EXHIBIT 2.3
EXECUTION COPY.
THE PERSONS LISTED ON SCHEDULE "A"
as Vendors
and
BST ACQUISITIONS LTD.
as Purchaser
and
TARPON INDUSTRIES, INC.
(FORMERLY, WALL ST. ACQUISITIONS, INC.)
as Principal
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SHARE PURCHASE AGREEMENT
April 2, 2004
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TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION
Section 1.1 Defined Terms ............................................... 1
Section 1.2 Gender and Number ........................................... 7
Section 1.3 Headings, etc. .............................................. 7
Section 1.4 Currency .................................................... 7
Section 1.5 Certain Phrases, etc. ....................................... 7
Section 1.6 Knowledge ................................................... 7
Section 1.7 Accounting Terms ............................................ 7
Section 1.8 Incorporation of Schedules .................................. 7
ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
Section 2.1 Purchase and Sale ........................................... 8
Section 2.2 Purchase Price for Purchased Shares ......................... 8
Section 2.3 Payment of Share Purchase Price ............................. 8
Section 2.4 Adjustment to Share Purchase Price .......................... 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Section 3.1 Representations and Warranties of the Vendors ............... 11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 4.1 Representations and Warranties of the Purchaser ............. 26
ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business Prior to Closing ........................ 27
Section 5.2 Access for Due Diligence .................................... 29
Section 5.3 Confidentiality ............................................. 30
Section 5.4 Actions to Satisfy Closing Conditions ....................... 31
Section 5.5 Transfer of the Purchased Shares ............................ 31
Section 5.6 Request for Consents and Waivers ............................ 31
Section 5.7 Filings and Authorizations .................................. 32
Section 5.8 Notice of Untrue Representation or Warranty ................. 32
Section 5.9 Exclusive Dealing and Settlement of Schedules ............... 32
(i)
ARTICLE 6
CONDITIONS OF CLOSING
Section 6.1 Conditions for the Benefit of the Purchaser ................. 33
Section 6.2 Conditions for the Benefit of the Vendors ................... 37
Section 6.3 Employment Agreements ....................................... 39
Section 6.4 Release of Corporation's Obligations ........................ 39
ARTICLE 7
CLOSING
Section 7.1 Date, Time and Place of Closing ............................. 40
Section 7.2 Closing Procedures .......................................... 40
Section 7.3 Risk of Loss ................................................ 40
ARTICLE 8
TERMINATION
Section 8.1 Termination by Purchaser .................................... 40
Section 8.2 Termination by Vendors ...................................... 41
Section 8.3 Other Termination Rights .................................... 41
Section 8.4 Contribution to Vendors' Costs .............................. 42
ARTICLE 9
INDEMNIFICATION
Section 9.1 Indemnification in Favour of the Purchaser .................. 42
Section 9.2 Indemnification in Favour of the Vendors .................... 43
Section 9.3 Time Limitations ............................................ 43
Section 9.4 Procedure for Indemnification--Third Party Claims ........... 44
Section 9.5 Minimum and Maximum Liability ............................... 46
Section 9.6 Procedure for Indemnification--Other Claims ................. 47
ARTICLE 10
POST-CLOSING COVENANTS
Section 10.1 Access to Books and Records ................................. 48
Section 10.2 Further Assurances .......................................... 48
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices ..................................................... 48
Section 11.2 Time of the Essence ......................................... 50
Section 11.3 Brokers ..................................................... 50
Section 11.4 Announcements ............................................... 50
Section 11.5 Third Party Beneficiaries ................................... 50
(ii)
Section 11.6 Expenses .................................................... 51
Section 11.7 Amendments .................................................. 51
Section 11.8 Waiver ...................................................... 51
Section 11.9 Non-Merger .................................................. 51
Section 11.10 Entire Agreement ............................................ 51
Section 11.11 Successors and Assigns ...................................... 52
Section 11.12 Severability ................................................ 52
Section 11.13 Obligations of the Principal ................................ 53
Section 11.14 Governing Law ............................................... 53
Section 11.15 Counterparts ................................................ 53
SCHEDULES
SCHEDULE "A" Vendors
SCHEDULE "B" Permitted Liens
SCHEDULE "C" Audited Financial Statements and Interim Financial Statements
SCHEDULE "D" Form of Note A
SCHEDULE "E" Form of Note B
SCHEDULE "F" Form of TD Loan Commitment Letters
SCHEDULE "G" Form of Guarantee
SCHEDULE "H" Form of General Security Agreement
SCHEDULE "J" Form of Attributes of Principal's IPO Shares
SCHEDULE 2.1(a) Description of Purchased Shares
SCHEDULE 3.1(a) Jurisdictions in which Corporation Carries on Business, etc.
SCHEDULE 3.1(c) Required Authorizations
SCHEDULE 3.1(h) Dividends and Distributions
SCHEDULE 3.1(j) Residence of Vendors
SCHEDULE 3.1(k) Ordinary Course Exceptions
SCHEDULE 3.1(n) Material Authorizations
SCHEDULE 3.1(p) Description of Assets
SCHEDULE 3.1(s) Lease and Leased Property
SCHEDULE 3.1(t) Material Contracts
SCHEDULE 3.1(x) Intellectual Property Matters
SCHEDULE 3.1(y) Inventory
SCHEDULE 3.1(dd) Liabilities
SCHEDULE 3.1(ee) Bank Accounts and Powers of Attorney
SCHEDULE 3.1(ff) Environmental Matters
SCHEDULE 3.1(gg) Employee Matters
SCHEDULE 3.1(hh) Employee Plans
SCHEDULE 3.1(ii) Insurance
SCHEDULE 3.1(jj) Litigation
SCHEDULE 3.1(ll) Disclosure Matters
SCHEDULE 5.6 Vendors' Guarantees
(iii)
SCHEDULE 6.1(c) Required Consents and Authorizations
SCHEDULE 6.1(g) Form of Non-Competition Agreement
SCHEDULE 6.1(h)(x) Form of Release
SCHEDULE 6.3(1) Employment Terms
SCHEDULE 6.3(2) Form of Employment Agreement
(iv)
SHARE PURCHASE AGREEMENT
Share Purchase Agreement dated April 2, 2004 among the Persons listed on
Schedule "A" hereto (collectively, the "VENDORS"), Tarpon Industries, Inc.
(formerly Wall St. Acquisitions, Inc.) (the "PRINCIPAL") and BST Acquisitions
Ltd. (the "PURCHASER").
ARTICLE 1
INTERPRETATION
SECTION 1.1 DEFINED TERMS.
As used in this Agreement, the following terms have the following
meanings:
"ACCOUNTS RECEIVABLE" means all accounts receivable, notes receivable and
other debts due or accruing due to the Corporation.
"AGREEMENT" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; and the expressions
"ARTICLE" and "SECTION" followed by a number mean and refer to the
specified Article or Section of this Agreement.
"ANCILLARY AGREEMENTS" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement.
"ASSETS" means all property and assets of the Corporation of every nature
and kind and wheresoever situate including, without limitation, (i) all
machinery, equipment, furniture, accessories and supplies of all kinds
including those described in Schedule 3.1(p), (ii) all trucks, cars and
other vehicles including those described in Schedule 3.1(p), (iii) all
inventories, (iv) all Accounts Receivable and the full benefit of all
security for the Accounts Receivable, (v) all prepaid expenses, (vi) the
leasehold interest of the Corporation in and to the Leased Property, (vii)
the Intellectual Property, (viii) the Contracts and the Lease, and (ix)
the Books and Records and the Corporate Records.
"AUDITORS" has the meaning specified in Section 2.4(a).
"AUTHORIZATION" means, with respect to any Person, any order, permit,
approval, waiver, licence or similar authorization of any Governmental
Entity having jurisdiction over the Person.
"BOOKS AND RECORDS" means all books of account, tax records, sales and
purchase records, customer and supplier lists, computer software,
formulae, business reports, plans and projections and all other documents,
files,
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correspondence and other information of the Corporation (whether in
written, printed, electronic or computer printout form).
"BUSINESS" means the business carried on by the Corporation, and including
the sale and distribution of structural and mechanical steel pipe and
tubing.
"BUSINESS DAY" means any day of the year, other than a Saturday, Sunday or
any day on which banks are required or authorized to close in Xxxxxxx,
Xxxxxxx.
"CLOSING" means the completion of the transaction of purchase and sale
contemplated in this Agreement.
"CLOSING DATE" means April 30, 2004 or such earlier or later date as the
Parties may agree in writing.
"CLOSING FINANCIAL STATEMENTS" has the meaning specified in Section 2.4(a)
"COLLECTIVE AGREEMENTS" means any collective agreements binding the
Corporation and all related documents including letters of understanding,
letters of intent and other written communications with bargaining agents
for employees of the Corporation, which impose any obligations upon the
Corporation, all as listed and described in Schedule 3.1(gg).
"COMPUTER EQUIPMENT LEASE" means the computer equipment and software lease
dated August 1, 2001 between 883707 Ontario Inc. (o/a Communication
Connections), as lessor and 1276758 Ontario Limited, as lessee, a true and
complete copy of which has been, or will be prior to Closing, delivered to
the Purchaser.
"CONSENT" means the consent of a contracting party to a change in control
of the Corporation if required by the terms of any Contract.
"CONTRACTS" means all agreements to which the Corporation is a party to
including all contracts, leases of personal property and commitments of
any nature, written or oral, including (i) unfilled purchase orders
received by the Corporation, (ii) forward commitments by the Corporation
for supplies or materials entered into in the Ordinary Course, (iii)
restrictive agreements and negative covenant agreements which the
Corporation has with its employees, past or present, and (iv) the Material
Contracts.
"CORPORATION" means Steelbank Inc., a corporation amalgamated under the
Laws of Ontario.
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"CORPORATE RECORDS" means the corporate records of the Corporation,
including (i) all constating documents and by-laws, (ii) all minutes of
meetings and resolutions of shareholders and directors (and any
committees), and (iii) the share certificate books, securities register,
register of transfers and register of directors.
"DAMAGES" has the meaning specified in Section 9.1.
"DEFERRED PAYMENT" has the meaning specified in Section 2.3(c).
"DEFERRED PAYMENT DATE" has the meaning specified in Section 2.3(c).
"EMPLOYEE PLANS" means all the employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, profit sharing,
termination, change of control, pension, retirement, stock option, stock
purchase, stock appreciation, health, welfare, medical, dental,
disability, life insurance and similar plans, programmes, arrangements or
practices relating to the current or former employees, officers or
directors of the Corporation maintained, sponsored or funded by the
Corporation, whether written or oral, funded or unfunded, insured or
self-insured, registered or unregistered.
"ENVIRONMENTAL LAWS" means all applicable Laws and agreements with
Governmental Entities and all other statutory requirements relating to
occupational health and safety or the protection of the environment and
all Authorizations issued pursuant to such Laws, agreements or statutory
requirements.
"GAAP" means, at any time, accounting principles generally accepted in
Canada including those set out in the Handbook of the Canadian Institute
of Chartered Accountants, at the relevant time applied on a consistent
basis.
"GOVERNMENTAL ENTITY" means any (i) multinational, federal, provincial,
state, municipal, local or other governmental or public department,
central bank, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) any subdivision or authority of any of the
foregoing, or (iii) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the above.
"GSA" has the meaning specified in Section 2.3(b).
"GUARANTEE" has the meaning specified in Section 2.3(b).
"INDEMNIFICATION PROPERTIES" has the meaning specified in Section
3.1(ff)(i).
"INDEMNIFIED PARTY" has the meaning specified in Section 9.4(1).
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"INDEMNIFYING PARTY" has the meaning specified in Section 9.4(1).
"INTELLECTUAL PROPERTY" means (i) any trade marks, trade names, business
names, brand names, service marks, computer software, computer programs,
copyrights, including any performing, author or moral rights, designs,
inventions, patents, franchises, formulae, processes, know-how, technology
and related goodwill, (ii) any applications, registrations, issued
patents, continuations in part, divisional applications or analogous
rights or licence rights therefor, and (iii) other intellectual or
industrial property including the intellectual property described in
Schedule 3.1(x), in each case, owned or used by the Corporation and, in
any event, which is proprietary in nature.
"INTERIM BALANCE SHEET" means the unaudited internally generated balance
sheets of the Corporation as at the Interim Balance Sheet Date.
"INTERIM BALANCE SHEET DATE" means March 23, 2004.
"INTERIM FINANCIAL STATEMENTS" means the internally generated unaudited
Interim Balance Sheet and the profit and loss statement of the Corporation
as at the Interim Balance Sheet Date and the accompanying unaudited
internally generated statement of income of the Corporation for the period
then ended, all attached as Schedule "C".
"INTERIM PERIOD" means the period between the close of business on this
date and the Closing.
"IPO" has the meaning specified in Section 2.3(b).
"JUST CAUSE" means any act or omission of an employee that would in law
permit an employer to, without notice or pay in lieu of notice, terminate
the employment of an employee.
"LAWS" means any and all applicable laws including all statutes, codes,
ordinances, decrees, rules, regulations, municipal by-laws, judicial or
arbitral or administrative or ministerial or departmental or regulatory
judgments, orders, decisions, rulings or awards, and general principles of
common and civil law and equity, binding on or affecting the Person
referred to in the context in which the word is used.
"LEASED PROPERTY" means the lands and premises listed and described in
Schedule 3.1(s) by reference to their municipal address.
"LEASE" means the lease of the Leased Property described in Schedule
3.1(s).
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"LIEN" means any mortgage, charge, pledge, hypothecation, security
interest, assignment, lien (statutory or otherwise), charge, title
retention agreement or arrangement, restrictive covenant or other
encumbrance of any nature or any other arrangement or condition which, in
substance, secures payment or performance of an obligation.
"MATERIAL AUTHORIZATIONS" has the meaning specified in Section 3.1(n).
"MATERIAL CONTRACTS" has the meaning specified in Section 3.1(t).
"MATURITY DATE" has the meaning specified in Section 2.3(b).
"NOTE A" has the meaning specified in Section 2.3(b).
"NOTE B" has the meaning specified in Section 2.3(c).
"ORDINARY COURSE" means, with respect to an action or omission taken by a
Person, that such action or omission is consistent with the past practices
of the Person and is taken in the ordinary course of the normal day-to-day
operations of the Person.
"PARTIES" means each of the Vendors, the Principal and the Purchaser and
any other Person who may become a party to this Agreement.
"PERMITTED LIENS" means (i) Liens for taxes, assessments or governmental
charges or levies on property not yet due and delinquent, (ii) easements,
encroachments and other minor imperfections of title which do not,
individually or in the aggregate, detract from the value of or impair the
use or marketability of any real property, and (iii) Liens listed and
described in Schedule "B" but only to the extent such Liens conform to
their description in Schedule "B".
"PERSON" means a natural person, partnership, limited liability
partnership, corporation, joint stock company, trust, unincorporated
association, joint venture or other entity or Governmental Entity, and
pronouns have a similarly extended meaning.
"PRELIMINARY DUE DILIGENCE PERIOD" has the meaning specified in Section
6.1(d).
"PRINCIPAL" means Tarpon Industries, Inc. (formerly Wall St. Acquisitions,
Inc.), a corporation incorporated pursuant to the laws of Michigan, and
the sole shareholder of the Purchaser.
"PROCEEDING" has the meaning specified in Section 9.4(2).
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"PUBLIC STATEMENT" has the meaning specified in Section 11.4.
"PURCHASED SHARES" has the meaning specified in Section 2.1.
"PURCHASER" means BST Acquisitions Ltd, a corporation incorporated under
the Laws of New Brunswick.
"PURCHASER'S CLOSING CERTIFICATE" has the meaning specified in Section
9.3(2)(a).
"PURCHASER'S INDEMNIFIED PERSONS" has the meaning specified in Section
9.1.
"PURCHASER'S REPRESENTATIVES" has the meaning specified in Section 5.2(1).
"REQUIRED CONSENTS" means those Consents and Authorizations listed and
described in Schedule 6.1(c).
"SHARE PLEDGE" has the meaning specified in Section 2.3(b).
"SHARE PURCHASE PRICE" has the meaning specified in Section 2.2.
"SHAREHOLDERS' AGREEMENT" means Schedule 17 to the share purchase
agreement dated December 11, 2001 among the pre-amalgamated corporations
of the Corporation, the Vendors and certain other Persons, a true and
complete copy of which has been, or will be prior to Closing, delivered to
the Purchaser.
"TD LOAN" means the credit facility established by The Toronto-Dominion
Bank (now TD Canada Trust) for the Corporation pursuant to the terms of a
credit advisory letter dated September 17, 2002, providing the Corporation
with, inter alia, an operating line of credit up to $700,000, as amended
by revised credit advisory letter dated <>, (such credit advisory letters
being attached hereto collectively in Schedule "F").
"VENDORS" means, collectively, the Persons listed in Schedule "A" hereto.
"VENDORS' CLOSING CERTIFICATES" has the meaning specified in Section
9.3(1)(a).
"VENDORS' CASH COLLATERAL" means the cash or cash equivalent assigned or
retained by TD Canada Trust from one or more of the Vendors in support of
the Vendors' Guarantees.
"VENDORS' GUARANTEES" means, collectively, the (i) joint and several
guarantees provided by the Vendors to The Toronto-Dominion Bank (now TD
Canada Trust), together with all security granted by the Vendors in
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connection therewith, in support of the Corporation's obligations under
the TD Loan (including the Vendors' Cash Collateral), and (ii) the
personal guarantees of Xxxxx Xxxxxx and Xxxxxxx Xxxxxxxxx in respect of
the Computer Equipment Lease, all as further described in Schedule 5.6.
"VENDORS' INDEMNIFIED PERSONS" has the meaning specified in Section 9.2.
SECTION 1.2 GENDER AND NUMBER.
Any reference in this Agreement or any Ancillary Agreement to gender
includes all genders and words importing the singular number only shall include
the plural and vice versa.
SECTION 1.3 HEADINGS, ETC.
The provision of a Table of Contents, the division of this Agreement
into Articles and Sections and the insertion of headings are for convenient
reference only and are not to affect its interpretation.
SECTION 1.4 CURRENCY.
All references in this Agreement or any Ancillary Agreement to dollars,
unless otherwise specifically indicated, are expressed in Canadian currency.
SECTION 1.5 CERTAIN PHRASES, ETC.
In this Agreement and any Ancillary Agreement (i) (y) the words
"including" and "includes" mean "including (or includes) without limitation",
and (z) the phrase "the aggregate of", "the total of", "the sum of", or a phrase
of similar meaning means "the aggregate (or total or sum), without duplication,
of", and (ii) in the computation of periods of time from a specified date to a
later specified date, unless otherwise expressly stated, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding".
SECTION 1.6 KNOWLEDGE.
Where any representation or warranty contained in this Agreement or any
Ancillary Agreement is expressly qualified by reference to the knowledge of the
Vendors, it shall be deemed to refer to the actual or constructive knowledge,
information and belief of each of the Vendors and the Corporation.
SECTION 1.7 ACCOUNTING TERMS.
All accounting terms not specifically defined in this Agreement shall be
interpreted in accordance with GAAP.
SECTION 1.8 INCORPORATION OF SCHEDULES.
The schedules attached to this Agreement shall, for all purposes of this
Agreement, form an integral part of it.
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ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
SECTION 2.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, the Vendors agree
to sell, assign and transfer to the Purchaser and the Purchaser agrees to
purchase from the Vendors on the Closing Date, all (but not less than all) of
the issued and outstanding shares in the capital of the Corporation
(collectively, the "PURCHASED SHARES"), as more fully described in Schedule 2.1.
SECTION 2.2 PURCHASE PRICE FOR PURCHASED SHARES.
The purchase price (the "SHARE PURCHASE PRICE") payable by the Purchaser
to the Vendors for the Purchased Shares shall be the amount of $1,655,000,
subject to adjustment in accordance with Section 2.4.
SECTION 2.3 PAYMENT OF SHARE PURCHASE PRICE
The Purchaser shall pay the Share Purchase Price as follows:
(a) An amount equal to $75,000 of the Share Purchase Price shall be paid
by certified cheque or wire transfer of immediately available funds
on Closing to or to the order of the Vendors;
(b) An amount equal to $800,000 of the Share Purchase Price shall be
paid pursuant to a promissory note in substantially the form set
forth in Schedule D to this Agreement ("NOTE A") issued to Vendors
at Closing. Note A shall provide for the payment of interest on the
unpaid balance at 8% per annum, and shall have a maturity date of
December 10, 2004 (the "MATURITY DATE"). In accordance with the
terms of Note A, beginning July 1, 2004, Purchaser shall pay to
Vendors blended payments of principal and interest in the amount of
$15,000 per month under Note A (such payment to be applied first
against accrued interest outstanding with the balance to be applied
in reduction of principal) until the earlier of the Maturity Date or
the date of the first sale pursuant to the Principal's initial
public offering (the "IPO"), at which time all interest and unpaid
principal shall be paid in full. The Purchaser's obligations under
Note A, Note B and the Purchaser's covenant to deliver common shares
of the Principal pursuant to Section 2.3(d) shall be fully and
unconditionally guaranteed by the Corporation in substantially the
form of guarantee set forth in Schedule "G" (the "GUARANTEE") and in
support of such guarantee, the Corporation shall provide the Vendors
with a general security agreement over all of the assets of the
Corporation in substantially the form of general security agreement
set forth in Schedule H to this Agreement (the "GSA"). In addition
to the GSA, the
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Purchaser's obligations under Note A, each Note B and its covenant
to deliver common shares of the Principal pursuant to Section 2.3(d)
shall be secured by a share pledge of all of the Purchased Shares
from the Purchaser in favour of the Vendors in substantially the
form of share pledge agreement set forth in Schedule "I" (the "SHARE
Pledge"). The Purchaser's payment obligations under Note A shall (i)
rank pari passu with the Principal's other junior secured note
holders (to the extent such noteholders have recourse to the assets
of the Corporation), and (ii) be subordinate to the first secured
position of the Corporation's primary lender.
(c) An amount equal to $405,000 of the Share Purchase Price shall be
paid pursuant to three (3) promissory notes in substantially the
form set forth in Schedule E to this Agreement ("NOTE B") issued to
each of the Vendors in the amount of $135,000 each at Closing (THE
"DEFERRED PAYMENT"). In accordance with the terms of each Note B,
Purchaser shall pay to each Vendor an amount equal to $45,000 on
each of the first, second and third anniversaries of the Closing
Date (each a "DEFERRED PAYMENT DATE"); provided, however, in the
event that a Vendor voluntarily terminates his employment with the
Corporation or his employment with the Corporation is terminated for
Just Cause prior to a Deferred Payment Date, the Deferred Payment
otherwise due to such Vendor shall be forfeited and not payable to
such Vendor. Such forfeiture shall not affect the Deferred Payment
due and payable to the other Vendors, who shall continue to be
entitled to such payments in accordance with this Section 2.3(c).
For clarification purposes, the death or disability of a Vendor
shall not disentitle such Vendor, his estate or his legal personal
representative from receiving his Deferred Payment on each
applicable Deferred Payment Date.
(d) An amount equal to $375,000 of the Share Purchase Price shall be
paid in the form of shares of common stock of the Principal. The
attributes of such shares, inclusive of any hold period restrictions
are set out in Schedule J. The amount of shares to be issued to the
Vendors shall be equal to $375,000 divided by the initial offering
price of the shares of common stock of Principal sold in the IPO and
shall be issued upon closing of the IPO.
SECTION 2.4 ADJUSTMENT TO SHARE PURCHASE PRICE.
(a) Notwithstanding any other provision hereof, if and to the extent
that the shareholders' equity of the Corporation at Closing shall be
less than NIL, then the Share Purchase Price shall be decreased to
the extent of fifty cents for each dollar that the aggregate of the
shareholders' equity amount of the Corporation is less than NIL,
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provided that in no event shall such reduction in the Share Purchase
Price exceed $50,000 in the aggregate. For purposes hereof,
"shareholders equity of the Corporation at Closing" shall mean the
amount by which the book value of the assets of the Corporation at
Closing exceed the book value of the liabilities of the Corporation
at Closing, all as such assets and liabilities will be shown on
audited financial statements of the Corporation (the "CLOSING
FINANCIAL STATEMENTS") prepared by the Purchaser's auditors, Xxxxx
Xxxxxxxx, (the "AUDITORS") at the Purchaser's sole cost and expense
as of the Closing Date in accordance with GAAP applied on a basis
consistent with those of previous years. For greater certainty, the
shareholders equity can be a negative number (that is a deficit).
(b) The Vendors covenant and agree to pay to the Purchaser any
adjustment to the Share Purchase Price payable pursuant to this
Section 2.4 as soon as practicable after the completion of the
Closing Financial Statements as such financial statements may be
amended by the decision of the Arbitrator pursuant to Section
2.4(d), and failing such payment by the Vendors, the Purchaser shall
be entitled to set-off such adjustment to the Share Purchase Price
as against Note A or Note B.
(c) As soon as is practicable, and in any event not later than 60
calendar days following the Closing Date, the Purchaser shall
deliver to the Vendors the Closing Financial Statements covering the
period from December 1, 2003 to the Closing Date.
(d) The Vendors shall have the right to dispute any aspect of the
Closing Financial Statements by notice in writing given to the
Purchaser within five (5) Business Days following the delivery of
the Closing Financial Statements to the Vendors. Unless such dispute
is not resolved promptly by agreement, the Vendors and the Purchaser
may each select jointly one of Xxxxx Xxxxx, PriceWaterhouseCoopers
and BDO Dunwoody LLP to arbitrate the dispute. If the Vendors and
the Purchaser are unable to agree as to the firm that will arbitrate
the dispute, one of the three firms proposed above shall be chosen
by lot by counsel for the Purchaser. The firm chosen shall designate
a partner (the "Arbitrator") to determine the matter in dispute as a
single arbitrator in accordance with the Arbitrations Act (Ontario).
The cost of the arbitration shall be in the discretion of the
Arbitrator. The decision of the Arbitrator with respect to any
matter in dispute (including as to all procedural matters and any
decision as to costs) shall be final and binding on the Vendors and
the Purchaser and shall not be subject to appeal by any party. The
fees and expenses of the
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Arbitrator shall be borne by the Purchaser and the Vendors, each as
to 50 percent of such fees and expenses. Upon agreement with respect
to all matters in dispute, or upon a decision of the Arbitrator with
respect to all matters in dispute, such amendments shall be made to
the Closing Financial Statements as may be necessary to reflect such
agreement or such decision, as the case may be. In such event,
references in this Agreement to the Closing Financial Statements
shall refer to the Closing Financial Statements, as so amended.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS.
Each of the Vendors jointly and severally represents and warrants as
follows to the Purchaser and acknowledges and confirms that the Purchaser is
relying upon the representations and warranties in connection with the purchase
by the Purchaser of the Purchased Shares:
CORPORATE MATTERS
(a) INCORPORATION AND QUALIFICATION. The Corporation is incorporated and
existing under the laws of its jurisdiction of incorporation and has
the corporate power to own and operate its properties, carry on its
business and enter into and perform its obligations under each of
the Ancillary Agreements to which it is or will become a party. The
Corporation is duly qualified, licensed or registered to carry on
business in the jurisdictions listed in Schedule 3.1(a). The
jurisdictions listed in Schedule 3.1(a) include all jurisdictions in
which the nature of the Assets or the Business makes such
qualification necessary or where the Corporation owns or leases any
material Assets or conducts any material business;
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
each of the Vendors and the Corporation, as the case may be, of this
Agreement and each of the Ancillary Agreements to which it is or
will become a party:
(i) have been, or at Closing, will be, duly authorized by all
necessary corporate action on the part of the Corporation;
(ii) do not or, at Closing, will not (or would not with the giving
of notice, the lapse of time or the happening of any other
event or condition) result in a breach or a violation of, or
conflict with, or allow any other Person to exercise any
rights under, any of the
-12-
terms or provisions of its constating documents or by-laws or
any contracts or instruments to which it is a party or
pursuant to which any of its assets or property may be
affected, save and except under the TD Loan;
(iii) will not result in a breach of, or cause the termination or
revocation of, any Authorization held by the Vendors or the
Corporation or necessary to the ownership of the Purchased
Shares or the operation of the Business; and
(iv) will not result in the violation of any Law;
(c) REQUIRED AUTHORIZATIONS. There is no requirement of the Vendors or
the Corporation to make any filing with, give any notice to, or
obtain any Authorization of, any Governmental Entity as a condition
to the lawful completion of the transactions contemplated by this
Agreement, except for the filings, notifications and Authorizations
described in Schedule 3.1(c) or that relate solely to the identity
of the Purchaser or the nature of the business carried on by the
Purchaser;
(d) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by each of the Vendors and constitutes the
legal, valid and binding obligations of each of the Vendors, and,
each of the Ancillary Agreements to which any of the Vendors or the
Corporation is, or will become, a party have been, or at Closing
will be, duly executed and delivered by such Vendors and the
Corporation, as the case may be, and constitutes, or at closing will
constitute the legal, valid and binding obligations of such Vendors
and the Corporation, as the case may be, in each such case
enforceable against such Person in accordance with their respective
terms subject only to any limitation under applicable laws relating
to (i) bankruptcy, winding-up, insolvency, arrangement and other
similar laws of general application affecting the enforcement of
creditors' rights, and (ii) the discretion that a court may exercise
in the granting of equitable remedies such as specific performance
and injunction;
(e) AUTHORIZED AND ISSUED CAPITAL. The authorized capital of the
Corporation consists of an unlimited number of Class A Shares, an
unlimited number of Class B Shares, an unlimited number of Class C
Shares and an unlimited number of common shares, of which (i) at
this date, 300 common shares (and no more) have been duly issued and
are outstanding as fully paid and non-assessable, and (ii) at the
Closing Date, 300 common shares (and no more) shall have been duly
issued and shall be outstanding as fully paid and non-assessable.
All such
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shares have been issued in compliance with all applicable Laws
including, without limitation, applicable securities laws;
(f) NO OTHER AGREEMENTS TO PURCHASE. Except for the Purchaser's right
under this Agreement, no Person has any written or oral agreement,
option or warrant or any right or privilege (whether by Law,
pre-emptive or contractual) capable of becoming such for (i) the
purchase or acquisition from any of the Vendors of any of the
Purchased Shares, or (ii) the purchase, subscription, allotment or
issuance of any of the unissued shares or other securities of the
Corporation;
(g) TITLE TO PURCHASED SHARES. As more fully described in Schedule
2.1, the Purchased Shares are owned by the Vendors as the registered
and beneficial owners with a good title, free and clear of all
Liens. Upon completion of the transaction contemplated by this
Agreement, the Purchaser will have good and valid title to the
Purchased Shares, free and clear of all Liens other than Liens
granted or directly caused by the Purchaser including the Share
Pledge;
(h) DIVIDENDS AND DISTRIBUTIONS. Except for the payments set forth in
Schedule 3.1(h), since the Interim Balance Sheet Date, the
Corporation has not, directly or indirectly, declared or paid any
dividends or declared or made any other distribution on any of its
shares of any class and has not, directly or indirectly, redeemed,
purchased or otherwise acquired any of its shares of any class or
agreed to do so;
(i) CORPORATE RECORDS. The Corporate Records are complete and accurate
in all material respects and all corporate proceedings and actions
reflected in the Corporate Records have been conducted or taken in
compliance with all applicable Laws and with the articles and
by-laws of the Corporation. Without limiting the generality of the
foregoing (i) the minute books contain complete and accurate minutes
of all meetings of the directors and shareholders of the Corporation
held since incorporation and all such meetings were properly called
and held, (ii) the minute books contain all resolutions passed by
the directors and shareholders (and committees, if any) of the
Corporation and all such resolutions were properly passed, (iii) the
share certificate books, register of shareholders and register of
transfers are complete and accurate, all transfers have been
properly completed and approved and any tax payable in connection
with the transfer of any securities has been paid, and (iv) the
registers of directors and officers of the Corporation are complete
and accurate and all former and present directors and officers of
the Corporation were properly elected
-14-
or appointed, as the case may be. Except for the Shareholders'
Agreement, the Corporation has never been subject to, or affected
by, any unanimous shareholders agreement;
(j) RESIDENCE OF THE VENDORS. Except as otherwise disclosed in Schedule
3.1(j), the Vendors are not non-residents of Canada within the
meaning of the Income Tax Act (Canada) and the Corporation is a
registrant for purposes of any taxes imposed under Part IX of the
Excise Tax Act;
GENERAL MATTERS RELATING TO THE BUSINESS
(k) CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as disclosed in
Schedule 3.1(k), since the Interim Balance Sheet Date, the Business
has been carried on in the Ordinary Course and the Corporation has
not:
(i) sold, transferred or otherwise disposed of any Assets except
for (i) Assets which are obsolete and which individually or in
the aggregate do not exceed $25,000, or (ii) inventory sold in
the Ordinary Course;
(ii) made any capital expenditure or commitment therefore which
individually or in the aggregate exceeded $25,000;
(iii) discharged any secured or unsecured obligation or liability
(whether accrued, absolute, contingent or otherwise) which
individually or in the aggregate exceeded $25,000;
(iv) increased its indebtedness for borrowed money or made any loan
or advance, or assumed, guaranteed or otherwise became liable
with respect to the liabilities or obligations of any Person;
(v) made any bonus or profit sharing distribution or similar
payment of any kind except as may be required by the terms of
a Material Contract;
(vi) removed any auditor or director or terminated any officer or
other senior employee;
(vii) granted any general increase in the rate of wages, salaries,
bonuses or other remuneration of any employees of the
Corporation except as may be required by the terms of a
Material Contract save and except for an increase in salary
provide to Xxxxxx Xxxxxxx in the amount of approximately
$2,000 per annum on or about December, 2003;
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(viii) written off as uncollectible any Accounts Receivable which
individually or in the aggregate is material to the
Corporation or is in excess of, individually or in the
aggregate, $25,000;
(ix) suffered any extraordinary loss, whether or not covered by
insurance;
(x) suffered any material shortage or any cessation or
interruption of inventory shipments, supplies or ordinary
services;
(xi) cancelled or waived any material claims or rights;
(xii) compromised or settled any litigation, proceeding or other
governmental action relating to the Assets, the Business or
the Corporation;
(xiii) cancelled or reduced any of its insurance coverage; or
(xiv) authorized, agreed or otherwise committed, whether or not in
writing, to do any of the foregoing;
In addition, the Corporation has not (i) made, or agreed to make,
any change in any method of accounting or auditing practice, or (ii)
save and except in connection with the amalgamation of the
Corporation effective December 1, 2002, amended or approved any
amendment to its constating documents, by-laws or capital structure.
(l) [INTENTIONALLY DELETED];
(m) COMPLIANCE WITH LAWS. The Corporation is conducting and has always
conducted the Business and any past business in compliance with all
applicable Laws other than acts of non-compliance which, in the
aggregate, are not material;
(n) AUTHORIZATIONS. The Corporation owns, holds, possesses or lawfully
uses in the operation of the Business, all Authorizations which are,
in any manner, necessary for the Corporation to conduct the Business
as presently or previously conducted or for the ownership and use of
the Assets in compliance with all applicable Laws. All
Authorizations material to the Corporation or the Business are
listed in Schedule 3.1(n) (the "MATERIAL AUTHORIZATIONS"). Each
Material Authorization is valid, subsisting and in good standing,
the Corporation is not in default or breach of any Material
Authorization applicable to it and, to the knowledge of the Vendors,
no proceeding is pending or threatened to revoke or limit any
Material Authorization. All Material
-16-
Authorizations are renewable by their terms or in the ordinary
course of business without the need for the Corporation to comply
with any special rules or procedures, agree to any materially
different terms or conditions or pay any amounts other than routine
filing fees. Neither the Vendors nor any of their affiliates owns or
has any proprietary, financial or other interests (direct or
indirect) in any Material Authorization which the Corporation owns,
possesses or uses in the operation of the Business as now or
previously conducted;
MATTERS RELATING TO THE ASSETS
(o) SUFFICIENCY OF ASSETS. The Business is the only business operation
carried on by the Corporation and its Assets include all rights and
property necessary to the conduct its Business after the Closing
substantially in the same manner as it was conducted prior to the
Closing. With the exception of inventory in transit, certain
Contracts, certain Books and Records and the Corporate Records, all
of the Assets are, and at Closing will be, situated at the Leased
Property;
(p) TITLE TO THE ASSETS. Subject to the Lease being assigned from Tube
Distributors Inc. to the Corporation and the Computer Equipment
Lease being assigned from 1276758 Ontario Limited to the
Corporation, the Corporation owns (with good title) all of the
properties and assets (whether real, personal or mixed and whether
tangible or intangible) that it purports to own including all the
properties and assets reflected as being owned by the Corporation in
its financial Books and Records. The Corporation has legal and
beneficial ownership of its Assets free and clear of all Liens
except for Permitted Liens;
(q) NO OPTIONS, ETC. No Person has any written or oral agreement,
option, understanding or commitment, or any right or privilege
capable of becoming such for the purchase or other acquisition from
the Corporation of any of its Assets other than pursuant to purchase
orders for inventory sold in the Ordinary Course;
(r) REAL PROPERTY. Subject to the Lease being assigned from Tube
Distributors Inc. to the Corporation, the Corporation is not the
owner or lessee of, or subject to any agreement or option to own or
lease, any real property or any interest in any real property other
than the Leased Property. Upon assignment of the Lease to the
Corporation, the Corporation will have adequate rights of ingress
and egress into the Leased Property for the operation of the
Business in the Ordinary Course. No condemnation or expropriation
proceeding is pending or, to the best knowledge of the Vendors,
threatened against all or any
-17-
portion of the Leased Property which would preclude or impair the
use of the Leased Property for the purposes for which it is
currently used. To the knowledge of the Vendors, there are no
outstanding work orders from or required by any municipality, police
department, fire department, sanitation, health or safety
authorities or from any other Person and there are no matters under
discussion with or by the Corporation relating to work orders;
(s) LEASE. Subject to the Lease being assigned from Tube Distributors
Inc. to the Corporation, the Corporation is not a party to, or under
any agreement to become a party to, any lease with respect to real
property other than the Lease, a copy of which has been provided to
the Purchaser. The Lease is (and will be upon being assigned to the
Corporation) in good standing, creates a good and valid leasehold
estate in the Leased Property thereby demised and is in full force
and effect without amendment, except as disclosed in Schedule
3.1(s). With respect to the Lease, save as disclosed in Schedule
3.1(s), (i) all rents and additional rents have been paid, (ii) no
waiver, indulgence or postponement of the lessee's obligations has
been granted by the lessor, (iii) except as disclosed in Schedule
3.1(s), there exists no event of default or event, occurrence,
condition or act (including the purchase of the Purchased Shares)
which, with the giving of notice, the lapse of time or the happening
of any other event or condition, would become a default under the
Lease, and (iv) all of the covenants to be performed by any party
(other than the Corporation) under the Lease have been fully
performed. The Leased Property is adequate and suitable for the
purposes for which it is presently being used and the Corporation,
has adequate rights of ingress and egress into the Leased Property
for the operation of the Business in the Ordinary Course. Schedule
3.1(s) contains a description of the Lease setting out a description
of the leased premises (by municipal address), the term of the
Lease, the rental payments under the Lease (specifying any breakdown
of base rent and additional rents), any rights of renewal and the
term thereof, and any restrictions on assignment or change of
control of the Corporation;
(t) MATERIAL CONTRACTS. Except for the Contracts described in Schedule
3.1(t) (collectively, the "MATERIAL CONTRACTS") the Lease, the
Employee Plans, the TD Loan, the insurance policies set out in
Schedule 3.1(ii) and the Contracts listed in Schedule 3.1(gg), the
Corporation is not a party to or bound by:
(i) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
-18-
(ii) any continuing Contract for the purchase of materials,
supplies, equipment or services involving in the case of any
such Contract more than $25,000 over the life of the
Contract;
(iii) any Contract that expires or may be renewed at the option of
any Person other than the Corporation so as to expire more
than one year after the date of this Agreement;
(iv) any trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money, any
currency exchange, commodities or other hedging arrangement
or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(v) any Contract for capital expenditures in excess of $25,000 in
the aggregate;
(vi) any confidentiality, secrecy or non-disclosure Contract or
any Contract limiting the freedom of the Corporation to
engage in any line of business, compete with any other
Person, operate its assets at maximum production capacity or
otherwise conduct its business (save and except for certain
informal and non-binding customs and understandings in the
industry in which the Business operates);
(vii) any Contract pursuant to which the Corporation is a lessor of
any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property, save and except for a
photocopier lease in the approximate leasing amount of $109
per month, a month to month fork lift rental agreement in the
aggregate approximate amount of $1,300 per month and a month
to month truck leasing agreement with Ryder;
(viii) any Contract with any Person with whom the Corporation or the
Vendors does not deal at arm's length within the meaning of
the Income Tax Act (Canada);
(ix) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with
respect to, the obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or indebtedness of any
other Person save and except to the Corporation's custom
broker, Xxxxxxx'x;
(x) any Collective Agreement; or
-19-
(xi) any Contract made out of the Ordinary Course;
(u) NO BREACH OF MATERIAL CONTRACTS. The Corporation has performed all
of the obligations required to be performed by it and is entitled to
all benefits under, and has received no notice of being in default
of any Material Contract. Each of the Material Contracts is in full
force and effect, unamended, and to the best of the knowledge of the
Vendors, there exists no default or event of default or event,
occurrence, condition or act (including the purchase of the
Purchased Shares) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become
a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been, or
will be prior to Closing, delivered to the Purchaser;
(v) NO BREACH OF OTHER CONTRACTS. To the knowledge of the Vendors, the
Corporation has not violated or breached, in any respect, any of the
terms or conditions of any Contract (other than the Material
Contracts), and to the best of the knowledge of the Vendors, all the
covenants to be performed by any other party to such Contract have
been fully performed;
(w) ACCOUNTS RECEIVABLE. Save and except as otherwise set out in this
Agreement and save and except for a 120 day account receivable in
the approximate amount of USD$25,000 payable by Ram Fabricating, all
Accounts Receivable are bona fide, and, subject to an allowance for
doubtful accounts that has been reflected on the books of the
Corporation in accordance with GAAP and consistent with past
practice, collectible without set-off or counterclaim;
(x) INTELLECTUAL PROPERTY. Attached as Schedule 3.1(x) is a complete and
accurate list of all Intellectual Property owned or used by the
Corporation in carrying on the Business. Schedule 3.1(x) also
includes complete and accurate particulars of all registrations or
applications for registration of the Intellectual Property. The
Intellectual Property comprises all intellectual property necessary
to properly conduct the Business. As more fully described in
Schedule 3.1 (x), the Corporation is the beneficial owner of the
Intellectual Property identified as being owned by it, free and
clear of all Liens other than Permitted Liens, and the Corporation
is not a party to or bound by any Contract or other obligation
whatsoever that limits or impairs its ability to sell, transfer,
assign or convey, or that otherwise affects, the Intellectual
Property. No Person has been granted any interest in or right to use
all or any portion of the Intellectual Property. The Vendors are not
aware of a
-20-
claim of any infringement or breach of any industrial or
intellectual property rights of any other Person by the Corporation,
nor have the Vendors received any notice that the conduct of the
Business, including the use of the Intellectual Property, infringes
upon or breaches any industrial or intellectual property rights of
any other Person, and the Vendors have no knowledge of any
infringement or violation of its rights or the rights of any of the
Corporation in the Intellectual Property. To the knowledge of the
Vendors, the conduct of the Business does not infringe upon the
patents, trade marks, licences, trade names, business names,
copyright or other industrial or intellectual property rights,
domestic or foreign, of any other Person. The Vendors are not aware
of any state of facts that casts doubt on the validity or
enforceability of any of the Intellectual Property. The Vendors have
provided, or shall provide prior to Closing, the Purchaser with a
true and complete copy of all Contracts that comprise or are related
to the Intellectual Property;
(y) INVENTORIES. Except as set out in Schedule 3.1(y), the inventories
of the Corporation do not include any material items which are
slow-moving, below standard quality or of a quality or quantity not
usable or saleable in the Ordinary Course of the Business, the value
of which has not been written down in the Interim Financial
Statements to net realizable market value; save for certain items
owned by the Corporation which, in accordance with past practice of
the Corporation, are excess or secondary and in fact below standard
quality and/or demand, all as further described in Schedule 3.1(y).
The inventory levels of the Corporation have been maintained at
levels sufficient for the continuation of the Business in the
Ordinary Course;
(z) SUBSIDIARIES. The Corporation has no subsidiaries and holds no
shares or other ownership, equity or proprietary interests in any
other Person;
FINANCIAL MATTERS
(aa) BOOKS AND RECORDS. All accounting and financial Books and Records
have been fully, properly and accurately kept and completed in all
material respects. The Books and Records and other data and
information are not recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process,
whether computerized or not) which are not available to the
Corporation in the Ordinary Course, save and except as set out in
Schedule 3.1(x);
-21-
(bb) FINANCIAL STATEMENTS. The unaudited "Notice to Reader" financial
statements of the Corporation dated November 30, 2003 and the
Interim Financial Statements have been prepared in accordance with
GAAP applied on a basis consistent with those of previous fiscal
years and each presents fairly:
(i) the assets, liabilities, (whether accrued, absolute,
contingent or otherwise) and financial position of the
Corporation as at the respective dates of the relevant
statements; and
(ii) the sales and earnings of the Corporation during the periods
covered by the unaudited "Notice to Reader" financial
statements of the Corporation dated November 30, 2003 or
Interim Financial Statements, as the case may be;
True, correct and complete copies of the unaudited "Notice to Reader"
financial statements of the Corporation dated November 30, 2003 and the
Interim Financial Statements are attached as Schedule "C".
(cc) [INTENTIONALLY DELETED];
(dd) NO LIABILITIES. Except as disclosed in this Agreement (including
Schedule 3.1(dd) or reflected or reserved against in the balance
sheet forming part of the Interim Financial Statements, the
Corporation has no liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) except for current
liabilities incurred in the Ordinary Course since the Interim
Balance Sheet Date;
(ee) BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 3.1(ee) is a correct
and complete list showing (i) the name of each bank in which the
Corporation has an account or safety deposit box and the names of
all Persons authorized to draw on such accounts or to have access to
such safety deposit boxes, (ii) the name of each bank in which the
Corporation had an account at any time after January 1, 2004 and not
specified in (i) above, and (iii) the names of all Persons holding
powers of attorney from the Corporation. Copies of the powers of
attorney have been, or simultaneously with the execution hereof will
be, provided to the Purchaser;
PARTICULAR MATTERS RELATING TO THE BUSINESS
(ff) ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.1(ff):
(i) to the knowledge of the Vendors, none of the real properties
(including, without limitation, the Leased Property) currently
or, to the knowledge of the Vendors, formerly owned, leased or
-22-
used by the Corporation or over which the Corporation has or
had charge, management or control (such property, the
"INDEMNIFICATION PROPERTIES") (i) has ever been used by any
Person as a waste disposal site or as a licensed landfill, or
(ii) has ever had asbestos, asbestos-containing materials,
PCBs, radioactive substances or aboveground or underground
storage systems, active or abandoned, located on, at or under
them;
(ii) to the knowledge of the Vendors, no properties adjacent to the
Leased Property are contaminated;
(iii) the Corporation has not transported, removed or disposed of
any waste to a location outside of Canada other than in
accordance with applicable Law;
(iv) to the best knowledge of the Vendors, there are no
contaminants located in the ground or in groundwater under the
Leased Property;
(v) the Corporation has not been required by any Governmental
Entity to (i) alter the Leased Property in a material way in
order to be in compliance with Environmental Laws, or (ii)
perform any environmental closure, decommissioning,
rehabilitation, restoration or post-remedial investigations,
on, about, or in connection with any real property; and
(vi) Schedule 3.1(ff) lists all reports and documents relating to
the environmental matters affecting the Corporation or the
Leased Property which are in the possession or under the
control of the Vendors. Copies of all such reports and
documents have been, or simultaneously with the execution
hereof will be, provided to the Purchaser. The Vendors are not
aware of any other reports or documents relating to
environmental matters affecting the Corporation or the Leased
Property which have not been made available to the Purchaser
whether by reason of confidentiality restrictions or
otherwise.
(gg) EMPLOYEES. Except as set forth in Schedule 3.1(gg):
(i) the Corporation is in compliance with all Laws respecting
employment and employment practices, terms and conditions of
employment, pay equity and wages and hours of work;
(ii) the Corporation has not and is not engaged in any unfair
labour practice and no unfair labour practice complaint,
grievance or
-23-
arbitration proceeding is pending or threatened against the
Corporation;
(iii) no collective bargaining agreement is currently being
negotiated by the Corporation with respect to its employees
and no collective agreements are or have been in force with
respect to the employees of the Corporation. No union
representation question exists respecting the employees of the
Corporation. There is no labour strike, dispute, work slowdown
or work stoppage pending or involving or threatened against
the Corporation. No trade union has applied to have the
Corporation declared a related employer pursuant to the Labour
Relations Act (Ontario) or any similar legislation in any
jurisdiction in which the Corporation carries on business;
(iv) all amounts due or accrued due for all salary, wages, bonuses,
commissions, vacation with pay, pension benefits or other
employee benefits are reflected in the Books and Records; and
(v) Schedule 3.1(gg) contains a correct and complete list of each
employee, director, independent contractor, consultant and
agent of the Corporation earning in excess of $35,000 on an
annual basis, whether actively at work or not, their salaries,
commissions and consulting fees, benefits, positions and
length of service. No employee of the Corporation has any
agreement as to length of notice or severance payment required
to terminate his or her employment, and the Corporation will
not incur any such liability in terminating an employee, other
than such as results by Law from the employment of an employee
without an agreement as to notice or severance.
(hh) EMPLOYEE PLANS.
(i) Schedule 3.1(hh) lists and describes all Employee Plans. The
Vendors have furnished to the Purchaser true, correct and
complete copies of all the Employee Plans as amended as of the
date hereof;
(ii) All obligations regarding the Employee Plans have been
satisfied, there are no outstanding defaults or violations by
any party to any Employee Plan and no taxes, penalties, or
fees are owing or exigible under or in respect of any of the
Employee Plans;
-24-
(iii) Subject to applicable Laws, the Corporation may unilaterally
amend or terminate, in whole or in part, and without
liability, each Employee Plan which relates to it;
(iv) No commitments to improve or otherwise amend any Employee Plan
have been made except as required by applicable Laws; and
(v) All employee data necessary to administer each Employee Plan
has been, or will be prior to Closing, provided by the Vendors
to the Purchaser and is true and correct as of the date of
this Agreement and the Vendors will notify the Purchaser of
any changes thereto.
(ii) INSURANCE. The Assets are insured against loss or damage by all
insurable hazards or risks on a replacement cost basis, save and
except for inventories which are insured on an actual cash value
basis. Schedule 3.1(ii) contains a list of insurance policies which
are maintained by the Corporation setting out, in respect of each
policy, a description of the type of policy, the name of insurer,
the coverage allowance, the expiration date, the annual premium and
any pending claims. To the knowledge of the Vendors, the Corporation
is not in default with respect to any of the provisions contained in
the insurance policies, the payment of any premiums under any
insurance policy and have not failed to give any notice or to
present any claim under any insurance policy in a due and timely
fashion. Save and except as disclosed in Schedule 3.1(ii), there
have not been any material adverse change in the relationship of the
Corporation with its insurers, the availability of coverage, or in
the premiums payable pursuant to the policies. Part of Schedule
3.1(ii) is a list setting forth any and all material claims, with
reasonable particulars, made under any policies of insurance
maintained by or for the benefit of the Corporation over the past
five (5) calendar years prior to this date. True, correct and
complete copies of all insurance policies of the Corporation and the
most recent inspection reports received from insurance underwriters
have been delivered to the Purchaser;
(jj) LITIGATION. Except as described in Schedule 3.1(jj), the Vendors
have received no notice and to the best of their knowledge there are
no actions, suits or proceedings, at law or in equity, by any Person
(including, without limitation, the Corporation), nor any
arbitration, administrative or other proceeding by or before (or any
investigation by) any Governmental Entity pending or, to the best of
the knowledge of the Vendors, threatened against or affecting the
Corporation, the
-25-
Business or any of the Assets, and the Vendors know of no valid
basis for any such action, suit, proceeding, arbitration or
investigation by or against the Corporation. To the knowledge of the
Vendors, the Corporation is not subject to any judgment, order or
decree entered in any lawsuit or proceeding nor has the Corporation
settled any claim prior to being prosecuted in respect of it. Except
as disclosed in Schedule 3.1(jj), the Corporation is not a plaintiff
or complainant, or defendant or respondent in any action, suit or
proceeding;
(kk) TAXES. The Corporation has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, provincial,
local and foreign tax returns and tax reports which are required to
be filed by or with respect to the Corporation. The information
contained in such returns and reports is correct and complete and
such returns and reports reflect accurately all liability for taxes
of the Corporation for the periods covered thereby. All federal,
provincial, local and foreign income, profits, franchise, sales,
use, occupancy, excise and other taxes and assessments (including
interest and penalties) that are or may become payable by or due
from the Corporation have been fully paid or fully disclosed and
fully provided for in the Books and Records and the Interim
Financial Statements. The federal income tax liability of the
Corporation has been assessed for all fiscal years to and including
its fiscal year ended on November 30, 2003. There are no outstanding
agreements or waivers extending the statutory period providing for
an extension of time with respect to the assessment or re-assessment
of tax or the filing of any tax return by, or any payment of any tax
by the Corporation, no notice of assessment or reassessment has been
received and to the best knowledge of the Vendors, no examination of
any tax return of the Corporation is currently in progress. The
Vendors have no notice or knowledge of any claims, actions, suits or
proceedings (or, to the best knowledge of the Vendors, any
investigation) which are pending, or to the best knowledge of the
Vendors, threatened against the Corporation relating to taxes and
the Vendors know of no valid basis for any such claim, action, suit,
proceeding, investigation or discussion. The Corporation has
withheld from each payment made by it the amount of all taxes and
other deductions required to be withheld therefrom and has paid the
same to the proper taxing or other authority within the time
prescribed under any applicable Law. The Corporation is a registrant
for purposes of the tax imposed under Part IX of the Excise Tax Act
(Canada). The Corporation is a Canadian - controlled private
corporation as defined in the Income Tax Act (Canada) and has been
so since February 11, 1986, the date of incorporation of the
Corporation,
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provided that such status shall end as of the date of this Agreement
is entered into; and
(ll) FULL DISCLOSURE. Neither this Agreement nor any Ancillary Agreement
to which any of the Vendors or the Corporation is a party (i)
contains any untrue statement of a material fact in respect of the
Vendors, the affairs, prospects, operations or condition of the
Corporation, its Assets or its Business, or (ii) omits any statement
of a material fact necessary in order to make the statements in
respect of the Vendors, the affairs, prospects, operations or
condition of the Corporation, its Assets or its Business contained
herein or therein not misleading. Subject to the matters described
in Schedule 3.1(ll), there is no fact known to the Corporation or
the Vendors which materially and adversely affects the affairs,
prospects, operations or condition of the Corporation, the Assets or
the Business which has not been set forth in this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants as follows to the Vendors and
acknowledges and confirms that the Vendors are relying on such representations
and warranties in connection with the sale by the Vendors of the Purchased
Shares:
(a) INCORPORATION AND CORPORATE POWER. The Purchaser is a corporation
incorporated and existing under the laws of New Brunswick and has
the corporate power and authority to enter into and perform its
obligations under this Agreement and each of the Ancillary
Agreements to which it is or will become a party;
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
the Purchaser of this Agreement and each of the Ancillary Agreements
to which it is or will become a party:
(i) have been or, at Closing, will be, duly authorized by all
necessary corporate action on the part of the Purchaser;
(ii) do not or, at Closing, will not (or would not with the giving
of notice, the lapse of time or the happening of any other
event or condition) result in a breach or a violation of, or
conflict with, any of the terms or provisions of its
constating documents or by-laws or any contracts or
instruments to which it is a party or pursuant to which any of
its assets or property may be affected; and
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(iii) will not result in the violation of any Law in any material
respect;
(c) EXECUTION AND BINDING OBLIGATION. This Agreement and each of the
Ancillary Agreements to which the Purchaser is or will become a
party have been duly executed and delivered by the Purchaser and
constitute legal, valid and binding obligations of the Purchaser,
enforceable against it in accordance with their respective terms
subject only to any limitation under applicable Laws relating to (i)
bankruptcy, insolvency, arrangement or other similar laws of general
application affecting creditors' rights, and (ii) the discretion
that a court may exercise in the granting of equitable remedies; and
(d) RELATIONSHIP OF PRINCIPAL. The Principal is the sole shareholder of
the Purchaser.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
SECTION 5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.
(1) During the Interim Period, save and except as otherwise expressly provided
for in this Agreement, the Vendors will cause the Corporation to conduct
the Business in the Ordinary Course.
(2) Without limiting the generality of Section 5.1(1), and without derogating
from the obligations of the Vendors in Section 6.1, the Vendors will not,
without the prior written consent of the Purchaser, such consent not to be
unreasonably withheld or delayed, permit the Corporation to:
(a) purchase, establish or acquire in any manner any new business
undertaking or make any change in the nature of the Corporation's
business as presently carried on;
(b) enter into any reorganization, consolidation, amalgamation,
arrangement, winding-up, merger or other similar transaction
(including, without limitation, the sale of all or substantially all
of the assets of the Corporation) or permit the assignment or
transfer of any of the Corporation's issued and outstanding shares
or any right, option or privilege convertible into shares in the
capital of the Corporation;
(c) declare, make, pay or commit to any form of distribution or
reduction of the profits of the Corporation or of its capital,
including (i) any dividend (including stock dividends) or other
distribution on any present or future shares, (ii) the purchase,
redemption or retirement or
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acquisition any of its shares, or any option, warrant or other right
to acquire any such shares, or apply or set apart any of its assets
therefor, (iii) bonuses to shareholders, (iv) payment on account of
loans made to shareholders of the Corporation, or (v) payment of any
bonuses or management fees;
(d) create, allot or issue any shares in the capital of the Corporation,
or to enter into any agreement, or grant any option, right or
privilege, whether pre-emptive, contractual or otherwise for the
purchase or other acquisition of shares or securities convertible
into shares of the Corporation, amend the Corporation's articles or
by-laws, change its capital structure or enter into any agreement or
make any offer to do so;
(e) increase the Corporation's indebtedness for borrowed money, except
for normal fluctuations in the Corporation's operating credit
facility under the TD Loan, make any loan or advance, or assume,
guarantee or otherwise become liable with respect to the liabilities
or obligations of any Person, or otherwise encumber any of the
property and assets of the Corporation, except for necessary
encumbrances for operating capital to finance operations of the
Corporation in the Ordinary Course;
(f) save and except for contracts necessary for the Corporation's
current supplies and services, enter into any contracts for capital
expenditures in excess of, either individually or in the aggregate,
$25,000;
(g) grant any general increase in the rate of wages, salaries, bonuses
or other remuneration of any employees of the Corporation, except as
may be required by the terms of a Material Contract; or
(h) agree, whether or not in writing, to do any of the foregoing.
(3) Without limiting the generality of Section 5.1(1), and without derogating
from the obligations of the Vendors in Section 6.1, the Vendors will cause
the Corporation to:
(a) use all reasonable commercial efforts to preserve intact the current
business organization of the Corporation, keep available the
services of the present employees and agents of the Corporation and
maintain good relations with, and the goodwill of, suppliers,
customers, landlords, creditors, distributors and all other Persons
having business relationships with the Corporation;
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(b) confer with the Purchaser concerning operational matters of a
material nature;
(c) use all reasonable commercial efforts consistent with past practice
to retain possession and control of its Assets and preserve the
confidentiality of any confidential or proprietary information of
the Business or the Corporation;
(d) subject to the terms of this Agreement and the prudent and
reasonable discretion of the Vendors, maintain adequate levels of
inventories to carry on the Business in the Ordinary Course;
(e) maintain the Assets in their current state of repair and condition,
reasonable wear and tear excepted;
(f) comply with all Authorizations and contractual obligations under the
Contracts;
(g) use all reasonable commercial efforts to conduct the Business in
such a manner that on the Closing Date, the representations and
warranties of the Vendors contained in this Agreement shall be true,
correct and complete as if such representations and warranties were
made on and as of such date; and
(h) otherwise periodically report to the Purchaser concerning the state
of the Business and the Corporation.
SECTION 5.2 ACCESS FOR DUE DILIGENCE.
(1) The Vendors shall (i) permit the Purchaser and its employees, agents,
counsel, accountants or other representatives, lenders, potential lenders
and potential investors (collectively, the "PURCHASER'S REPRESENTATIVES")
between the date hereof and the Closing, without undue interference to the
ordinary conduct of the Business and accompanied by one or more of the
Vendors or their representatives, to have reasonable access during normal
business hours and upon reasonable notice to (a) the premises of the
Corporation, (b) the Assets, including assets on lease, and review of the
condition of those assets, including all environmental work safety issues,
and, in particular to any information, including all Books and Records
whether retained by the Vendors, the Corporation or otherwise, (c) all
Contracts, and (d) the senior personnel of the Corporation, and (ii)
furnish to the Purchaser and the Purchaser's Representatives such
financial and operating data and other information with respect to the
Assets and the Corporation as the Purchaser shall from time to time
reasonably request. Copies of all written reports and studies prepared by
or on behalf of the Purchaser in connection with its due
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diligence investigations shall, upon prior reasonable request by the
Vendors to the Purchaser or the Purchaser's Representatives, be delivered
to the Vendors within a reasonable time after the delivery of such written
reports and studies, if any, to the Purchaser or the Purchaser's
Representatives.
(2) No investigations made by or on behalf of the Purchaser, whether under
this Section 5.2 or any other provision of this Agreement or any Ancillary
Agreement, shall have the effect of waiving, diminishing the scope of, or
otherwise affecting any representation or warranty made in this Agreement
or any Ancillary Agreement.
(3) On or prior to the date that is two (2) Business Days prior to the expiry
of the Preliminary Due Diligence Period, the Vendors shall deliver to the
Purchaser a true and correct list setting forth the ten (10) largest
customers and the ten (10) largest suppliers of the Corporation by dollar
amount for the most recently completed fiscal year of the Corporation.
Such list shall be accompanied by a representation and warranty from the
Vendors that, save and except as otherwise expressly contemplated in this
Agreement, they have no reason to believe that the benefits of any
relationship with any of the major customers or suppliers of the
Corporation will not continue after the Closing Date in substantially the
same manner as prior to the date of this Agreement.
SECTION 5.3 CONFIDENTIALITY.
Until the Closing and in the event of termination of this Agreement
without Closing, the Purchaser and each of the Purchaser's Representatives will
keep confidential any information obtained from the Vendors, the Corporation or
their respective agents and representatives, unless such information (i) is or
becomes generally available to the public other than as a result of a disclosure
in violation of this Agreement, (ii) becomes available to the Purchaser or any
Purchaser's Representative on a non-confidential basis from a source other than
the Vendors, the Corporation or their respective agents and representatives,
unless the Purchaser or any Purchaser's Representative knows that such source is
prohibited from disclosing the information to the Purchaser or any Purchaser's
Representative by a contractual, fiduciary or other legal obligation to the
Vendors or the Corporation, or (iii) was known to the Purchaser or any
Purchaser's Representative on a non-confidential basis before its disclosure to
the Purchaser or any Purchaser's Representative by the Vendors, the Corporation
or their respective agents and representatives. In the event the Purchaser or
any Purchaser's Representative is required by Law to disclose any confidential
information, the Purchaser or any Purchaser's Representative will, to the extent
not prohibited by applicable Law, provide the Vendors with prompt notice of such
requirements so that the Vendors may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Section 5.3.
If this Agreement is terminated, promptly after such termination the Purchaser
or any Purchaser's Representative will return or cause to
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be returned or destroyed all documents, work papers and other material (whether
in written, printed, electronic or computer printout form and including all
copies) obtained from the Vendors, the Corporation or their respective agents
and representatives in connection with this Agreement and not previously made
public.
SECTION 5.4 ACTIONS TO SATISFY CLOSING CONDITIONS.
(1) Each of the Vendors shall take all such actions as are within their
reasonable power to control and to use all reasonable commercial efforts
to cause other actions to be taken which are not within their power to
control, so as to ensure compliance with all of the conditions set forth
in Section 6.1 including ensuring that, subject to Section 5.8, during the
Interim Period and at Closing, there is no breach of any of the Vendors'
representations and warranties.
(2) The Purchaser shall take all such actions as are within its reasonable
power to control and to use all reasonable commercial efforts to cause
other actions to be taken which are not within its power to control, so as
to ensure compliance with all of the conditions set forth in Section 6.2
including ensuring that, subject to Section 5.8, during the Interim Period
and at Closing, there is no breach of any of its representations and
warranties.
SECTION 5.5 TRANSFER OF THE PURCHASED SHARES.
The Vendors shall take all necessary steps and corporate proceedings to
permit good title to the Purchased Shares to be duly and validly transferred and
assigned to the Purchaser at the Closing, free of all Liens other than those
specifically set out or provided for in this Agreement.
SECTION 5.6 REQUEST FOR CONSENTS AND WAIVERS.
(1) The Vendors will use all reasonable commercial efforts to obtain, prior to
Closing, all Consents, provided that the failure to obtain such Consents
(provided further that the Vendors have used reasonable commercial efforts
as aforesaid) for any reason whatsoever shall not constitute a default
hereunder. Such Consents shall be upon such terms as are acceptable to the
Purchaser, acting reasonably. The Purchaser will co-operate in obtaining
such Consents.
(2) The Purchaser will use all reasonable commercial efforts to have, prior to
Closing, the Vendors' Guarantees terminated, discharged and released prior
to Closing, and the Vendors' Cash Collateral released to them, provided
that failure to obtain such Consents (provided further that the Purchaser
has used reasonable commercial efforts as aforesaid) for any reason
whatsoever shall not constitute a default hereunder. The termination or
waiver of the Vendors' Guarantees and the release of the Vendors' Cash
Collateral shall be upon such terms as are acceptable to the Vendors,
acting reasonably and shall be a condition precedent to the Closing of the
transactions herein provided.
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SECTION 5.7 FILINGS AND AUTHORIZATIONS.
Each of the Vendors and the Purchaser, as promptly as practicable after
the execution of this Agreement, will (i) make, or cause to be made, all such
filings and submissions under all Laws applicable to it, as may be required for
it to consummate the purchase and sale of the Purchased Shares in accordance
with the terms of this Agreement, (ii) use all reasonable commercial efforts to
obtain, or cause to be obtained, all Authorizations necessary or advisable to be
obtained by it in order to consummate such transfer, and (iii) use all
reasonable commercial efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for it to fulfil its obligations under
this Agreement. The Vendors and the Purchaser will coordinate and cooperate with
one another in exchanging such information and supplying such assistance as may
be reasonably requested by each in connection with the foregoing including,
without limitation, providing each other with all notices and information
supplied or filed with any Governmental Entity (except for notices and
information which the Vendors or the Purchaser, in each case acting reasonably,
considers highly confidential and sensitive which may be filed on a confidential
basis), and all notices and correspondence received from any Governmental
Entity.
SECTION 5.8 NOTICE OF UNTRUE REPRESENTATION OR WARRANTY.
The Vendors shall promptly notify the Purchaser, and the Purchaser shall
promptly notify the Vendors, upon any representation or warranty made by them or
it, as the case may be, contained in this Agreement or any Ancillary Agreement
becoming untrue or incorrect during the Interim Period and for the purposes of
this Section 5.8 each representation and warranty shall be deemed to be given at
and as of all times during the Interim Period. Any such notification shall set
out particulars of the untrue or incorrect representation or warranty and
details of any actions being taken by the Vendors or the Purchaser, as the case
may be, to rectify that state of affairs. If no such notification is provided,
it shall be interpreted as meaning that the Party failing to give such notice
had no actual knowledge of any untrue or incorrect representation or warranty.
If notification is provided, and the Parties are unable to cure the incorrect or
untrue representation or warranty prior to Closing despite exercising all
commercially reasonable efforts to do so, the Party receiving such notice may
either terminate the Agreement in accordance with Section 8.1 or Section 8.2, as
applicable, or waive such breach of a representation or warranty and proceed to
Closing. If such Party elects to proceed to Closing, it will be precluded from
asserting a claim against the other Party based on the untrue or incorrect
representation or warranty which the notifying Party disclosed in such written
notification prior to Closing.
SECTION 5.9 EXCLUSIVE DEALING AND SETTLEMENT OF SCHEDULES.
(1) During the Interim Period (unless this Agreement and the transactions
herein contemplated are terminated in accordance with the terms of this
Agreement
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prior to Closing), the Vendors shall not, directly or indirectly, solicit,
initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the
merits of any inquiries or proposals from, any Person (other than
Purchaser) relating to any transaction involving the sale of any shares of
the Corporation or the sale of the Business or any of the Assets (other
than as permitted in this Agreement).
(2) The Parties shall use commercially reasonable efforts to prepare and
settle the contents and form of the Schedules on or prior to April 16,
2004.
ARTICLE 6
CONDITIONS OF CLOSING
SECTION 6.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER.
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed prior to Closing (except as otherwise
expressly provided), which conditions are for the exclusive benefit of the
Purchaser and may be waived, in whole or in part, by the Purchaser in its sole
discretion:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Vendors contained in this Agreement or in any
Ancillary Agreement shall be true and correct as of the Closing Date
with the same force and effect as if such representations and
warranties had been made on and as of such date, and the Vendors
shall, subject to Section 5.8, have executed and delivered a
certificate to that effect. The receipt of such certificates and the
Closing shall not constitute a waiver by the Purchaser of any of the
representations and warranties of the Vendors which are contained in
this Agreement or in any Ancillary Agreement. Upon delivery of such
certificates, the representations and warranties of the Vendors in
Article 3 shall be deemed to have been made on and as of the Closing
Date with the same force and effect as if made on and as of such
date;
(b) PERFORMANCE OF COVENANTS. Each of the Vendors shall have fulfilled
or complied with all covenants contained in this Agreement and in
any Ancillary Agreement to be fulfilled or complied with by it at or
prior to the Closing, and each of the Vendors shall also have
executed and delivered a certificate of to that effect. The receipt
of such certificates and the Closing shall not constitute a waiver
by the Purchaser of any of the covenants of the Vendors which are
contained in this Agreement or any Ancillary Agreement;
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(c) CONSENTS. All Required Consents shall have been obtained on terms
acceptable to the Purchaser acting reasonably;
(d) DUE DILIGENCE. Subject to Section 5.2, the Purchaser shall, from the
date of this Agreement and until April 15, 2004 (the "PRELIMINARY
DUE DILIGENCE PERIOD"), have completed its preliminary investigation
into the Corporation, the Business, the Vendors' title to the
Purchased Shares, the Assets and all other matters it deems relevant
and such investigation shall not have disclosed any matter which the
Purchaser, acting reasonably, considers to be adverse to the
Corporation, the Business or the Assets or adverse to its decision
to acquire the Purchased Shares. On or prior to the expiration of
the Preliminary Due Diligence Period, the Purchaser shall notify the
Vendors in writing if the Purchaser has discovered any matter which
it, acting reasonably, considers to be adverse to the Corporation,
the Business, or the Assets or adverse to its decision to acquire
the Purchased Shares. The Purchaser shall be deemed to have waived
its due diligence investigation if it does not notify the Vendors of
its objection within the said Preliminary Due Diligence Period;
(e) ENVIRONMENTAL INVESTIGATION. The Purchaser shall have been satisfied
with the results of the environmental assessment and review and any
remedial work completed in connection with it;
(f) FINANCING. The Purchaser shall have received financing sufficient to
complete the transaction of purchase and sale contemplated in this
Agreement on terms and conditions satisfactory to the Purchaser, in
its sole and absolute discretion;
(g) NON-COMPETITION AGREEMENT. The Vendors shall have delivered to the
Purchaser, the Non-Competition Agreements in the form attached to
this Agreement as Schedule 6.1(g);
(h) DELIVERIES. The Vendors shall deliver or cause to be delivered to
the Purchaser the following in form and substance satisfactory to
the Purchaser, acting reasonably:
(i) share certificates representing the Purchased Shares duly
endorsed in blank for transfer, or accompanied by irrevocable
security transfer powers of attorney duly executed in blank,
in either case by the holders of record, together with
evidence satisfactory to the Purchaser that the Purchaser has
been entered upon the books of the Corporation as the holder
of the Purchased Shares;
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(ii) certified copies of (i) the charter documents of the
Corporation, (ii) by-laws of the Corporation, (iii) all
resolutions of the shareholders and the board of directors of
the Corporation approving or ratifying, as the case may be,
the entering into and completion of the transaction
contemplated by this Agreement and the Ancillary Agreements,
and (iii) a list of the officers and directors of the
Corporation authorized to sign agreements together with their
specimen signatures;
(iii) a certificate of status with respect to the Corporation issued
by appropriate government officials of its jurisdiction of
amalgamation and each jurisdiction in which the Corporation
carries on its business as listed in Schedule 3.1(a);
(iv) the certificates referred to in Section 6.1(a) and Section
6.1(b);
(v) an opinion of counsel to the Vendors and the Corporation with
respect to the due incorporation and existence of the
Corporation, and matters related to corporate power, due
authorization, corporate proceedings, no conflicts and no
violations, due execution and delivery of this Agreement,
regulatory approvals, outstanding litigation and the
authorized and issued capital of the Corporation, and such
other matters as the Purchaser may reasonably request.
(vi) the employment agreement(s) contemplated in Section 6.3, duly
executed by each of the Vendors and the Corporation.;
(vii) an estoppel certificate or landlord's acknowledgement from the
lessor under the Lease, confirming the matters set forth in
Section 3.1(s), provided that the Vendors shall not be
required to deliver such an estoppel certificate or landlords'
acknowledgement if, despite all reasonable commercial efforts,
the Vendors are unable to obtain such an estoppel certificate
or landlord's acknowledgement;
(viii) evidence that all necessary steps and proceedings as approved
by counsel for the Purchaser to permit all of the Purchased
Shares to be transferred to the Purchaser have been taken;
(ix) a duly executed resignation effective as at the Closing of
each director and officer of the Corporation as the Purchaser
may specify in writing at least three (3) Business Days prior
to Closing; and
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(x) a release in favour of the Corporation substantially in the
form of the release in Schedule 6.1(h)(x) from each of the
Persons listed in Schedule 6.1(h)(x).
(i) SHAREHOLDERS' EQUITY. [INTENTIONALLY DELETED]
(j) CORPORATION'S BANK DEBT. The Corporation shall have no outstanding
bank debt as of Closing, except for the debt in connection with the
TD Loan;
(k) PROCEEDINGS. All corporate proceedings to be taken in connection
with the transactions contemplated in this Agreement and any
Ancillary Agreement shall be reasonably satisfactory in form and
substance to the Purchaser, acting reasonably, and the Purchaser
shall have received copies of all instruments and other evidence as
it may reasonably request in order to establish the consummation of
such transactions and the taking of all necessary proceedings in
connection therewith;
(l) NO LEGAL ACTION. No action or proceeding shall be pending or
threatened by any Person (other than the Purchaser) in any
jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right of the
Corporation to conduct the Business after Closing on substantially
the same basis as heretofore operated;
(m) ASSIGNMENT OF CERTAIN CONTRACTS. All necessary consents, in form and
substance satisfactory to the Purchaser, to the assignment and
assumption by the Corporation of each of the Lease and the Computer
Equipment Lease, as the case may be, shall have been obtained, and
each of the Lease and the Computer Equipment Lease, as the case may
be, shall have been validly assigned to, and assumed by, the
Corporation;
(n) TERMINATION OF SHAREHOLDERS' AGREEMENT. The Shareholders' Agreement
shall have been terminated in accordance with its terms;
(o) OTHER TRANSACTION. The Purchaser shall have completed the closing of
the purchase of all of the outstanding shares of Xxxxxx Welding Co.,
a Michigan corporation; and
(p) MATERIAL ADVERSE CHANGE. There shall not have occurred a material
adverse change in the financial condition, prospects, or business of
the Corporation when compared to the period ending November 30,
2003.
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(q) SCHEDULES. The contents and form of each of the Schedules shall
be satisfactory to the Purchaser in its sole and absolute
discretion.
SECTION 6.2 CONDITIONS FOR THE BENEFIT OF THE VENDORS.
The purchase and sale of the Purchased Shares is subject to the
following conditions to be fulfilled or performed prior to the Closing, which
conditions are for the exclusive benefit of the Vendors and may be waived, in
whole or in part, by the Vendors in their sole discretion:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in this Agreement and in
any Ancillary Agreement shall be true and correct as of the
Closing Date with the same force and effect as if such
representations and warranties had been made on and as of such
date and the Purchaser shall, subject to Section 5.8, have
executed and delivered a certificate of a senior officer to that
effect. The receipt of such certificate and the Closing shall not
constitute a waiver by the Vendors of any of the representations
and warranties of the Purchaser which are contained in this
Agreement or in any Ancillary Agreement. Upon delivery of such
certificate, the representations and warranties of the Purchaser
in Article 4 shall be deemed to have been made on and as of the
Closing Date with the same force and effect as if made on and as
of such date;
(b) PERFORMANCE OF COVENANTS. The Purchaser shall have fulfilled or
complied with all covenants contained in this Agreement and in
any Ancillary Agreement to be fulfilled or complied with by it at
or prior to the Closing and the Purchaser shall have executed and
delivered a certificate of a senior officer to that effect;
(c) DELIVERIES. The Purchaser shall deliver or cause to be delivered
to the Vendors the following in form and substance satisfactory
to the Vendors acting reasonably:
(i) certified copies of (i) the charter documents and extracts
from the by-laws of the Purchaser relating to the execution
of documents, (ii) all resolutions of the board of
directors of the Purchaser approving the entering into and
completion of the transactions contemplated by this
Agreement and the Ancillary Agreements, and (iii) a list of
its officers and directors authorized to sign agreements
together with their specimen signatures;
(ii) a certificate of status, compliance, good standing or like
certificate with respect to the Purchaser and the Principal
issued
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by appropriate government official of their respective
jurisdictions of its incorporation;
(iii) the certificates referred to in Section 6.2(a) and Section
6.2(b);
(iv) the employment agreement(s) contemplated in Section 6.3, duly
executed by each of the Vendors and the Corporation;
(v) an opinion of counsel to the Purchaser and the Principal with
respect to the incorporation of the Purchaser and the
Principal, and matters related to corporate power, due
authorization, corporate proceedings, no conflicts and no
violations, due execution and delivery of this Agreement and
each Ancillary Agreement, as applicable; and
(vi) the A Note, the B Note(s), the Guarantee, the GSA and the
Share Pledge, all in accordance with Section 2.3(b).
(d) PROCEEDINGS. All corporate proceedings to be taken in connection
with the transactions contemplated in this Agreement and any
Ancillary Agreement shall be reasonably satisfactory in form and
substance to the Vendors, acting reasonably, and the Vendors shall
have received copies of all the instruments and other evidence as it
may reasonably request in order to establish the consummation of
such transactions and the taking of all corporate proceedings in
connection therewith;
(e) NO LEGAL ACTION. No action or proceeding shall be pending or
threatened by any Person (other than the Vendors or the Corporation)
in any jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right of the
Corporation to conduct the Business after Closing on substantially
the same basis as heretofore operated; and
(f) TERMINATION, DISCHARGE AND RELEASE OF VENDORS' GUARANTEES. Each of
the Vendors' Guarantees shall have been terminated, released and
discharged and the Vendors' Cash Collateral shall be fully released
to such applicable Vendor, all in a manner satisfactory to the
Vendors, acting reasonably.
(g) SCHEDULES. The contents and form of each of the Schedules (not
including Schedules 3.1(a) through 3.1(ll), inclusive, which shall
be the Vendors' sole responsibility for preparing) shall be
satisfactory to all of the Vendors in their sole and absolute
discretion.
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SECTION 6.3 EMPLOYMENT AGREEMENTS.
(1) The Parties covenant and agree to make all reasonable commercial efforts
to negotiate and settle on the form of employment agreement to be executed
and delivered by each of the Vendors and the Corporation, such form of
employment agreement to be settled on or prior to the Closing Date, and
delivered at Closing in accordance with this Article 6. Such employment
agreements shall contain customary covenants and shall provide that each
of the Vendors will occupy a senior management sales position with the
Corporation. The employment agreement shall each contain the terms and
provisions listed in Schedule 6.3(1).
(2) Upon agreement between the Parties regarding the form of such employment
agreements, such form or forms of employment agreements shall be attached
to this Agreement as Schedule 6.3(2), and shall, for all purposes of this
Agreement, thereafter form an integral part of it.
(3) If, despite the Parties making all reasonable commercial efforts, the
Parties are unable to negotiate and settle on the form of employment
agreement on or prior to the Closing Date, either the Vendors or the
Purchaser may terminate this Agreement by notice in writing to the other
Parties, and in such event all obligations of the Vendors and the
Purchaser (save and except for their respective obligations under Section
5.3, Section 11.3, Section 11.4 and Section 11.6 which shall survive)
shall terminate immediately upon written notice being received as required
herein.
SECTION 6.4 RELEASE OF CORPORATION'S OBLIGATIONS
(1) Each of the Vendors covenants and agrees to irrevocably and
unconditionally release and forever discharge any amounts owed to the
Vendors on account of accrued salaries and/or loans and/or any other
claims existing as of the Closing Date (and to cause all related Persons
to the Vendors who are owed any amounts on account of accrued salaries
and/or loans and/or any other claims existing as of the Closing Date to
irrevocably and unconditionally release and forever discharge) the
Corporation and the Purchaser from and in respect of any and all such
amounts. Such releases shall be delivered by the Vendors and such related
Persons, as the case may be, to the Corporation and the Purchaser on
Closing.
(2) On Closing, the Corporation shall irrevocably and unconditionally release
and forever discharge any amounts owed to the Corporation by the Vendors
or related Persons to the Vendors, as the case may be, on account of any
claims existing as of the Closing Date as between the Corporation and the
Vendors or related Persons to the Vendors, as the case may be. Such
releases shall be delivered by the Corporation to the Vendors and such
related Persons to the Vendors, as the case may be, on Closing.
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ARTICLE 7
CLOSING
SECTION 7.1 DATE, TIME AND PLACE OF CLOSING.
The completion of the transaction of purchase and sale contemplated by
this Agreement shall take place at the offices of Stikeman Elliott LLP, Suite
0000, Xxxxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx, at 10:00 a.m. (Toronto time) on the
Closing Date or at such other place, on such other date and at such other time
as may be agreed upon in writing between the Vendors and the Purchaser.
SECTION 7.2 CLOSING PROCEDURES.
Subject to satisfaction or waiver by the relevant Party of the conditions
of closing, at the Closing, the Vendors shall deliver actual possession of the
Purchased Shares to the Purchaser and upon such delivery the Purchaser shall pay
or satisfy the Purchase Price and deliver or cause to be delivered the security
in accordance with Section 2.3.
SECTION 7.3 RISK OF LOSS.
If, during the Interim Period, all or any material part of the Assets are
destroyed or damaged by fire or any other casualty or are appropriated,
expropriated or seized by any Governmental Entity, the Purchaser shall have the
option, exercisable by notice in writing given on or prior to the Closing Date
to terminate this Agreement and not complete the transaction contemplated in
this Agreement, in which case all obligations of the Purchaser and the Vendors
(save and except for their respective obligations under Section 5.3, Section
11.3, Section 11.4 and Section 11.6 which shall survive) shall terminate
immediately upon the Purchaser giving notice as required herein.
ARTICLE 8
TERMINATION
SECTION 8.1 TERMINATION BY PURCHASER.
If any of the conditions set forth in Section 6.1 have not been fulfilled
or waived at or prior to Closing or any obligation or covenant of the Vendors or
the Corporation to be performed at or prior to Closing has not been observed or
performed by such time for any reason or cause whatsoever, the Purchaser may
terminate this Agreement by notice in writing to the Vendors, and in such event
the Purchaser, the Principal, the Vendors and the Corporation shall be fully and
unconditionally released from all of their respective obligations hereunder save
and except for its obligations under Section 5.3, Section 8.4, Section 11.3,
Section 11.4 and Section 11.6 which shall survive. If the Purchaser waives
compliance with any of the conditions, obligations or covenants contained in
this Agreement, the waiver will be without prejudice to any of its rights of
termination in the event of non-fulfilment,
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non-observance or non-performance of any other condition, obligation, or
covenant in whole or in part. For greater certainty, if the Purchaser terminates
this Agreement for any reason whatsoever, the Purchaser's sole and exclusive
remedy shall be such termination of this Agreement and the Purchaser shall have
no right, remedy or recourse as against the Vendors or the Corporation
notwithstanding any rule or principle of law or equity to the contrary.
SECTION 8.2 TERMINATION BY VENDORS.
If any of the conditions set forth in Section 6.2 have not been fulfilled
or waived at or prior to Closing or any obligation or covenant of the Purchaser
to be performed at or prior to Closing has not been observed or performed by
such time, for any reason or cause whatsoever, the Vendors may terminate this
Agreement by notice in writing to the Purchaser, and in such event the Vendors,
the Purchaser and the Corporation and the Principal shall be fully and
unconditionally released from all of their respective obligations hereunder save
and except for their obligations under Section 5.3, Section 11.3, Section 11.4
and Section 11.6 which shall survive. If the Vendors waive compliance with any
of the conditions, obligations or covenants contained in this Agreement, the
waiver will be without prejudice to any of their rights of termination in the
event of non-fulfilment, non-observance or non-performance of any other
condition, obligation or covenant in whole or in part. For greater certainty, if
the Vendors terminate this Agreement for any reason whatsoever, the Vendors'
sole and exclusive remedy shall be such termination of this Agreement and the
Vendors shall have no right, remedy or recourse as against the Purchaser or the
Principal notwithstanding any rule or principle of law or equity to the
contrary.
SECTION 8.3 OTHER TERMINATION RIGHTS.
(1) This Agreement may, by notice in writing given prior to or on the Closing
Date, be terminated:
(a) by mutual consent of the Vendors and the Purchaser; or
(b) by the Vendors or the Purchaser, if the Closing shall not have
occurred by April 30, 2004, provided, however, that the right to
terminate this Agreement under this Section 8.3(1)(b) shall not be
available to any Party whose failure to fulfil any covenant or
obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur by April
30, 2004;
and, in such event, each Party shall be released from all obligations
under this Agreement, save and except for its obligations under Section
5.3, Section 11.3, Section 11.4 and Section 11.6 which shall survive.
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(2) This Agreement may also be terminated in the circumstances and upon the
terms set out in Section 6.3(3) and Section 7.3.
SECTION 8.4 CONTRIBUTION TO VENDORS' COSTS.
If Purchaser terminates this Agreement for any reason other than a default
by Vendors under this Agreement, Purchaser covenants and agrees to reimburse
Vendors for their reasonable legal and accounting costs up to a maximum amount
of $25,000 forthwith after demand.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION IN FAVOUR OF THE PURCHASER.
Subject to Section 8.1, Section 9.3, Section 9.4 and Section 9.5, the
Vendors shall, jointly and severally, indemnify and save each of the Purchaser,
the Corporation and their respective shareholders, directors, officers,
employees, agents and representatives (collectively, the "PURCHASER'S
INDEMNIFIED PERSONS") harmless of and from any loss, liability, claim, damage
(including incidental and consequential damage) or expense (whether or not
involving a third-party claim) including legal expenses (collectively,
"DAMAGES") suffered by, imposed upon or asserted against any of the Purchaser's
Indemnified Persons as a result of, in respect of, connected with, or arising
out of, under, or pursuant to:
(a) any failure of the Vendors or the Corporation to perform or fulfil
any covenant of the Vendors or the Corporation under this Agreement
or any Ancillary Agreement;
(b) any breach or inaccuracy of any representation or warranty given by
the Vendors contained in this Agreement or in any Ancillary
Agreement; or
(c) any facts, circumstances, events, conditions or occurrences in
existence on or prior to the Closing Date, relating directly or
indirectly to the Corporation, the Business or the Assets, even
though such Damages may be suffered after the Closing Date except to
the extent that the liability in respect thereof (i) is reflected on
the Interim Financial Statements, (ii) has been incurred by the
Corporation in the Ordinary Course since the Interim Financial
Statement Date, or (iii) is specifically disclosed (a) in this
Agreement, (b) in any of the Material Contracts, or (c) in any other
Contracts which, by the terms of this Agreement, are not required to
be disclosed.
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SECTION 9.2 INDEMNIFICATION IN FAVOUR OF THE VENDORS.
Subject to Section 8.2, Section 9.3, Section 9.4 and Section 9.5, the
Purchaser shall indemnify and save the Vendors and their respective
shareholders, directors, officers, employees, agents and representatives
(collectively, the "VENDORS' INDEMNIFIED PERSONS") harmless of and from any
Damages suffered by, imposed upon or asserted against any of the Vendors as a
result of, in respect of, connected with, or arising out of, under or pursuant
to:
(a) any failure of the Purchaser to perform or fulfil any covenant of
the Purchaser under this Agreement or any Ancillary Agreement; or
(b) any breach or inaccuracy of any representation or warranty given by
the Purchaser contained in this Agreement or in any Ancillary
Agreement.
SECTION 9.3 TIME LIMITATIONS.
(1) The representations and warranties of the Vendors contained in this
Agreement and in any Ancillary Agreement shall survive the Closing and,
notwithstanding the Closing or any investigation made by or on behalf of
the Purchaser, shall continue for a period of two (2) years after the
Closing Date and any claim in respect thereof shall be made in writing,
except that:
(a) the representations and warranties set out in Section 3.1(a),
Section 3.1(b), Section 3.1(c), Section 3.1(d), Section 3.1(e) and
Section 3.1(f) (and the corresponding representations and warranties
set out in the certificates to be delivered pursuant to Section
6.1(a) (the "VENDORS' CLOSING CERTIFICATES")) shall survive and
continue in full force and effect without limitation of time;
(b) the representations and warranties set out in Section 3.1(kk) (and
the corresponding representations and warranties set out in the
Vendors' Closing Certificates) shall survive and continue in full
force and effect until, and for a thirty (30) day period thereafter,
the expiration of the period, if any, during which an assessment,
reassessment or other form of recognized document assessing
liability for tax, interest or penalties under applicable tax
legislation in respect of any taxation year to which such
representations and warranties extend could be issued under such tax
legislation to the Corporation, provided the Corporation did not
file any waiver or other document extending such period; and
(c) a claim for any breach by the Vendors of any of the representations
and warranties contained in this Agreement or in any Ancillary
Agreement involving fraud or fraudulent misrepresentation may be
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made at any time subject only to applicable limitation periods
imposed by law.
(2) The representations and warranties of the Purchaser contained in this
Agreement and in any Ancillary Agreement shall survive the Closing and,
notwithstanding the Closing or any investigation made by or on behalf of
the Vendors, shall continue for a period of two (2) years after the
Closing Date and any claim in respect thereof shall be made in writing,
except that:
(a) the representations and warranties set out in Section 4.1(a),
Section 4.1(b) and Section 4.1(c) (and the corresponding
representations and warranties set out in the certificate to be
delivered pursuant to Section 6.1(b) (the "PURCHASER'S CLOSING
CERTIFICATE") shall survive and continue in full force and effect
without limitation of time; and
(b) a claim for any breach by the Purchaser of any of the
representations and warranties contained in this Agreement or in any
Ancillary Agreement involving fraud or fraudulent misrepresentation
may be made at any time subject only to applicable limitation
periods imposed by Law.
SECTION 9.4 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(1) Promptly after receipt by an indemnified party (an "INDEMNIFIED PARTY")
under Section 9.1 or Section 9.2 of a notice of the commencement of any
proceeding against it, the Indemnified Party will, if a claim is to be
made against an indemnifying party under such Section, give notice to the
Indemnifying Party (an "INDEMNIFYING PARTY") of the commencement of such
claim. The failure to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to any Indemnified
Party, except to the extent that the Indemnifying Party demonstrates that
the defense of such action is prejudiced by the Indemnified Party's
failure to give such notice.
(2) If any proceeding referred to in Section 9.4(1) (a "PROCEEDING") is
brought against an Indemnified Party and it gives notice to the
Indemnifying Party of the commencement of the Proceeding, the Indemnifying
Party will be entitled to participate in the Proceeding. Subject to the
next following sentence, to the extent that the Indemnifying Party wishes
to assume the defense of the Proceeding with counsel satisfactory to the
Indemnified Party, it may do so provided it reimburses the Indemnified
Party for all of its out-of-pocket expenses arising prior to or in
connection with such assumption. The Indemnifying Party may not assume
defence of the Proceeding if the Indemnifying Party is also a party to the
Proceeding and the Indemnified
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Party determines in good faith that joint representation would be
inappropriate. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defence of the Proceeding, the
Indemnifying Party will not, as long as it diligently and in good faith
conducts such defence, be liable to the Indemnified Party under this
Section 9.4 for any fees of other counsel or any other expenses with
respect to the defence of the Proceeding, in each case subsequently
incurred by the Indemnified Party in connection with the defence of the
Proceeding, other than reasonable costs of investigation approved in
advance by the Indemnifying Party. If the Indemnifying Party assumes the
defence of a Proceeding (i) no compromise or settlement of such claims may
be made by the Indemnifying Party without the Indemnified Party's consent
unless (a) there is no finding or admission of any violation of Laws or
any violation of the rights of any Person and no effect on any other
claims that may be made against the Indemnified Party, and (b) the sole
relief provided is monetary damages that are paid in full by the
Indemnifying Party, and (ii) the Indemnified Party will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an Indemnifying Party of the
commencement of any Proceeding and the Indemnifying Party does not, within
ten (10) days after receipt of such notice, give notice to the Indemnified
Party of its election to assume the defence of the Proceeding, the
Indemnifying Party will be bound by any determination made in the
Proceeding or any compromise or settlement effected by the Indemnified
Party.
(3) Notwithstanding the foregoing, if an Indemnified Party determines in good
faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle the
Proceeding. In such case, the Indemnifying Party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(4) Where the defence of a Proceeding is being undertaken and controlled by
the Indemnifying Party, the Indemnified Party will use all reasonable
efforts to make available to the Indemnifying Party those employees whose
assistance, testimony or presence is necessary to assist the Indemnifying
Party in evaluating and defending any such claims.
(5) With respect to any Proceeding, the Indemnified Party shall make available
to the Indemnifying Party or its representatives on a timely basis all
documents, records and other materials in the possession of the
Indemnified Party, at the
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expense of the Indemnifying Party, reasonably required by the Indemnifying
Party for its use in defending any such claim and shall otherwise
cooperate on a timely basis with the Indemnifying Party in the defence of
such claim.
(6) With respect to any re-assessment for income, corporate, sales, excise, or
other tax or other liability of the Indemnified Party, the Indemnifying
Party's right to so contest shall only apply after payment of the
re-assessment or the provision of such security as is necessary to avoid a
Lien being placed on the property of the Indemnified Party.
(7) In the event that an Indemnified Party subsequently recovers all or part
of a third-party claim from any Person (other than the Indemnifying Party)
legally obligated to pay the same, the Indemnified Party shall forthwith
repay to the Indemnifying Party the amounts so recovered (net of any
reasonable expenses, costs or other liabilities which the Indemnified
Party has incurred in connection with such recovery) up to an amount not
exceeding the amount theretofore paid by the Indemnifying Party to the
Indemnified Party by way of indemnity.
SECTION 9.5 MINIMUM AND MAXIMUM LIABILITY.
(1) The Vendors will have no liability for indemnification with respect to the
matters described in Section 9.1 until the total of all Damages with
respect to such matters exceeds $5,000.
(2) The Purchaser will have no liability for indemnification with respect to
the matters described in Section 9.2 until the total of all Damages with
respect to such matters exceeds $5,000.
(3) The remedies of the Parties hereto with respect to this Agreement and all
Ancillary Agreements (including, without limitation, those arising out of
representations, warranties and covenants) shall be exercised only through
and limited by the indemnities contained in this Agreement. The aggregate
liability of any Vendor (and of all parties giving a representation,
warranty or covenant in respect of) or on behalf of such Vendor including,
without limitation, the Principal of such Vendor) to the Purchaser and the
Purchaser's Indemnified Parties shall be limited to the amount of the
Purchase Price received by such Vendor. The aggregate liability of the
Purchaser to any Vendor or the Vendors' Indemnified Parties of such Vendor
shall be limited to the amount of the Purchase Price received by such
Vendor. For greater certainty, the maximum liability of the Vendors, in
the aggregate, on the one hand, and the Purchaser on the other hand, shall
not exceed the Purchase Price. The limitations herein shall not apply to
any breach by the indemnifying party of its representations or warranties
of which that party had knowledge at any time prior to the date on which
such representation or
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warranty was made or any intentional breach by the indemnifying party of
any covenant or obligation and such indemnifying party will be liable for
all Damages with respect to such breaches.
SECTION 9.6 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the Party from whom indemnification is
sought.
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ARTICLE 10
POST-CLOSING COVENANTS
SECTION 10.1 ACCESS TO BOOKS AND RECORDS.
For a period of 6 years from the Closing Date or for such longer period as
may be required by applicable Law, the Purchaser shall retain all original
accounting Books and Records relating to the Corporation for the period prior to
the Closing Date, but the Purchaser shall not be responsible or liable to the
Vendors for or as a result of any accidental loss or destruction of or damage to
any such Books and Records. So long as any such Books and Records are retained
by the Purchaser pursuant to this Agreement, the Vendors shall have the
reasonable right to inspect and to make copies (at its own expense) of them at
any time upon reasonable request during normal business hours and upon
reasonable notice for any proper purpose, including tax matters and litigation,
without undue interference to the business operations of the Corporation. The
Purchaser shall have the right to have its representatives present during any
such inspection.
SECTION 10.2 FURTHER ASSURANCES.
From time to time after the Closing Date, each Party shall, at the request
of any other Party, execute and deliver such additional conveyances, transfers
and other assurances as may be reasonably required to effectively transfer the
Purchased Shares to the Purchaser and carry out the intent of this Agreement and
any Ancillary Agreement.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 NOTICES.
Any notice, direction or other communication given under this Agreement or
any Ancillary Agreement shall be in writing and given by delivering it or
sending it by facsimile or other similar form of recorded communication
addressed:
(a) To the Purchaser and the Principal at:
BST Acquisition Ltd.
c/o Tarpon Industries, Inc.
X.X. Xxx 00000
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention:
Xxxx X. Xxxxx
Facsimile: (000) 000-0000
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(b) With a copy to:
Xxxxxx Xxxxxxxx & Xxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And a copy to:
Stikeman Elliott LLP
0000 Xxxxxxxx Xxxxx Xxxx
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) to the Vendors at:
c/o Mr. Xxxxx Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxx, XXX
Xxxxx 0000, Xxxxxx Plaza
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any such communication shall be deemed to have been validly and effectively
given (i) if personally delivered, on the date of such delivery if such date is
a Business Day and such delivery was made prior to 4:00 p.m. (Toronto time) and
otherwise on the
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next Business Day, or (ii) if transmitted by facsimile or similar means of
recorded communication on the Business Day following the date of transmission.
Any Party may change its address for service from time to time by notice given
in accordance with the foregoing and any subsequent notice shall be sent to such
Party at its changed address.
SECTION 11.2 TIME OF THE ESSENCE.
Time shall be of the essence of this Agreement.
SECTION 11.3 BROKERS.
The Vendors shall jointly and severally indemnify and save harmless the
Purchaser, the Principal and the Corporation from and against any and all
claims, losses and costs whatsoever for any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary who
purports to act or have acted for the Vendors or the Corporation. The Purchaser
shall indemnify and save harmless the Vendors from and against any and all
claims, losses and costs whatsoever for any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary who
purports to act or have acted for the Purchaser or the Principal. Without
limiting the generality of the foregoing, the Vendors expressly covenant and
agree to indemnify and save harmless the Purchaser, the Principal, the
Corporation and their respective officers, shareholders and directors from and
against any and all claims, losses and costs whatsoever for any commission or
other remuneration payable or alleged to be payable to Xxxx Xxxxx or Globe
Capital Corporation in connection therewith.
SECTION 11.4 ANNOUNCEMENTS.
At all times prior to Closing, any press release or public statement or
announcement (a "PUBLIC STATEMENT") with respect to the transaction contemplated
in this Agreement shall be made only with the prior written consent and joint
approval of the Vendors and the Purchaser unless such Public Statement is
required by Law or by any stock exchange, in which case the Party required to
make the Public Statement shall use its best efforts to obtain the approval of
the other Party as to the form, nature and extent of the disclosure.
SECTION 11.5 THIRD PARTY BENEFICIARIES.
Except as otherwise provided in Section 9.1 and Section 9.2, the Vendors
and the Purchaser intend that this Agreement shall not benefit or create any
right or cause of action in, or on behalf of, any Person other than the Parties
to this Agreement and no Person, other than the Parties to this Agreement shall
be entitled to rely on the provisions of this Agreement in any action, suit,
proceeding, hearing or other forum. For greater certainty, the Vendors
acknowledge to each of the Purchaser's Indemnified Persons their direct rights
against it under Section 9.1 of this Agreement and the Purchaser acknowledges to
each of the Vendors'
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Indemnified Persons their direct rights against it under Section 9.2 of this
Agreement.
SECTION 11.6 EXPENSES.
Except as otherwise expressly provided in this Agreement, all costs and
expenses (including the fees and disbursements of legal counsel, investment
advisers and accountants) incurred in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated therein shall be paid by
the Party incurring such expenses. For purposes of greater clarity, any fees and
expenses incurred by the Corporation shall be borne by the Vendors.
SECTION 11.7 AMENDMENTS.
This Agreement may only be amended, supplemented or otherwise modified by
written agreement signed by the Vendors and the Purchaser.
SECTION 11.8 WAIVER.
(1) No waiver of any of the provisions of this Agreement or any Ancillary
Agreement shall be deemed to constitute a waiver of any other provision
(whether or not similar); nor shall such waiver be binding unless executed
in writing by the Party to be bound by the waiver.
(2) No failure on the part of the Vendors or the Purchaser to exercise, and no
delay in exercising any right under this Agreement shall operate as a
waiver of such right; nor shall any single or partial exercise of any such
right preclude any other or further exercise of such right or the exercise
of any other right.
SECTION 11.9 NON-MERGER.
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive the Closing
and, notwithstanding such Closing or any investigation made by or on behalf of
any Party, shall continue in full force and effect. Closing shall not prejudice
any right of one Party against any other Party in respect of anything done or
omitted under this Agreement or in respect of any right to damages or other
remedies.
SECTION 11.10 ENTIRE AGREEMENT.
This Agreement and the Ancillary Agreements constitute the entire
agreement between the Parties and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties. There are no representations, warranties, covenants, conditions or
other agreements, express or implied, collateral, statutory or otherwise,
between the Parties in connection with the subject matter of this Agreement
except as specifically set forth herein and therein and neither the Vendors nor
the Purchaser has relied or
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is relying on any other information, discussion or understanding in entering
into and completing the transactions contemplated in this Agreement and the
Ancillary Agreements. If there is any conflict or inconsistency between the
provisions of this Agreement and the provisions of any Ancillary Agreement, the
provisions of this Agreement shall govern.
SECTION 11.11 SUCCESSORS AND ASSIGNS.
(1) This Agreement shall become effective when executed by the Vendors and the
Purchaser and after that time shall be binding upon and inure to the
benefit of the Vendors, the Purchaser and their respective successors and
permitted assigns.
(2) Except as provided in this Section 11.11, neither this Agreement nor any
of the rights or obligations under this Agreement shall be assignable or
transferable by any Party without the prior written consent of the other
Party. The Purchaser shall be entitled, upon giving notice to the Vendors
at any time on or prior to the Closing Date, to assign this Agreement or
any of the Purchaser's rights and obligations under this Agreement to any
affiliate (as such term is defined under the Business Corporations Act
(Ontario)) of the Purchaser subject to the following conditions:
(a) the assignee shall execute and deliver a confidentiality agreement
to the Vendors in substantially the same form as the confidentiality
agreement executed by the Purchaser;
(b) the assignee shall become jointly and severally liable with the
Purchaser, as a principal and not as a surety, with respect to all
of the representations, warranties, covenants, indemnities and
agreements of the Purchaser;
(c) the assignee shall execute an agreement confirming the assignment
and the assumption by the assignee of all obligations of the
Purchaser under this Agreement; and
(d) the assignment shall not materially adversely affect the Vendors'
rights and entitlements pursuant to Article 2 of this Agreement.
SECTION 11.12 SEVERABILITY.
If any provision of this Agreement shall be determined by any court of
competent jurisdiction to be illegal, invalid or unenforceable, that provision
shall be severed from this Agreement and the remaining provisions shall continue
in full force and effect.
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SECTION 11.13 OBLIGATIONS OF THE PRINCIPAL.
The Principal hereby agrees to be jointly and severally liable with the
Purchaser for all of the obligations of the Purchaser hereunder (and, for a
period of 12 months following Closing, under the employment agreements
contemplated by Section 6.3), including, without limitation, for all of the
Purchaser's representations, warranties and covenants, as well as the
obligations of the Purchaser to indemnify the Vendors' Indemnified Persons in
respect of any and all Damages contemplated by Section 9.2, provided, however,
that notwithstanding any other provision hereof, this joint and several
liability (i) shall not apply to any payments of the Share Purchase Price, Note
A or Note(s) B or the amount referred to in Section 2.3(d), and (ii) shall apply
to the payment obligations, if any, contemplated in Section 8.4. Without
limitation, the obligations of the Principal under this Section 11.13 shall not
be released, discharged or affected by any extensions of time or indulgences or
modifications granted by the Vendors in favour of the Purchaser, or by any
failure to enforce any of the terms of this Agreement or by the bankruptcy,
insolvency, dissolution, amalgamation, winding-up or reorganization of any of
the Purchaser, and the Principal hereby waives any right to require the Vendors
to exhaust any action or recourse against the Purchaser before requiring
performance by the Principal pursuant to this Section 11.13. The Principal
further agrees that it shall be liable as principal and not solely as surety
with respect to the obligations of the Purchaser hereunder. The agreement of the
Principal under this Section 11.13 shall survive the Closing, subject to any
time limitations otherwise provided for herein.
SECTION 11.14 GOVERNING LAW.
This Agreement shall be governed by and interpreted and enforced in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein.
SECTION 11.15 COUNTERPARTS.
This Agreement may be executed in any number of counterparts (including
counterparts by facsimile) and all such counterparts taken together shall be
deemed to constitute one and the same instrument.
BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK
SIGNATURES ARE ON FOLLOWING PAGE
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IN WITNESS WHEREOF the Parties have executed this Share Purchase Agreement.
BST ACQUISITIONS LTD.
By: /s/ Xxxx X. Xxxxx
--------------------------
Name: XXXX X. XXXXX
Title: CHAIRMAN, CEO
/s/ /s/ Xxxxx Xxxxxx
------------------------------ ------------------------------
WITNESS XXXXX XXXXXX
/s/ /s/ Xxxxxxx Xxxxxxxxx
------------------------------ ------------------------------
WITNESS XXXXXXX XXXXXXXXX
/s/ /s/ Xxxx Xxxxxxx
------------------------------ ------------------------------
WITNESS XXXX XXXXXXX
TARPON INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------
Name: XXXX X. XXXXX
Title: CHAIRMAN, CEO
