indicate that any
statements contained herein taken from or based on such documents and records
are untrue or incomplete, the Offeror does not assume any responsibility for the
accuracy or completeness of the information taken from or based upon such
documents and records, or for any failure by Merfin 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 terms and conditions of the Offer are incorporated into and form part
of this Circular and holders of Common Shares should refer to the Offer for
details of the terms and conditions of the Offer, including details as to
payment and withdrawal rights. Terms defined in the Offer but not defined in
this Circular have the same meaning herein as in the Offer unless the context
otherwise requires. All sums expressed in dollars herein are in Canadian dollars
unless otherwise expressly stated.
1. The Offeror and Buckeye
The Offeror, a wholly-owned subsidiary of Buckeye, was incorporated on
February 19, 1997, under the Company Act and has not otherwise carried on any
material business activity. The registered office of the Offeror is located at
666 Burrard Street, Suite 1700, Park Place, Vancouver, British Columbia, V6C
2X8.
Buckeye is a leading manufacturer and world-wide marketer of high-quality,
value-added specialty cellulose. Buckeye focuses on a wide array of technically
demanding niche markets in which its proprietary products and commitment to
customer technical service give it a competitive advantage. Buckeye is the
world's only manufacturer of both wood-based and cotton linter-based specialty
cellulose and, as such, produces the broadest range of specialty cellulose in
the industry.
2. Merfin
Merfin was incorporated under the Company Act on August 30, 1983. The
registered and principal office of Merfin is located at 7979 Vantage Way, Delta,
British Columbia, V4G 1A6.
Merfin is one of the leading manufacturers of air-laid fabrics, which are
used as ultra thin absorbent cores in feminine hygiene and adult incontinence
products. Other important applications of air-laid fabrics include hot towels,
baby wipes, table top products and a variety of industrial wipes. Together with
its wholly-owned subsidiaries, Merfin manufactures, converts and distributes
paper products for commercial, industrial and institutional markets in North and
South America, Europe and the Pacific Rim countries of Japan, Korea, Taiwan,
Hong Kong and Singapore.
The authorized capital of Merfin consists of 100,000,000 Common Shares,
without par value, of which, according to the shareholder list provided by
Merfin to the Offeror, 25,474,614 Common Shares are issued and outstanding
(approximately 28.2 million Common Shares on a fully diluted basis, including
all stock options and conversion of Merfin's $4 million of Convertible
Debentures.)
2.1-19
<PAGE>
3. Background to the Offer,Purpose of the Offer and the Offeror's Plans for
Merfin
Background to the Offer
On February 26 and 27, 1997, senior executives of Buckeye met in Vancouver,
British Columbia with senior executives of Merfin to explore a possible
relationship between the two companies, including, under certain circumstances,
the acquisition of Merfin by Buckeye.
At the invitation of Buckeye, senior executives of Merfin met with senior
executives of Buckeye March 4 to March 6, 1997 in Memphis, Tennessee and Foley,
Florida. During that time, the respective senior executives discussed the
businesses of the two companies and visited the operations of Buckeye. During
those few days, Buckeye reiterated its interest in acquiring Merfin.
Both Merfin and Buckeye then agreed that it would be reasonable and
appropriate, under the circumstances, for Buckeye to conduct a "due diligence"
investigation of Merfin's business, affairs and condition, financial and
otherwise, prior to making an offer.
However, during the week of March 10, 1997, Merfin requested that Buckeye
disclose the price it was willing to offer for each Common Share. Buckeye was
not then prepared to do so prior to completing its due diligence. Furthermore,
Merfin and Buckeye could not agree on the terms of a confidentiality agreement
proposed by Merfin principally because it contained provisions which would have
prohibited Buckeye for a period of time, without the prior approval of Merfin's
board of directors, from making an offer to the Shareholders to purchase the
Common Shares of Merfin.
On March 13, 1997, Buckeye delivered a letter to the board of directors of
Merfin reiterating its desire to complete due diligence and proceed with a
negotiation with the board of directors to acquire all of the issued and
outstanding Common Shares of Merfin. Buckeye also delivered a formal request for
Merfin to provide its shareholder list.
On March 14, 1997, Mr. Ivan B. Pivko, the Chairman and Chief Executive
Officer of Merfin, wrote to Mr. Robert E. Cannon to thank him for his letter of
March 13 and indicated that, like Buckeye, Merfin's board of directors wished to
pursue a possible friendly negotiated transaction and its board of directors
would be meeting to discuss this matter.
On March 17, 1997, Merfin issued a press release stating that it had
received an unsolicited approach by a U.S. company expressing an interest in
making a bid for all of Merfin's Common Shares. In the press release, Merfin
said that its board had adopted a shareholder rights plan, subject to the
approval of the TSE and ratification by Merfin's Shareholders, with terms
similar to those adopted by many other Canadian companies.
On March 18, 1997, Buckeye's board of directors met to discuss the proposed
acquisition of Merfin. After a thorough review of the transaction, its board
approved the acquisition as proposed by Buckeye's management.
On March 19, 1997, Mr. Cannon again wrote to Mr. Pivko requesting that
Buckeye be allowed to complete its due diligence and that Merfin's management
group meet with Buckeye's management group to negotiate an agreement by which
Buckeye would acquire all of the issued and outstanding Common Shares of Merfin
at a price per share the Merfin board of directors could support.
On March 20, 1997, Mr. Pivko acknowledged receipt of Mr. Cannon's letter of
March 19 and stated that Merfin's board of directors could not authorize
negotiations until Buckeye disclosed the price it was willing to offer to
Merfin's Shareholders. There was no response to Mr. Cannon's request for due
diligence.
Purpose of the Offer
The purpose of the Offer is to enable the Offeror to acquire all of the
outstanding Common Shares of Merfin. The Offeror's current intentions are to
acquire Common Shares not deposited under the Offer. See Section 10 of the
Circular, "Acquisition of Common Shares Not Deposited". The exact timing and
details of a Compulsory Acquisition or Subsequent Acquisition Transaction
involving Merfin will necessarily depend upon a variety of factors, including
the number of Common Shares acquired pursuant to the Offer.
2.1-20
<PAGE>
Although the Offeror currently intends to propose a Compulsory Acquisition
or a Subsequent Acquisition Transaction generally on the terms described herein,
it is possible that, as a result of delays in the Offeror's ability to effect
such a transaction, information hereafter obtained by the Offeror, changes in
general economic, industry or market conditions or in the business of Merfin, or
other currently unforeseen circumstances, such a transaction may not be so
proposed, may be delayed or abandoned or may be proposed on different terms. The
Offeror expressly reserves the right not to propose a Compulsory Acquisition, or
Subsequent Acquisition Transaction involving Merfin, or to propose a Subsequent
Acquisition Transaction on terms other than those described herein.
Specifically, the Offeror reserves the right to propose that the consideration
in a Subsequent Acquisition Transaction consist of cash or securities or a
combination of cash and securities and that the consideration in such a
transaction have a value more or less than the amount offered under the Offer.
If the Offeror decides not to propose a Compulsory Acquisition or a
Subsequent Acquisition Transaction, or proposes a Subsequent Acquisition
Transaction but cannot promptly obtain any required approvals, the Offeror will
evaluate its other alternatives. Such alternatives could include, to the extent
permitted by applicable laws, purchasing additional Common Shares in the open
market, in privately negotiated transactions, in another take-over bid or
exchange offer or otherwise, or taking no further action to acquire additional
Common Shares. Any additional purchases of Common Shares could be at a price
greater than, equal to or less than the price to be paid for Common Shares under
the Offer and could be for cash and/or other consideration. Alternatively, the
Offeror may sell or otherwise dispose of any or all Common Shares acquired
pursuant to the Offer or otherwise. Such transactions may be effected on terms
and at prices then determined by the Offeror, which may vary from the price paid
for Common Shares under the Offer.
Plans for Merfin
If the Offer is successful and the Offeror acquires control of Merfin as a
result thereof, it is expected that certain changes will be effected with
respect to the composition of the board of directors of Merfin to allow nominees
of the Offeror to become members of the board of directors of Merfin. The
Offeror has developed no specific proposal in respect of Merfin, its assets or
operations or any changes in its assets, business strategies or personnel
following the acquisition of Common Shares pursuant to the Offer.
If permitted by applicable law, subsequent to the completion of the Offer,
if all issued and outstanding Common Shares are deposited, or further to any
Compulsory Acquisition or Subsequent Acquisition Transaction, if any, it is
intended to delist the Common Shares from the TSE and the MSE, and, subject to
applicable securities laws in provinces where Merfin is a reporting issuer, to
cause Merfin to cease to be a reporting issuer in such provinces.
Except as described in the Offer or in the Circular, the Offeror has no
current plans or proposals which would relate to or result in any material
changes in the affairs of Merfin, including any proposal to liquidate Merfin, to
sell, lease or exchange all or a substantial part of its assets, to amalgamate
it with any other business organization or to make any material changes in its
business, corporate structure or personnel.
4. Poison Pill
On March 13, 1997, Buckeye requested Merfin's transfer agent to provide a
list of shareholders in accordance with provisions of the Company Act, which
list was provided to Buckeye on March 19, 1997. On March 17, 1997, Merfin
announced that its board of directors had adopted a shareholder rights plan (the
"Poison Pill"), subject to TSE approval and ratification by its Shareholders.
The agreement giving effect to the Poison Pill has not yet been made public
by Merfin and, as a result, the information below is provided solely in reliance
upon the public announcement by Merfin of the terms of the Poison Pill.
The Poison Pill provides that a Permitted Bid is a take-over bid which
provides for a minimum deposit period of at least 60 days and which is made for
all outstanding Common Shares and to all Shareholders. The Poison Pill will be
submitted for ratification by Shareholders at Merfin's next annual Shareholders'
meeting, which is scheduled to take place in June, 1997.
2.1-21
<PAGE>
It is likely that the Offer does not constitute a "Permitted Bid" within
the meaning of the Poison Pill because the Offer does not provide for a minimum
deposit period of at least 60 days. In addition, the Offer may not meet other as
yet unannounced conditions required to constitute a Permitted Bid.
As a result of not constituting a Permitted Bid and assuming that the terms
of the Poison Pill are similar to those of other corporations that have enacted
such defensive measures: (i) the announcement of the Offeror's intention to make
the Offer on March 25, 1997 resulted in the Poison Pill Rights becoming
exercisable after the close of business on a date prior to the Expiry Time; and
(ii) if the Offeror were to take up and pay for Common Shares pursuant to the
Offer and, as a result, acquire 20% or more of the Common Shares determined in
accordance with the terms of the Poison Pill, each Poison Pill Right (other than
those held by the Offeror) would constitute the right to purchase Common Shares
at a 50 percent discount to the prevailing market price.
It is a condition of the Offer that the Board of Directors of Merfin shall
have redeemed all outstanding Poison Pill Rights or waived the application of
the Poison Pill to the purchase of securities by the Offeror under the Offer, a
Compulsory Acquisition and any Subsequent Acquisition Transaction or that the
Offeror is otherwise satisfied that the Poison Pill does not affect the Offer, a
Compulsory Acquisition and any Subsequent Acquisition Transaction proposed by
the Offeror. See Section 3 of the Offer "Conditions of the Offer".
With the delivery of the Offer to the board of directors of Merfin, the
Offeror intends to request that the board of directors of Merfin provide a
waiver of the application of the Poison Pill to the Offer, a Compulsory
Acquisition and any Subsequent Acquisition Transaction proposed by the Offeror.
The Offeror believes that the Poison Pill was effected in anticipation of the
Offer, that the Offer is in the best interests of the Shareholders and the
Shareholders should be permitted to make their own investment decision whether
or not to accept the Offer. Further, the Offeror believes that the 60-day the
minimum period for a "Permitted Bid" in the Poison Pill is an unreasonably
lengthy period to require an offer to be open for acceptance having regard to
general market and economic conditions.
If the board of directors of Merfin does not waive the application of the
Poison Pill to the Offer, a Compulsory Acquisition and any Subsequent
Acquisition Transaction proposed by the Offeror, the Offeror may take legal or
regulatory action with respect to the Poison Pill with the intention of
permitting Shareholders to accept the Offer and the Offeror to take up and pay
for Common Shares deposited under the Offer and effect a Compulsory Acquisition
or any Subsequent Acquisition Transaction without the application of the Poison
Pill.
5. Source of Funds
The Offeror estimates that if it acquires all of the Common Shares (on a
fully-diluted basis) pursuant to the Offer or pursuant to any following
Compulsory Acquisition or Subsequent Acquisition Transaction, the total amount
required to purchase such Common Shares will be approximately $169 million
(other than the fees (including advisory fees) and expenses under the Offer
estimated at $5.15 million). Buckeye has agreed to provide or cause to be
provided such funds to the Offeror. Buckeye and its subsidiaries will provide
such funding from internal cash resources and lines of credit. To this effect,
Buckeye has received from its current bankers a commitment to increase Buckeye's
line of credit to an amount sufficient to allow Buckeye to provide to the
Offeror such funding. Such line of credit will be unsecured and will mature in
2002. The commitment is subject to Buckeye entering into loan documentation
containing customary terms.
6. Previous Distributions
Based upon publicly available information, the Offeror believes that,
during the five years preceding the date of the Offer, Merfin has issued the
following Common Shares (excluding distributions pursuant to the exercise of
outstanding stock options and distributions under Merfin's employee share
ownership plan and group retirement savings plan):
-- on January 21, 1992, Merfin issued 666,666 Common Shares at $0.75 per
Common Share pursuant to a convertible promissory note dated January
22, 1991;
-- on April 16, 1992, Merfin completed a private placement of 210,000
Common Shares to three placees at a price of $0.95 per Common Share
for total consideration of $199,500;
2.1-22
<PAGE>
-- on April 21, 1992, Merfin issued 625,000 Common Shares at $0.80 per
Common Share pursuant to the exercise of convertible promissory notes
dated April 22, 1991;
-- on May 8, 1992, Merfin issued 625,000 Common Shares at $0.80 per
Common Share pursuant to the exercise of convertible promissory notes
dated May 23, 1991;
-- on June 10, 1992, Merfin issued 33,333 Common Shares at $0.75 per
Common Share to a financial advisor in settlement of outstanding fees;
-- on October 20, 1992, Merfin issued 194,175 Common Shares at $1.03 per
Common Share pursuant to the exercise of convertible promissory notes
dated March 20, 1992;
-- on December 11, 1992, Merfin issued 235,848 Common Shares at $2.12 per
Common Share pursuant to debt settlement agreements dated December 7,
1992;
-- on January 21, 1993, Merfin issued 490,196 Common Shares at $1.02 per
Common Share pursuant to a convertible promissory note dated January
22, 1991 and modified January 21, 1992;
-- on March 17, 1993, Merfin issued 4,000,000 Common Shares upon the
exercise of 4,000,000 special warrants each issued on December 2, 1992
at a price of $2.04 per special warrant. Each Common Share was issued
without additional consideration upon the exercise of each special
warrant;
-- on November 15, 1993, Merfin issued 4,400,000 Common Shares upon the
exercise of 4,400,000 special warrants each issued on July 29, 1993 at
a price of $4.00 per special warrant. Each Common Share was issued
without additional consideration upon the exercise of each special
warrant;
-- on February 2, 1996, Merfin completed a private placement of 1,275,000
Common Shares at $5.50 each for a total consideration of $7,012,500
and of $4 million of redeemable debentures convertible into 640,000
Common Shares at $6.25 per Common Share.
7. Dividend Record of Merfin
The Offeror believes that Merfin has not paid dividends on any outstanding
Common Shares in the two years preceding the date hereof and that it currently
intends to retain its earnings to finance the further growth of Merfin, and when
appropriate, retire existing debt.
8. Effect of the Offer on Market and Listings
The purchase of Common Shares by the Offeror pursuant to the Offer will
reduce the number of Common Shares which might otherwise trade publicly, as well
as the number of Shareholders, and, depending on the number of Shareholders
depositing and the number of Common Shares purchased under the Offer, could
adversely affect the liquidity and market value of the remaining Common Shares
held by the public. After the purchase of Common Shares under the Offer, it may
be possible for Merfin to take steps towards the elimination of any applicable
public reporting requirements under applicable securities legislation in any
province in which it has an insignificant number of security holders.
The rules and regulations of the MSE and the TSE establish certain criteria
which, if not met, could lead to the delisting of the Common Shares from such
exchanges. Among such criteria are the number of Shareholders, the number of
Common Shares publicly held and the aggregate market value of the Common Shares
publicly held. Depending on the number of Common Shares purchased pursuant to
the Offer, it is possible that the Common Shares would fail to meet the criteria
for continued listing on such exchanges. If this were to happen, the Common
Shares could be delisted and this could, in turn, adversely affect the market or
result in a lack of an established market for such Common Shares. It is the
intention of the Offeror to apply to delist the Common Shares from each such
exchange as soon as practicable after completion of the Offer, if all the issued
and outstanding Common Shares are deposited, or after a Compulsory Acquisition
or Subsequent Acquisition Transaction, if any.
2.1-23
<PAGE>
9. Price Range and Trading Volume of Common Shares
The Common Shares are listed and posted for trading on the TSE and the MSE.
The volume of trading and the price ranges of the Common Shares of Merfin on the
TSE and MSE (as reported by the TSE and MSE, respectively) are set forth on the
following table for the periods indicated:
TSE MSE
-------------------------- ---------------------
Cdn. $ Cdn. $ DM DM
High Low Volume High Low Volume
------ ------ --------- ----- ----- ------
1996
March................... 6.50 5.50 714,510 6.75 6.30 160
April................... 6.00 5.50 740,532 6.50 5.90 9,880
May..................... 6.15 5.50 1,168,528 6.70 5.95 31,000
June.................... 6.10 5.70 547,835 6.60 6.20 2,000
July.................... 6.25 5.55 270,960 6.70 5.90 8,000
August.................. 5.80 5.35 442,836 6.10 5.75 1,400
September............... 5.95 5.45 411,102 6.25 5.95 7,800
October................. 5.70 5.00 1,056,553 6.30 5.40 49,746
November................ 5.35 4.50 663,329 5.80 4.95 0
December................ 5.25 4.50 1,313,029 6.20 5.00 6,000
1997
January................. 5.25 3.90 4,564,735 5.55 4.80 21,000
February................ 4.25 3.60 1,472,777 5.50 4.60 36,572
March 1 to March 24..... 6.40 3.90 1,873,652 7.00 5.00 18,500
On March 17, 1997, Merfin announced that it had received an unsolicited
approach by a U.S. company expressing an interest in making a bid for all of
Merfin's Common Shares. The closing trading prices of the Common Shares of
Merfin on the TSE and the MSE on March 14, 1997, the last day on which the
Common Shares traded prior to such announcement, were $4.70 and DM5.90
respectively.
The Offer was announced on March 25, 1997. The closing trading prices of
the Common Shares of Merfin on the TSE and the MSE on March 24, 1997 were $5.95
and DM7.00 respectively.
10. Acquisition of Common Shares Not Deposited
Compulsory Acquisition
If, within four months after the date hereof, the Offer has been accepted
by holders of not less than 90% of the Common Shares, other than Common Shares
held on the date hereof by or on behalf of the Offeror or its affiliates, and
the Offeror acquires such deposited Common Shares, then the Offeror intends to
acquire the remainder of the Common Shares on the same terms as the Common
Shares are acquired under the Offer pursuant to the provisions of section 279 of
the Company Act (a "Compulsory Acquisition").
To exercise such statutory right, the Offeror must give to each shareholder
who does not accept the Offer (in each case, a "Remaining Shareholder") a
written notice within five months of the date of the Offer of the Offeror's
intent to acquire such Common Shares under section 279 of the Company Act. Upon
giving such notice, the Offeror will be entitled and bound to acquire every
Common Share held by the Remaining Shareholders to whom a notice was given for
the price and on the terms set forth in the Offer, unless the Supreme Court of
British Columbia (the "Court"), on application by any Remaining Shareholder to
whom a notice was given and within two months from the date of giving such
notice, orders otherwise. Pursuant to any such application, the Court may fix
the price and terms of payment for the Common Shares held by the Remaining
Shareholders and make such consequential orders and give such directions as the
Court considers appropriate.
Where notice has been given by the Offeror and the Court has not, on an
application made by a Remaining Shareholder to whom a notice was given, ordered
otherwise, the Offeror shall, on the expiration of two months from the date on
which a notice was given or, if an application to the Court by a Remaining
Shareholder to whom notice was given is then pending, then after that
application has been disposed of, send a copy of the notice to Merfin and
2.1-24
<PAGE>
forward to Merfin the full amount of the consideration payable by the Offeror
for the Common Shares that the Offeror is entitled to acquire and Merfin will
thereupon register the Offeror as a shareholder of Merfin with respect to such
Common Shares.
Section 279 of the Company Act also provides, in effect, that if the
Offeror is entitled to deliver the notice and has chosen not to do so, the
Remaining Shareholders may, by following the procedures specified therein,
require the Offeror to purchase their Common Shares at the same price and on the
same terms as are contained in the Offer.
The foregoing is a summary only. Section 279 of the Company Act is complex
and may require strict adherence to notice and timing provisions, failing which
such rights may be lost or altered. Shareholders should consult with their legal
advisors with respect to the exact nature of their rights under these
provisions.
Subsequent Acquisition Transaction
If for any reason the statutory right of acquisition under section 279 of
the Company Act described above is not available, the Offeror intends to use
other means of acquiring all of the Common Shares not acquired under the Offer
in accordance with applicable law, including by way of an arrangement,
amalgamation, merger or other combination of the Offeror or one or more
affiliates of the Offeror with Merfin on such terms and conditions as the
Offeror, at the time, believes to be fair and equitable to Merfin and the other
holders of Common Shares (a "Subsequent Acquisition Transaction"). If the
Offeror concludes that a Subsequent Acquisition Transaction is necessary, the
Offeror currently intends to amalgamate Merfin and the Offeror and/or an
affiliate of the Offeror or propose a plan of arrangement between Merfin and its
Shareholders. Pursuant to an amalgamation, Shareholders who do not deposit their
Common Shares pursuant to the Offer would have their Common Shares exchanged for
redeemable preferred shares of the amalgamated corporation. Such preferred
shares would forthwith be redeemed for cash consideration equal to the purchase
price paid under the Offer. Pursuant to a plan of arrangement, Shareholders,
other than the Offeror or affiliates of the Offeror, will have their Common
Shares redeemed by Merfin.
The details of any Subsequent Acquisition Transaction, including the timing
of its implementation and the consideration to be received by the minority
holders of Common Shares, would necessarily be subject to a number of
considerations, including the number of Common Shares acquired pursuant to the
Offer. There can be no assurance that any such transaction will be proposed or,
if proposed, effected. The Offeror intends that the Common Shares acquired by it
pursuant to the Offer will be counted as part of any minority approval in
connection with any such transaction.
Each of the methods of acquiring the remaining outstanding Common Shares
described above, other than the statutory right of acquisition under the Company
Act, would be a "going private transaction" within the meaning of Ontario
Securities Commission ("OSC") Policy Statement No. 9.1, as amended ("OSC Policy
9.1") and Quebec Securities Commission ("QSC") Policy Q-27 ("QSC Policy Q-27")
and the regulations to securities legislations in certain of the provinces of
Canada (collectively the "Regulations"), if such Subsequent Acquisition
Transaction 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 Merfin, a successor to the business of Merfin or a
person who controls Merfin or a person who controls a successor to the business
of Merfin. In certain circumstances, the provisions of OSC Policy 9.1 and QSC
Policy Q-27 may also deem certain types of Subsequent Acquisition Transactions
to be "related party transactions".
OSC Policy 9.1, QSC Policy Q-27 and the Regulations provide that, unless
exempted, a corporation proposing to carry out a going private 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. OSC Policy 9.1 and QSC Policy Q-27 have
similar requirements for related party transactions. In connection therewith,
the Offeror intends to seek waivers pursuant to OSC Policy 9.1 and QSC Policy
Q-27 from the OSC and QSC exempting the Offeror or Merfin, as appropriate, from
the requirement to prepare a valuation in connection with a subsequent going
private transaction.
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OSC Policy 9.1 and QSC Policy Q-27 would also require that, in addition to
any other required security holder approval, in order to complete a going
private transaction, the approval of a simple or two-thirds majority (depending
on the nature of the transaction) of the votes cast by "minority" holders of the
affected securities be obtained. The necessary level of security holder approval
required to complete a going private transaction is a simple majority if the
consideration offered pursuant to such transaction is payable entirely in cash
or the right to receive cash within 35 days after approval of such transaction
and, if a formal valuation is required, such consideration is not less than the
value, or the simple average of the high and low ends of the range of values,
arrived at pursuant to such valuation; otherwise, the necessary level of
shareholder approval is 66 2/3% of the votes cast by "minority" holders of the
affected securities. In relation to the Offer and any Subsequent Acquisition
Transaction which constitutes a going private transaction (or a related party
transaction within the meaning of OSC Policy 9.1 and QSC Policy Q-27), the
"minority" holders will be all holders of Common Shares other than the Offeror,
its directors and senior officers and any associate or affiliate of the Offeror
and its directors and senior officers and any person or company acting jointly
or in concert with the Offeror or any of its directors or senior officers in
connection with the Offer or the subsequent going private transaction. However,
OSC Policy 9.1 and QSC Policy Q-27 also provide that the Offeror may treat
Common Shares acquired pursuant to the Offer as "minority" shares and to vote
them, or to consider them voted, in favour of such going private (or related
party) transaction if the consideration per security in the going private (or
related party) transaction is at least equal in value to the consideration paid
under the Offer. The Offeror currently intends that the consideration offered
under any Subsequent Acquisition Transaction proposed by it would be identical
to the consideration offered under the Offer.
In addition, under OSC Policy 9.1 and QSC Policy Q-27, if, following the
Offer, the Offeror and its affiliates are the registered holders of 90% or more
of the Common Shares at the time the Subsequent Acquisition Transaction is
initiated, the requirement for minority approval would not apply to the
transaction if an enforceable right of appraisal or a substantially equivalent
right is made available to the minority shareholders.
Judicial Developments
Certain judicial decisions may be considered relevant to any Subsequent
Acquisition Transaction which may be proposed or effected subsequent to the
expiry of the Offer. Prior to the adoption of OSC Policy 9.1 and QSC Policy
Q-27, Canadian courts, in a few instances, granted preliminary injunctions to
prohibit transactions involving going private amalgamations. The current trend
both in legislation and in the American jurisprudence upon which the previous
Canadian decisions were based is toward permitting going private transactions to
proceed subject to compliance with procedures designed to ensure substantive
fairness to the minority shareholders. Holders should consult their legal
advisors for a determination of their legal rights.
In two decisions in 1978, the Supreme Court of Ontario restrained proposed
amalgamations which would have had the effect of eliminating the interest which
minority shareholders held in one of the amalgamating corporations, without the
minority shareholders having been offered the opportunity to receive in exchange
participating securities issued by the amalgamated corporation, an affiliate or
a successor body corporate, with the result that the existing controlling
shareholder would become the sole holder of common shares of the amalgamated
corporation. See Carlton Realty Ltd. v. Maple Leaf Mills Ltd. (1978), 22 O.R.
(2d) 198 and Alexander v. Westeel-Rosco Ltd. (1978), 22 O.R. (2d) 211. In light
of the specific regulatory framework governing "going private transactions" in
OSC Policy 9.1 and QSC Policy Q-27 and the decision of the Supreme Court of
Ontario in Lornex described below, the decision in Maple Leaf Mills and
Westeel-Rosco may be of limited relevance to any subsequent acquisition
transaction that may be effected by the Offeror in respect of Merfin subsequent
to the Offer.
In The General Accident Assurance Company of Canada v. Lornex Mining
Corporation Ltd. et al (1988), 66 O.R. (2d) 783, the Supreme Court of Ontario
declined to grant injunctive relief to a minority shareholder of Lornex seeking
to prevent a proposed amalgamation squeeze-out transaction which was to follow a
take-over bid made through the facilities of the Vancouver Stock Exchange. The
minority shareholder also sought an order declaring that the minority
shareholders of Lornex were entitled to vote separately as a class in approving
the proposed amalgamation. Lornex was not an "offering corporation" as defined
in the Business Corporations Act (Ontario) ("OBCA"), so the "going private
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transaction" provisions of Section 190 of the OBCA were held to be not
applicable to it. The court held that the proposed amalgamation did not
contravene the relevant provisions of the OBCA and that, in light of the
oppression remedy contained in the OBCA, the OBCA did not require that a
separate class vote of the minority shareholders of Lornex be held to approve
the amalgamation. The Court further held that the minority shareholder failed to
establish that the proposed amalgamation was oppressive or unfairly prejudicial
to or unfairly disregarded the rights of the minority shareholders of Lornex.
11. Regulatory Matters
Hart-Scott-Rodino Antitrust Improvements Act of 1976
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 of the United
States (the "HSR Act") provides that certain acquisition transactions may not be
consummated unless certain information and materials have been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the United States Federal Trade Commission (the "FTC") and
certain waiting period requirements have been satisfied. The rules promulgated
by the FTC under the HSR Act require that a Premerger Notification and Report
Form (the "Form") be filed by the Offeror with the Antitrust Division and the
FTC and that the acquisition of Common Shares under the Offer may not be
consummated prior to the expiration of the applicable waiting period unless
early termination of such waiting period is granted. The Offeror intends to
timely file the Form with the Antitrust Division and the FTC.
Under the provisions of the HSR Act applicable to the purchase of Common
Shares pursuant to the Offer, purchases cannot be consummated until the
expiration of a 15-day waiting period after the date of the Offeror's filing,
unless the Antitrust Division and the FTC grant early termination of the waiting
period prior thereto. If, within the 15-day waiting period either the Antitrust
Division or the FTC requests additional information or documentary materials
relevant to the Offer from the Offeror, the waiting period will be extended for
an additional period of 10 days following the date of substantial compliance
with the request.
If purchases of the Common Shares under the Offer are delayed pursuant to a
request by the Antitrust Division or the FTC for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not, be
extended (see Section 4 of the Offer, "Extension and Variation of the Offer")
and, in any event, the purchase of and payment for Common Shares must be
deferred until 10 days after the Offeror substantially complies with such
request, in circumstances where the initial 15-day period would otherwise have
expired, or unless the waiting period is sooner terminated by the FTC and the
Antitrust Division. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the rules promulgated under
the HSR Act. Thereafter, the waiting period can be extended only by court order.
Any extension of the waiting period will not give rise to any withdrawal rights
not otherwise provided for herein or by applicable law.
Federal and state antitrust enforcement agencies frequently scrutinize the
legality under the antitrust laws of transactions such as the acquisition of
Common Shares by the Offeror pursuant to the Offer. At any time before or after
the consummation of any such transactions, any agency could take such action
under Federal or state antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the transaction or seeking
divestiture of the Common Shares so acquired or divestiture of substantial
assets of the Offeror or Merfin. Private parties may also bring legal action
under Federal or state antitrust laws in certain circumstances.
12. Holdings of Securities of Merfin
None of the Offeror, or any of its directors or officers beneficially owns,
directly or indirectly, or controls or exercises direction over, or has the
right to acquire, any securities of Merfin. To the knowledge of the directors
and officers of the Offeror after reasonable inquiry, no securities of Merfin
are beneficially owned, directly or indirectly, by, nor is control or direction
over any securities of Merfin exercised by, any person or company who
beneficially owns, directly or indirectly, more than 10% of any class of equity
securities of the Offeror or by any person or company acting jointly or in
concert with the Offeror.
According to the Annual Information Form dated May 15, 1996 of Merfin and
insider reports filed with Canadian securities commissions, there is no person
holding more than 10% of the Common Shares of Merfin other than Van Berkom and
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Associates Inc. which, on behalf of its pension fund and mutual fund clients,
held, as of the end of June 1996, 4,386,200 Common Shares, representing
approximately 17.2% of all Common Shares currently outstanding.
13. Trading in Securities of Merfin
No securities of Merfin have been traded during the six-month period
preceding the date of the Offer by the Offeror, any associate or affiliate of
the Offeror, any of the directors or officers of the Offeror or their respective
associates or, to the knowledge of the directors and officers of the Offeror, by
any person or company who beneficially owns, directly or indirectly, more than
10% of any class of equity securities of the Offeror or by any person or company
acting jointly or in concert with the Offeror.
14. Commitments to Acquire Securities of Merfin
Neither the Offeror, nor any of its directors and officers, nor to the
knowledge of directors and senior officers of the Offeror, any associate of any
director or senior officer or any person or company holding more than 10% of any
class of equity securities of the Offeror, have entered into any commitments to
acquire any securities of Merfin.
15. Arrangements, Agreements or Understandings
There are no arrangements or agreements made or proposed to be made between
the Offeror and any of the directors or senior officers of Merfin and no
payments or other benefits are proposed to be made or given by the Offeror to
such directors or senior officers as compensation for loss of office or as
compensation for remaining in or retiring from office. There are no contracts,
arrangements or understandings, formal or informal, between the Offeror and any
security holder of Merfin with respect to the Offer or between the Offeror and
any person or company with respect to any securities of Merfin in relation to
the Offer, except as otherwise described herein.
16. Acceptance of the Offer
The Offeror has no knowledge regarding whether any Shareholders will accept
the Offer.
17. Material Changes and Other Information
Except for the making of the Offer by the Offeror and as disclosed herein,
the Offeror is not aware of any information which indicates that any material
change has occurred in the affairs of Merfin since the date of the last
available published financial statements of Merfin.
Except as disclosed herein, the Offeror has no knowledge of any other
matter that has not previously been generally disclosed but which would
reasonably be expected to affect the decision of Shareholders to accept or
reject the Offer.
18. Depositary
The Offeror has engaged the Depositary for the receipt of certificates in
respect of Common Shares, Letters of Transmittal and Notices of Guaranteed
Delivery deposited under the Offer and for the payment for Common Shares
purchased by the Offeror pursuant to the Offer. The duties of the Depositary
will include receiving deposits of Common Shares and Letters of Transmittal,
giving notices where necessary and assisting in making settlement under 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.
19. Soliciting Dealer Arrangements
The Offeror has engaged the services of TD Securities Inc. (the "Dealer
Manager") to solicit acceptances of the Offer. The Offeror has agreed to pay the
Dealer Manager U.S.$100,000 for its services. The Dealer Manager has undertaken
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to form a soliciting dealer group comprised of members of the Investment Dealers
Association of Canada and 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 each Soliciting Dealer whose name appears in the
appropriate space in the Letter of Transmittal accompanying a deposit of Common
Shares a fee of $0.05 for each such Common Share deposited and taken up by the
Offeror under the Offer. The aggregate amount payable with respect to any single
depositing holder of Common Shares will be not less than $75 nor more than
$1,500. Where Common Shares deposited and registered in a single name are
beneficially owned by more than one person, the minimum and maximum amounts will
be applied separately in respect of each such beneficial owner. The Offeror may
require the Soliciting Dealer to furnish evidence of such beneficial ownership
satisfactory to the Offeror at the time of deposit.
No brokerage fees or commissions will be payable by any holder of Common
Shares who transmits Common Shares directly to the Depositary or who uses the
services of the Dealer Manager or a member of the Soliciting Dealer Group to
accept the Offer. Shareholders should contact the Depositary, the Dealer Manager
or a broker or dealer for assistance in accepting the Offer and in depositing
Common Shares with the Depositary.
20. Canadian Federal Income Tax Considerations
The tax discussion set forth below is included for general information
only. It is not intended to be, nor should it be construed to be, legal or tax
advice to any particular Shareholder. Shareholders are advised and expected to
consult with their own legal or tax advisers regarding the Canadian federal
income tax consequences of disposing of their Common Shares pursuant to the
Offer or a Compulsory Acquisition or a Subsequent Acquisition Transaction in
light of their particular circumstances, and any other consequences to them of
such transactions under provincial, local and foreign tax laws.
In the opinion of Stikeman, Elliott, Canadian counsel to the Offeror, the
following is a summary of the principal Canadian federal income tax
considerations generally applicable to Shareholders who dispose of their Common
Shares pursuant to the Offer or pursuant to the transactions described under
"Acquisition of Common Shares Not Deposited--Compulsory Acquisition" or
"Acquisition of Common Shares Not Deposited--Subsequent Acquisition
Transaction".
This summary is based upon the current provisions of the Tax Act, the
regulations thereunder and the current administrative and assessing policies and
practices published by Revenue Canada. This summary also takes into account all
specific proposals to amend the Tax Act and the regulations thereunder publicly
announced by the Canadian Minister of Finance prior to the date hereof. This
summary does not otherwise take into account or anticipate any other changes in
the law, whether by way of judicial decision or legislative action nor does it
take into account provincial, territorial or foreign tax legislation or
considerations. This summary is not intended to be, nor shall it be construed to
be, legal or tax advice to any particular Shareholder.
(a) Residents of Canada
This summary is applicable only to Shareholders who, for purposes of the
Tax Act, are resident in Canada, or deemed to be resident, hold their Common
Shares as capital property and deal at arm's length with the Offeror and Merfin
(a "Holder"). Common Shares will generally constitute capital property to a
Shareholder unless such Common Shares are held by such Shareholder in the course
of carrying on a business of trading or dealing in securities or otherwise as
part of a business of buying and selling securities or were acquired in a
transaction or transactions considered to be an adventure in the nature of
trade. Certain Shareholders 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 Tax Act. Under the Tax Act,
certain Shareholders, including certain financial institutions, traders and
dealers in securities (other than mutual fund corporations or mutual fund
trusts), corporations controlled by one or more of the foregoing, and trusts and
partnerships more than 50% of the fair market value of the interests in which
are held by the foregoing are, subject to certain transitional rules, generally
precluded from making this election to treat Common Shares as capital property.
Moreover, a Shareholder, who is a "financial institution" subject to special
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<PAGE>
provisions of the Tax Act applicable to income, gain or loss arising from
mark-to-market properties, should consult its own tax advisors as the following
summary does not apply to such a Shareholder.
The Offer
A Holder whose Common Shares are taken up and paid for under the Offer will
realize a capital gain (or capital loss) to the extent that the proceeds
received for such Common Shares, net of any costs of disposition, exceed (or are
less than) the adjusted cost base to such Holder of such Common Shares.
A Holder will generally be required to include, in computing income for the
year in which the disposition occurs, three-quarters of the amount of any
resulting capital gain (the "taxable capital gain") and will generally be
entitled to deduct three-quarters of the amount of any resulting capital loss
(the "allowable capital loss") against taxable capital gains realized by the
Holder in the year in which the disposition occurs, in any of the three
preceding taxation years or in any future taxation years to the extent and in
the circumstances described by the Tax Act. In the case of a Holder that is a
corporation, the amount of any capital loss otherwise determined may be reduced
by the amount of dividends previously received to the extent and under the
circumstances described in the Tax Act. Similar rules may apply where a
corporation is a member of a partnership or a beneficiary of a trust that owns
Common Shares, and under proposed amendments to the Tax Act, these rules will be
extended to a trust that is a member of a partnership or a partnership that is a
beneficiary of a trust that owns Common Shares.
In addition to any other tax payable by a corporation, the Tax Act imposes
a refundable tax of 6 2/3% on certain investment income, including taxable
capital gains, earned by a Canadian controlled private corporation. This tax
will be refunded when the corporation pays taxable dividends (at a rate of one
dollar for every three dollars of taxable dividends paid).
Capital gains realized by an individual or a trust, other than certain
specified trusts, may give rise to alternative minimum tax under the Tax Act.
Compulsory Acquisition
As described in Section 10 of the Circular, "Acquisition of Common Shares
Not Deposited -- Compulsory Acquisition", the Offeror may, in certain
circumstances, acquire Common Shares not deposited under the Offer pursuant to
the compulsory acquisition provisions of section 279 of the Company Act. A
Holder whose Common Shares are acquired by the Offeror pursuant to such
Compulsory Acquisition provisions will receive proceeds of disposition giving
rise to a capital gain (or capital loss) generally calculated in the manner, and
subject to the same treatment, as described above.
Subsequent Acquisition Transaction
As described in Section 10 of the Circular, "Acquisition of Common Shares
Not Deposited -- Subsequent Acquisition Transaction", if the compulsory
acquisition provisions are not utilized, it is the Offeror's current intention
to propose a Subsequent Acquisition Transaction to acquire the remaining Common
Shares. The tax treatment of such a transaction to a Holder will depend upon the
exact manner in which the transaction is carried out and may be substantially
the same as, or materially different than, that described above. Holders should
consult their own tax advisors for advice with respect to the potential income
tax consequences to them of having their Common Shares acquired pursuant to such
a transaction.
In particular, in such circumstances, the Offeror currently intends to
propose an amalgamation of Merfin and of the Offeror and/or an affiliate of the
Offeror pursuant to which Holders who do not deposit their Common Shares under
the Offer would have their Common Shares exchanged on the amalgamation for
redeemable preference shares ("Preference Shares") of the amalgamated
corporation, which Preference Shares would forthwith be redeemed for cash
consideration equal to the purchase price paid under the Offer. If such an
amalgamation is implemented, a Holder will realize neither a capital gain nor a
capital loss as a result of the disposition of Common Shares in exchange for
Preference Shares. The aggregate cost to the Holder of the Preference Shares
received on the exchange will be equal to the aggregate adjusted cost base of
such Holder's Common Shares immediately before the amalgamation.
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Alternatively to the amalgamation of Merfin and of the Offeror and/or an
affiliate of the Offeror, the Offeror may propose a plan of arrangement between
Merfin and its Shareholders pursuant to which Holders who do not deposit their
Common Shares under the Offer would have their Common Shares redeemed by Merfin.
Upon the redemption of Preference Shares (under the amalgamation) or of
Common Shares (under the plan of arrangement) the Holder thereof will be deemed
to have received a taxable dividend (subject to the potential application of
subsection 55(2) of the Tax Act to Holders that are corporations as described
below) equal to the amount, if any, by which the redemption price in respect of
such shares exceeds their paid-up capital for the purposes of the Tax Act. In
the case of a Holder who is an individual, any such deemed dividend will be
included in computing the Holder's income and will be subject to the gross-up
and dividend tax credit rules normally applicable to taxable dividends received
from taxable Canadian corporations. In the case of a Holder that is a
corporation, any such deemed dividend will be included in computing the Holder's
income and will generally be deductible in computing taxable income if the
Holder is not a "specified financial institution" for the purposes of the Tax
Act. If the Holder is a specified financial institution, it is unclear whether
any such dividend will be deductible in computing its taxable income. To the
extent that such a deduction is available, certain corporations may be liable to
pay a 33 1/3% refundable tax under Part IV of the Tax Act in respect of such
dividends. Under subsection 55(2) of the Tax Act, a Holder that is a corporation
may be required to recognize all or a portion of the dividend otherwise deemed
to have been received upon the redemption of the Preference Shares or Common
Shares as proceeds of disposition in the computation of the capital gain or
capital loss resulting from the redemption. In any case, the redemption of the
Preference Shares will be structured in order to minimize any tax payable under
Part IV.1 of the Tax Act.
A Holder whose Preference Shares or Common Shares are redeemed will be
regarded as having disposed of such shares on the redemption and will realize a
capital gain (or capital loss) to the extent that the difference between the
redemption price and the amount of any deemed dividend exceeds (or is less than)
the adjusted cost base thereof to the Holder. The treatment of any such capital
gain (or capital loss) will be the same as described above under "The Offer".
As discussed in Section 10 of the Circular, "Acquisition of Common Shares
Not Deposited -- Subsequent Acquisition Transaction", a Holder who dissents with
respect to an amalgamation is entitled to receive the fair value of such
Holder's Common Shares. Under the current published administrative practice of
Revenue Canada, the amount so received from the amalgamated corporation would be
treated as proceeds of disposition (rather than a deemed dividend) giving rise
to a capital gain or capital loss. Because of uncertainties as to whether and to
what extent an amount paid to a dissenting Holder will be treated as proceeds of
disposition or as the payment of a dividend, dissenting Holders should consult
their own tax advisors in this regard. The calculation and tax treatment of any
such capital gain or capital loss would be the same as described above under
"The Offer".
(b) Non-Residents of Canada
The following summary is applicable only to Shareholders who, for purposes
of the Tax Act, are neither resident nor deemed to be resident in Canada, deal
at arm's length with Merfin and the Offeror, hold their Common Shares as capital
property, and do not use or hold and are not deemed to use or hold their Common
Shares in carrying on a business in Canada and whose Common Shares do not
otherwise constitute "taxable Canadian property" for the purposes of the Tax Act
(a "Non-Resident Holder"). Common Shares of a Shareholder will not generally
constitute "taxable Canadian property" unless either (a) at any time during the
period of five years immediately preceding the disposition of Common Shares by
such Shareholder, not less than 25% of the issued shares (and in the view of
Revenue Canada, taking into account any rights to acquire shares) of any class
or series of the capital stock of Merfin were owned by the Shareholder, by
persons with whom the Shareholder did not deal at arm's length or by any
combination thereof, or (b) the Shareholder's Common Shares are otherwise deemed
to be taxable Canadian property.
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The Offer and Compulsory Acquisition
No tax will be payable under the Tax Act on any capital gains realized by a
Non-Resident Holder on the disposition of such Non-Resident Holder's Common
Shares pursuant to the Offer or pursuant to the compulsory acquisition
provisions of section 279 of the Company Act as described under Section 10 of
the Circular, "Acquisition of Common Shares Not Deposited -- Compulsory
Acquisition".
Subsequent Acquisition Transaction
As described in Section 10 of the Circular, "Acquisition of Common Shares
Not Deposited -- Subsequent Acquisition Transaction", if the compulsory
acquisition provisions of the Company Act are not available or are not utilized,
the Offeror will consider other means of acquiring, directly or indirectly, all
of the Common Shares not deposited under the Offer by way of a Subsequent
Acquisition Transaction. The tax treatment of such a transaction to a
Non-Resident Holder will depend upon the exact manner in which the transaction
is carried out and may be substantially the same as, or materially different
than, that described above. Non-Resident Holders should consult their own tax
advisors for advice with respect to the potential income tax consequences to
them of having their Common Shares acquired pursuant to such a transaction.
The Offeror currently intends to propose an amalgamation of Merfin and the
Offeror and/or an affiliate of the Offeror pursuant to which Non-Resident
Holders who do not deposit their Common Shares under the Offer would have their
Common Shares exchanged for Preference Shares of the amalgamated corporation,
which Preference Shares would forthwith be redeemed for cash consideration equal
to the purchase price paid under the Offer. If such an amalgamation is
implemented, a Non-Resident Holder will realize neither a capital gain nor a
capital loss as a result of the disposition of Common Shares in exchange for
Preference Shares. The aggregate cost to the Non-Resident Holder of the
Preference Shares received on the exchange will be equal to the aggregate
adjusted cost base of such Non-Resident Holder's Common Shares immediately
before the amalgamation.
Alternatively to the amalgamation of Merfin and of the Offeror and/or an
affiliate of the Offeror, the Offeror may propose a plan of arrangement between
Merfin and its Shareholders pursuant to which Non-Resident Holders who do not
deposit their Common Shares under the Offer would have their Common Shares
redeemed by Merfin.
Upon the redemption of the Preference Shares (under the amalgamation) or of
the Common Shares (under the plan of arrangement), the Non-Resident Holder
thereof will be deemed to have received a taxable dividend equal to the amount,
if any, by which the redemption price in respect of such shares exceeds their
paid-up capital for purposes of the Tax Act. Such dividend will be subject to
non-resident withholding tax at a rate of 25% or such lower rate as may be
provided under the terms of an applicable bilateral tax treaty.
A Non-Resident Holder whose Preference Shares or Common Shares are redeemed
will be regarded as having disposed of such shares on the redemption and will
realize a capital gain to the extent, if any, that the redemption price in
respect of such shares, net of the amount of any deemed dividend, exceeds the
adjusted cost base thereof to the Non-Resident Holder. Under proposed amendments
to the Tax Act, a Non-Resident Holder of a Common Share will not be subject to
tax under the Tax Act on any capital gain realized on the redemption of such
share unless the Common Share is not listed on a prescribed stock exchange at
the time of redemption. Under proposed amendments to the Tax Act, a Non-Resident
Holder will be subject to tax under the Tax Act on any capital gains realized on
a disposition of Preference Shares unless such shares are listed on a prescribed
stock exchange or the amalgamated corporation is a public corporation and the
Preference Shares are redeemed, acquired or canceled within 60 days after the
amalgamation of Merfin, the Offeror and/or one affiliate of the Offeror. If the
Preference Shares are not so listed and the amalgamated corporation is not a
public corporation or the Preference Shares are shares of a public corporation
but are not redeemed, canceled or acquired within 60 days of the amalgamation,
or if the Common Shares are not so listed, a Non-Resident Holder will have the
obligation, under proposed amendments to the Tax Act, to file a notice in
respect of the disposition of the Preference Shares or the Common Shares under
section 116 of the Tax Act. Unless the Non-Resident Holder provides to the
amalgamated corporation the appropriate clearance certificate under section 116
of the Tax Act, as a collection mechanism for tax payable by a Non-Resident
Holder on any capital gains realized on the disposition, the amalgamated
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corporation will be entitled to withhold 33 1/3% of the amount of the redemption
price in respect of the shares as tax on behalf of the Non-Resident Holder
thereof (which amount is required to be remitted by the amalgamated corporation
to Revenue Canada and will be treated as an installment of tax by the
Non-Resident Holder). A Non-Resident Holder on whose behalf an amount of tax on
capital gains has been so withheld and remitted to Revenue Canada may be
entitled to a refund of all or a portion of such amount, depending on the actual
liability of the Non-Resident Holder for such tax, upon the filing of a Canadian
tax return for the taxation year of the Non-Resident Holder in which the
redemption occurs. An exemption from tax under the Tax Act may be available to a
Non-Resident Holder under the terms of an applicable bilateral tax treaty.
As discussed in Section 10 of the Circular, "Acquisition of Common Shares
Not Deposited -- Subsequent Acquisition Transaction", a Non-Resident Holder who
dissents with respect to an amalgamation is entitled to receive the fair value
of such Non-Resident Holder's Common Shares. Under the current published
administrative practice of Revenue Canada, the amount so received from the
amalgamated corporation will be treated as proceeds of disposition (rather than
a deemed dividend) giving rise to a capital gain or capital loss. Because of
uncertainties as to whether or to what extent an amount paid to a dissenting
Non-Resident Holder will be treated as proceeds of disposition, or as the
payment of a dividend, dissenting Non-Resident Holders should consult their own
tax advisors in this regard.
21. 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 of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered to
the holders of Common Shares. However, 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
particulars of those rights or consult with a lawyer.
2.1-33
<PAGE>
CONSENT
TO: The Directors of the Offeror
We hereby consent to the reference to our opinion contained under "Canadian
Federal Income Tax Considerations" in the Circular accompanying the Offer dated
March 25, 1997 made by Buckeye Acquisition Inc. to the holders of Common Shares
of Merfin International Inc.
Montreal, Canada
March 25, 1997 (Signed) STIKEMAN, ELLIOTT
2.1-34
<PAGE>
APPROVAL AND CERTIFICATE
The contents of the Offer and the Circular have been approved, and the
sending, communication or delivery thereof to the Shareholders of Merfin
International Inc. has been authorized by the board of directors of Buckeye
Acquisition Inc. 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. In addition, the foregoing does not contain
any misrepresentation likely to affect the value or the market price of the
securities which are the subject of the Offer.
DATED: March 25, 1997
(Signed) ROBERT E. CANNON (Signed) DAVID B. FERRARO
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) JOHN F. ANDERSON (Signed) PIERRE RAYMOND
Director Director
2.1-35
<PAGE>
Offices of the Depositary, Montreal Trust Company
By Mail
Stock Transfer Services
1800 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3K9
By Hand, Courier or Facsimile Transmission
Montreal Vancouver Toronto
Stock Transfer Services Stock Transfer Services Stock Transfer Services
1800 McGill College Avenue 510 Burrard Street 151 Front Street West
6th Floor 2nd Floor 8th Floor
Montreal, Quebec Vancouver, British Toronto, Ontario
H3A 3K9 Columbia M5J 2N1
V6C 3B9
Tel: (514) 982-7555 Tel: (604) 661-0222 Tel: (416) 981-9596
Fax: (514) 982-7347 Fax: (604) 661-9480 Fax: (416) 981-9600
The Dealer Manager is:
TD Securities Inc.
55 King Street West
7th Floor
P.O. Box 1
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Tel: (416)982-2865
Fax: (416)982-4410
Any questions and requests for assistance may be directed by Shareholders
to the Dealer Manager or the Depositary at their telephone numbers and locations
set out above.
2.1-36
Exhibit 2.2
6 pages
April 15, 1997
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at price of
Cdn. $6.00 per Common Share by
BUCKEYE ACQUISITION INC.
<PAGE>
This document is important and requires your immediate attention. If you are in
doubt as to how to deal with it, you should consult your investment dealer,
broker, bank, manager, lawyer or other professional advisor.
April 15, 1997
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at price of
Cdn. $6.00 per Common Share by
BUCKEYE ACQUISITION INC.
The Offeror hereby gives notice that it is amending and varying its Offer
by extending the time for acceptance of the Offer.
The Offer, as amended by this Notice of Variation, is open for acceptance
until 5:00 p.m. (Vancouver time) on April 29, 1997, unless extended or
withdrawn.
Questions and requests for assistance may be directed to the Dealer
Manager or the Depositary. Additional copies of this Notice of Variation, the
Offer, the Circular and the related Letter of Transmittal and Notice of
Guaranteed Delivery may be obtained without charge on request from such persons
at their respective offices shown on the back cover of this document.
The Dealer Manager for the Offer is:
TD SECURITIES INC.
NOTICE TO U.S. HOLDERS OF COMMON SHARES
The Offer is made for the securities of a Canadian issuer and 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, that some of its officers and
directors are residents of Canada, that the experts and the Dealer Manager for
the Offer are residents of Canada, and that all or a substantial portion of the
assets of the Offeror and said persons are located outside the United States.
Shareholders should be aware that the Offeror or its affiliates or
associates, directly or indirectly, may bid for or make purchases of Merfin
International Inc. securities subject to the Offer during the period of the
Offer, as permitted by applicable Canadian laws or provincial laws or
regulations.
All currency amounts expressed herein, unless otherwise indicated, are
expressed in Canadian dollars.
2.2-1
<PAGE>
NOTICE OF VARIATION
To: THE HOLDERS OF COMMON SHARES OF MERFIN INTERNATIONAL INC.
This Notice of Variation amends and supplements the Offer and Circular
dated March 25, 1997 (the "Original Offer") of the Offeror pursuant to which the
Offeror is offering to purchase all of the issued and outstanding Common Shares,
together with associated Poison Pill Rights. Unless the context otherwise
requires, terms denoted by initial capital letters and not defined herein have
the meanings set forth in the Original Offer.
Except as set forth in and as amended by this Notice of Variation, the
terms and conditions previously set forth in the Original Offer continue to be
applicable in all respects. This Notice of Variation should be carefully read in
conjunction with the Original Offer, the Letter of Transmittal and the Notice of
Guaranteed Delivery which have been previously mailed to registered
Shareholders, holders of options or other rights to acquire or receive Common
Shares and holders of Convertible Debentures.
All references to the "Offer" in the Original Offer, the Letter of
Transmittal, the Notice of Guaranteed Delivery and this Notice of Variation mean
the Original Offer as hereby amended.
1. Variation of Offer
The Offeror has amended the Original Offer to extend the time for
acceptance of the Offer until 5:00 p.m. (Vancouver time) on April 29, 1997,
unless further extended or withdrawn. Accordingly, the Expiry Date is April 29,
1997 and the Expiry Time is 5:00 p.m. (Vancouver time) on the Expiry Date, or
such other date or time to which the Offer may be extended from time to time
pursuant to Section 4 of the Original Offer, "Extension and Variation of the
Offer".
2. Manner and Time of Acceptance
The Offer is open for acceptance until the Expiry Time, unless further
extended or withdrawn. Common Shares may be deposited pursuant to the Offer in
accordance with the provisions of Section 2 of the Original Offer, "Manner and
Time of Acceptance".
3. Take-up and Payment for Deposited Common Shares
The Offeror will take up and pay for the Common Shares deposited as
provided in Section 5 of the Original Offer, "Take-up and Payment for Deposited
Common Shares", but in any event, no later than as required by applicable
securities law.
4. Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer are irrevocable,
provided that any Common Shares deposited in acceptance to the Offer may be
withdrawn by or on behalf of the depositing Shareholder (unless otherwise
required or permitted by law):
(a) at any time before the Expiry Time;
(b) at any time before the expiration of the tenth day after the date upon
which either (i) a notice of change is delivered in accordance with
Section 10 of the Original Offer, "Notice", relating to a change which
has occurred in the information contained in the Original Offer or in
any notice of change or notice of variation delivered in connection
therewith (except any change that is not within the control of the
Offeror or an affiliate of the Offeror) that would reasonably be
expected to affect the decision of a Shareholder to accept or reject
the Offer, which change occurred prior to the Expiry Time or after the
Expiry Time 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 is delivered in accordance with
Section 10 of the Original Offer, "Notice", unless such deposited
Common Shares have been taken up by the Offeror at the date of such
notice of change or variation, or in the case of a notice of
2.2-2
<PAGE>
variation, unless the variation in the terms of the Offer consists
solely of an increase in the consideration offered for Common Shares
and the time for deposit is not extended for a period greater than 10
days or the variation in the terms of the Offer consists solely of the
waiver of a condition in the Offer where the consideration offered for
the Common Shares under the Offer consists solely of cash; and
(c) at any time after May 9, 1997 provided that 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.
The withdrawal of deposited Common Shares must be made in accordance with
the provisions of Section 6 of the Original Offer, "Withdrawal of Deposited
Common Shares".
5. Offeror's Response to Merfin's Recommendations
The rejection of the Offer by Merfin's board is based upon expectations
that the Offeror believes to be unrealistic. The Offeror believes that the
actions of Merfin's board are not in the best interest of Merfin's Shareholders.
From their initial contact with Merfin, representatives of the Offeror have
indicated a willingness to negotiate an agreement with the management of Merfin
which its board would be comfortable in favorably recommending to Merfin's
Shareholders. However, the demand of Merfin's board that the Offeror first agree
to commit not to make any Offer to Merfin's Shareholders without Merfin's
board's approval and, initially, to commit not to acquire a competitor if its
efforts to acquire Merfin are unsuccessful have prevented any meaningful
dialogue between the parties. Additionally, Merfin's requirement that the
Offeror submit an Offer acceptable to its board before the Offeror is allowed
access to the same company information Merfin has shared with others, who have
not been required to make an offer, continues to create a barrier to discussions
between the parties. The Offeror believes meaningful discussions between the
Offeror and Merfin's board are in the best interest of Merfin's Shareholders.
Merfin's board has attacked the Offer as opportunistic and insufficient,
and it has suggested that the Offer does not adequately reflect Merfin's value
and growth prospects. The Offeror continues to believe its Offer is full and
fair by any reasonable financial measure.
The Offer represents a 45% premium over the 30-day weighted average market
price prior to Merfin's March 17, 1997, announcement that Merfin had received an
unsolicited expression of interest. Further, the Offer is equivalent to 35 times
Merfin's reported 1996 earnings and 23 times analysts' estimated 1997 earnings.
While increased earnings for Merfin have been forecast in the past, the
company's actual earnings have remained stagnant at 16(cent) to 19(cent) per
share for the last four years. In fact, despite management assurances as
recently as June 21, 1996, that earnings would increase for 1996, earnings for
that year ended lower than for both 1994 and 1995. On that same date, management
also predicted earnings could run as high as $10 million in 1997, or about 50%
more than current analyst estimates.
Buckeye has made a strategic decision to enter the air-laid nonwovens
business. The acquisition of Merfin represents only one avenue for this entry.
Buckeye continues to pursue other alternatives, including strategically locating
new production facilities closer to customer plants, which would mean, among
other things, significantly lower freight costs for Buckeye than is possible
with Merfin's facilities.
Based on Buckeye's current negotiations with equipment suppliers for the
installation of state-of-the-art greenfield capacity, the Offer represents a
substantial premium to the replacement cost of Merfin's tangible assets,
including Merfin's $66 million investment in its Irish facility.
Merfin's board has continued to speculate about future business
possibilities, but it has refused to provide the Offeror with any concrete
evidence to demonstrate the insufficiency of the Offer. Instead, it has, in the
Offeror's opinion, arbitrarily and unreasonably enacted highly questionable
barriers to the Offer by implementing a Shareholder Rights Plan ("Poison Pill")
in response to the Offeror's interest in Merfin and inviting others, including,
reportedly, Merfin's principal competitor, to review confidential information
relating to Merfin which may harm the competitive position of Merfin and thus
reduce its value.
Concurrently with the mailing of this Notice of Variation, which has the
effect of extending the Offer to a 35-day period, the Offeror has again
requested the board of directors of Merfin to waive the application of the
Poison Pill to the Offer, a Compulsory Acquisition and any Subsequent
2.2-3
<PAGE>
Acquisition Transaction. If Merfin's board fails to waive the application of the
Poison Pill, the Offeror intends to initiate all reasonable actions to challenge
(i) the Poison Pill, (ii) Merfin's management's continued denial of pertinent
Merfin information to the Offeror which Merfin's board is sharing with other
potential bidders and/or (iii) any other action of Merfin's board which has the
effect of impeding the right of Merfin's Shareholders to accept the Offer.
6. Amendments to the Original Offer, Letter of Transmittal and Notice of
Guaranteed Delivery
The Original Offer, the Letter of Transmittal and the Notice of Guaranteed
Delivery are deemed to be amended as required to reflect the extension of time
for deposit of Common Shares contemplated in this Notice of Variation.
7. Satisfaction of a Condition to the Offer and Regulatory Matters
Hart-Scott-Rodino Antitrust Improvements Act of 1976
On April 9, 1997, the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, expired in respect of the Offer.
Accordingly, at the date hereof, the condition to the Offer described under
paragraph (d) of Section 3 of the Original Offer, "Conditions of the Offer", has
been satisfied.
8. 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 of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered to
the holders of Common Shares. However, 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
particulars of those rights or consult with a lawyer.
2.2-4
<PAGE>
APPROVAL AND CERTIFICATE
The contents of the Offer, the Circular and this Notice of Variation have
been approved, and the sending, communication or delivery thereof to the
Shareholders of Merfin International Inc. has been authorized by the board of
directors of Buckeye Acquisition Inc. The foregoing contain no untrue statement
of a material fact and do 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. In addition, the foregoing do not
contain any misrepresentation likely to affect the value or the market price of
the securities which are the subject of the Offer.
DATED: April 15, 1997
(Signed) ROBERT E. CANNON (Signed) DAVID B. FERRARO
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) JOHN F. ANDERSON (Signed) PIERRE RAYMOND
Director Director
2.2-5
<PAGE>
Offices of the Depositary, Montreal Trust Company
By Mail
Stock Transfer Services
1800 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3K9
By Hand, Courier or and By Facsimile Transmission
Montreal Vancouver Toronto
Stock Transfer Services Stock Transfer Services Stock Transfer Services
1800 McGill College Ave 510 Burrard Street 151 Front Street West
6th Floor 2nd Floor 8th Floor
Montreal, Quebec Vancouver, British Columbia Toronto, Ontario
H3A 3K9 V6C 3B9 M5J 2N1
Tel: (514) 982-7555 Tel: (604) 661-0222 Tel: (416) 981-9596
Fax: (514) 982-7347 Fax: (604) 661-9480 Fax: (416) 981-9600
The Dealer Manager is:
TD Securities Inc.
55 King Street West
7th Floor
P.O. Box 1
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Tel: (416) 982-2865
Fax: (416) 982-4410
Any questions and requests for assistance may be directed by Shareholders
to the Dealer Manager or the Depositary at their respective telephone numbers
and locations set out above.
2.2-6
EXHIBIT 2.3
5 pages
April 25, 1997
SECOND
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $6.50 per Common Share by
BUCKEYE ACQUISITION INC.
<PAGE>
This document is important and requires your immediate attention. If you are in
doubt as to how to deal with it, you should consult your investment dealer,
broker, bank, manager, lawyer or other professional advisor.
April 25, 1997
SECOND
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $6.50 per Common Share by
BUCKEYE ACQUISITION INC.
- --------------------------------------------------------------------------------
The Offeror hereby gives notice that it is amending and varying its Offer
by increasing the consideration payable under the Offer to Cdn. $6.50 per Common
Share and further extending the time for acceptance of the Offer.
The Offer, as amended by this Notice of Variation, is open for acceptance
until 7:00 p.m. (Vancouver time) on May 8, 1997, unless further extended or
withdrawn.
- --------------------------------------------------------------------------------
Questions and requests for assistance may be directed to the Dealer
Manager or the Depositary. Additional copies of this Notice of Variation, the
Notice of Variation dated April 15, 1997, the Offer, the Circular and the
related Letter of Transmittal and Notice of Guaranteed Delivery may be obtained
without charge on request from such persons at their respective offices shown on
the back cover of this document.
The Dealer Manager for the Offer is:
TD SECURITIES INC.
NOTICE TO U.S. HOLDERS OF COMMON SHARES
The Offer is made for the securities of a Canadian issuer and 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, that some of its officers and
directors are residents of Canada, that the experts and the Dealer Manager for
the Offer are residents of Canada, and that all or a substantial portion of the
assets of the Offeror and said persons are located outside the United States.
Shareholders should be aware that the Offeror or its affiliates or
associates, directly or indirectly, may bid for or make purchases of Merfin
International Inc. securities subject to the Offer during the period of the
Offer, as extended, as permitted by applicable Canadian laws or provincial laws
or regulations.
All currency amounts expressed herein, unless otherwise indicated, are
expressed in Canadian dollars.
2.3-1
<PAGE>
NOTICE OF VARIATION
To: THE HOLDERS OF COMMON SHARES OF MERFIN INTERNATIONAL INC.
By notice to Montreal Trust Company dated April 25, 1997, the Offeror has
amended its offer dated March 25, 1997, as extended to April 29, 1997, pursuant
to which the Offeror is offering to purchase all of the issued and outstanding
Common Shares of Merfin, together with associated Poison Pill Rights. Unless the
context otherwise requires, terms denoted by initial capital letters and not
defined herein have the meanings set forth in the Offer.
All references to the "Offer" in the Offer, the Letter of Transmittal, the
Notice of Guaranteed Delivery, the Notice of Variation dated April 15, 1997 and
this Notice of Variation mean the Offer as initially extended to April 29, 1997
and as hereby further amended.
Except as set forth in and as amended by the Notice of Variation dated
April 15, 1997 and by this Notice of Variation, the terms and conditions
previously set forth in the Offer continue to be applicable in all respects.
This Notice of Variation should be carefully read in conjunction with the Offer,
the Letter of Transmittal and the Notice of Guaranteed Delivery which have been
previously mailed to registered Shareholders, holders of options or other rights
to acquire or receive Common Shares and holders of Convertible Debentures.
1. Variation of Offer
The Offeror has amended the Offer to increase the price offered for Common
Shares under the Offer to Cdn. $6.50 in cash per Common Share and to extend the
time for acceptance of the Offer until 7:00 p.m. (Vancouver time), on May 8,
1997, unless further extended or withdrawn. Accordingly, the Expiry Date is May
8, 1997 and the Expiry Time is 7:00 p.m. (Vancouver time) on the Expiry Date, or
such other date or time to which the Offer may be extended from time to time
pursuant to Section 4 of the Offer, "Extension and Variation of the Offer".
2. Manner and Time of Acceptance
The Offer is open for acceptance until the Expiry Time, unless further
extended or withdrawn. Common Shares may be deposited pursuant to the Offer in
accordance with the provisions of Section 2 of the Offer, "Manner and Time of
Acceptance".
3. Take-up and Payment for Deposited Common Shares
The Offeror will take up and pay for the Common Shares deposited as
provided in Section 5 of the Offer, "Take-up and Payment for Deposited Common
Shares", but in any event, no later than as required by applicable securities
law.
4. Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer are irrevocable,
provided that any Common Shares deposited in acceptance to the Offer may be
withdrawn by or on behalf of the depositing Shareholder (unless otherwise
required or permitted by law):
(a) at any time before the Expiry Time;
(b) at any time before the expiration of the tenth day after the date upon
which either (i) a notice of change is delivered in accordance with
Section 10 of the Offer, "Notice", relating to a change which has
occurred in the information contained in the Offer or in any notice of
change or notice of variation delivered in connection therewith
(except any change that is not within the control of the Offeror or an
affiliate of the Offeror) that would reasonably be expected to affect
the decision of a Shareholder to accept or reject the Offer, which
change occurred prior to the Expiry Time or after the Expiry Time 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 is delivered in accordance with Section 10 of the Offer,
"Notice", unless such deposited Common Shares have been taken up by
the Offeror at the date of such notice of change or variation, or in
the case of a notice of variation, unless the variation in the terms
of the Offer consists solely of an increase in the consideration
2.3-2
<PAGE>
offered for Common Shares and the time for deposit is not extended for
a period greater than 10 days or the variation in the terms of the
Offer consists solely of the waiver of a condition in the Offer where
the consideration offered for the Common Shares under the Offer
consists solely of cash; and
(c) at any time after May 9, 1997 provided that 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.
The withdrawal of deposited Common Shares must be made in accordance with
the provisions of Section 6 of the Offer, "Withdrawal of Deposited Common
Shares".
5. Waiver of the Poison Pill
On April 18, 1997, the Offeror applied to the Ontario Securities Commission
requesting an order striking down Merfin's Shareholder Rights Plan ("Poison
Pill"), preferably on or before April 28, 1997, but in any event on or before
May 8, 1997. The Offeror anticipated that it would be successful in obtaining
such an order. In response, Merfin committed to waiving the Poison Pill on or
before 5:00 p.m. (Vancouver time) on May 8, 1997. In light of Merfin's
acquiescence with the Offeror's demands, the Offeror withdrew its application
rather than proceeding with the hearing to consider the Offeror's request for an
order.
6. Amendments to the Offer, Letter of Transmittal and Notice of Guaranteed
Delivery
The Offer, as extended to April 29, 1997, the Letter of Transmittal and the
Notice of Guaranteed Delivery are deemed to be amended as required to reflect
the increase in the price offered per Common Share and the extension of time for
deposit of Common Shares contemplated in this Notice of Variation.
7. 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 of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered to
the holders of Common Shares. However, 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
particulars of those rights or consult with a lawyer.
2.3-3
<PAGE>
APPROVAL AND CERTIFICATE
The contents of this Notice of Variation have been approved, and the
sending, communication or delivery thereof to the Shareholders of Merfin
International Inc. has been authorized by the board of directors of Buckeye
Acquisition Inc. The foregoing contains no untrue statement of a material fact
and do 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. In addition, the foregoing does not contain
any misrepresentation likely to affect the value or the market price of the
securities which are the subject of the Offer.
DATED: April 25, 1997
(Signed) ROBERT E. CANNON (Signed) DAVID B. FERRARO
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) JOHN F. ANDERSON (Signed) PIERRE RAYMOND
Director Director
2.3-4
<PAGE>
Offices of the Depositary, Montreal Trust Company
By Mail
Stock Transfer Services
1800 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3K9
By Hand, Courier or Facsimile Transmission
Montreal Vancouver Toronto
Stock Transfer Services Stock Transfer Services Stock Transfer Services
800 McGill College Avenue 510 Burrard Street 151 Front Street West
6th Floor 2nd Floor 8th Floor
Montreal, Quebec Vancouver, British Columbia Toronto, Ontario
H3A 3K9 V6C 3B9 M5J 2N1
Tel: (514) 982-7555 Tel: (604) 661-0222 Tel: (416) 981-9596
Fax: (514) 982-7347 Fax: (604) 661-9480 Fax: (416) 981-9600
The Dealer Manager is:
TD Securities Inc.
55 King Street West
7th Floor
P.O. Box 1
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Tel: (416) 982-2865
Fax: (416) 982-4410
Any questions and requests for assistance may be directed by Shareholders
to the Dealer Manager or the Depositary at their respective telephone numbers
and locations set out above.
2.3-5
EXHIBIT 2.4
May 5, 1997
5 pages
THIRD
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $7.00 per Common Share by
BUCKEYE ACQUISITION INC.
<PAGE>
This document is important and requires your immediate attention. If you are in
doubt as to how to deal with it, you should consult your investment dealer,
broker, bank, manager, lawyer or other professional advisor.
May 5, 1997
THIRD
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $7.00 per Common Share by
BUCKEYE ACQUISITION INC.
- --------------------------------------------------------------------------------
On April 29, 1997, Merfin International Inc. ("Merfin") and the Offeror
announced that the directors of Merfin have unanimously recommended that
Shareholders accept the Offer at an increased price of Cdn. $7.00 per Common
Share.
- --------------------------------------------------------------------------------
The Offeror hereby gives notice that it is amending and varying its Offer
by increasing the consideration payable under the Offer to Cdn. $7.00 per Common
Share and further extending the time for acceptance of the Offer.
The Offer, as amended by this Notice of Variation, is open for acceptance
until 12:00 a.m. (midnight, Vancouver time) on May 15, 1997, unless further
extended or withdrawn.
Questions and requests for assistance may be directed to the Dealer
Manager or the Depositary. Additional copies of this Notice of Variation, the
Notice of Variation dated April 15, 1997, the Notice of Variation dated April
25, 1997, the Offer, the Circular and the related Letter of Transmittal and
Notice of Guaranteed Delivery may be obtained without charge on request from
such persons at their respective offices shown on the back cover of this
document.
The Dealer Manager for the Offer is:
TD SECURITIES INC.
NOTICE TO U.S. HOLDERS OF COMMON SHARES
The Offer is made for the securities of a Canadian issuer and 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, that some of its officers and
directors are residents of Canada, that the experts and the Dealer Manager for
the Offer are residents of Canada, and that all or a substantial portion of the
assets of the Offeror and said persons are located outside the United States.
Shareholders should be aware that the Offeror or its affiliates or
associates, directly or indirectly, may bid for or make purchases of Merfin
International Inc. securities subject to the Offer during the period of the
Offer, as extended, as permitted by applicable Canadian laws or provincial laws
or regulations.
All currency amounts expressed herein, unless otherwise indicated, are
expressed in Canadian dollars.
2.4-1
<PAGE>
NOTICE OF VARIATION
To: THE HOLDERS OF COMMON SHARES OF MERFIN INTERNATIONAL INC.
By notice to Montreal Trust Company dated May 5, 1997, the Offeror has
amended its offer dated March 25, 1997, as extended to May 8, 1997, pursuant to
which the Offeror is offering to purchase all of the issued and outstanding
Common Shares of Merfin, together with associated Poison Pill Rights. Unless the
context otherwise requires, terms denoted by initial capital letters and not
defined herein have the meanings set forth in the Offer.
All references to the "Offer" in the Offer, the Letter of Transmittal, the
Notice of Guaranteed Delivery, the Notice of Variation dated April 15, 1997, the
Notice of Variation dated April 25, 1997 and this Notice of Variation mean the
Offer as extended to May 8, 1997 and as hereby further amended.
Except as set forth in and as amended by the Notice of Variation dated
April 15, 1997, the Notice of Variation dated April 25, 1997 and this Notice of
Variation, the terms and conditions previously set forth in the Offer continue
to be applicable in all respects. This Notice of Variation should be carefully
read in conjunction with the Offer, the Letter of Transmittal and the Notice of
Guaranteed Delivery which have been previously mailed to registered
Shareholders, holders of options or other rights to acquire or receive Common
Shares and holders of Convertible Debentures.
1. Variation of Offer
The Offeror has amended the Offer to increase the price offered for Common
Shares under the Offer to Cdn. $7.00 in cash per Common Share and to extend the
time for acceptance of the Offer until 12:00 a.m. (midnight, Vancouver time), on
May 15, 1997, unless further extended or withdrawn. Accordingly, the Expiry Date
is May 15, 1997 and the Expiry Time is 12:00 a.m. (midnight, Vancouver time) on
the Expiry Date, or such other date or time to which the Offer may be extended
from time to time pursuant to Section 4 of the Offer, "Extension and Variation
of the Offer".
2. Manner and Time of Acceptance
The Offer is open for acceptance until the Expiry Time, unless further
extended or withdrawn. Common Shares may be deposited pursuant to the Offer in
accordance with the provisions of Section 2 of the Offer, "Manner and Time of
Acceptance".
3. Take-up and Payment for Deposited Common Shares
The Offeror will take up and pay for the Common Shares deposited as
provided in Section 5 of the Offer, "Take-up and Payment for Deposited Common
Shares", but in any event, no later than as required by applicable securities
law.
4. Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer may be withdrawn by or
on behalf of the depositing Shareholder at any time provided that 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.
The withdrawal of deposited Common Shares must be made in accordance with
the provisions of Section 6 of the Offer, "Withdrawal of Deposited Common
Shares".
5. Support Agreement
Pursuant to discussions between the parties and their respective advisors
on April 28, 1997, the Offeror and Merfin entered into a support agreement (the
"Support Agreement") on April 29, 1997 whereby (i) the Offeror committed to
increase the price offered for the Common Shares to $7.00 in cash and (ii)
Merfin agreed to support the increased Offer. As a result of the Support
Agreement, Buckeye obtained access to information concerning the business and
affairs of Merfin, including certain non-public information related to Merfin.
The Offeror has no information which indicates that any material change to the
information publicly disclosed by Merfin has occurred since the date of the last
public financial statements of Merfin.
Pursuant to the Support Agreement, Merfin has represented to the Offeror
that the board of directors of Merfin, upon consultation with its financial and
legal advisors, has determined that the increased price is fair to the
Shareholders and that the Offer, as amended, is in the best interests of Merfin
and the Shareholders.
2.4-2
<PAGE>
Furthermore, in the Support Agreement, Merfin made customary
representations and agreed, among other things, (i) to recommend that holders of
Common Shares accept the increased Offer, (ii) to use all reasonable efforts to
secure the acceptance of the Offer and (subject to the determination that a
proposal with respect to Merfin constitutes a Superior Proposal) to recommend
against any other proposal with respect to Merfin which has been announced or
launched, (iii) to encourage all persons holding options and convertible
debentures to tender the Common Shares to be issued in connection therewith,
(iv) to accelerate the vesting of all entitlements under outstanding stock
options, (v) to carry on its business in the regular and ordinary course, (vi)
subject to the fiduciary obligations of the board of directors of Merfin if a
person has made a Superior Proposal, not to solicit, initiate or encourage
offers, participate in any negotiations or provide information to any person
other than the Offeror relating to any amalgamation, takeover bid,
reorganization or similar transaction involving Merfin, (vii) to notify the
Offeror upon becoming aware of any proposal for any of the transactions referred
to in (vi) of this paragraph and (viii) to notify the Offeror of the existence
or occurrence of any change, event or state of facts which would likely have a
material adverse effect on Merfin.
The Support Agreement may be terminated (a) by Merfin, if the board of
directors of Merfin reasonably determines that a proposal received by Merfin
constitutes a Superior Proposal to the Offer, (b) by the Offeror, if the board
of directors of Merfin shall (i) not have recommended the increased Offer to the
holders of Common Shares, (ii) have modified in a manner adverse to the Offeror
or withdrawn its recommendation of the increased Offer or (iii) have failed to
recommend against another offer that the board of directors of Merfin has not
determined to be a Superior Proposal and (c) by the Offeror, if certain
covenants or representations of Merfin in the Support Agreement shall not be
true and accurate or if any condition of the Offer has not been satisfied or
waived on the expiration date of the Offer. If the Support Agreement is
terminated by Merfin pursuant to (a) above or by the Offeror pursuant to (b)
above, Merfin shall immediately pay to the Offeror $8 million together with all
the reasonable expenses of the Offeror.
If the board of directors of Merfin determines that a proposal received by
Merfin constitutes a Superior Proposal, Merfin may not terminate the Support
Agreement unless and until Merfin has notified the Offeror of such determination
and Merfin has fully cooperated with the Offeror with the intent of enabling
(but not obliging) the Offeror to agree to a modification of the terms and
conditions of the Support Agreement so that the Offer may be completed.
A "Superior Proposal" means a bona fide written and unsolicited proposal or
offer for cash or a combination of cash and securities made by any person to
acquire all or substantially all of the Common Shares or assets of Merfin on
terms which the board of directors of Merfin determines in good faith and in the
exercise of reasonable judgment to be more favourable to Merfin and its
Shareholders than the Offer.
6. Sources of Funds
As a result of the increase in the price offered to $7.00 per Common Share,
the Offeror estimates that if it acquires all of the Common Shares (on a
fully-diluted basis) pursuant to the Offer or pursuant to any following
Compulsory Acquisition or Subsequent Acquisition Transaction, the total amount
required to purchase such Common Shares will be approximately $196 million
(other than the fees (including advisory fees) and expenses under the Offer
estimated at $5.15 million). Buckeye has agreed to provide or cause to be
provided such funds to the Offeror as are needed to complete the transaction
from internal cash resources and a line of credit.
7. Amendments to the Offer, Letter of Transmittal and Notice of Guaranteed
Delivery
The Offer, as extended to April 29, 1997 and as further extended to May 8,
1997, the Letter of Transmittal and the Notice of Guaranteed Delivery are deemed
to be amended as required to reflect the increase in the price offered per
Common Share and the extension of time for deposit of Common Shares contemplated
in this Notice of Variation.
8. 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 of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered to
the holders of Common Shares. However, 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
particulars of those rights or consult with a lawyer.
2.4-3
<PAGE>
APPROVAL AND CERTIFICATE
The contents of this Notice of Variation have been approved, and the
sending, communication or delivery thereof to the Shareholders of Merfin
International Inc. has been authorized by the board of directors of Buckeye
Acquisition Inc. 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. In addition, the foregoing does not contain
any misrepresentation likely to affect the value or the market price of the
securities which are the subject of the Offer.
DATED: May 5, 1997
(Signed) ROBERT E. CANNON (Signed) DAVID B. FERRARO
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) JOHN F. ANDERSON (Signed) PIERRE RAYMOND
Director Director
2.4-4
<PAGE>
Offices of the Depositary, Montreal Trust Company
By Mail
Stock Transfer Services
1800 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3K9
By Hand, Courier or Facsimile Transmission
Montreal Vancouver Toronto
Stock Transfer Services Stock Transfer Services Stock Transfer Services
1800 McGill College Avenue 510 Burrard Street 151 Front Street West
6th Floor 2nd Floor 8th Floor
Montreal, Quebec Vancouver, British Columbia Toronto, Ontario
H3A 3K9 V6C 3B9 M5J 2N1
Tel: (514) 982-7555 Tel: (604) 661-0222 Tel: (416) 981-9596
Fax: (514) 982-7347 Fax: (604) 661-9480 Fax: (416) 981-9600
The Dealer Manager is:
TD Securities Inc.
55 King Street West
7th Floor
P.O. Box 1
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Tel: (416) 982-2865
Fax: (416) 982-4410
Any questions and requests for assistance may be directed by Shareholders
to the Dealer Manager or the Depositary at their respective telephone numbers
and locations set out above.
2.4-5
EXHIBIT 2.5
6 pages
May 15, 1997
FOURTH
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $7.50 per Common Share by
BUCKEYE ACQUISITION INC.
<PAGE>
This document is important and requires your immediate attention. If you are in
doubt as to how to deal with it, you should consult your investment dealer,
broker, bank, manager, lawyer or other professional advisor.
May 15, 1997
FOURTH
NOTICE OF VARIATION
of the
OFFER TO PURCHASE FOR CASH
all of the Common Shares of
MERFIN INTERNATIONAL INC.
at an increased price of
Cdn. $7.50 per Common Share by
BUCKEYE ACQUISITION INC.
The Offeror hereby gives notice that it is amending and varying its Offer
by increasing the consideration payable under the Offer to Cdn. $7.50 per Common
Share and further extending the time for acceptance of the Offer.
The Offer, as amended by this Notice of Variation, is open for acceptance
until 5:00 p.m. (Toronto time) on May 27, 1997, unless further extended or
withdrawn.
Questions and requests for assistance may be directed to the Dealer Manager
or the Depositary. Additional copies of this Notice of Variation, the Notice of
Variation dated April 15, 1997, the Notice of Variation dated April 25, 1997,
the Notice of Variation dated May 5, 1997, the Offer, the Circular and the
related Letter of Transmittal and Notice of Guaranteed Delivery may be obtained
without charge on request from such persons at their respective offices shown on
the back cover of this document.
The Dealer Manager for the Offer is:
TD SECURITIES INC.
NOTICE TO U.S. HOLDERS OF COMMON SHARES
The Offer is made for the securities of a Canadian issuer and 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, that some of its officers and
directors are residents of Canada, that the experts and the Dealer Manager for
the Offer are residents of Canada, and that all or a substantial portion of the
assets of the Offeror and said persons are located outside the United States.
Shareholders should be aware that the Offeror or its affiliates or
associates, directly or indirectly, may bid for or make purchases of Merfin
International Inc. securities subject to the Offer during the period of the
Offer, as extended, as permitted by applicable Canadian laws or provincial laws
or regulations.
All currency amounts expressed herein, unless otherwise indicated, are
expressed in Canadian dollars.
2.5-1
<PAGE>
NOTICE OF VARIATION
To: THE HOLDERS OF COMMON SHARES OF MERFIN INTERNATIONAL INC.
By notice to Montreal Trust Company dated May 15, 1997, the Offeror has
amended its offer dated March 25, 1997, as extended to May 15, 1997, pursuant to
which the Offeror is offering to purchase all of the issued and outstanding
Common Shares of Merfin, together with associated Poison Pill Rights. Unless the
context otherwise requires, terms denoted by initial capital letters and not
defined herein have the meanings set forth in the Offer.
All references to the "Offer" in the Offer, the Letter of Transmittal, the
Notice of Guaranteed Delivery, the Notices of Variation dated April 15, 1997,
April 25, 1997, May 5, 1997 and this Notice of Variation mean the Offer as
extended to May 15, 1997 and as hereby further amended.
Except as set forth in and as amended by the Notices of Variation dated
April 15, 1997, April 25, 1997, May 5, 1997 and this Notice of Variation, the
terms and conditions previously set forth in the Offer continue to be applicable
in all respects. This Notice of Variation should be carefully read in
conjunction with the Offer, the Letter of Transmittal and the Notice of
Guaranteed Delivery which have been previously mailed to registered
Shareholders, holders of options or other rights to acquire or receive Common
Shares and holders of Convertible Debentures.
1. Variation of Offer
The Offeror has amended the Offer to increase the price offered for Common
Shares under the Offer to Cdn. $7.50 in cash per Common Share and to extend the
time for acceptance of the Offer until 5:00 p.m. (Toronto time), on May 27,
1997, unless further extended or withdrawn. Accordingly, the Expiry Date is May
27, 1997 and the Expiry Time is 5:00 p.m. (Toronto time) on the Expiry Date, or
such other date or time to which the Offer may be extended from time to time
pursuant to Section 4 of the Offer, "Extension and Variation of the Offer".
2. Manner and Time of Acceptance
The Offer is open for acceptance until the Expiry Time, unless further
extended or withdrawn. Common Shares may be deposited pursuant to the Offer in
accordance with the provisions of Section 2 of the Offer, "Manner and Time of
Acceptance".
3. Take-up and Payment for Deposited Common Shares
The Offeror will take up and pay for the Common Shares deposited as
provided in Section 5 of the Offer, "Take-up and Payment for Deposited Common
Shares", but in any event, no later than as required by applicable securities
law.
4. Withdrawal of Deposited Common Shares
All deposits of Common Shares pursuant to the Offer may be withdrawn by or
on behalf of the depositing Shareholder at any time provided that 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.
The withdrawal of deposited Common Shares must be made in accordance with
the provisions of Section 6 of the Offer, "Withdrawal of Deposited Common
Shares".
5. Polymer Offer
On May 9, 1997 Polymer Group, Inc. ("Polymer") announced that it intended,
itself or through a wholly owned Canadian subsidiary, to mail an offer to
purchase all of the Common Shares to Merfin's Shareholders as soon as practical
(the "Proposed Polymer Offer"). The Proposed Polymer Offer would have entitled
each Merfin Shareholder to elect, at its option, to receive a cash payment of
$7.15 per Common Share or, in the alternative (the "Alternative Proposal"), a
payment of $7.60 per Common Share, with 55% of such amount to be paid in cash
and the remaining 45% to be paid in the form of a non-interest-bearing
promissory note entitling such Shareholder to receive, on May 31, 1999, a
2.5-2
<PAGE>
minimum amount of $7.60 per Common Share and a maximum amount of $10.00 per
Common Share, based upon Merfin's fiscal 1998 earnings, before income taxes,
interest, depreciation and amortization measured against the Merfin management's
target amount for that period.
The Proposed Polymer Offer, when made, was to be subject to certain
conditions, including the tendering of at least 75% of the Common Shares, no
break-up fee or other payment being paid or required to be paid by Merfin to the
Offeror pursuant to the Support Agreement, compliance with or receipt of
applicable regulatory requirements and approvals, including under the Hart
Scott-Rodino Antitrust Improvements Act of 1976, and the effectiveness of a
registration statement under the United States Securities Act of 1933, as
amended.
On May 13, 1997, Polymer announced that it was amending the Proposed
Polymer Offer (the "Amended Proposed Polymer Offer") to increase its cash
payment to $7.20 per Common Share, which Amended Proposed Polymer Offer was to
be made on or about May 19, 1997 or sooner if possible. Unless accepted by
Merfin, the Amended Proposed Polymer Offer was to expire at 5:00 p.m. (Vancouver
time) on Tuesday, May 13, 1997, unless otherwise extended in writing by Polymer
prior to such time.
In announcing the Amended Proposed Polymer Offer, Polymer withdrew the
Alternative Proposal and therefore the necessity of obtaining an effective
registration statement under the United States Securities Act of 1933, as
amended, as well as the condition that no break-up fee or other payment be paid
or required to be paid by Merfin to the Offeror pursuant to the Support
Agreement.
On May 14, 1997, Polymer (i) announced that, in response to the entering
into of the Amended Support Agreement (as defined below), it was withdrawing the
Amended Proposed Polymer Offer and would not pursue the acquisition of Merfin
and (ii) sent a letter to Buckeye congratulating it on its successful bid for
Merfin.
6. Amended Support Agreement
Pursuant to discussions between the parties and their respective advisors,
the Offeror and Merfin entered into an amended support agreement (the "Amended
Support Agreement") on May 13, 1997 whereby (i) the Offeror committed to
increase the price offered for the Common Shares to $7.50 in cash; (ii) the
original intention of the parties to the Support Agreement was clarified and
(iii) Merfin agreed to support the increased Offer.
Pursuant to the Amended Support Agreement, Merfin has represented to the
Offeror that the board of directors of Merfin, upon consultation with its
financial and legal advisors, has determined that the increased price is fair to
the Shareholders and that the Offer, as amended, is in the best interests of
Merfin and the Shareholders.
Furthermore, in the Amended Support Agreement, Merfin made customary
representations and agreed, among other things, (i) to recommend that holders of
Common Shares accept the increased Offer, (ii) to use all reasonable efforts to
secure the acceptance of the Offer and (subject to the determination that a
proposal with respect to Merfin constitutes a Superior Proposal) to recommend
against any other proposal with respect to Merfin which has been announced or
launched, (iii) to encourage all persons holding options and convertible
debentures to tender the Common Shares to be issued in connection therewith,
(iv) to accelerate the vesting of all entitlements under outstanding stock
options, (v) to carry on its business in the regular and ordinary course, (vi)
subject to the right of the board of directors of Merfin to terminate the
Amended Support Agreement if a person has made a Superior Proposal, not to
solicit, initiate or encourage offers, participate in any negotiations or
provide information to any person other than the Offeror relating to any
amalgamation, takeover bid, reorganization or similar transaction involving
Merfin, (vii) to notify the Offeror upon becoming aware of any proposal for any
of the transactions referred to in (vi) of this paragraph, (viii) to notify the
Offeror of the existence or occurrence of any change, event or state of facts
which would likely have a material adverse effect on Merfin and (ix) as soon as
possible after the Offeror takes up and pays for at least 50% of the Common
Shares pursuant to the Offer, to use its reasonable efforts to enable the
Offeror to elect or appoint all of the directors of Merfin.
The Amended Support Agreement may be terminated (i) by Merfin, if the
board of directors of Merfin reasonably determines that a proposal received by
Merfin constitutes a Superior Proposal to the Offer, (ii) by the Offeror, if the
board of directors of Merfin shall (a) not have recommended the increased Offer
2.5-3
<PAGE>
to the holders of Common Shares, (b) have modified in a manner adverse to the
Offeror its support of the increased Offer or modified or withdrawn its
recommendation of the increased Offer or (c) have determined that a proposal
received by Merfin constitutes a Superior Proposal to the Offer and (iii) by the
Offeror, if certain covenants or representations of Merfin in the Amended
Support Agreement shall not be true and accurate or if any condition of the
Offer has not been satisfied or waived on the Expiry Date of the Offer. If the
Amended Support Agreement is terminated by Merfin pursuant to (i) above or by
the Offeror pursuant to (ii) above, Merfin shall immediately pay to the Offeror
$6 million together with all the reasonable expenses of the Offeror, in an
amount not to exceed in the aggregate, $4 million.
Furthermore, if at the Expiry Time less than 75% of the Common Shares have
been deposited under the Offer and the Offeror shall not have taken up and paid
for any Common Shares deposited under the Offer (i) Merfin shall, within five
days after the Expiry Date, pay to the Offeror all the reasonable expenses of
the Offeror subject to a maximum amount of $4 million and (ii) should (a) Merfin
become a party to any transaction whereby more than 50% of its assets become,
directly or indirectly, the property of any other joint venture, entity or
person; (b) Merfin exchange, lease or otherwise dispose of more than 50% of its
assets; (c) any person or group of affiliated persons acquire, directly or
indirectly, the legal or beneficial ownership of Common Shares that carry more
than 50% of the vote for the election of directors of Merfin or acquire rights
to do so; or (d) Merfin become a party to any agreement which contemplates any
of the events referred to in (a), (b) or (c) above (the "Events") at any time
prior to twelve months after the Expiry Date, then Merfin shall, within five
days of the occurrence of any of the Events, pay to the Offeror $6 million.
If the board of directors of Merfin determines that a proposal received by
Merfin constitutes a Superior Proposal, Merfin may not terminate the Amended
Support Agreement unless and until Merfin has notified the Offeror of such
determination and provided the Offeror with a copy of all written materials
pertaining thereto and Merfin has fully cooperated with the Offeror with the
intent of enabling (but not obliging) the Offeror to agree to a modification of
the terms and conditions of the Amended Support Agreement so that the Offer may
be substantially similar to the Superior Proposal. The board of directors of
Merfin may not, however, terminate the Amended Support Agreement and recommend
the Superior Proposal unless the Offeror shall have failed to modify its Offer
within three business days of receiving Merfin's notification and information
regarding the Superior Proposal.
A "Superior Proposal" means a bona fide written and unsolicited proposal or
offer for cash or a combination of cash and securities made by any person to
acquire all or substantially all of the Common Shares or assets of Merfin on
terms which the board of directors of Merfin determines in good faith and in the
exercise of reasonable judgment to be more favourable to Merfin and its
Shareholders than the Offer.
As an inducement to the Offeror to make the Offer, Merfin has agreed to pay
the Offeror an amount of $2 million no later than 5:00 p.m. (Toronto time) on
Friday, May 16, 1997 which amount is an addition to, and not in lieu of or in
payment of, any other amounts required to be paid to the Offeror under the
Amended Support Agreement.
7. Sources of Funds
As a result of the increase in the price offered to $7.50 per Common Share,
the Offeror estimates that if it acquires all of the Common Shares (on a
fully-diluted basis) pursuant to the Offer or pursuant to any following
Compulsory Acquisition or Subsequent Acquisition Transaction, the total amount
required to purchase such Common Shares will be approximately $210 million
(other than the fees (including advisory fees) and expenses under the Offer
estimated at $5.25 million). Buckeye has agreed to provide or cause to be
provided such funds to the Offeror as are needed to complete the transaction
from internal cash resources and a line of credit.
8. Amendments to the Offer, Letter of Transmittal and Notice of Guaranteed
Delivery
The Offer, as extended to May 15, 1997, the Letter of Transmittal and the
Notice of Guaranteed Delivery are deemed to be amended as required to reflect
the increase in the price offered per Common Share and the extension of time for
deposit of Common Shares contemplated in this Notice of Variation.
9. 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 of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered to
the holders of Common Shares. However, 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
particulars of those rights or consult with a lawyer.
2.5-4
<PAGE>
APPROVAL AND CERTIFICATE
The contents of this Notice of Variation have been approved, and the
sending, communication or delivery thereof to the Shareholders of Merfin
International Inc. has been authorized by the board of directors of Buckeye
Acquisition Inc. 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. In addition, the foregoing does not contain
any misrepresentation likely to affect the value or the market price of the
securities which are the subject of the Offer.
DATED: May 15, 1997
(Signed) ROBERT E. CANNON (Signed) DAVID B. FERRARO
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) JOHN F. ANDERSON (Signed) PIERRE RAYMOND
Director Director
2.5-5
<PAGE>
Offices of the Depositary, Montreal Trust Company
By Mail
Stock Transfer Services
1800 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3K9
By Hand, Courier or Facsimile Transmission
Montreal Vancouver Toronto
Stock Transfer Services Stock Transfer Services Stock Transfer Services
1800 McGill College Avenue 510 Burrard Street 151 Front Street West
6th Floor 2nd Floor 8th Floor
Montreal, Quebec Vancouver, British Columbia Toronto, Ontario
H3A 3K9 V6C 3B9 M5J 2N1
Tel: (514) 982-7555 Tel: (604) 661-0222 Tel: (416) 981-9596
Fax: (514) 982-7347 Fax: (604) 661-9480 Fax: (416) 981-9600
The Dealer Manager is:
TD Securities Inc.
55 King Street West
7th Floor
P.O. Box 1
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Tel: (416) 982-2865
Fax: (416) 982-4410
Any questions and requests for assistance may be directed by Shareholders
to the Dealer Manager or the Depositary at their respective telephone numbers
and locations set out above.
2.5-6
