SHARE EXCHANGE AGREEMENT
Exhibit
2.1
This
Share Exchange Agreement (this “Agreement”), dated as
of December 2, 2009, is by and among Pioneer Power Solutions, Inc., a Delaware
corporation (the “Parent”), Pioneer
Transformers Ltd., a company incorporated under the Canada Business Corporations
Act (the “Company”), and
Provident Pioneer Partners, L.P., a Delaware limited partnership, and the sole
stockholder of the Company (the “Shareholder”). Each
of the parties to this Agreement is individually referred to herein as a “Party” and
collectively as the “Parties.”
BACKGROUND
The
Company has 750,000 common shares (the “Company Shares”)
issued and outstanding, all of which are held by the Shareholder. The
Shareholder has agreed to transfer the Company Shares to the Parent in exchange
for an aggregate of 22,800,000 newly issued shares of common stock, par value
$0.001 per share, of the Parent (the “Parent Stock”), and a
five-year warrant to purchase up to 1,000,000 shares of Parent Stock at an
exercise price of $3.25 per share in the form attached hereto as Exhibit A (the “Warrant”).
The
exchange of the Company Shares for 22,800,000 shares of Parent Stock (the “Parent Shares”) and
the Warrant is intended to constitute a tax-deferred exchange of
property governed by Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of
1986, as amended (the “Code”), or such other
tax free reorganization or restructuring provisions as may be available under
the Code.
The Board
of Directors of each of the Parent and the Company has determined that it is
desirable to effect this plan of reorganization and share exchange.
AGREEMENT
NOW
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and intending to be
legally bound hereby, the Parties agree as follows:
ARTICLE
I
Exchange of
Shares
SECTION
1.01. Exchange by the
Shareholder. At the Closing (as defined in Section 1.02), the Shareholder
shall sell, transfer, convey, assign and deliver to the Parent all of the
Company Shares free and clear of all Liens in exchange for the Parent Shares and
the Warrant.
SECTION
1.02. Closing. The
closing (the “Closing”) of the
transactions contemplated by this Agreement (the “Transactions”) shall
take place at the offices of Xxxxxx and Xxxxx, LLP at 1221 Avenue of the
Xxxxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, commencing upon the satisfaction or waiver of
all conditions and obligations of the Parties to consummate the Transactions
contemplated hereby (other than conditions and obligations with respect to the
actions that the respective Parties will take at Closing) or such other date and
time as the Parties may mutually determine (the “Closing
Date”).
ARTICLE
II
Representations and
Warranties of the Shareholder
The
Shareholder hereby represents and warrants to the Parent, as
follows:
SECTION
2.01. Good
Title. The Shareholder is the record and beneficial owner, and
has good title to the Company Shares, with the right and authority to sell and
deliver the Company Shares to the Parent as provided herein. Upon delivery of
any certificate or certificates duly endorsed for transfer to the Parent,
representing the same as herein contemplated and/or upon registering of the
Parent as the new owner of the Company Shares in the share register of the
Company, the Parent will receive good title to the Company Shares, free and
clear of all liens, hypothecs security interests, pledges, equities and claims
of any kind, voting trusts, trust agreements, shareholder agreements, xxxxx nom
agreements and other encumbrances (collectively, “Liens”).
SECTION
2.02. Power and
Authority. All acts required to be taken by the Shareholder to
enter into this Agreement and to carry out the Transactions have been properly
taken. This Agreement constitutes a legal, valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance
with the terms hereof.
SECTION
2.03. No
Conflicts. The execution and delivery of this Agreement by the
Shareholder and the performance by the Shareholder of its obligations hereunder
in accordance with the terms hereof: (i) will not require the consent of any
third party or any federal, state, provincial, local or foreign government or
any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (“Governmental Entity”)
under any statutes, laws, ordinances, rules, regulations, orders, writs,
injunctions, judgments, or decrees (collectively, “Laws”); (ii) will not
violate any Laws applicable to the Shareholder; and (iii) will not violate or
breach any contractual obligation to which the Shareholder is a
party.
SECTION
2.04. No Finder’s
Fee. The Shareholder has not created any obligation for any
finder’s, investment banker’s or broker’s fee in connection with the
Transactions that the Company or the Parent will be responsible
for.
SECTION
2.05. Purchase Entirely for Own
Account. The Parent Shares proposed to be acquired by the
Shareholder hereunder will be acquired for investment for its own account, and
not with a view to the resale or distribution of any part thereof, and the
Shareholder has no present intention of selling or otherwise distributing the
Parent Shares, except in compliance with applicable securities
laws.
SECTION
2.06. Available
Information. The Shareholder has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Parent.
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SECTION
2.07. Non-Registration. The
Shareholder understands that the Parent Shares have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”) and,
if issued in accordance with the provisions of this Agreement, will be issued by
reason of a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Shareholder’s representations as
expressed herein. The non-registration shall have no prejudice with
respect to any rights, interests, benefits and entitlements attached to the
Parent Shares in accordance with the Parent charter documents or the laws of its
jurisdiction of incorporation.
SECTION
2.08. Restricted
Securities. The Shareholder understands that the Parent Shares are
characterized as “restricted securities” under the Securities Act inasmuch as
this Agreement contemplates that, if acquired by the Shareholder pursuant
hereto, the Parent Shares would be acquired in a transaction not involving a
public offering. The Shareholder further acknowledges that if the
Parent Shares are issued to the Shareholder in accordance with the provisions of
this Agreement, the Parent Shares may not be resold without registration under
the Securities Act or the existence of an exemption therefrom. The
Shareholder represents that it is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
SECTION
2.09. Legends. It
is understood that the Parent Shares will bear the following legend or another
legend that is similar to the following:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
and any
legend required by the “blue sky” laws of any state to the extent such laws are
applicable to the securities represented by the certificate so
legended.
SECTION
2.10. Accredited
Investor. The Shareholder is an “accredited investor” within
the meaning of Rule 501 under the Securities Act.
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ARTICLE
III
Representations and
Warranties of the Company
The
Company has previously provided to the Parent a Disclosure Schedule and draft
Current Report on Form 8-K for filing with the Securities and Exchange
Commission (the “SEC”), including
financial statements and notes thereto (the “Company Disclosure
Letter”). The Company represents and warrants to the Parent that, except
as set forth in the Company Disclosure
Letter, regardless of whether or not the Company Disclosure Letter is
referenced below with respect to any particular representation or
warranty:
SECTION
3.01. Organization, Standing and
Power. Each of the Company and its subsidiaries (the “Company
Subsidiaries”) is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized and in which it has
a place of business and has the corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the Company, a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or on the ability of the Company to consummate the Transactions (a
“Company Material
Adverse Effect”). The Company is duly qualified to do business
in each jurisdiction where the nature of its business or its ownership or
leasing of its properties make such qualification necessary except where the
failure to so qualify would not reasonably be expected to have a Company
Material Adverse Effect. The Company has delivered to the Parent true
and complete copies of the certificate of incorporation and bylaws of the
Company and such other constituent instruments of the Company as may exist, each
as amended to the date of this Agreement (as so amended, the “Company Constituent
Instruments”), and the comparable charter, organizational documents and
other constituent instruments of each Company Subsidiary, in each case as
amended through the date of this Agreement.
SECTION
3.02. Company Subsidiaries; Equity
Interests.
(a) The
Company Disclosure Letter lists each Company Subsidiary and its jurisdiction of
organization. Except as specified in the Company Disclosure Letter,
all the outstanding shares of capital stock or equity investments of each
Company Subsidiary have been validly issued and are fully paid and nonassessable
and are as of the date of this Agreement owned by the Company, by another
Company Subsidiary or by the Company and another Company Subsidiary, free and
clear of all Liens.
(b) Except
for its interests in the Company Subsidiaries, the Company does not as of the
date of this Agreement own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest in any person.
SECTION
3.03. Capital
Structure. The Company has 750,000 ordinary shares issued and
outstanding. Except as set forth above, no shares of capital stock or
other voting securities of the Company are issued, reserved for issuance or
outstanding. Except as specified in the Company Disclosure Letter,
the Company is the sole record and beneficial owner of all of the issued and
outstanding capital stock of each Company Subsidiary. All outstanding shares of
the capital stock of the Company and each Company Subsidiary are duly
authorized, validly
4
issued,
fully paid and nonassessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the applicable
corporate laws of Canada, the Company Constituent Instruments or any Contract
(as defined in Section 3.05) to which the Company is a party or otherwise
bound. Except as set forth in this Section 3.03 and in the Company
Disclosure Letter, there are not any bonds, debentures, notes or other
indebtedness of the Company or any Company Subsidiary having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which holders of Company Shares or the common stock of any
Company Subsidiary may vote (“Voting Company
Debt”). Except as set forth above, as of the date of this Agreement,
there are not any options, warrants, rights, convertible or exchangeable
securities, “phantom” stock rights, stock appreciation rights, stock-based
performance units, commitments, Contracts, arrangements or undertakings of any
kind to which the Company or any Company Subsidiary is a party or by which any
of them is bound (a) obligating the Company or any Company Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company or any Company Subsidiary or any Voting Company Debt,
(b) obligating the Company or any Company Subsidiary to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking or (c) that give any person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of the capital stock of the Company or
of any Company Subsidiary.
SECTION
3.04. Authority; Execution and
Delivery; Enforceability. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
Transactions have been duly authorized and approved by the Board of Directors of
the Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the Transactions. When
executed and delivered, this Agreement will be enforceable against the Company
in accordance with its terms, subject to bankruptcy, insolvency and similar laws
of general applicability as to which the Company is subject.
SECTION
3.05. No Conflicts;
Consents.
(a) Except as
set forth in the Company Disclosure Letter, the execution and delivery by the
Company of this Agreement does not, and the consummation of the Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary under any provision of (a) the Company Constituent
Instruments or the comparable charter or organizational documents of any Company
Subsidiary, (b) any material contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a “Contract”) to which
the Company or any Company Subsidiary is a party or by which any of their
respective properties or assets is bound or (c) subject to the filings and other
matters referred to in Section 3.05(b), any material judgment, order or decree
(“Judgment”) or
material Law applicable to the Company or any Company Subsidiary or their
respective properties or assets, other than, in the case of clauses (b) and (c)
above, any such items that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse
Effect.
5
(b) Except as
set forth in the Company Disclosure Letter and except for required filings with
the Province of Quebec, the SEC and applicable “Blue Sky” or state securities
commissions, no material consent, approval, license, permit, order or
authorization (“Consent”) of, or
registration, declaration or filing with, or permit from, any Governmental
Entity is required to be obtained or made by or with respect to the Company or
any Company Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the
Transactions.
SECTION
3.06. Taxes.
(a) The
Company and each Company Subsidiary have timely filed, or have caused to be
timely filed on their behalf, all Tax Returns required to be filed by them, and
all such Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. All Taxes shown to be due on such
Tax Returns, or otherwise owed, have been timely paid, except to the extent that
any failure to pay, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse
Effect. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. No tax audit is in process or
threatened and the Company has not received a notice of assessment from any tax
authority indicating a tax assessment or recalculation of any taxes in any tax
return previously filed.
(b) The
Company Financial Statements (as defined in Section 3.15) reflect an adequate
reserve for all Taxes payable by the Company and the Company Subsidiaries (in
addition to any reserve for deferred Taxes to reflect timing differences between
book and Tax items) for all Taxable periods and portions thereof through the
date of such financial statements. No deficiency with respect to any
Taxes has been proposed, asserted or assessed against the Company or any Company
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending, except to the extent any such deficiency or request for waiver,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(c) For
purposes of this Agreement:
“Taxes” includes all
forms of taxation, whenever created or imposed, and whether of the United States
or elsewhere, and whether imposed by a local, municipal, governmental, state,
provincial, foreign, federal or other Governmental Entity, or in connection with
any agreement with respect to Taxes, including all interest, penalties and
additions imposed with respect to such amounts.
6
“Tax Return” means all
federal, state, provincial, local, provincial and foreign Tax returns,
declarations, statements, reports, schedules, forms and information returns and
any amended Tax return relating to Taxes.
SECTION
3.07. Benefit
Plans. Except as set forth in the Company Disclosure Letter,
the Company does not have or maintain any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
share ownership, share purchase, share option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director of the
Company or any Company Subsidiary (collectively, “Company Benefit
Plans”). Except as set forth in the Company Disclosure Letter,
as of the date of this Agreement there are not any severance or termination
agreements or arrangements between the Company or any Company Subsidiary and any
current or former employee, officer or director of the Company or any Company
Subsidiary, nor does the Company or any Company Subsidiary have any general
severance plan or policy.
SECTION
3.08. Litigation. There
is no action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Company Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, provincial, county,
local or foreign), stock market, stock exchange or trading facility (“Action”) that (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Company Shares or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Company Material Adverse Effect. Neither the
Company nor any Company Subsidiary, nor any director or officer thereof (in his
or her capacity as such), is or has been the subject of any Action involving a
claim or violation of or liability under federal, state or provincial securities
laws or a claim of breach of fiduciary duty.
SECTION
3.09. Compliance with Applicable
Laws. The Company and the Company Subsidiaries are in
compliance with all applicable Laws, including those relating to occupational
health, labor and safety and the environment, except for instances of
noncompliance that, individually and in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in the Company Disclosure Letter, the
Company has not received any written communication during the past two years
from a Governmental Entity that alleges that the Company is not in compliance in
any material respect with any applicable Law. This Section 3.09 does
not relate to matters with respect to Taxes, which are the subject of Section
3.06.
SECTION
3.10. Brokers; Schedule of Fees
and Expenses. Except for those brokers as to which the Company
and Parent shall be solely responsible, no broker, investment banker, financial
advisor or other person is entitled to any broker’s, finder’s, financial
advisor’s or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of the Company.
7
SECTION
3.11. Contracts. Except
as disclosed in the Company Disclosure Letter, there are no Contracts that are
material to the business, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Company and the Company
Subsidiaries taken as a whole. Neither the Company nor any Company
Subsidiary is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any Contract to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect.
SECTION
3.12. Title to Properties.
Except as set forth in the Company Disclosure Letter, the Company and the
Company Subsidiaries do not own any real or immoveable property. Each
of the Company and the Company Subsidiaries has sufficient title to, or valid
leasehold interests in, all of its properties and assets used in the conduct of
its businesses. All such assets and properties, other than assets and
properties in which the Company or any of the Company Subsidiaries has leasehold
interests, are free and clear of all Liens other than those set forth in the
Company Disclosure Letter and except for Liens that, in the aggregate, do not
and will not materially interfere with the ability of the Company and the
Company Subsidiaries to conduct business as currently conducted.
SECTION
3.13. Intellectual
Property. The Company and the Company Subsidiaries own, or are validly
licensed or otherwise have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service xxxx rights, copyrights and other proprietary intellectual property
rights and computer programs (collectively, “Intellectual Property
Rights”) that are material to the conduct of the business of the Company
and the Company Subsidiaries taken as a whole. The Company Disclosure
Letter sets forth a description of all Intellectual Property Rights that are
material to the conduct of the business of the Company and the Company
Subsidiaries taken as a whole. There are no claims pending or, to the
knowledge of the Company, threatened that the Company or any of the Company
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Intellectual Property Right. To the
knowledge of the Company, no person is infringing the rights of the Company or
any of the Company Subsidiaries with respect to any Intellectual Property
Right.
SECTION
3.14. Labor
Matters. Except as set forth in the Company Disclosure Letter,
there are no collective bargaining or other labor union agreements to which the
Company or any of the Company Subsidiaries is a party or by which any of them is
bound. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the
Company.
SECTION
3.15. Financial
Statements. The Company has delivered to the Parent its
audited consolidated financial statements for the fiscal years ended December 31, 2007 and 2008
(collectively, the “Company Financial
Statements”). The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated. The Company
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company, as of the dates, and for the
periods, indicated therein. The Company does not have any material
8
liabilities
or obligations, contingent or otherwise, other than (a) liabilities incurred in
the ordinary course of business subsequent to December 31, 2008, and (b)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Company Financial Statements, which, in both cases,
individually and in the aggregate would not be reasonably expected to result in
a Company Material Adverse Effect.
SECTION
3.16. Insurance. The
Company and the Company Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company and the Company
Subsidiaries are engaged and in the geographic areas where they engage in such
businesses. The Company has no reason to believe that it will not be able to
renew its and the Company Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business on terms consistent with market for the
Company’s and the Company Subsidiaries’ respective lines of
business.
SECTION
3.17. Transactions With Affiliates
and Employees. Except as set forth in the Company Disclosure
Letter and Company Financial Statements, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any Company
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real, immoveable,
personal or moveable property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the Company,
any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or
partner.
SECTION
3.18. Internal Accounting
Controls. The Company and the Company Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management’s
general or specific authorizations, (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (c) access
to assets is permitted only in accordance with management’s general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure
controls and procedures for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the officers by others within those
entities. The Company’s officers have evaluated the effectiveness of
the Company’s controls and procedures. Since December 31, 2008, there
have been no significant changes in the Company’s internal controls or, to the
Company’s knowledge, in other factors that could significantly affect the
Company’s internal controls.
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SECTION
3.19. Solvency. Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (a) the Company’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature, (b) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof, and (c) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company is not insolvent or bankrupt and it has not filed for protection under
the Bankruptcy and Insolvency Act of Canada or the Companies’ Creditors
Arrangement Act of Canada. Moreover, there has been no petition in bankruptcy
filed by the Company or against the Company.
SECTION
3.20. Application of Takeover
Protections. The Company has taken all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s charter documents
or the laws of its jurisdiction of formation that is or could become applicable
to the Shareholder as a result of the Shareholder and the Company fulfilling
their obligations or exercising their rights under this Agreement, including,
without limitation, the issuance of and the Shareholder’s ownership of the
Parent Shares.
SECTION
3.21. No Additional
Agreements. The Company does not have any agreement or
understanding with the Shareholder with respect to the transactions contemplated
by this Agreement other than as specified in this Agreement.
SECTION
3.22. Investment
Company. The Company is not, and is not an affiliate (as
defined in the Canadian Business Corporations Act) of, and immediately following
the Closing will not have become, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.
SECTION
3.23. Absence of Certain Changes
or Events. Except as disclosed in the Company Financial
Statements or in the Company Disclosure Letter, from December 31, 2008 to the
date of this Agreement, the Company has conducted its business only in the
ordinary course, and during such period there has not been:
(a) any
change in the assets, liabilities, financial condition or operating results of
the Company or any Company Subsidiary, except changes in the ordinary course of
business that have not caused, in the aggregate, a Company Material Adverse
Effect;
(b) any
damage, destruction or loss, whether or not covered by insurance, that would
have a Company Material Adverse Effect;
(c) any
waiver or compromise by the Company or any Company Subsidiary of a valuable
right or of a material debt owed to it;
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(d) any
satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company or any Company Subsidiary, except in the ordinary
course of business and the satisfaction or discharge of which would not have a
Company Material Adverse Effect;
(e) any
material change to a material Contract by which the Company or any Company
Subsidiary or any of its respective assets is bound or subject;
(f) any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Company or any Company Subsidiary, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable and liens
that arise in the ordinary course of business and do not materially impair the
Company’s or any Company Subsidiary’s ownership or use of such property or
assets;
(g) any loans
or guarantees made by the Company or any Company Subsidiary to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(h) any
alteration of the Company’s method of accounting or the identity of its
auditors;
(i) any
declaration or payment of dividend or distribution of cash or other property to
the Shareholder or any purchase, redemption or agreements to purchase, redeem or
retract any Company Shares;
(j) any
issuance of equity securities to any officer, director or affiliate (as defined
in the Canadian Business Corporations Act), except pursuant to existing Company
Shares option plans; or
(k) any
arrangement or commitment by the Company or any Company Subsidiary to do any of
the things described in this Section 3.23.
SECTION
3.24. Foreign Corrupt
Practices. Neither the Company nor any Company Subsidiary,
nor, to the Company’s knowledge, any director, officer, agent, employee or other
person acting on behalf of the Company or any Company Subsidiary has, in the
course of its actions for, or on behalf of, the Company (a) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (c) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
11
ARTICLE
IV
Representations and
Warranties of the Parent
The
Parent represents and warrants as follows to the Shareholder and the Company,
that, except as set forth in the reports, schedules, forms, statements and other
documents filed by the Parent with the SEC and publicly available prior to the
date of this Agreement, or in the letter, dated as of the date of this
Agreement, from the Parent to the Company and the Shareholder (the “Parent Disclosure
Letter”):
SECTION
4.01. Organization, Standing and
Power. The Parent is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own, lease or
otherwise hold its properties and assets and to conduct its businesses as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on the Parent, a material adverse effect on the ability of the
Parent to perform its obligations under this Agreement or on the ability of the
Parent to consummate the Transactions (a “Parent Material Adverse
Effect”). The Parent is duly qualified to do business in each
jurisdiction where the nature of its business or the ownership or leasing of its
properties make such qualification necessary and where the failure to so qualify
would reasonably be expected to have a Parent Material Adverse
Effect. The Parent has delivered to the Company true and complete
copies of the certificate of incorporation of the Parent, as amended to the date
of this Agreement (as so amended, the “Parent Charter”), and
the Bylaws of the Parent, as amended to the date of this Agreement (as so
amended, the “Parent
Bylaws”).
SECTION
4.02. Subsidiaries; Equity
Interests. Except as set forth in the Parent Disclosure
Letter, the Parent does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
equity interest in any person.
SECTION
4.03. Capital
Structure. The authorized capital stock of the Parent consists
of 75,000,000 shares of Parent Stock, par value $0.001 per share, and 5,000,000 shares of
preferred stock, par value $0.001 per share, of which (a) 8,400,000 shares of
Parent Stock are issued and outstanding (before giving effect to the issuances
to be made at Closing) (b) no shares of preferred stock are outstanding, and (c)
no shares of Parent Stock or preferred stock are held by the Parent in its
treasury. No other shares of capital stock or other voting securities
of the Parent are issued, reserved for issuance or outstanding. All
outstanding shares of the capital stock of the Parent are, and all such shares
that may be issued prior to the date hereof will be when issued, duly
authorized, validly issued, fully paid and non-assessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the General Corporation Law of the State of Delaware, the Parent Charter, the
Parent Bylaws or any Contract to which the Parent is a party or otherwise
bound. There are not any bonds, debentures, notes or other
indebtedness of the Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of the Parent Stock may vote (“Voting Parent
Debt”). Except as set forth above, as of the date of this
Agreement, there are no options, warrants, rights, convertible or exchangeable
securities, “phantom” stock rights, stock appreciation rights, stock-based
performance units, commitments, Contracts, arrangements or undertakings of any
kind to which the Parent is a party or by which it is bound (a) obligating the
Parent to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of
12
capital
stock or other equity interests in, or any security convertible or exercisable
for or exchangeable into any capital stock of or other equity interest in, the
Parent or any Voting Parent Debt, (b) obligating the Parent to issue, grant,
extend or enter into any such option, warrant, call, right, security,
commitment, Contract, arrangement or undertaking or (c) that give any person the
right to receive any economic benefit or right similar to or derived from the
economic benefits and rights occurring to holders of the capital stock of the
Parent. As of the date of this Agreement, there are no outstanding
contractual obligations of the Parent to repurchase, redeem or otherwise acquire
any shares of capital stock of the Parent. The Parent is not a party to any
agreement granting any securityholder of the Parent the right to cause the
Parent to register shares of the capital stock or other securities of the Parent
held by such securityholder under the Securities Act. The stockholder
list provided to the Company is a current stockholder list generated by the
Parent’s stock transfer agent, and such list accurately reflects all of the
issued and outstanding shares of the Parent Stock as at the
Closing.
SECTION
4.04. Authority; Execution and
Delivery; Enforceability. The execution and delivery by the
Parent of this Agreement and the consummation by the Parent of the Transactions
have been duly authorized and approved by the Board of Directors of the Parent
and no other corporate proceedings on the part of the Parent are necessary to
authorize this Agreement and the Transactions. This Agreement constitutes a
legal, valid and binding obligation of the Parent, enforceable against the
Parent in accordance with the terms hereof.
SECTION
4.05. No Conflicts;
Consents.
(a) Except as
set forth in the Parent Disclosure Letter, the execution and delivery by the
Parent of this Agreement, does not, and the consummation of the Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the properties
or assets of the Parent under, any provision of (a) the Parent Charter or Parent
Bylaws, (b) any material Contract to which the Parent is a party or by which any
of its properties or assets is bound or (c) subject to the filings and other
matters referred to in Section 4.05(b), any material Judgment or material Law
applicable to the Parent or its properties or assets, other than, in the case of
clauses (b) and (c) above, any such items that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(b) No
Consent of, or registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to the
Parent in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than the (i) filing
with the SEC of reports under Sections 13 and 15 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and
(ii) filings under state “blue sky” laws, as each may be required in connection
with this Agreement and the Transactions.
13
SECTION
4.06. SEC Documents; Undisclosed
Liabilities.
(a) The
Parent has filed all reports, schedules, forms, statements and other documents
required to be filed by the Parent with the SEC since November 26, 2008,
pursuant to Sections 13 and 15 of the Exchange Act, as applicable (the “Parent SEC
Documents”).
(b) As of its
respective filing date, each Parent SEC Document complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such Parent SEC Document, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in
any Parent SEC Document has been revised or superseded by a later filed Parent
SEC Document, none of the Parent SEC Documents contains any untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
consolidated financial statements of the Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) (except, in
the case of unaudited statements, as permitted by the rules and regulations of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of the Parent as of the dates thereof and the results of
operations and cash flows for the periods shown (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(c) Except as
set forth in the filed Parent SEC Documents, the Parent has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a balance sheet of the Parent or in the
notes thereto. The Parent Disclosure Letter sets forth all financial
and contractual obligations and liabilities (including any obligations to issue
capital stock or other securities of the parent) due after the date
hereof. As of the date hereof, all liabilities of the Parent have
been paid off and shall in no event remain liabilities of the Parent, the
Company or the Shareholder following the Closing.
SECTION
4.07. Information
Supplied. None of the information supplied or to be supplied
by the Parent for inclusion or incorporation by reference in any SEC filing of
report by the Company contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
SECTION
4.08. Absence of Certain Changes
or Events. Except as disclosed in the filed Parent SEC
Documents or in the Parent Disclosure Letter, from the date of the most recent
audited financial statements included in the filed Parent SEC Documents to the
date of this Agreement, the Parent has conducted its business only in the
ordinary course, and during such period there has not been:
(a) any
change in the assets, liabilities, financial condition or operating results of
the Parent from that reflected in the Parent SEC Documents, except changes in
the ordinary course of business that have not caused, in the aggregate, a Parent
Material Adverse Effect;
14
(b) any
damage, destruction or loss, whether or not covered by insurance, that would
have a Parent Material Adverse Effect;
(c) any
waiver or compromise by the Parent of a valuable right or of a material debt
owed to it;
(d) any
satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Parent, except in the ordinary course of business and the
satisfaction or discharge of which would not have a Parent Material Adverse
Effect;
(e) any
material change to a material Contract by which the Parent or any of its assets
is bound or subject;
(f) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(g) any
resignation or termination of employment of any officer of the
Parent;
(h) any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Parent, with respect to any of its material properties or assets, except liens
for taxes not yet due or payable and liens that arise in the ordinary course of
business and do not materially impair the Parent’s ownership or use of such
property or assets;
(i) any loans
or guarantees made by the Parent to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;
(j) any
declaration, setting aside or payment or other distribution in respect of any of
the Parent’s capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock by the Parent;
(k) any
alteration of the Parent’s method of accounting or the identity of its
auditors;
(l) any
issuance of equity securities to any officer, director or affiliate (as defined
in the Securities Act), except pursuant to existing Parent stock option plans;
or
(m) any
arrangement or commitment by the Parent to do any of the things described in
this Section 4.08.
SECTION
4.09. Taxes.
(a) Except as
set forth in the Parent Disclosure Letter, the Parent has timely filed, or has
caused to be timely filed on its behalf, all Tax Returns required to be filed by
it, and all such Tax Returns are true, complete and accurate, except to the
extent any failure to file, any delinquency in filing or any inaccuracies in any
filed Tax Returns, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect. All
Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely
paid, except to the extent that any failure to pay, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
15
(b) The most
recent financial statements contained in the filed Parent SEC Documents reflect
an adequate reserve for all Taxes payable by the Parent (in addition to any
reserve for deferred Taxes to reflect timing differences between book and Tax
items) for all Taxable periods and portions thereof through the date of such
financial statements. No deficiency with respect to any Taxes has
been proposed, asserted or assessed against the Parent, and no requests for
waivers of the time to assess any such Taxes are pending, except to the extent
any such deficiency or request for waiver, individually or in the aggregate, has
not had and would not reasonably be expected to have a Parent Material Adverse
Effect.
(c) There are
no Liens for Taxes (other than for current Taxes not yet due and payable) on the
assets of the Parent. The Parent is not bound by any agreement with
respect to Taxes.
SECTION
4.10. Absence of Changes in
Benefit Plans. From the date of the most recent audited
financial statements included in the filed Parent SEC Documents to the date of
this Agreement, there has not been any adoption or amendment in any material
respect by the Parent of any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally binding) providing benefits
to any current or former employee, officer or director of the Parent
(collectively, “Parent
Benefit Plans”). As of the date of this Agreement there are
not any employment, consulting, indemnification, severance or termination
agreements or arrangements between the Parent and any current or former
employee, officer or director of the Parent, nor does the Parent have any
general severance plan or policy.
SECTION
4.11. ERISA Compliance; Excess
Parachute Payments. The Parent does not, and since its
inception never has, maintained, or contributed to any “employee pension benefit
plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit plans”
(as defined in Section 3(1) of ERISA) or any other Parent Benefit Plan for the
benefit of any current or former employees, consultants, officers or directors
of the Parent.
SECTION
4.12. Litigation. Except
as disclosed in the Parent SEC Documents or in the Parent Disclosure Letter,
there is no Action that (i) adversely affects or challenges the legality,
validity or enforceability of any of this Agreement or the Parent Shares or (ii)
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Parent Material Adverse Effect.
Neither the Parent nor any subsidiary, nor any director or officer thereof (in
his or her capacity as such), is or has been the subject of any Action involving
a claim or violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.
16
SECTION
4.13. Compliance with Applicable
Laws. Except as disclosed in the Parent SEC Documents or in
the Parent Disclosure Letter, the Parent is in compliance with all applicable
Laws, including those relating to occupational health and safety, the
environment, export controls, trade sanctions and embargoes, except for
instances of noncompliance that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Parent Material Adverse
Effect. Except as set forth in the Parent SEC Documents or in the
Parent Disclosure Letter, the Parent has not received any written communication
during the past two years from a Governmental Entity that alleges that the
Parent is not in compliance in any material respect with any applicable
Law. The Parent is in compliance with all effective requirements of
the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and regulations
thereunder, that are applicable to it, except where such noncompliance could not
have or reasonably be expected to result in a Parent Material Adverse
Effect. This Section 4.13 does not relate to matters with respect to
Taxes, which are the subject of Section 4.09.
SECTION
4.14. Contracts. Except
as disclosed in the Parent SEC Documents, there are no Contracts that are
material to the business, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Parent taken as a
whole. The Parent is not in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving of
notice would cause such a violation of or default under) any Contract to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Parent Material Adverse
Effect.
SECTION
4.15. Title to
Properties. The Parent has good title to, or valid leasehold
interests in, all of its properties and assets used in the conduct of its
businesses. All such assets and properties, other than assets and
properties in which the Parent has leasehold interests, are free and clear of
all Liens other than those set forth in the Parent Disclosure Letter and except
for Liens that, in the aggregate, do not and will not materially interfere with
the ability of the Parent to conduct business as currently
conducted. The Parent has complied in all material respects with the
terms of all material leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect. The
Parent enjoys peaceful and undisturbed possession under all such material
leases.
SECTION
4.16. Intellectual
Property. The Parent owns, or is validly licensed or otherwise
has the right to use, all Intellectual Property Rights that are material to the
conduct of the business of the Parent taken as a whole. The Parent
Disclosure Letter sets forth a description of all Intellectual Property Rights
that are material to the conduct of the business of the Parent taken as a
whole. Except as set forth in the Parent Disclosure Letter no claims
are pending or, to the knowledge of the Parent, threatened that the Parent is
infringing or otherwise adversely affecting the rights of any person with regard
to any Intellectual Property Right. To the knowledge of the Parent,
no person is infringing the rights of the Parent with respect to any
Intellectual Property Right.
SECTION
4.17. Labor
Matters. There are no collective bargaining or other labor
union agreements to which the Parent is a party or by which it is
bound. No material labor dispute exists or, to the knowledge of the
Parent, is imminent with respect to any of the employees of the
Parent.
17
SECTION
4.18. Market
Makers. The Parent has at least two (2) market makers for the
Parent Stock and such market makers have obtained all permits and made all
filings necessary in order for such market makers to continue as market makers
of the Parent.
SECTION
4.19. Transactions With Affiliates
and Employees. Except as set forth in the filed Parent SEC
Documents and Parent Disclosure Letter, none of the officers or directors of the
Parent and, to the knowledge of the Parent, none of the employees of the Parent
is presently a party to any transaction with the Parent or any subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Parent, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
SECTION
4.20. Internal Accounting
Controls. The Parent maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (a) transactions are
executed in accordance with management’s general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management’s general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Parent has established disclosure controls and
procedures for the Parent and designed such disclosure controls and procedures
to ensure that material information relating to the Parent is made known to the
officers by others within those entities. The Parent’s officers have
evaluated the effectiveness of the Parent’s controls and
procedures. Since September 30, 2009, there have been no
significant changes in the Parent’s internal controls or, to the Parent’s
knowledge, in other factors that could significantly affect the Parent’s
internal controls.
SECTION
4.21. Solvency. Based
on the financial condition of the Parent as of the Closing Date (and assuming
that the Closing shall have occurred), (a) the Parent’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Parent’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (b) the Parent’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Parent, and projected capital requirements and capital
availability thereof, and (c) the current cash flow of the Parent, together with
the proceeds the Parent would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid. The Parent does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
18
SECTION
4.22. Application of Takeover
Protections. The Parent has taken all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Parent’s charter documents or
the laws of its state of incorporation that is or could become applicable to the
Shareholder as a result of the Shareholder and the Parent fulfilling their
obligations or exercising their rights under this Agreement, including, without
limitation, the issuance of the Parent Shares and the Shareholder’s ownership of
the Parent Shares.
SECTION
4.23. No Additional
Agreements. The Parent does not have any agreement or
understanding with the Shareholder with respect to the transactions contemplated
by this Agreement other than as specified in this Agreement.
SECTION
4.24. Investment
Company. The Parent is not, and is not an affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.
SECTION
4.25. Certain Registration
Matters. Except as specified in the Parent Disclosure Letter
and Parent SEC Documents, the Parent has not granted or agreed to grant to any
person any rights (including “piggy-back” registration rights) to have any
securities of the Parent registered with the SEC or any other governmental
authority that have not been satisfied.
SECTION
4.26. Listing and Maintenance
Requirements. The Parent is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance with the
listing and maintenance requirements for continued listing of the Parent Stock
on the trading market on which the Parent Stock as currently listed or
quoted. The issuance and sale of the Parent Shares under this
Agreement do not contravene the rules and regulations of the trading market on
which the Parent Stock is currently listed or quoted, and no approval of the
stockholders of the Parent is required for the Parent to issue and deliver to
the Shareholder the Parent Shares contemplated by this Agreement.
SECTION
4.27. No Undisclosed Events,
Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Parent, its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Parent under applicable securities
laws on a registration statement on Form S-1 filed with the SEC relating to an
issuance and sale by the Parent of its Parent Stock and which has not been
publicly announced.
SECTION
4.28. Foreign Corrupt
Practices. Neither the Parent, nor to the Parent’s knowledge,
any director, officer, agent, employee or other person acting on behalf of the
Parent has, in the course of its actions for, or on behalf of, the Parent (a)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (c) violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
19
ARTICLE
V
Deliveries
SECTION
5.01. Deliveries of the
Shareholder.
(a) Concurrently
herewith the Shareholder is delivering to the Parent this Agreement executed by
the Shareholder.
(b) At or
prior to the Closing, the Shareholder shall deliver to the Parent:
|
(i)
|
certificates
representing its Company Shares;
and
|
|
(ii)
|
a
duly executed share transfer power for transfer by the Shareholder of the
Company Shares to the Parent.
|
SECTION
5.02. Deliveries of the
Parent.
(a) Concurrently
herewith, the Parent is delivering to the Shareholder and to the Company, a copy
of this Agreement executed by the Parent.
(b) At or
prior to the Closing, the Parent shall deliver to the Company:
|
(i)
|
a
certificate from the Parent, signed by its Secretary or Assistant
Secretary certifying that the attached copies of the Parent Charter,
Parent Bylaws and resolutions of the Board of Directors of the Parent and
of the stockholders of the Parent approving this Agreement and the
transactions contemplated hereunder, are all true, complete and correct
and remain in full force and
effect;
|
|
(ii)
|
a
letter of resignation of Xxxxx Xxxxx from all offices he holds with the
Parent and as a director of the
Parent;
|
|
(iii)
|
evidence
of the election of Xxxxxx X. Xxxxxxx, Xxxxx Xxxx, Xxxxx Xxxxxx, Xxxxx X.
Xxxxxx and Xxxxxxxx Xxxxxxx as directors of the Parent effective upon the
Closing;
|
|
(iv)
|
evidence
of the election of Xxxxxx X. Xxxxxxx as the Chief Executive Officer,
President, Chairman of the Board, Chief Financial Officer, Secretary and
Treasurer of the Parent effective upon the
Closing;
|
|
(v)
|
such
pay-off letters and releases relating to liabilities as the Company shall
require in order to result in the Company having no liabilities at Closing
and such pay-off letters and releases shall be in form and substance
satisfactory to the Company;
|
20
|
(vi)
|
if
requested, the results of UCC, judgment lien and tax lien searches with
respect to the Parent, the results of which indicate no liens on the
assets of the Parent; and
|
|
(vii)
|
a
duly executed release by the current director and officers of the Parent
in favor of the Parent, the Company and the
Shareholders.
|
(c) At or
prior to the Closing, the Parent shall deliver to the Company and the
Shareholder an opinion from Parent’s legal counsel in form and substance
reasonably satisfactory to the Shareholder.
(d) Promptly
following the Closing, the Parent shall deliver:
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(i)
|
to
the Shareholder, certificates representing the Parent Shares;
and
|
|
(ii)
|
to
the Company, a consent letter of the accounting firm of the Parent
confirming such firm’s respective consent to the use by the Parent of
reports prepared by such firm regarding the financial statements of the
Parent in all future registration statements filed with the
SEC.
|
SECTION
5.03. Deliveries of the
Company.
(a) Concurrently
herewith, the Company is delivering to the Parent this Agreement executed by the
Company.
(b) At or
prior to the Closing, the Company shall deliver to the Parent a certificate from
the Company, signed by its authorized officer certifying that the attached
copies of the Company Constituent Instruments and resolutions of the Board of
Directors of the Company approving the Agreement and the Transactions are all
true, complete and correct and remain in full force and effect.
ARTICLE
VI
Conditions to
Closing
SECTION
6.01. Shareholder and Company
Conditions Precedent. The obligations of the Shareholder and
the Company to enter into and complete the Closing is subject, at the option of
the Shareholder and the Company, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by the
Shareholder and the Company in writing.
(a) Representations and
Covenants. The representations and warranties of the Parent contained in
this Agreement shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date. The Parent shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by the Parent on or prior to the Closing
Date. The Parent shall have delivered to the Shareholder and the
Company, a certificate, dated the Closing Date, to the foregoing
effect.
21
(b) Litigation. No
action, suit or proceeding shall have been instituted before any court or
governmental or regulatory body or instituted or threatened by any governmental
or regulatory body to restrain, modify or prevent the carrying out of the
Transactions or to seek damages or a discovery order in connection with such
Transactions, or which has or may have, in the reasonable opinion of the Company
or the Shareholder, a materially adverse effect on the assets, properties,
business, operations or condition (financial or otherwise) of the Parent or the
Company.
(c) No Material Adverse
Change. There shall not have been any occurrence, event,
incident, action, failure to act, or transaction since September 30, 2009 which
has had or is reasonably likely to cause a Parent Material Adverse
Effect.
(d) SEC
Reports. The Parent shall have filed all reports and other
documents required to be filed by Parent under the U.S. federal securities laws
through the Closing Date.
(e) OTCBB
Quotation. The Parent shall have maintained its status as a
company whose common stock is quoted on the Over-the-Counter Bulletin Board and
no reason shall exist as to why such status shall not continue immediately
following the Closing.
(f) Deliveries. The
deliveries specified in Section 5.02 shall have been made by the
Parent.
(g) No Suspensions of Trading in
Parent Stock; Listing. Trading in the Parent Stock shall not
have been suspended by the SEC or any trading market (except for any suspensions
of trading of not more than one trading day solely to permit dissemination of
material information regarding the Parent) at any time since the date of
execution of this Agreement, and the Parent Stock shall have been at all times
since such date listed for trading on a trading market.
(h) Satisfactory Completion of
Due Diligence. The Company and the Shareholder shall have
completed their legal, accounting and business due diligence of the Parent and
the results thereof shall be satisfactory to the Company and the Shareholder in
their sole and absolute discretion.
(i) Delivery of Legal Opinion
from Parent’s Counsel. The Company and the Shareholders shall
have received an opinion from the Parent’s legal counsel in form and substance
reasonably satisfactory to the Shareholder.
SECTION
6.02. Parent Conditions
Precedent. The obligations of the Parent to enter into and
complete the Closing are subject, at the option of the Parent, to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived by the Parent in writing.
22
(a) Representations and
Covenants. The representations and warranties of the
Shareholder and the Company contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. The Shareholder and the
Company shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by the Shareholder and the Company on or prior to the Closing
Date. The Company shall have delivered to the Parent, if requested, a
certificate, dated the Closing Date, to the foregoing effect.
(b) Litigation. No
action, suit or proceeding shall have been instituted before any court or
governmental or regulatory body or instituted or threatened by any governmental
or regulatory body to restrain, modify or prevent the carrying out of the
Transactions or to seek damages or a discovery order in connection with such
Transactions, or which has or may have, in the reasonable opinion of the Parent,
a materially adverse effect on the assets, properties, business, operations or
condition (financial or otherwise) of the Parent.
(c) No Material Adverse
Change. There shall not have been any occurrence, event,
incident, action, failure to act, or transaction since December 31, 2008 which
has had or is reasonably likely to cause a Company Material Adverse
Effect.
(d) Deliveries. The
deliveries specified in Section 5.01 and Section 5.03 shall have been made by
the Shareholder and the Company, respectively.
(e) Audited Financial Statements
and Form 10 Disclosure. The Company shall have provided the
Parent and the Shareholder with reasonable assurances that the Parent will be
able to comply with its obligation to file a current report on Form 8-K no later
than four (4) business days following the Closing containing the requisite
audited consolidated financial statements of the Company and the requisite Form
10 disclosure regarding the Company.
(f) Satisfactory Completion of
Due Diligence. The Parent shall have completed its legal,
accounting and business due diligence of the Company and the Shareholder and the
results thereof shall be satisfactory to the Parent in its sole and absolute
discretion.
ARTICLE
VII
Covenants
SECTION
7.01. Blue Sky Laws. The
Parent shall take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of the Parent
Shares in connection with this Agreement.
SECTION
7.02. Public
Announcements. Prior to the Closing, the Parent and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press releases or other public
statements with respect to the Agreement and the Transactions and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national securities
exchanges.
23
SECTION
7.03. Fees and
Expenses. All fees and expenses incurred in connection with
this Agreement shall be paid by the Party incurring such fees or expenses,
whether or not this Agreement is consummated.
SECTION
7.04. Continued
Efforts. Each Party shall use commercially reasonable efforts
to (a) take all action reasonably necessary to consummate the Transactions,
and (b) take such steps and do such acts as may be necessary to keep all of
its representations and warranties true and correct as of the Closing Date with
the same effect as if the same had been made, and this Agreement had been dated,
as of the Closing Date.
SECTION
7.05. Exclusivity. Each
of the Parent and the Company shall not (and shall not cause or permit any of
their affiliates to) engage in any discussions or negotiations with any person
or take any action that would be inconsistent with the Transactions and that has
the effect of avoiding the Closing contemplated hereby. Each of the
Parent and the Company shall notify each other immediately if any person makes
any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
SECTION
7.06. Filing of Form 8-K and Press
Release. The Parent shall file, no later than four (4)
business days after the Closing Date, a current report on Form 8-K and attach as
exhibits all relevant agreements disclosing the terms of this Agreement and
other requisite disclosure regarding the Transactions and including the
requisite audited consolidated financial statements of the Company and the
requisite Form 10 disclosure regarding the Company.
SECTION
7.07. Access. Each
Party shall permit representatives of any other Party to have full access to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to such Party.
SECTION
7.08. Preservation of
Business. From the date of this Agreement until the Closing
Date, the Company and the Parent shall operate only in the ordinary and usual
course of business consistent with their respective past practices (provided,
however, that Parent shall not issue any securities without the prior written
consent of the Company), and shall use reasonable commercial efforts to (a)
preserve intact their respective business organizations, (b) preserve the good
will and advantageous relationships with customers, suppliers, independent
contractors, employees and other persons material to the operation of their
respective businesses, and (c) not permit any action or omission that would
cause any of their respective representations or warranties contained
herein to become inaccurate or any of their respective covenants to be breached
in any material respect.
ARTICLE
VIII
Miscellaneous
SECTION
8.01. Notices. All
notices, requests, claims, demands and other communications under this Agreement
shall be in writing and shall be deemed given upon receipt by the Parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice):
24
If to the
Parent, to:
0000
Xxxxxxxx Xxxxx
Xxxx,
Xxxxxx 00000
Attention: Xxxxx
Xxxxx
With a
copy to:
Cane
Xxxxx LLP
0000 X.
Xxxx Xxxxxxx Xxxx
Xxx
Xxxxx, Xxxxxx 00000
Attention: Xxxxxx
X. Xxxx
Facsimile: (000)
000-0000
If to the
Company, to:
Pioneer
Transformers Ltd.
0 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxxx
Facsimile.:
(000) 000-0000
with a
copy to:
Xxxxxx
and Xxxxx, LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxx
X. Xxxxxx, Esq.
Facsimile
(000) 000-0000
If to the
Shareholder, to:
Provident
Pioneer Partners, L.P.
0 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxxx
Facsimile:
(000) 000-0000
SECTION
8.02. Amendments; Waivers; No
Additional Consideration. No provision of this Agreement may
be waived or amended except in a written instrument signed by the Company,
Parent and the Shareholder. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any Party to exercise any right hereunder in any manner
impair the exercise of any such right.
25
SECTION
8.03. Replacement of
Securities. If any certificate or instrument evidencing any
Parent Shares is mutilated, lost, stolen or destroyed, the Parent shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefore, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Parent of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Parent
Shares. If a replacement certificate or instrument evidencing any
Parent Shares is requested due to a mutilation thereof, the Parent may require
delivery of such mutilated certificate or instrument as a condition precedent to
any issuance of a replacement.
SECTION
8.04. Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, the Shareholder, the Parent and the Company
will be entitled to specific performance under this Agreement. The
Parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
SECTION
8.05. Interpretation. When
a reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. Whenever the
words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.”
SECTION
8.06. Severability. If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule or Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions contemplated
hereby is not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
Transactions contemplated hereby are fulfilled to the extent
possible.
SECTION
8.07. Counterparts; Facsimile
Execution. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties. Facsimile execution
and delivery of this Agreement is legal, valid and binding for all
purposes.
SECTION
8.08. Entire Agreement; Third
Party Beneficiaries. This Agreement, taken together with the Company
Disclosure Letter and the Parent Disclosure Letter, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the Parties with respect to the Transactions and (b) are not
intended to confer upon any person other than the Parties any rights or
remedies.
26
SECTION
8.09. Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without reference
to principles of conflicts of laws. Any action or proceeding brought
for the purpose of enforcement of any term or provision of this Agreement shall
be brought only in the federal or state courts sitting in New York, New York,
and the parties hereby waive any and all rights to trial by jury.
SECTION
8.10. Assignment. Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the Parties without the prior written consent of the other
Parties. Any purported assignment without such consent shall be
void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the Parties and
their respective successors and assigns.
27
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Share
Exchange Agreement as of the date first above written.
The
Parent: PIONEER POWER SOLUTIONS,
INC.
By: /s/ Xxxxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
President
The
Company: PIONEER TRANSFORMERS
LTD.
By: /s/ Xxxxxx X.
Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title: Chief Executive
Officer
The
Shareholder:
PROVIDENT PIONEER PARTNERS,
L.P.
By:
Provident Canada Corp.
Its
General Partner
By: /s/ Xxxxxx X.
Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title:
General Partner
[Signature Page to Share Exchange
Agreement]
