Exhibit 2.1
EXECUTION COPY
STOCK AND ASSET
PURCHASE AGREEMENT
BY
AND
AMONG
TARRANT APPAREL GROUP
4366883 CANADA INC.,
3681441 CANADA INC.
BUFFALO INC.
3163946 CANADA INC.
BUFFALO CORPORATION,
AND
BUFFALO INTERNATIONAL INC.
4183517 CANADA INC.
3979512 CANADA INC.
THE BUFFALO TRUST
DATED: DECEMBER 6, 2006
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS ....................................................................................1
ARTICLE 2. DEPOSIT ......................................................................................17
2.1 Deposit...............................................................................17
ARTICLE 3. PURCHASE AND SALE OF SHARES................................................................... 17
3.1 Purchase and Sale of Shares...........................................................17
3.2 Purchase Price for Shares.............................................................18
3.3 The Closing...........................................................................18
3.4 Delivery of Purchase Price for Shares at the Closing..................................18
3.5 Other Deliveries at the Closing.......................................................19
3.6 Tax Election..........................................................................20
3.7 Allocation of the Buffalo Inc. Purchase Price.........................................20
3.8 Contingent Payment....................................................................20
ARTICLE 4. PURCHASE AND SALE OF ASSETS....................................................................22
4.1 Purchase and Sale of Purchased Assets.................................................22
4.2 Assumed Liabilities...................................................................22
4.3 Purchase Price for Purchased Assets...................................................22
4.4 Asset Purchase Price Allocation.......................................................24
4.5 The Closing...........................................................................24
4.6 Delivery of Asset Purchase Price at the Closing.......................................24
4.7 Other Deliveries at the Closing.......................................................24
4.8 Certain Tax Treatment.................................................................25
ARTICLE 5. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION......................................26
5.1 Representations and Warranties of Sellers.............................................26
5.2 Representations and Warranties of Buyer Parties.......................................28
5.3 Representations and Warranties of Trust...............................................32
ARTICLE 6. REPRESENTATIONS AND WARRANTIES CONCERNING ACQUIRED ENTITIES AND PURCHASED ASSETS...............33
6.1 Entity Status.........................................................................33
6.2 Power and Authority; Enforceability...................................................33
6.3 No Violation..........................................................................33
6.4 Brokers' Fees.........................................................................34
6.5 Capitalization........................................................................34
6.6 Records...............................................................................34
6.7 Acquired Subsidiaries.................................................................34
6.8 Financial Statements..................................................................35
6.9 Subsequent Events.....................................................................35
6.10 Liabilities...........................................................................37
6.11 Legal Compliance......................................................................38
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6.12 Tax Matters...........................................................................38
6.13 Title to and Condition of Assets; Retail Stores.......................................41
6.14 Real Property.........................................................................41
6.15 Intellectual Property.................................................................42
6.16 Inventory.............................................................................44
6.17 Acquired Entity Contracts.............................................................45
6.18 Trust Contracts.......................................................................46
6.19 Receivables...........................................................................47
6.20 Powers of Attorney....................................................................47
6.21 Insurance.............................................................................48
6.22 Litigation............................................................................49
6.23 Product Warranty......................................................................49
6.24 Product Liability.....................................................................49
6.25 Labor and Employees...................................................................49
6.26 Employee Benefits.....................................................................50
6.27 Environmental, Health, and Safety Matters.............................................52
6.28 Customers and Suppliers...............................................................52
6.29 Permits...............................................................................53
6.30 Certain Business Relationships with Acquired Entities.................................53
6.31 Proxy Statement.......................................................................53
ARTICLE 7. PRE-CLOSING COVENANTS..........................................................................53
7.1 General...............................................................................54
7.2 Notices and Consents..................................................................54
7.3 Operation of Business.................................................................54
7.4 Preservation of Business..............................................................56
7.5 Access to Business Information........................................................56
7.6 Notice of Developments................................................................56
7.7 Exclusivity...........................................................................56
7.8 Affiliated Transactions...............................................................57
7.9 Repayment of Certain Liabilities of Sellers and Trust.................................57
7.10 Discharge of Certain Liabilities Payable to Sellers and Trust.........................57
7.11 Shareholders Meeting; Proxy Statement.................................................57
7.12 Publicity.............................................................................58
7.13 Trademark Purchase....................................................................59
7.14 Rights to Name........................................................................59
7.15 Security Agreement and Intercreditor Agreement........................................59
7.16 Discharge of Certain Security Interests of Acquired Entities..........................61
7.17 Ancillary Agreements..................................................................61
7.18 Tax Returns; Affidavit................................................................61
ARTICLE 8. POST-CLOSING COVENANTS.........................................................................62
8.1 General...............................................................................62
8.2 Litigation Support....................................................................62
8.3 Transition............................................................................62
8.4 Confidentiality.......................................................................62
8.5 Release...............................................................................63
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8.6 Stock Certificates....................................................................64
8.7 Board Representation..................................................................65
8.8 Treatment of Certain Tax Matters Post-Closing.........................................65
8.9 Restrictive Covenant..................................................................68
8.10 Option Awards.........................................................................69
ARTICLE 9. CLOSING CONDITIONS.............................................................................69
9.1 Conditions Precedent to Obligation of Buyer Parties...................................69
9.2 Conditions Precedent to Obligation of Sellers and Trust...............................71
ARTICLE 10. TERMINATION...................................................................................73
10.1 Termination of Agreement..............................................................73
10.2 Effect of Termination.................................................................74
ARTICLE 11. INDEMNIFICATION...............................................................................75
11.1 Survival of Representations and Warranties............................................75
11.2 Indemnification Provisions for Parent's Benefit.......................................76
11.3 Indemnification Provisions for Trust's and Sellers' Benefit...........................76
11.4 Indemnification Claim Procedures......................................................77
11.5 Limitations on Indemnification Liability..............................................78
11.6 Set-Off Rights; Limitation on Cash Recovery; Other Matters............................79
ARTICLE 12. EARN-OUT......................................................................................80
12.1 Earn-Out..............................................................................80
12.2 Retirement of Earn Out................................................................81
12.3 Certain Definitions...................................................................82
12.4 Accounting and Other General Principles...............................................84
12.5 Resolution of Conflicts...............................................................85
12.6 Management of Acquired Business.......................................................86
12.7 Contributions to Buyer................................................................88
ARTICLE 13. MISCELLANEOUS.................................................................................88
13.1 Schedules.............................................................................88
13.2 Entire Agreement......................................................................89
13.3 Successors............................................................................89
13.4 Assignments...........................................................................89
13.5 Notices...............................................................................90
13.6 Specific Performance..................................................................91
13.7 Submission to Jurisdiction; Service of Process........................................91
13.8 Time..................................................................................92
13.9 Counterparts..........................................................................92
13.10 Headings..............................................................................92
13.11 Governing Law.........................................................................92
13.12 Amendments and Waivers................................................................92
13.13 Severability..........................................................................92
13.14 Expenses..............................................................................93
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13.15 Construction..........................................................................93
13.16 Incorporation of Exhibits, Annexes, and Schedules.....................................93
13.17 Joint and Several Obligations.........................................................93
13.18 Remedies..............................................................................94
13.19 Electronic Signatures.................................................................94
NOTE REGARDING ATTACHMENTS: ALL OF THE FOLLOWING SCHEDULES, EXHIBITS AND OTHER
ATTACHMENTS HAVE BEEN OMITTED PURSUANT TO ITEM 601(b)(2) OF REGULATION S-K. THE
REGISTRANT HEREBY AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED
ATTACHMENT TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
ATTACHMENTS
EXHIBITS
Exhibit A -- Stockholders of each Target Companies
Exhibit B -- Assignment and Assumption Agreement
Exhibit C -- Xxxx of Sale and Assignment of Contract Rights
Exhibit D -- Rights, Privileges, Restrictions and Conditions
related to the Non-Voting Exchangeable Shares
Exhibit E -- Non-Negotiable Secured Promissory Note
Exhibit F-1 -- Employment Agreement for Xxxxxxx Xxxxxx
Exhibit F-2 -- Form of Employment Agreement for other Bitton
Brothers
Exhibit G -- Term of Employment Agreements
Exhibit H -- Exchange Right Agreement
Exhibit I -- Form of Non-Competition Agreement
Exhibit J -- Registration Rights Agreement
Exhibit K -- Standstill Agreement
Exhibit L -- Support Agreement
Exhibit M -- Form of Trademark Purchase Agreement
Exhibit N -- Voting Trust Agreement
SCHEDULES
Schedule 4.3(b) -- Trust Adjusted Net Revenue
Schedule 4.4 -- Asset Purchase Price Allocation
Schedule 5.1(c) -- Notices and Consents (of Seller)
Schedule 5.1(i) -- Assets and Liabilities
Schedule 5.2(c) -- Notices and Consents (of Buyer)
Schedule 5.2(e) -- Commitment with respect to Parent Common Stock
Schedule 5.2(l) -- Litigation
Schedule 5.3 (c) -- Notices and Consents (of Trust)
Schedule 6.1 -- Acquired Entities' Directors and Officers
Schedule 6.3 -- Notices and Consents (of Acquired Entities)
Schedule 6.5 -- Capitalization of Target Companies
Schedule 6.7 -- Acquired Subsidiaries
Schedule 6.8 -- Financial Statements
Schedule 6.9 -- Events Out of the Ordinary Course of Business
(threshold $15,000)
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SCHEDULES
Schedule 6.10 -- Liabilities
Schedule 6.12(a) -- No Waiver of Limitation for Collection of Tax
Schedule 6.12(b) -- Tax Returns Reassessment
Schedule 6.12(e) -- Tax Returns outside Canada
Schedule 6.12(f) -- Tax Returns and Audits
Schedule 6.13(a) -- Security Interest (of Acquired Entities)
Schedule 6.13(b) -- Security Interest (of Trust)
Schedule 6.13(c) -- Capital Expenditure since December 31, 2005)
Schedule 6.14(b) -- Real Property (List of lease or sublease contracts
of each Acquired Entity)
Schedule 6.15(b) -- Acquired Entities' Listed Marks & Jurisdictions
Schedule 6.15(c) -- Trust Trade Marks (Owned or Licensed)
Schedule 6.15(e) -- Acquired Entities Intellectual Property
Schedule 6.15(f) -- Marks Restriction of Use & Infringement
Schedule 6.17 -- Acquired Entities' Contracts
Schedule 6.18 -- Assumed Liabilities of Trust
Schedule 6.20 -- Powers of Attorney
Schedule 6.21 -- Insurance
Schedule 6.22 -- Litigation
Schedule 6.23 -- Product Warranty
Schedule 6.25(a) -- Employees
Schedule 6.25(e) -- Bargaining Certificate
Schedule 6.26 -- Employee Benefits
Schedule 6.27 -- Environmental, Health & Safety
Schedule 6.28 -- Customers and Suppliers
Schedule 6.29 -- Permits
Schedule 6.30 -- Business Relationship
Schedule 7.8 -- Affiliated Transactions
Schedule 7.9 -- Liabilities (of Sellers and Trust)
Schedule 7.10 -- Liabilities (payable by Acquired Entities to Sellers
or Trust)
Schedule 7.16 -- Securities Interests of Acquired Entities to be
Discharged
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement (this "AGREEMENT"), dated
December 6, 2006, is by and among (i) Tarrant Apparel Group, a California
corporation ("PARENT"), (ii) 4366883 Canada Inc., a corporation incorporated
under the CANADA BUSINESS CORPORATIONS ACT ("CBCA") ("BUYER" and, together with
Parent, each a "BUYER PARTY" and collectively the "BUYER PARTIES"), (iii)
3681441 Canada Inc., a corporation incorporated under the CBCA ("368 CANADA"),
(iv) Buffalo Inc., a corporation incorporated under the CBCA ("BUFFALO INC."),
(v) 3163946 Canada Inc., a corporation incorporated under the CBCA ("316
CANADA"), (vi) Buffalo Corporation, a Delaware corporation ("BUFFALO US" and,
together with 368 Canada, Buffalo Inc., and 316 Canada, each a "TARGET COMPANY"
and collectively the "TARGET COMPANIES"), (vii) BFL Management Inc. in its
capacity as the sole trustee of The Buffalo Trust ("TRUST"), and (viii) each
stockholder of Target Companies set forth in EXHIBIT A (individually, "SELLER"
and, collectively, "SELLERS" and, together with Target Companies and Trust, each
a "SELLER PARTY" and collectively the "SELLER PARTIES").
RECITALS:
A. Sellers own all of the outstanding shares in the share capital
of Target Companies, and Trust owns certain assets that are used by Target
Companies in the operation of their respective businesses.
B. Buyer Parties desire to purchase from Sellers all of the
outstanding shares in the share capital of Target Companies, and Sellers desire
to sell to Buyer Parties all of the outstanding shares in the share capital of
Target Companies, in accordance with this Agreement's terms and conditions.
C. Buyer Parties desire to purchase from Trust, and Trust desires
to sell to Buyer Parties, certain of Trust's assets in accordance with this
Agreement's terms and conditions.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants contained herein, each Buyer Party and each Seller Party agree as
follows:
ARTICLE 1.
DEFINITIONS
"316 CANADA" is defined in the preamble to this Agreement.
"316 CANADA SHARES" means the issued and outstanding 100 Class "A"
shares in the share capital of 000 Xxxxxx.
"316 PURCHASE PRICE" is defined in SECTION 3.2(C).
"368 CANADA" is defined in the preamble to this Agreement.
"368 CANADA SHARES" means the issued and outstanding 100 Class "A"
shares in the share capital of 000 Xxxxxx.
"368 PURCHASE PRICE" is defined in SECTION 3.2(A).
"397 CANADA" means 3979512 Canada Inc., a corporation incorporated
under the CBCA and the sole stockholder of Buffalo US, and a Seller under this
Agreement.
"418 CANADA" means 4183517 Canada Inc., a corporation incorporated
under the CBCA and the sole stockholder of 368 Canada and Buffalo International,
and a Seller under this Agreement.
"ACCELERATED EARN-OUT AMOUNT" is defined in SECTION 12.3.
"ACCELERATION EVENT" is defined in SECTION 12.3.
"ACQUIRED BUSINESS" is defined in SECTION 12.3.
"ACQUIRED ENTITIES" means, collectively, Target Companies and Acquired
Subsidiaries.
"ACQUIRED SUBSIDIARY" means any Subsidiary listed on SCHEDULE 6.7.
"ACTION" means any action, appeal, petition, plea, charge, complaint,
claim, suit, audit, request, demand, litigation, arbitration, mediation,
hearing, inquiry, investigation or similar event, occurrence, or proceeding.
"ADJUSTED EARNINGS" is defined in SECTION 12.3.
"AFFILIATE" or "AFFILIATED" with respect to any specified Person, means
a Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. For this definition, "control" (and its derivatives) means the
possession, directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting Equity Interests, as trustee or executor, by
contract or credit arrangements or otherwise. In furtherance, and not in
limitation, of the foregoing, each of the Bitton Brothers shall be deemed to be
an Affiliate of Seller Parties and Acquired Entities.
"AFFILIATED GROUP" means any affiliated group under Code Section
1504(a) or any similar group defined under provisions of applicable Law.
"AGREEMENT" is defined in the preamble to this Agreement.
"ANCILLARY AGREEMENTS" means the Buyer Notes, Security Agreement,
Intercreditor Agreement, Exchange Right Agreement, Support Agreement, Standstill
Agreement, Employment Agreements, Non-Competition Agreements, and Registration
Rights Agreement.
"ASSET PURCHASE PRICE" is defined in SECTION 4.3.
"ASSET PURCHASE PRICE ADJUSTMENT" is defined in SECTION 4.3(B)(I).
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"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement in the form of EXHIBIT B.
"ASSUMED LIABILITIES" means all unperformed or unfulfilled Liabilities
of Trust under those Contracts set forth on SCHEDULE 6.18, excluding, however,
any Liabilities of Trust under any such Contract arising or accruing on or
before the Closing Date and, for greater certainty, excluding all and any past,
present and future Tax Liability that is or may be attributable to Trust, its
settlor, trustee or beneficiary.
"BALANCE SHEET DATE" is defined in SECTION 6.8.
"BEST EFFORTS" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; PROVIDED, HOWEVER, that no such use, expenditure, or incurrence will
be required if it would be manifestly unreasonable from a commercial perspective
to incur them.
"XXXX OF SALE" means the Xxxx of Sale and Assignment of Contract Rights
in the form of EXHIBIT C.
"BITTON BROTHERS" means Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxxx Xxxxxx,
Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx.
"BREACH" means any breach, inaccuracy, failure to perform, failure to
comply, failure to notify, default, or violation which would (i) permit any
Person to accelerate any obligation or terminate, cancel, or modify any right or
obligation, or (ii) require the payment of money or other consideration.
"BUDGETS" is defined in SECTION 12.6(D).
"BUFFALO INC." is defined in the preamble to this Agreement.
"BUFFALO INC. PURCHASE PRICE" is defined in SECTION 3.2(B).
"BUFFALO INC. SHARES" means, collectively, the issued and outstanding
100 Class "A" Common shares in the share capital of Buffalo Inc., the issued and
outstanding 4,731,301 Class "E" preferred shares in the share capital of Buffalo
Inc., and the issued and outstanding 1,117,184 Class "F" preferred shares in the
share capital of Buffalo Inc.
"BUFFALO INTERNATIONAL" means Buffalo International Inc., a corporation
incorporated under the CBCA and the sole stockholder of Buffalo Inc., 316
Canada, and 397 Canada, and a Seller under this Agreement.
"BUFFALO US" is defined in the preamble to this Agreement.
"BUFFALO US PURCHASE PRICE" is defined in SECTION 3.2(D).
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"BUFFALO US SHARES" means the issued and outstanding 120 Common shares
in the share capital of Buffalo US.
"BUYER" is defined in the preamble to this Agreement.
"BUYER COMMON SHARES" means the common shares in the share capital of
Buyer.
"BUYER EXCHANGEABLE SHARES" means the non-voting exchangeable shares in
the share capital of Buyer, having substantially the rights, privileges,
restrictions and conditions set forth in EXHIBIT D.
"BUYER NOTES" means the promissory notes of Buyer in substantially the
form of EXHIBIT E.
"BUYER PARTIES" is defined in the preamble to this Agreement.
"CALCULATION PERIOD" is defined in SECTION 12.3.
"CANADIAN GAAP" means, at any time, generally accepted accounting
principles in Canada, approved by the Canadian Institute of Chartered
Accountants and in force at such time.
"CANADIAN PENSION PLAN" means any agreement other than a registered
retirement savings plan, whether written or oral, providing for retirement
benefits to any current or former employer, consultant, independent contractor
or any other individual residing or located in Canada and having provided
services to any Acquired Entity whether or not such agreement is formal or
informal, funded or unfunded, and registered or not.
"CBCA" is defined in the preamble to this Agreement.
"CHANGE OF CONTROL" means any of the following: (a) Parent and Buyer
(or any of their Affiliates) shall sell or transfer to any Person who is not an
Affiliate of Parent all or substantially all of the assets of the Acquired
Business; (b) Buyer shall sell or transfer all or substantially all of the
voting securities of the Acquired Entities to any Person who is not an Affiliate
of Parent; (c) Parent (or any of its Affiliates) shall sell or transfer all or
substantially all of the voting securities of Buyer to any Person who is not an
Affiliate of Parent; (d) Parent shall sell or otherwise transfer all or
substantially all of its assets (on a consolidated basis) or merge, consolidate
or reorganize with any other corporation or entity, as a result of which less
than 50% of the total voting power represented by the capital stock or other
equity interests of the corporation or entity to which Parent's assets are sold
or transferred or surviving such merger, consolidation or reorganization shall
be held by the Persons who were holders of voting securities of Parent
immediately prior to such transaction; (e) Buyer shall sell or otherwise
transfer all or substantially all of its assets (on a consolidated basis) or
merge, consolidate or reorganize with any other corporation or entity, as a
result of which less than 50% of the total voting power represented by the
capital stock or other equity interests of the corporation or entity to which
Buyer's assets are sold or transferred or surviving such merger, consolidation
or reorganization shall be held by the Persons who were holders of voting
securities of Buyer immediately prior to such transaction; or (f) (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Bitton Brothers and any of their Affiliates and any
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Affiliate of Parent as of the Closing Date, shall become, or obtain rights
(whether by means of warrants, options or otherwise) to become, the "beneficial
owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of more
than 35% of the total voting power of the capital stock of Parent then
outstanding and (ii) such "person" or "group" become, or obtain rights to
become, the beneficial owners of a greater percentage of the total voting power
of all the outstanding capital stock of Parent than any other person or group,
including the Bitton Brothers and their Affiliates or any Affiliate of Parent as
of the Closing Date.
"CGCL" means the California General Corporation Law, as amended from
time to time.
"CLOSING" is defined in SECTION 3.3.
"CLOSING DATE" is defined in SECTION 3.3.
"CLOSING DATE ADJUSTED ASSET PURCHASE PRICE" is defined in SECTION
4.3(B)(II).
"CLOSING DATE ADJUSTMENT AMOUNT" is defined in SECTION 4.3(B)(II).
"CLOSING TAX RETURNS" shall have the meaning set forth in SECTION
8.8(B).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" is defined in SECTION 7.15.
"COMMERCIALLY REASONABLE EFFORTS" means efforts that are designed to
enable a Party, directly or indirectly, to satisfy a condition to, or otherwise
assist in the consummation of, the Transactions and that do not require the
performing Party to expend any funds or assume Liabilities other than
expenditures and Liabilities that are customary and reasonable in nature and
amount in the context of the Transactions.
"COMMITMENT" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other Contracts that require a Person to issue any of its Equity
Interests; (b) any other securities convertible into, exchangeable or
exercisable for, or representing the right to subscribe for any Equity Interest
of a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
"CONCLUSIVE ADJUSTMENT AMOUNT" is defined in SECTION 4.3(B)(III)(B).
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of any Buyer Party or any Acquired Entity.
"CONSENT" means any consent, approval, notification, waiver, or other
similar action.
"CONSOLIDATED BUDGET" as defined in SECTION 12.6(D).
"CONTINGENT PAYMENT" is defined in SECTION 3.8(A).
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"CONTINGENT RIGHTHOLDER" is defined in SECTION 3.8(D).
"CONTRACT" means any contract, agreement or commitment, whether written
or oral.
"COPYRIGHTS" means all copyrights, whether registered or unregistered,
in both published works and unpublished works, and pending applications to
register the same.
"DAMAGES" means all damages, losses (including any diminution in value
but excluding incidental consequential lost profits, indirect punitive or
exemplary damages), Liabilities, payments, Taxes, amounts paid in settlement,
obligations, fines, penalties, interest, expenses, costs associated with
obtaining injunctive relief, and other costs, including reasonable fees and
expenses of attorneys, accountants and other professional advisors, and of
expert witnesses and other costs of investigation, preparation, and litigation
in connection with any Action or threatened Action.
"DEFERRED INTERCOMPANY TRANSACTIONS" is defined in Treas. Reg. Section
1.1502-13.
"DEPOSIT" is defined in SECTION 2.1.
"DISPUTED AMOUNT" as defined in SECTION 12.5.
"DRAFT LEGISLATION" as defined in SECTION 8.9.
"EARN-OUT AMOUNT" is defined in SECTION 12.3.
"EARN-OUT SHARE" is defined in SECTION 12.3.
"EMPLOYEE AGREEMENT" means each management, employment, severance,
change of control, consulting, or similar Contract between any Acquired Entity
and any employee, consultant, independent contractor, or other individuals
providing services thereto pursuant to which any Acquired Entity has or may have
any Liability.
"EMPLOYEE BENEFIT PLAN" means each plan, program, policy, payroll
practice, contract, agreement (including Employee Agreements), or other
arrangement providing for compensation, notice, severance, termination pay,
change of control awards, performance awards, stock or stock related awards,
insurance coverage, fringe benefits, registered retirement savings plan, or
other employee benefits of any kind, whether formal or informal, funded or
unfunded, written or oral and whether or not legally binding, including each
"employee benefit plan," within the meaning of Section 3(3) of ERISA and each
"Multiemployer Plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"EMPLOYEE PENSION BENEFIT PLAN" is defined in ERISA Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" is defined in ERISA Section 3(1).
"EMPLOYMENT AGREEMENTS" means the employment agreements together with
non-qualified stock option agreements to be entered into as of the Closing Date
between Buyer, on the one hand, and each of the Bitton Brothers, on the other
hand, substantially in the form of
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EXHIBIT F-1 with respect to Xxxxxxx Xxxxxx and EXHIBIT F-2 with respect to each
other Bitton Brother, and completed for each other Bitton Brother with the terms
on EXHIBIT G, setting forth the terms of employment of such Person by Buyer
following the Closing.
"ENCUMBRANCE" means any Order, Security Interest, easement, servitude,
right of first refusal, or restriction on voting, transfer, or receipt of
income, other than restrictions under federal and state securities laws and
regulations.
"ENFORCEABLE" - a Contract is "Enforceable" if it is the legal, valid,
and binding obligation of the applicable Person enforceable against such Person
in accordance with its terms, except as such enforceability may be subject to
(i) the effects of bankruptcy, winding-up, insolvency, arrangement,
reorganization, moratorium, or other Laws relating to or affecting the rights of
creditors, (ii) the discretion that a court may exercise in the granting of
extraordinary remedies such as specific performance and injunction, (iii)
general principles of equity, (iv) general principles of public policy with
respect to specific provisions that violate such public policy, and (v) the
legal capacity of natural persons or the corporate or other power of each Person
not a natural person, or lack thereof, other than the parties to this Agreement
and their respective Affiliates.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" means all Orders and
Laws concerning or relating to public health and safety, worker/occupational
health and safety, and pollution or protection of the environment, including
those relating to the presence, use, manufacturing, refining, production,
generation, handling, transportation, treatment, recycling, transfer, storage,
disposal, distribution, importing, labeling, testing, processing, discharge,
release, threatened release, control, or other action or failure to act
involving cleanup of any hazardous materials, substances or wastes, chemical
substances, or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now or hereafter in effect and in effect at
Closing.
"EQUITY INTEREST" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust, or similar Person,
any and all units, interests, or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other direct or
indirect equity ownership or participation in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with any Acquired Entity within the meaning of Sections 414(b),
(c) or (m) of the Code, or required to be aggregated with any Acquired Entity
under Section 414(o) of the Code, or is under "common control" with any Acquired
Entity, within the meaning of Section 4001(a)(14) of ERISA.
"EXCESS LOSS ACCOUNT" is defined in Treas. Reg. Section 1.1502-19.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
7
"EXCHANGE RATE" means, for the purpose of translating an amount
denominated in a currency other than United States Dollars into United States
Dollars as of a specified date, the closing mid-range rate for exchanges between
the relevant currency and United States Dollars on the Business Day for which
that rate is so quoted in the Wall Street Journal immediately prior to such
specified date (and, if relevant, the 1-month forward rate shall be used).
"EXCHANGE RIGHT AGREEMENT" means the agreement to be entered into as of
the Closing Date among Parent, Buyer and Sellers, substantially in the form of
EXHIBIT H.
"EXPIRATION DATE" means March 31, 2007.
"FIDUCIARY" is defined in ERISA Section 3(21).
"FINAL ASSET PURCHASE PRICE" is defined in SECTION 4.3(B)(III)(C).
"FINANCIAL STATEMENTS" is defined in SECTION 6.8.
"FUTURE PAYMENTS" means any amounts payable in respect of the Buyer
Notes, the Earn-Out Payments and the Contingent Payment.
"GMAC CF" means GMAC Commercial Finance LLC.
"GOVERNMENTAL BODY" means any legislature, government, agency, board,
bureau, branch, department, division, subdivision of any kind whatsoever,
commission, court, tribunal, magistrate, judicial, regulatory, administrative,
justice, multi-national organization, quasi-governmental body, or other similar
recognized organization or body of any federal, provincial, state, county,
municipal, local, or foreign government or other similar recognized organization
or body exercising, or purporting to exercise, similar powers or authority.
"GUGGENHEIM" means Guggenheim Corporate Funding, LLC.
"INDEMNIFICATION CLAIM" is defined in SECTION 11.4(A).
"INDEMNIFIED PARTIES" means, individually and as a group, the Parent
Indemnified Parties and the Seller Indemnified Parties.
"INDEMNITOR" means any Party having any Liability to any Indemnified
Party under this Agreement.
"INTELLECTUAL PROPERTY" means any rights, licenses, and other claims
that any Person may have to claim ownership, authorship, or invention, or the
right to use, to object to or prevent the modification of, to withdraw from
circulation, or to control the publication or distribution of, any Marks,
Patents, Copyrights, Trade Secrets, Software or other intellectual property or
proprietary rights.
"INTERCREDITOR AGREEMENT" is defined in SECTION 7.15.
"INTERIM FINANCIAL STATEMENTS" is defined in SECTION 6.8.
8
"JURISDICTIONS" is defined in SECTION 6.15(B).
"KEY EMPLOYEES" is defined in SECTION 6.25(C).
"KNOWLEDGE" means the knowledge of a Person's officers and directors as
of the date hereof and the Closing Date after due investigation. With respect to
particular areas of interest, "Knowledge" includes the knowledge of such
Person's employees or of an employee of an Affiliate of such Person, charged
with responsibility for a particular functional or regional area of such
Person's operations (E.G., an employee directing the environmental section with
respect to knowledge of environmental matters or a regional manager). In
furtherance, and not in limitation, of the forgoing, each Seller Party shall be
deemed to have Knowledge of all matters of which any Acquired Subsidiary has
Knowledge.
"LAW" means any law (statutory, common, or otherwise), statute,
constitution, treaty, convention, ordinance, code, rule, regulation, executive
order, by-law, or other similar authority enacted, adopted or promulgated by any
Governmental Body and having the force of law, each as amended and now and
hereinafter in effect.
"LIABILITY" or "LIABLE" means any liability or obligation, whether
absolute or contingent, matured or unmatured, conditional or unconditional,
accrued or unaccrued, liquidated or unliquidated, or due or to become due.
"LISTED XXXX" is defined in SECTION 6.15(B).
"MARKS" means all fictitious business names, trademarks, service marks,
brand names, trade dress, logos, domain names, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof throughout the world, and all rights
therein provided by international treaties or conventions.
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means any change (or effect) that
is materially adverse to the business, operations, condition (financial or
otherwise), assets, or liabilities of Acquired Entities taken as a whole;
PROVIDED, HOWEVER, that a Material Adverse Change (or Effect) shall not include
any adverse change or effect (i) resulting from any change in general economic
or market conditions, including, without limitation, any change in general
economic or market conditions due to any act of war, terrorism or threat, (ii)
which negatively affects the wholesale or retail apparel industries generally,
unless the change or effect with respect to either clause (i) or (ii)
disproportionately affects Acquired Entities, (iii) resulting from the execution
and performance of or compliance with this Agreement, (iv) resulting from the
announcement of this Agreement and the transactions contemplated hereby
(including, without limitation, any (x) actions by customers or competitors or
(y) loss of personnel or customers, or (v) resulting from any outbreak or
escalation of hostilities involving the United States, the declaration by the
United States of a national emergency or war, or the occurrence of any acts of
terrorism; PROVIDED, HOWEVER, that, with respect to ARTICLE 9 and ARTICLE 10
only, "MATERIAL ADVERSE CHANGE (OR EFFECT)" means any materially adverse event,
series of events or the lack of occurrence thereof which, singularly or in the
aggregate, (a) if capable of being reduced to a dollar amount, would be valued
at an amount at least equal to $1,500,000, or (b) if not capable of
9
being reduced to a dollar amount, would be expected to cause a third-party
purchaser, acting reasonably, to refuse to complete the Transactions on the
terms set forth in this Agreement.
"MINIMUM SHARE PRICE" is defined in SECTION 3.8(D).
"MOST RECENT YEAR END" is defined in SECTION 6.8.
"MULTIEMPLOYER PLAN" is defined in ERISA Section 3(37).
"NON-COMPETITION AGREEMENTS" means the agreements to be entered into as
of the Closing Date between Parent, on the one hand, and each of the Bitton
Brothers, on the other hand, substantially in the form of EXHIBIT I, whereby
each of the Bitton Brothers will agree, for a term ending on the later of three
years from the Closing Date and one year from termination of employment with
Parent or any of its Affiliates, not to engage in any business related to the
sale of apparel products in Canada or the United States in competition with
Parent or its Affiliates.
"ORDER" means any order, ruling, decision, verdict, decree, writ,
subpoena, award, judgment, injunction, or other similar determination or finding
by, before, or under the supervision of any Governmental Body or arbitrator.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality, and frequency) of the relevant Person and its Subsidiaries.
"ORGANIZATIONAL DOCUMENTS" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, declaration of trust, and all other similar documents,
instruments, Contracts, or certificates executed, adopted, or filed in
connection with the creation, formation, or organization of a Person, including
any amendments thereto.
"PARENT" is defined in the preamble to this Agreement.
"PARENT BOARD" as defined in SECTION 12.6(A).
"PARENT COMMON STOCK" means the common stock, no par value, of Parent.
"PARENT CONTRIBUTION" is defined in SECTION 12.7.
"PARENT CONTRIBUTION AMOUNT" is defined in SECTION 12.7.
"PARENT FINANCIAL STATEMENTS" is defined in SECTION 5.2(F).
"PARENT INDEMNIFIED PARTIES" means each Seller and Trust, and its
officers, directors, managers, employees, agents, representatives, controlling
Persons, stockholders, trustees, beneficiaries, and their Affiliates.
"PARENT MATERIAL ADVERSE CHANGE (OR EFFECT)" means any change (or
effect) that is materially adverse to the business, operations, condition
(financial or otherwise), assets, or
10
liabilities of Parent taken as a whole; PROVIDED, HOWEVER, that a Parent
Material Adverse Change (or Effect) shall not include any adverse change or
effect (i) resulting from any change in general economic or market conditions,
including, without limitation, any change in general economic or market
conditions due to any act of war, terrorism or threat, or (ii) which negatively
affects the wholesale or retail apparel industries generally, unless the change
or effect with respect to either clause (i) or (ii) disproportionately affects
Parent, (iii) resulting from the execution and performance of or compliance with
this Agreement, (iv) resulting from the announcement of this Agreement and the
transactions contemplated hereby (including, without limitation, any (x) actions
by customers or competitors or (y) loss of personnel or customers or, (v)
resulting from any outbreak or escalation of hostilities involving the United
States, the declaration by the United States of a national emergency or war, or
the occurrence of any acts of terrorism; PROVIDED, HOWEVER, that, with respect
to ARTICLE 9 and ARTICLE 10 only, "PARENT MATERIAL ADVERSE CHANGE (OR EFFECT)"
means any materially adverse event, series of events or the lack of occurrence
thereof which, singularly or in the aggregate, (a) if capable of being reduced
to a dollar amount, would be valued at an amount at least equal to $1,500,000,
or (b) if not capable of being reduced to a dollar amount, would be expected to
cause a third-party purchaser, acting reasonably, to refuse to complete the
Transactions on the terms set forth in this Agreement.
"PARENT SEC DOCUMENTS" is defined in SECTION 5.2(F).
"PARENT SHARE VALUE" is defined in SECTION 3.8(D).
"PARENT SHARES" is defined in SECTION 3.5(C).
"PARENT SPECIAL VOTING SHARES" means 130,000 shares of Series A Special
Voting Preferred Stock of Parent issued in its own series which entitles the
holder of record to 100 votes per share at meetings of holders of Parent Common
Stock, which shares are to be issued to, deposited with, and voted by, the
Voting Trustee in accordance with the Voting Trust Agreement.
"PARTIES" means, collectively, Buyer Parties and Seller Parties, and
each permitted assignee, if any, of any Buyer Party that becomes a party to this
Agreement in accordance with the terms hereof.
"PATENTS" means all patents and patent applications.
"PAYMENT DEFAULT" is defined in SECTION 7.15.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERFORMANCE SUMMARY" is defined in SECTION 12.6(E).
"PERMIT" means any permit, license, certificate, approval, consent,
waiver, accreditation, or other similar authorization required by any Law or
Governmental Body.
"PERSON" means any individual, partnership, limited liability company,
unlimited liability company, corporation, association, joint stock company,
trust, entity, joint venture, labor organization, unincorporated organization,
Governmental Body, or other business entity.
11
"PERSONAL INDICIA" is defined in SECTION 7.14.
"POST-CLOSING ESTIMATED ADJUSTMENT AMOUNT" is defined in SECTION
4.3(B)(III)(A).
"PRIVATE ISSUER" means a Person:
(a) that is not a "reporting issuer" within the meaning of the
SECURITIES ACT (Quebec) as of the date of this Agreement or an
"investment fund" within the meaning of Regulation 45-106 as
of the date of this Agreement;
(b) the securities (other than non-convertible debt securities) of
which:
(i) are subject to restrictions on transfer contained in
that Person's constating documents or in agreements
to which its security holders are parties; and
(ii) are beneficially owned, directly or indirectly, by
not more than 50 holders (not including employees and
former employees of the Person or any Affiliate of
the Person), provided that each holder is counted as
one beneficial owner unless the holder is created or
used solely to purchase or hold securities of that
Person in which case each beneficial owner or each
beneficiary of the holder, as the case may be, shall
be counted as a separate beneficial owner; and
(c) that has distributed, within the meaning of Law, securities
only to persons described in section 2.4(2) of Regulation
45-106.
"PROHIBITED TRANSACTIONS" is defined in ERISA Section 406 and Code
Section 4975.
"PRIORITY COLLATERAL" is defined in SECTION 7.15.
"PROPOSED EARN-OUT AMOUNT" as defined in SECTION 12.1(B).
"PROXY STATEMENT" is defined in SECTION 7.11(B).
"PURCHASED ASSETS" means (i) all cash and cash equivalents of Trust,
(ii) the Related Party Receivables, and (iii) all of the right, title and
interest that Trust possesses and has the right to transfer in and to
Intellectual Property, including, without limitation, Trust Marks set forth on
SCHEDULE 6.15(C), the Contracts set forth on SCHEDULE 6.18, all Contracts with
respect to the Trust Marks entered into after the date of this Agreement and
before the Closing, and in respect of all such Intellectual Property: (a)
goodwill associated therewith, Contracts (including licenses and sublicenses
granted and obtained) with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (b) claims, deposits, prepayments, advances
(including payments of royalties or other obligations to Trust prior to, and not
recouped or earned as of, the Closing), refunds, causes of action, chooses in
action, rights of recovery, rights of set off, and rights of recoupment; and (c)
books, records, ledgers, files, documents, correspondence, lists, drawings,
creative materials, advertising and promotional materials, and other printed or
written materials.
12
"REALLOCATION" as defined in SECTION 8.9.
"RECEIVABLES" means all receivables of Acquired Entities, including all
Contracts in transit, manufacturers warranty receivables, notes receivable,
accounts receivable, trade account receivables, and insurance proceeds
receivable.
"REGISTRATION RIGHTS AGREEMENT" means a registration rights contract,
substantially in the form of EXHIBIT J, providing for registration under the
Securities Act of the resale of the Parent Common Stock by the holders thereof
after the Closing.
"REGULATION 45-106" means Regulation 45-106 respecting prospectus and
registration exemptions (Quebec).
"RELATED PARTY RECEIVABLES" means the loans receivable of Trust payable
by Buffalo Inc. (CAD $1,117,535), Buffalo de France Corp ($2,872,000), and 368
Canada (CAD $188,624) as described more fully on SCHEDULE 7.10.
"RELEASEE" and "RELEASEES" is defined in SECTION 8.5.
"REQUISITE VOTE" is defined in SECTION 5.2(H).
"RESTRICTED AREAS" is defined in SECTION 7.14.
"RETAIL BUDGET" as defined in SECTION 12.6(D).
"REVISED BUDGET" as defined in SECTION 12.6(E).
"SCHEDULES" means the Schedules to this Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"SECRETARY'S CERTIFICATE" of a specified Person means a certificate,
duly executed on behalf of such Person by its Secretary, attaching and
certifying to the truth and correctness of: (a) the Organizational Documents of
such Person, as in effect at the time of the Closing; (b) a good standing
certificate with respect to such Person from the applicable authority in the
jurisdiction of such Person's organization, dated a recent date before the
Closing; (c) the resolutions approved by the board of directors or similar
governing body of such Person authorizing the Transaction and the Transaction
Documents; (d) the resolutions, if required, of such Person's equity holders
approving the Transaction and the Transaction Documents; and (e) the incumbency
of such Person's officers who are authorized to execute, deliver and perform
Transaction Documents and any other agreements, instruments, certificate or
other documents required to be executed by it in connection therewith.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" is defined in SECTION 7.15.
13
"SECURITY INTEREST" means any security interest, deed of trust,
hypothec, mortgage, pledge, lien, charge, claim, or other similar interest or
right, except for (i) liens for taxes, assessments, governmental charges, or
claims that are being contested in good faith by appropriate Actions promptly
instituted and diligently conducted and only to the extent that a reserve or
other appropriate provision, if any, has been made on the face of the Financial
Statements in an amount equal to the Liability for which the lien is asserted,
(ii) statutory liens of landlords and warehousemen's, carriers', mechanics',
suppliers', materialmen's, repairmen's, or other like liens (including
Contractual landlords' liens) arising in the Ordinary Course of Business and
with respect to amounts not yet delinquent, or with respect to amounts being
contested in good faith by appropriate proceedings, only to the extent that a
reserve or other appropriate provision, if any, has been made on the face of the
Financial Statements in an amount equal to the Liability for which the lien is
asserted; and (iii) liens incurred or deposits made in the Ordinary Course of
Business in connection with workers' compensation, unemployment insurance and
other similar types of social security.
"SELLER" and "SELLERS" are defined in the preamble to this Agreement.
"SELLER DOCUMENTS" is defined in SECTION 7.15.
"SELLER INDEMNIFIED PARTIES" means (a) Buyer Parties, and their
respective Affiliates, officers, directors, managers, employees, agents,
representatives, controlling Persons, and stockholders, and (b) each Acquired
Entity.
"SELLER OBLIGATIONS" is defined in SECTION 7.15.
"SELLER PARTIES" is defined in the preamble to this Agreement.
"SELLER PRIORITY COLLATERAL" is defined in SECTION 7.15.
"SELLER RELEASEE" and "SELLER RELEASEES" are defined in SECTION 8.5(B).
"SENIOR OBLIGATIONS" is defined in SECTION 7.15.
"SENIOR OFFICER" as defined in SECTION 12.6(A).
"SHAREHOLDER APPROVAL" means approval of this Agreement, the Ancillary
Agreements, and the Transactions, including, without limitation, the issuance
and sale of the Parent Shares, by the Requisite Vote obtained in compliance with
applicable Law.
"SHARES" means, collectively, the 368 Shares, the Buffalo Inc. Shares,
the 316 Shares and the Buffalo US Shares.
"SHORTFALL" is defined in SECTION 12.3.
"SOFTWARE" means computer software or middleware.
"SPECIAL MEETING" is defined in SECTION 7.11(A).
14
"STANDSTILL AGREEMENT" means the Standstill and Voting Agreement in the
form of EXHIBIT K.
"SUBSIDIARY" means, with respect to any Person: (a) any corporation of
which more than 50% of the total voting power of all classes of the Equity
Interests entitled (without regard to the occurrence of any contingency) to vote
in the election of directors is owned by such Person directly or through one or
more other Subsidiaries of such Person, and (b) any Person other than a
corporation of which at least a majority of the Equity Interests (however
designated) entitled (without regard to the occurrence of any contingency) to
vote in the election of the governing body, partners, managers or others that
will control the management of such entity is owned by such Person directly or
through one or more other Subsidiaries of such Person.
"SUPPORT AGREEMENT" means the agreement to be entered into as of the
Closing Date among Parent and Buyer substantially in the form of EXHIBIT L
pursuant to which such parties agree to take certain actions so long as there
are any Buyer Exchangeable Shares outstanding.
"SURPLUS" is defined in SECTION 12.3.
"TARGET" is defined in SECTION 12.3.
"TARGET COMPANIES" is defined in the preamble to this Agreement.
"TAX" or "TAXES" means all taxes, charges, duties, fees, levies,
imposts, and any other charges of any kind lawfully levied, assessed,
reassessed, charged, collected, withheld or imposed in any manner by any
Governmental Body under any applicable Law, including:
(a) federal, provincial, municipal and local, foreign or other
income, franchise, profits, capital (including large
corporations), capital gains, alternative, net worth, gross
receipts, immovable or real property, movable or personal
property, tangible, withholding, payroll, employment-related,
health, safety, severance, transfer, registration, sales,
value added, goods and services, harmonized sales, license,
stamp, use, excise, occupation, consumption, anti-dumping,
customs, import, AD VALOREM, countervail duties, Canada
pension plan contributions, Quebec pension plan contributions,
unemployment and employment insurance payments, social
security, provincial workers' compensation payments, and value
added taxes and all other taxes, contributions, duties and
charges of any kind whatsoever for which any corporation of
Acquired Entities may have any liability imposed by any
Governmental Body, together with any installments with respect
thereto, whether disputed or not; and
(b) interest, fines, penalties and additions associated therewith
imposed by any Governmental Body, whether disputed or not.
"TAX PROCEEDING" is defined in SECTION 8.8(E).
"TAX RETURN" means all reports, declarations, remittances, returns,
claims, elections, statements, designations, forms, and other documents and
information filed or required to be filed in respect of Taxes or in respect of
or pursuant to any domestic or foreign federal,
00
xxxxxxxxxx, xxxxx, xxxxxxxxx, xxxxxxxxxxx, or other taxing statute, including
any schedule or attachment thereto and any amendment thereof.
"TERMINATION DATE" means the earlier to occur of (a) the Expiration
Date and (b) the date on which this Agreement is terminated pursuant to SECTION
10.1 (other than SECTION 10.1(B)).
"TERMINATION FEE" is defined in SECTION 10.2(F).
"TRADEMARK PURCHASE" means the acquisition by Trust of rights in the
Trust Marks pursuant to and in accordance with the Trademark Purchase
Agreements.
"TRADEMARK PURCHASE AGREEMENTS" means the series of agreements
providing for the sale and transfer by Sarafina Invest Limited and Hurstwood
Limited of their respective interests in the Trust Marks to Beldene Limited, and
the subsequent sale and transfer of such acquired interests in the Trust Marks
by Beldene Limited to Trust, substantially in the form of EXHIBIT M.
"TRADE SECRETS" means all know-how, trade secrets and confidential
information, including customer lists, supplier lists, technical information,
data, process technology, plans, drawings, designs, inventions, and conceptions
of inventions whether patentable or unpatentable and whether or not reduced to
practice.
"TRADING DAY" is defined in SECTION 3.8(D).
"TRADING MARKET" is defined in SECTION 3.8(D).
"TRANSACTION DOCUMENTS" means this Agreement and the Ancillary
Agreements.
"TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including: (a) the sale of the Shares by Sellers to Buyer Parties and
Buyer Parties' delivery of the purchase price therefor; (b) the sale of the
Assets by Trust to Buyer Parties and Buyer Parties' delivery of the purchase
price therefore; (c) the execution, delivery, and performance of all of the
documents, instruments, and agreements to be executed, delivered, and performed
in connection herewith, including each Ancillary Agreement; and (d) the
performance by the Parties of their respective covenants and obligations (pre-
and post-Closing) under this Agreement.
"TREAS. REG." means the temporary and final regulations promulgated
under the Code.
"TRUST" is defined in the preamble to this Agreement.
"TRUST ADJUSTED NET REVENUE" is defined in SECTION 4.3(B)(I).
"TRUSTEE" is defined in SECTION 5.3(A).
"TRUST XXXX" is defined in SECTION 6.15(C).
"US GAAP" means, at any time, United States generally accepted
accounting principles in force at such time.
16
"VOTING TRUST AGREEMENT" means an agreement with respect to voting by
the Voting Trustee of the Parent Special Voting Shares substantially in the form
of EXHIBIT N.
"VOTING TRUSTEE" means Computershare Trust Company of Canada, a trust
company incorporated under the laws of Canada, or such other trust company
incorporated under the laws of Canada reasonably acceptable to Parent and
Sellers.
ARTICLE 2.
DEPOSIT
2.1 DEPOSIT
Upon the execution of this Agreement, Parent shall pay to Buffalo
International, the amount of $5,000,000 as a deposit (the "DEPOSIT"), to be held
by Buffalo International and applied as follows:
(a) If the Closing occurs, the Deposit shall be retained by
Buffalo International and applied to the Buffalo Inc. Purchase
Price, and the cash portion of the Buffalo Inc. Purchase Price
payable by Buyer at the Closing shall be reduced by the amount
of the Deposit.
(b) If this Agreement is terminated by Sellers or Parent, as the
case may be, in accordance with SECTIONS 10.1(B), 10.1(D), or
10.1(E) then, as Sellers Parties' sole and exclusive remedy
and as liquidated damages, the Deposit shall be retained by
Buffalo International.
(c) If this Agreement is terminated by Sellers or Parent, as the
case may be, in accordance with SECTIONS 10.1(A), 10.1(C), or
10.1(F), the Deposit less, in the case of termination pursuant
to SECTION 10.1(F) only, the Termination Fee, shall be
refunded by Buffalo International to Buyer promptly following
such termination.
ARTICLE 3.
PURCHASE AND SALE OF SHARES
3.1 PURCHASE AND SALE OF SHARES
(a) On and subject to the terms and conditions of this Agreement,
Parent agrees to cause Buyer to purchase from 418 Canada, and
418 Canada agrees to sell to Buyer, all of the 000 Xxxxxx
Shares for the consideration specified in SECTION 3.2 and
delivered in the manner specified in SECTION 3.4.
(b) On and subject to the terms and conditions of this Agreement,
Parent agrees to cause Buyer to purchase from Buffalo
International, and Buffalo International agrees to sell to
Buyer, all of the Buffalo Inc. Shares and the 316 Shares for
the consideration specified in SECTION 3.2 and delivered in
the manner specified in SECTION 3.4.
17
(c) On and subject to the terms and conditions of this Agreement,
Parent agrees to purchase from 397 Canada, and 397 Canada
agrees to sell to Parent, all of the Buffalo US Shares for the
consideration specified in SECTION 3.2 and delivered in the
manner specified in SECTION 3.4.
3.2 PURCHASE PRICE FOR SHARES
(a) The purchase price for the 000 Xxxxxx Shares (the "368
PURCHASE PRICE") consists of: (i) 1,000,000 Buyer Exchangeable
Share; and (ii) a right to receive the Contingent Payment
described in SECTION 3.8 which the Parties agree currently has
a nominal value.
(b) The purchase price for the Buffalo Inc. Shares (the "BUFFALO
INC. PURCHASE PRICE") consists of: (i) 3,000,000 Buyer
Exchangeable Shares; (ii) balance of portion of Buffalo Inc.
Purchase Price of $11,000,000 evidenced by Buyer Notes (iii) a
right to receive the Contingent Payment described in SECTION
3.8 which the Parties agree currently has a nominal value; and
(iv) any portion of the Earn Out Amount payable to Buffalo
International by virtue of ARTICLE 12.
(c) The purchase price for the 000 Xxxxxx Shares (the "316
PURCHASE PRICE") consists of: (i) 9,000,000 Buyer Exchangeable
Shares; (ii) a right to receive the Contingent Payment
described in SECTION 3.8 which the Parties agree currently has
a nominal value; and (iii) any portion of the Earn Out Amount
payable to Buffalo International by virtue of ARTICLE 12.
(d) The purchase price for the Buffalo US Shares (the "BUFFALO US
PURCHASE PRICE") consists of: (i) $17,000,000 in cash; and
(ii) any portion of the Earn Out Amount payable to 397 Canada
by virtue of ARTICLE 12.
3.3 THE CLOSING
The closing of the purchase and sale of the Shares (the "CLOSING")
shall take place at the offices of Blake, Xxxxxxx & Xxxxxxx LLP, Suite 2200, 000
xx Xxxxxxxxxxx Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxx X0X 0X0, commencing at 9:00
a.m., local time, on the second (2nd) business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
purchase and sale of the Shares and Assets (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or such other
date as Buyer Parties, Sellers and Trust may mutually determine (the "CLOSING
DATE").
3.4 DELIVERY OF PURCHASE PRICE FOR SHARES AT THE CLOSING
(a) Parent shall cause Buyer to deliver the 368 Purchase Price at
the Closing by delivering to 418 Canada, stock certificates
representing 1,000,000 Buyer Exchangeable Shares.
(b) Parent shall cause Buyer to deliver the Buffalo Inc. Purchase
Price at the Closing as follows: (i) to Buffalo International,
stock certificates representing 3,000,000
18
Buyer Exchangeable Shares; and (ii) to Buffalo International,
$11,000,000 in principal amount of Buyer Notes.
(c) Parent shall cause Buyer to deliver the 316 Purchase Price at
the Closing by delivering to Buffalo International, stock
certificates representing 9,000,000 Buyer Exchangeable Shares.
(d) Parent shall deliver the Buffalo US Purchase Price at the
Closing, by delivering to 397 Canada, $17,000,000 in cash via
Fedwire transfer.
3.5 OTHER DELIVERIES AT THE CLOSING
(a) At the Closing, Sellers shall deliver to applicable Buyer
Party:
(i) Certificates representing the Shares, duly endorsed
or accompanied by duly executed stock powers in favor
of Buyer or Parent, as the case may be, or their
nominee in form acceptable to applicable Buyer Party;
(ii) An Officers' certificate, in form and substance
reasonably satisfactory to Parent, duly executed on
Sellers' behalf, certifying as to whether each
condition specified in SECTIONS 9.1(A) through (d)
has been satisfied in all respects;
(iii) A Secretary's Certificate, in form and substance
reasonably satisfactory to Parent, duly executed on
Sellers' behalf;
(iv) The resignation, effective as of the Closing, of each
Acquired Entity's directors and officers requested by
Parent; and
(v) Each Seller's counterpart signatures to each of the
Transaction Documents to which it is a party, and
each Bitton Brother's counterpart signature to each
of the Transaction Documents to which such Bitton
Brother is a party.
(b) At the Closing, Parent shall deliver to Sellers:
(i) An Officers' certificate, in form and substance
reasonably satisfactory to Sellers, duly executed on
Parent's behalf, certifying as to whether each
condition specified in SECTIONS 9.2(A) and 9.2(D) has
been satisfied in all respects;
(ii) A Secretary's Certificate, in form and substance
reasonably satisfactory to Sellers, duly executed on
Parent's behalf; and
(iii) Each Buyer Party's counterpart signatures to each of
the Transaction Documents to which it is a party.
(c) At the Closing, Parent shall deliver to Voting Trustee, the
Parent Special Voting Shares to be held in accordance with the
Voting Trust Agreement.
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3.6 TAX ELECTION
Buyer agrees that, at the request of a Seller who has received Buyer
Exchangeable Shares on Closing and who is a resident of Canada for purposes of
the INCOME TAX ACT (Canada), Buyer will make a joint election with such Seller
with respect to the Shares sold to Buyer by such Seller under this Agreement
under Subsection 85(1) of the INCOME TAX ACT (Canada) and the corresponding
provisions of any applicable provincial income tax statute, with such "agreed
amount" as is determined by such Seller in its sole discretion (within the
limits under applicable Law). Such Seller shall have sole responsibility for the
timely and proper filing of the elections with the relevant tax authorities. The
sole obligation of Buyer shall be to provide any information reasonably
requested by the Seller for the election form(s) concerning Buyer, and to
execute and return to such Seller within ten (10) days of receipt such election
form(s) which are received by Buyer at the address set forth in this Agreement
not later than one hundred twenty (120) days following the Closing Date.
3.7 ALLOCATION OF THE BUFFALO INC. PURCHASE PRICE
The Buffalo Inc. Purchase Price shall be allocated as follows among the
Buffalo Inc. Shares:
(a) For the 4,731,301 Class "E" preferred shares, and amount in US
Dollars that is the equivalent of 4,731,301 Canadian Dollars
at the Exchange Rate as of the Closing Date;
(b) For the 1,117,184 Class "F" preferred shares, and amount in US
Dollars that is the equivalent of 1,117,184 Canadian Dollars
at the Exchange Rate as of the Closing Date; and
(c) For the 100 Class "A" Common shares, the remaining balance of
the Buffalo Inc. Purchase Price.
3.8 CONTINGENT PAYMENT
(a) Upon the terms and subject to the conditions set forth in this
SECTION 3.8, the Contingent Rightholder shall have the right
to receive from Buyer an amount equal to any additional
payment (the "CONTINGENT PAYMENT") required to be made
pursuant to this Section and Parent agrees to cause Buyer to
pay such Contingent Payment.
(b) The Contingent Payment, if any, to be made by Buyer to the
Contingent Rightholder shall be determined for each Parent
Share on the basis of the market price per share of Parent
Common Stock during the five year period following the
Closing, as follows:
(i) With respect to each Parent Share, Parent shall cause
Buyer to pay to the Contingent Rightholder an amount
equal to the excess of (i) the Minimum Share Price
over (ii) the Parent Share Value, unless the Parent
Share Value for such Parent Share equals or exceeds
the Minimum Share Price at any time on or before the
fifth anniversary of the Closing Date. For example,
if the Parent Share
20
Value is $2.80, then Parent shall cause Buyer to pay
to the Contingent Rightholder an amount equal to
$0.276 for each Parent Share. As a further example,
if the Parent Share Value is $3.15, then Parent shall
have no obligation to pay the Contingent Payment.
(ii) The Contingent Payment shall be payable by Buyer no
sooner than five (5) days and no later than thirty
(30) days following the fifth anniversary of the
Closing Date in cash via Fedwire transfer pursuant to
instructions provided by the Contingent Rightholder.
(c) Each Seller receiving Buyer Exchangeable Shares at Closing,
and each subsequent Contingent Rightholder, shall have the
right to transfer the right to receive the Contingent Payment
either together with, or separate from, the Parent Shares with
respect to which such Contingent Payment relates. Any
Contingent Rightholder that desires to transfer its right to
receive the Contingent Payment shall first deliver to Buyer a
copy of an assignment agreement.
(d) For purposes of this SECTION 3.8, the following terms shall
have the following meanings:
"CONTINGENT RIGHTHOLDER" means any Person that has the right to receive
a Contingent Payment in respect of a Parent Share. The initial Contingent
Rightholder for all of the Parent Shares shall be Sellers receiving Buyer
Exchangeable Shares at Closing, and thereafter shall include any Person to whom
such Seller or any subsequent Contingent Rightholder transfers a right to
receive a Contingent Payment in accordance with this SECTION 3.8.
"MINIMUM SHARE PRICE" means $3.076 per share of Parent Common Stock (as
adjusted for stock splits, reverse stock splits, and similar transactions after
the date of this Agreement which affect the price of Parent Common Stock).
"PARENT SHARE VALUE" means the highest volume weighted average price
per share of the Parent Common Stock (a reported by Bloomberg Financial Markets)
on the Trading Market over ten (10) consecutive Trading Days during the five
years following the Closing Date, during which the aggregate trading volume of
the Parent Common Stock traded on the Trading Market during such ten (10)
Trading Days is at least 500,000 shares (as adjusted for stock splits, reverse
stock splits, and similar transactions after the date of this Agreement which
affect the number of issued and outstanding shares of Parent Common Stock).
"TRADING DAY" means a day on which the principal national securities
exchange on which the Parent Common Stock is listed or admitted to trading or
traded is open for the transaction of business or, if the Stock is not listed or
admitted to trading on any national securities exchange, a business day.
"TRADING MARKET" means the Nasdaq Global Market or, if the Parent
Common Stock is not then listed or admitted to trading on the Nasdaq Global
Market, such other principal securities market or exchange or automated
quotation system on which the Parent Common Stock is then traded, listed or
quoted on the date in question.
21
ARTICLE 4.
PURCHASE AND SALE OF ASSETS
4.1 PURCHASE AND SALE OF PURCHASED ASSETS
On and subject to the terms and conditions of this Agreement, Buyer
Parties agree to purchase from Trust, and Trust agrees to sell to Buyer Parties,
all of the Purchased Assets for the consideration specified in SECTION 4.3 and
delivered in the manner specified in SECTION 4.6. At least ten (10) days prior
to the expected Closing, the Buyer Parties shall determine and notify Trust of
which of the Purchased Assets will be acquired by Parent and Buyer at the
Closing and the portion of the Asset Purchase Price to be paid by Parent and
Buyer for the Purchased Assets to be acquired by such Buyer Party; PROVIDED,
HOWEVER, that in all events, the Buyer Note to be delivered in payment of the
Purchase Assets shall be paid by Buyer for the Purchase Assets acquired by
Buyer. Nothing in this SECTION 4.1 shall restrict a Buyer Party from assigning
its rights under this Agreement in accordance with SECTION 13.4.
4.2 ASSUMED LIABILITIES
On and subject to the terms and conditions of this Agreement, Buyer
Parties agree to assume and become responsible for all of the Assumed
Liabilities as of the Closing Date. Buyer Parties will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
Trust not included within the definition of Assumed Liabilities.
4.3 PURCHASE PRICE FOR PURCHASED ASSETS
(a) ASSET PURCHASE PRICE. The purchase price for the Purchased
Assets (the "ASSET PURCHASE PRICE") consists of: (i)
$23,000,000 in cash; and (ii) balance of portion of Asset
Purchase Price of $4,000,000 evidenced by Buyer Notes.
(b) ADJUSTMENTS TO ASSET PURCHASE PRICE. The Asset Purchase Price
will be adjusted in the following manner. Any such adjustment
will be applied against, and reduce, the cash portion of the
Asset Purchase Price.
(i) PURCHASE PRICE ADJUSTMENT. The Asset Purchase Price
will be decreased by the amount by which the Trust
Adjusted Net Revenue attributable to the period from
January 1, 2005 up to (and including) the Closing
exceeds the amount of cash and cash equivalents of
Trust as of the Closing Date and which are included
in the Purchased Assets acquired by Buyer Parties
(the "ASSET PURCHASE PRICE ADJUSTMENT"). For purposes
hereof, the "TRUST ADJUSTED NET REVENUE" means (w)
all revenues of Trust LESS (x) all expenses of Trust
(including income taxes of Trust and 6144195 Canada
Inc. relating to revenues of Trust or 6144195 Canada
Inc. revenues from Trust and which are actually paid
to the taxing authorities either during or after the
period for which the applicable revenues were
accrued), other than (A) expenses paid or payable to
Affiliates of Trust other than for bona fide services
actually rendered by such Affiliate for the Trust's
benefit (which in no event shall include interest
expense payable to Affiliates) and (B) non-cash
expenses (including, without limitation, amortization
expense), LESS (y) the Related Party Receivables
(provided that the amount of the loans giving rise to
22
such Related Party Receivables have not been
distributed by the Acquired Entities to Sellers),
LESS (z) $3,000,000, all determined in accordance
with Canadian GAAP and the financial statements of
Trust. The Asset Purchase Price Adjustment shall be
determined in Canadian Dollars and converted to
United States Dollars using the Exchange Rate on the
Closing Date.
(ii) INITIAL ASSET PURCHASE PRICE ADJUSTMENT. Ten calendar
days prior to the expected Closing Date, Trust will
deliver to Buyer a written statement setting forth
Trust's good faith estimate of the Asset Purchase
Price Adjustment as of the Closing Date (the "CLOSING
DATE ADJUSTMENT AMOUNT"). The Asset Purchase Price as
adjusted by the Closing Date Adjustment Amount is the
"CLOSING DATE ADJUSTED ASSET PURCHASE PRICE."
(iii) DEFINITIVE ASSET PURCHASE PRICE ADJUSTMENT.
(A) As promptly as practicable after the Closing
Date, but not later than 60 calendar days
thereafter, Parent will deliver to Trust a
schedule setting forth in reasonable detail
Parent's calculation of the Asset Purchase
Price Adjustment as of the Closing Date
based on actual results (the "POST-CLOSING
ESTIMATED ADJUSTMENT AMOUNT"). If Parent
fails to deliver such schedule within such
period, the Closing Date Adjusted Asset
Purchase Price will be deemed to be the
Final Asset Purchase Price.
(B) The Post-Closing Estimated Adjustment Amount
will be subject to Trust's review. In
reviewing the Post-Closing Estimated
Adjustment Amount, Trust will have the right
to communicate with, and to review the work
papers, schedules, memoranda and other
documents Parent prepared or reviewed in
determining the Post-Closing Estimated
Adjustment Amount and thereafter will have
access to all relevant books and records,
all to the extent Trust reasonably requires
to complete its review of Parent's
calculation of the Post-Closing Estimated
Adjustment Amount. Within 30 calendar days
after its receipt of Parent's calculation of
the Post-Closing Estimated Adjustment
Amount, Trust will advise Parent whether,
based on such review, it has any exceptions
to such calculation. Unless Trust delivers
to Parent within such 30 calendar day period
a letter describing its exceptions to
Parent's calculation of Post-Closing
Estimated Adjustment Amount as set forth in
the schedule delivered by Parent described
in SECTION 4.3(B)(III)(A), the Post-Closing
Estimated Adjustment Amount will be
conclusive and binding on Parent and Trust.
If Trust submits a letter detailing any
exceptions to the calculation of the
Post-Closing Estimated Adjustment Amount,
then (1) for 20 days after the date Parent
receives such letter, Trust and Parent will
use their Commercially Reasonable Efforts to
agree on the calculation of the Post-Closing
Estimated Adjustment Amount and (2) lacking
such agreement, the matter will be referred
to an independent accounting firm reasonably
acceptable to Parent and Sellers, who will
determine the correct Post-Closing Estimated
Adjustment Amount within 30 days of
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such referral, which determination will be
final and binding on Parent and Trust for
all purposes. Such amount determined in
accordance with this SECTION 4.3(B)(III)(B)
is the "CONCLUSIVE ADJUSTMENT AMOUNT."
(C) If the Conclusive Adjustment Amount is
different than the Closing Date Adjustment
Amount, then, within two business days of
the determination of the Conclusive
Adjustment Amount, Sellers (Parent) will pay
to Parent (Sellers), as appropriate, an
amount equal to the difference between the
Closing Date Adjustment Amount and the
Conclusive Adjustment Amount, together with
interest thereon at a rate of seven percent
(7%) per annum during the period commencing
on and including the Closing Date and
continuing through but excluding the date
such amount is paid. The "FINAL ASSET
PURCHASE PRICE" is the Closing Date Adjusted
Asset Purchase Price, increased or
decreased, as applicable, by the amount paid
by Parent or Seller pursuant to this SECTION
4.3(B)(III)(C).
4.4 ASSET PURCHASE PRICE ALLOCATION
Buyer Parties and Sellers agree to cooperate in good faith to determine
on or prior to the Closing Date the manner in which the Asset Purchase Price
shall be allocated among the Purchased Assets, which determination shall be set
forth on SCHEDULE 4.4 and initialed by the parties hereto at the Closing. Buyer
Parties and Sellers shall file and cause to be filed all Tax Returns, and
execute such other documents as may be required by any taxing authority, in a
manner consistent with the Asset Purchase Price allocation, and shall refrain,
and cause their Affiliates to refrain, from taking any position inconsistent
with such Asset Purchase Price allocation with any taxing authority unless, and
then only to the extent, required to do so by a taxing authority.
4.5 THE CLOSING
The closing of the purchase and sale of the Purchased Assets shall
occur concurrently with the closing of the purchase and sale of the Shares at
the Closing on the Closing Date.
4.6 DELIVERY OF ASSET PURCHASE PRICE AT THE CLOSING
Buyer Parties shall deliver to Trust at Closing: (i) the cash portion
of the Closing Date Adjusted Asset Purchase Price in cash via Fedwire transfer;
and (ii) $4,000,000 in principal amount of Buyer Notes.
4.7 OTHER DELIVERIES AT THE CLOSING
(a) At the Closing, Trust shall deliver to Buyer Parties:
(i) The Xxxx of Sale and the Assignment and Assumption
Agreement, each duly executed by Trust;
(ii) Such other bills of sale, assignments, and other
instruments of transfer or conveyance as Parent may
reasonably request or as may be otherwise
24
necessary to evidence and effect the sale,
assignment, transfer, conveyance, and delivery of the
Purchased Assets to Buyer Parties, including, without
limitation, duly executed assignments of trademarks
for all applicable jurisdictions and suitable to be
recorded therein;
(iii) All cash and cash equivalents of Trust;
(iv) An Officers' certificate, in form and substance
reasonably satisfactory to Parent, duly executed on
Trust's behalf, certifying as to whether each
condition specified in SECTIONS 9.1(A) through (D)
has been satisfied in all respects;
(v) A Secretary's Certificate, in form and substance
reasonably satisfactory to Parent, duly executed on
Trust's behalf; and
(vi) Trust's counterpart signatures to each of the
Transaction Documents to which it is a party.
(b) At the Closing, Buyer Parties shall deliver to Trust:
(i) The Assignment and Assumption Agreement, duly
executed by each Buyer Party;
(ii) An Officers' certificate, in form and substance
reasonably satisfactory to Trust, duly executed on
each Buyer Party's behalf, certifying as to whether
each condition specified in SECTIONS 9.2(A) through
(F) has been satisfied in all respects;
(iii) A Secretary's Certificate, in form and substance
reasonably satisfactory to Trust, duly executed on
each Buyer Party's behalf; and
(iv) Each Buyer Party's counterpart signatures to each of
the Transaction Documents to which it is a party.
4.8 CERTAIN TAX TREATMENT
Buyer Parties and Trust agree that, pursuant to Section 10 of Part V of
Schedule VI of the EXCISE TAX Act (Canada) and section 188 of an ACT RESPECTING
THE QUEBEC SALES TAX, no Goods and Services Tax under the EXCISE TAX ACT
(Canada) or Quebec Sales Tax under an ACT RESPECTING THE QUEBEC SALES TAX is
payable in respect of the purchase and sale of the Purchased Assets. In that
respect, Parent represents that it is not registered under Subdivision d of
Division V of Part IX of the EXCISE TAX ACT (Canada) and under Division I of
Chapter VIII of an ACT RESPECTING THE QUEBEC SALES TAX.
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
CONCERNING THE TRANSACTION
5.1 REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer Parties
the following as of the date of this Agreement:
(a) STATUS OF CERTAIN SELLERS. Each Seller is an entity duly
created, formed or organized, validly existing, and in good
standing under the Laws of the jurisdiction of its creation,
formation, or organization. There is no pending or threatened
Action for the dissolution, liquidation, insolvency, or
rehabilitation of any Seller.
(b) POWER AND AUTHORITY; ENFORCEABILITY. Each Seller has the power
and authority to execute and deliver each Transaction Document
to which such Seller is a party, and to perform and consummate
the Transactions. Each Seller has taken all actions necessary
to authorize the execution and delivery of each Transaction
Document to which it is party, the performance of such
Seller's obligation's thereunder, and the consummation of the
Transactions. Each Transaction Document has been duly
authorized, executed, and delivered by, and assuming the due
authorization, execution, and delivery thereof by each other
party thereto, is Enforceable against, each Seller that is
party thereto.
(c) NO VIOLATION. Except as set forth on SCHEDULE 5.1(C), the
execution and the delivery of the Transaction Documents by
each Seller party thereto and the performance and consummation
of the Transactions by such Seller will not (i) result in a
material Breach of any Law or Order to which such Seller is
subject or any provision of its Organizational Documents, (ii)
result in a material Breach of any Contract, Order, or Permit
to which such Seller is a party or by which such Seller is
bound or to which any of such Seller's assets is subject, or
(iii) require any Consent, except any SEC and other filings
required to be made by Parent or Buyer. No Seller that is
party to any Contract to which any Acquired Entity is a party
or by which any Acquired Entity is bound or any of its assets
is subject has Breached any such Contract.
(d) RESIDENCE OF SELLERS. Each Seller is not a non-resident of
Canada for purposes of section 116 of the INCOME TAX ACT
(Canada) and Part II of the TAXATION ACT (Quebec).
(e) BROKERS' FEES. No Seller has any Liability to pay any
compensation to any broker, finder, or agent with respect to
the Transactions for which any Buyer Party or any Acquired
Entity could become directly or indirectly Liable.
(f) SHARES; SELLER INFORMATION. Each Seller holds of record and
owns beneficially the number of Shares as set forth next to
such Seller's name in EXHIBIT A, free and clear of any
Encumbrances (other than any restrictions under the Securities
Act and state securities Laws). With respect to each Seller,
EXHIBIT A also sets forth the address, state of residence and
federal tax identification number (or social security
26
number, as applicable) of such Seller as of the date hereof.
No Seller is a party to any Contract that could require such
Seller to sell, transfer, or otherwise dispose of any capital
stock of any Acquired Entity (other than this Agreement). No
Seller is a party to any other Contract with respect to any
capital stock of any Acquired Entity.
(g) INVESTMENT. Each Seller (i) understands that none of the Buyer
Notes, the Buyer Exchangeable Shares or the Parent Common
Stock have been, nor will be, except as provided for in the
Registration Rights Agreement, registered under the Securities
Act, under any state securities Laws, or under any Canadian
securities Laws, and that the Buyer Notes, the Buyer
Exchangeable Shares and the Parent Common Stock are being
offered and sold in reliance upon United States federal and
state, and Canadian provincial, exemptions for transactions
not involving any public offering, (ii) is acquiring the Buyer
Notes, the Buyer Exchangeable Shares and the Parent Common
Stock solely for Seller's own account for investment purposes,
and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain
information concerning Buyer Parties and has had the
opportunity to obtain additional information as desired to
evaluate the merits and the risks inherent in holding the
Buyer Notes, the Buyer Exchangeable Shares and the Parent
Common Stock, (v) is able to bear the economic risk and lack
of liquidity inherent in holding the Buyer Notes, the Buyer
Exchangeable Shares and the Parent Common Stock, (vi) is an
"accredited investor" as defined in Regulation D promulgated
under the Securities Act and as defined under Regulation
45-106 and, where applicable, has not been created or used
solely to purchase or hold securities as an "accredited
investor" for purposes of Regulation 45-106, (vii) has not
entered into this transactions as a result of any general
solicitation or general advertising (within the meaning of
Regulation D under the Securities Act and (viii) understands
that the Buyer Notes, the Buyer Exchangeable Shares, and the
Parent Shares issuable in exchange thereof will be "restricted
securities" within the meaning of Rule 144(a)(3) of the
Securities Act and may not be offered or sold in the United
States or to a U.S. Person except pursuant to a registration
statement under the Securities Act or an exemption therefrom
and except pursuant to a prospectus filed and receipted under
applicable Canadian securities legislation or an exemption
therefrom.
(h) BUYER REVIEW. Each Seller:
(i) Has such knowledge and experience in financial and
business matters that it is capable of evaluating the
merits and risks of such Seller's investment in the
Buyer Notes, the Buyer Exchangeable Shares and the
Parent Common Stock contemplated hereby, and that
such Seller is able to bear the economic risk of such
investment indefinitely.
(ii) Has (A) had the opportunity to meet with
representative officers and other representatives of
Parent to discuss its business, assets, liabilities,
financial condition, cash flow, and operations, and
(B) received all materials, documents and other
information that it deems necessary or advisable to
evaluate the Buyer Notes, the Buyer Exchangeable
Shares and the Parent Common Stock and the
Transactions.
27
(iii) Has made its own independent examination,
investigation, analysis and evaluation of the Buyer
Notes, the Buyer Exchangeable Shares and the Parent
Common Stock Buyer, including its own estimate of the
value of the Buyer Notes, the Buyer Exchangeable
Shares and the Parent Common Stock.
(iv) Has undertaken such due diligence (including a review
of Parent's assets, properties, liabilities, books,
records, and contracts) as it deems adequate,
including that described above.
Nothing in SECTION 5.1(H) will preclude a Seller from relying
on the representations, warranties, covenants, and agreements of Buyer
Parties herein or from pursuing their remedies with respect to a Breach
thereof.
(i) ASSETS AND LIABILITIES. Except as set forth on SCHEDULE
5.1(I), each Seller is a holding company and does not operate
any business nor have any assets or Liabilities other than
such Seller's ownership of the Shares and Liabilities related
thereto.
5.2 REPRESENTATIONS AND WARRANTIES OF BUYER PARTIES
Buyer Parties, jointly and severally, represent and warrant to Sellers
and Trust the following as of the date of this Agreement.
(a) ENTITY STATUS. Each Buyer Party is a corporation duly created,
formed or organized, validly existing and in good standing
under the Laws of the jurisdiction of its creation, formation
or organization. Each Buyer Party has the requisite power and
authority to own or lease its properties and to carry on its
business as currently conducted. There is no pending or
threatened Action for the dissolution, liquidation,
insolvency, or rehabilitation of any Buyer Party. Buyer (not
Parent) is a Private Issuer.
(b) POWER AND AUTHORITY; ENFORCEABILITY. Each Buyer Party has the
relevant corporate power and authority to execute and deliver
each Transaction Document to which it is party, and, subject
to obtaining Shareholder Approval, to perform and consummate
the Transactions. Other than obtaining Shareholder Approval,
each Buyer Party has taken all action necessary to authorize
the execution and delivery of each Transaction Document to
which it is party, the performance of its obligations
thereunder, and the consummation of the Transactions. Each
Transaction Document has been duly authorized, executed and
delivered by, and assuming the due authorization, execution,
and delivery thereof by each other party thereto and obtaining
Shareholder Approval, is Enforceable against, each Buyer Party
that is a party thereto.
(c) NO VIOLATION. Except as set forth on SCHEDULE 5.2(C), the
execution and delivery of the Transaction Documents by each
Buyer Party party thereto and the performance and consummation
of the Transactions by such Buyer Party will not (i) Breach
any Law or Order to which such Buyer Party is subject or any
provision of its Organizational Documents; (ii) Breach any
Contract, Order, or Permit to which such Buyer Party is a
party or by which it is bound or to which any of its assets is
subject; (iii) require any Consent, except (A) obtaining
Shareholder Approval, and (B) any SEC and
28
other filings required to be made by Buyer or Parent,
including the Proxy Statement to be filed in connection with
obtaining Shareholder Approval.
(d) BROKERS' FEES. No Buyer Party has any Liability to pay any
compensation to any broker, finder, or agent with respect to
the Transactions for which any Seller could become directly or
indirectly Liable.
(e) CAPITALIZATION.
(i) Buyer's authorized share capital consists of an
unlimited number of Buyer Common Shares, of which 100
shares are issued and outstanding and no shares are
held in treasury, an unlimited number of Buyer
Exchangeable Shares, of which no shares are issued
and outstanding and no shares are held in treasury,
an unlimited number of first preferred shares, of
which no shares are issued and outstanding and no
shares are held in treasury, and an unlimited number
of second preferred shares, of which no shares are
issued and outstanding and no shares are held in
treasury. All of the issued and outstanding Buyer
Common Shares (A) have been duly authorized, are
validly issued, fully paid, and nonassessable, (B)
were issued in compliance with all applicable United
States federal and state securities Laws and all
applicable Canadian securities Laws, and (C) were not
issued in Breach of any Commitments. No Commitments
exist with respect to any Buyer Common Shares and no
such Commitments will arise in connection with the
Transactions. There are no Contracts with respect to
the voting or transfer of Buyer's share capital,
other than the Ancillary Agreements and Voting Trust
Agreement. Buyer is not obligated to redeem or
otherwise acquire any of its outstanding share
capital other than the Buyer Exchangeable Shares.
(ii) The Buyer Exchangeable Shares to be issued pursuant
to this Agreement will be duly authorized, validly
issued, fully paid and nonassessable, and the Buyer
Exchangeable Shares and the Buyer Notes to be issued
pursuant to this Agreement will be issued in
compliance with all applicable United States federal
and state securities Laws and all applicable Canadian
securities Laws.
(iii) Parent's authorized capital stock consists of
100,000,000 shares of Parent Common Stock, of which
30,543,763 shares are issued and outstanding as of
November 24, 2006 and no shares are held in treasury,
and 2,000,000 shares of preferred stock, no par
value, of which 250,000 shares have been designated
Series B Preferred Stock, of which no shares are
issued and outstanding and no shares are held in
treasury. Prior to the Closing, Parent's authorized
capital stock also will include the Parent Special
Voting Shares. All of the issued and outstanding
shares of Parent Common Stock (A) have been duly
authorized, are validly issued, fully paid, and
nonassessable, (B) were issued in compliance with all
applicable state, federal and foreign securities
Laws, and (C) were not issued in Breach of any
Commitments. Except as described in SCHEDULE 5.2(E)
or disclosed in the Parent SEC Documents, no
Commitments exist with respect to any Parent Common
Stock and no such Commitments will arise in
connection with the Transactions. Parent is not
obligated to redeem or otherwise acquire any of its
outstanding capital stock.
29
(iv) The shares of Parent Common Stock and the Parent
Special Voting Shares to be issued pursuant to this
Agreement will be duly authorized, validly issued,
fully paid and nonassessable and will be issued in
compliance with all applicable United States federal
and state securities Laws and all applicable Canadian
securities Laws.
(f) PARENT'S SECURITIES FILINGS AND FINANCIAL STATEMENTS. Parent
has furnished or made available to Sellers and Trust true and
complete copies of all reports or registration statements
Parent has filed with the SEC under the Securities Act and the
Exchange Act, for all periods subsequent to December 31, 2004,
all in the form so filed (collectively the "PARENT SEC
DOCUMENTS"). As of their respective filing dates, the Parent
SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as
applicable, and none of the Parent SEC Documents filed under
the Exchange Act contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances in which they were made, not
misleading, except to the extent corrected by a subsequently
filed document with the SEC. None of the Parent SEC Documents
filed under the Securities Act contained an untrue statement
of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading at the time such Parent SEC Documents
became effective under the Securities Act. Parent's financial
statements, including the notes thereto, included in the
Parent SEC Documents (the "PARENT FINANCIAL STATEMENTS")
comply as to form in all material respects with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been
prepared in accordance with US GAAP consistently applied
(except as may be indicated in the notes thereto) and present
fairly Parent's consolidated financial position at the dates
thereof and of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to
normal audit adjustments). Since the date of the most recent
Parent SEC Document, Parent has not effected any change in any
method of accounting or accounting practice, except for any
such change required because of a concurrent change in US
GAAP. Except as disclosed in the Parent SEC Documents, there
has not been an event or development that has had or would
reasonably be expected to have a Parent Material Adverse
Effect.
(g) ACQUIRED ENTITY REVIEW. Each Buyer Party:
(i) Has such knowledge and experience in financial and
business matters that it is capable of evaluating the
merits and risks of its investment in the Shares
being acquired by such Buyer Party contemplated
hereby, and that such Buyer Party is able to bear the
economic risk of such investment indefinitely.
(ii) Has (A) had the opportunity to meet with
representative officers and other representatives of
each Acquired Entity to discuss its business, assets,
liabilities, financial condition, cash flow, and
operations, and (B) received all materials, documents
and other information that it deems necessary or
advisable to evaluate the Shares and the
Transactions.
30
(iii) Has made its own independent examination,
investigation, analysis and evaluation of the Shares,
including its own estimate of the value of the
Shares.
(iv) Has undertaken such due diligence (including a review
of Acquired Entities' assets, properties,
liabilities, books, records, and contracts) as it
deems adequate, including that described above.
Nothing in this SECTION 5.2(G) will preclude any Buyer Party
from relying on the representations, warranties, covenants, and
agreements of Seller Parties herein or from pursuing their remedies
with respect to a Breach thereof.
(h) REQUIRED VOTE. The affirmative vote of the holders of a
majority of the votes entitled to be cast by the holders of
the Parent Common Stock (the "REQUISITE VOTE") is the only
vote of the holders of any class or series of Parent's capital
stock necessary to approve this Agreement, the Ancillary
Agreements, and the Transactions, including, without
limitation, the issuance and sale of the Parent Shares.
(i) RIGHTS AGREEMENT. The Board of Directors of Parent has
unanimously approved this Agreement, the Ancillary Agreements,
and the Transactions, including, without limitation, the
issuance and sale of the Parent Special Voting Shares and
Parent Shares, and Parent has otherwise taken all action
sufficient to render inapplicable to this Agreement, the
Ancillary Agreements, and the Transactions, including, without
limitation, the issuance and sale of the Parent Special Voting
Shares and Parent Shares, the provisions of that Rights
Agreement, dated as of November 21, 2003, by and between
Parent and Computershare Trust Company, as amended.
(j) NO UNDISCLOSED LIABILITIES. Except as disclosed in the Parent
SEC Documents, and except for normal or recurring Liabilities
in the ordinary course of business consistent with past
practice, the Parent and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise, whether
due or to become due, which individually or in the aggregate
are reasonably likely to have a Parent Material Adverse
Effect.
(k) LEGAL COMPLIANCE. Each of Parent and its Subsidiaries has
complied in all material respects with all applicable Laws,
and no Action is pending or, to Parent's Knowledge, threatened
against it alleging any such failure to comply.
(l) LITIGATION.
(i) Except as disclosed in SCHEDULE 5.2(L) or the Parent
SEC Reports, neither Parent nor any of its
Subsidiaries (a) is subject to any outstanding Order
or (b) is a party, the subject of, or, to Parent's
Knowledge, is threatened to be made a party to or the
subject of any Action that seeks monetary Damages in
excess of $500,000. Except as disclosed in SCHEDULE
5.2(L), no Action questions the Enforceability of
this Agreement or the Transactions, or could result
in any Parent Material Adverse Change, and Parent has
no basis to believe that any such Action may be
brought or threatened against any of Parent or
Subsidiaries.
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(ii) To Parent's Knowledge, there is no instance where,
due either to (a) rights asserted by another Person,
(b) a covenant granted by Parent or any
predecessor-in-interest or Affiliate thereof, or (c)
any Order, there is any restriction on the ability of
Parent or its Subsidiaries to carry on the business
currently carried on by such Parent or Subsidiary
anywhere in the world, whether or not such
restriction results in a Parent Material Adverse
Change.
5.3 REPRESENTATIONS AND WARRANTIES OF TRUST
Trust represents and warrants to Buyer Parties that the statements
contained in this SECTION 5.3 are correct and complete as of the date of this
Agreement:
(a) STATUS OF TRUST. Trust is a trust duly created, formed or
organized, validly existing, and in good standing under the
Laws of the jurisdiction of its creation, formation, or
organization, pursuant to Declaration of Trust dated as of
October 1, 2003, which is currently in effect. There is no
pending or threatened Action for the dissolution, liquidation,
insolvency, or rehabilitation of Trust. The sole trustee (the
"TRUSTEE") of Trust is BFL Management Inc., a Canada
corporation, which is wholly-owned, directly or indirectly, by
000 Xxxxxx. The sole beneficiary of Trust is 6144195 Canada
Inc., a Canada corporation, which is wholly-owned, directly or
indirectly, by 418 Canada. Trust is not a non-resident of
Canada for purposes of Section 116 of the INCOME TAX ACT
(Canada) and Part II of the TAXATION ACT (Quebec).
(b) POWER AND AUTHORITY; ENFORCEABILITY. Each of Trust and Trustee
has the power and authority to execute and deliver each
Transaction Document to which Trust is a party, and to perform
and consummate the Transactions. Each of Trust and Trustee has
taken all actions necessary to authorize the execution and
delivery of each Transaction Document to which Trust is party,
the performance of Trust's obligation's thereunder, and the
consummation of the Transactions. Each Transaction Document to
which Trust is a party has been duly authorized, executed, and
delivered by, and assuming the due authorization, execution,
and delivery thereof by each other party thereto, is
Enforceable against, Trust.
(c) NO VIOLATION. Except as set forth on SCHEDULE 5.3(C), the
execution and the delivery of the Transaction Documents by
Trust to the extent a party thereto and the performance and
consummation of the Transactions by Trust, including, without
limitation, the sale and transfer of the Purchase Assets, will
not (i) result in a material Breach of any Law (including the
Bulk Sales Act (Ontario)) or Order to which Trust is subject
or any provision of its Organizational Documents, (ii) result
in a material Breach of any Contract, Order, or Permit to
which Trust is a party or by which Trust is bound or to which
any of Trust's assets is subject, or (iii) require any
Consent, except any SEC and other filings required to be made
by Parent or Buyer. To the extent Trust is a party thereto,
Trust has not Breached any Contract to which any Acquired
Entity is a party or by which any Acquired Entity is bound or
any of its assets is subject.
32
(d) BROKERS' FEES. Trust has no Liability to pay any compensation
to any broker, finder, or agent with respect to the
Transactions for which any Buyer Party or any Acquired Entity
could become directly or indirectly Liable.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES CONCERNING
ACQUIRED ENTITIES AND PURCHASED ASSETS
Each Seller Party, jointly and severally, represents and warrants to
each Buyer Party the following as of the date of this Agreement:
6.1 ENTITY STATUS
Each Acquired Entity is an entity duly created, formed, or organized,
validly existing, and in good standing under the Laws of the jurisdiction of its
creation, formation, or organization. Each Acquired Entity is duly authorized to
conduct its business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each Acquired Entity has the requisite
power and authority necessary to own or lease its properties and to carry on its
businesses as currently conducted. SCHEDULE 6.1 lists each Acquired Entity's
directors and officers. Sellers have delivered to Parent correct and complete
copies of each Acquired Entity's Organizational Documents, as amended to date.
No Acquired Entity is in Breach of any provision of its Organizational
Documents. There is no pending or, to each Seller Party's Knowledge, threatened
Action for the dissolution, liquidation, insolvency, or rehabilitation of any
Acquired Entity. Each Acquired Entity is a Private Issuer.
6.2 POWER AND AUTHORITY; ENFORCEABILITY
Each Acquired Entity has the relevant power and authority necessary to
execute and deliver each Transaction Document to which it is a party and to
perform and consummate the Transactions. Each Acquired Entity has taken all
action necessary to authorize the execution and delivery of each Transaction
Document to which it is a party, the performance of such Acquired Entity's
obligations thereunder, and the consummation of the Transactions. Each
Transaction Document to which any Acquired Entity is party has been duly
authorized, executed, and delivered by, and assuming the due authorization,
execution, and delivery thereof by each other party thereto, is Enforceable
against, such Acquired Entity.
6.3 NO VIOLATION
Except as listed on SCHEDULE 6.3, the execution and the delivery of the
Transaction Documents to which an Acquired Entity is a party by such Acquired
Entity and the performance of their respective obligations hereunder and
thereunder, and consummation of the Transactions by each Acquired Entity will
not (a) result in a material Breach of any Law or Order to which any Acquired
Entity is subject or any provision of its Organizational Documents; (b) result
in a material Breach of any Contract, Order, or Permit to which any Acquired
Entity is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Encumbrance upon any of its assets);
(c) require any Consent; (d) trigger any rights of first refusal, preferential
purchase, or similar rights; or (e) cause the recognition of gain or loss for
33
Tax purposes with respect to any Acquired Entity or subject any Acquired Entity
or its assets to any Tax.
6.4 BROKERS' FEES
No Acquired Entity has any Liability to pay any compensation to any
broker, finder, or agent with respect to the Transactions for which any Buyer
Party or any Acquired Entity could become directly or indirectly Liable.
6.5 CAPITALIZATION
Each of Target Companies' authorized Equity Interests are described on
SCHEDULE 6.5, of which only the Shares are issued and outstanding and no shares
are held in treasury by any Target Company. All of the issued and outstanding
Shares: (a) have been duly authorized and are validly issued, fully paid, and
nonassessable, (b) were issued in compliance with all applicable state, federal
and foreign securities Laws, (c) were not issued in Breach of any Commitments,
and (d) are held of record and owned beneficially by the respective Sellers as
set forth in EXHIBIT A. No Commitments exist with respect to any Equity Interest
of Target Companies, and no Commitments will arise in connection with the
Transactions. There are no Contracts with respect to the voting or transfer of
any of Target Companies' Equity Interests. None of Target Companies is obligated
to redeem or otherwise acquire any of its outstanding Equity Interests.
6.6 RECORDS
The copies of Acquired Entities' Organizational Documents that were
provided to Parent are accurate and complete and reflect all amendments made
through the date hereof. Acquired Entities' minute books and in all material
respects other records made available to Parent for review were correct and
complete in all material respects as of the date of such review, no further
entries have been made through the date of this Agreement, such minute books and
records contain the true signatures of the persons purporting to have signed
them, and such minute books and records contain an accurate record of all
material actions of the stockholders, directors, members, managers, or other
such representatives of Acquired Entities taken by written consent, at a
meeting, or otherwise since formation.
6.7 ACQUIRED SUBSIDIARIES
Set forth on SCHEDULE 6.7 is a list of each Target Company's
Subsidiaries (collectively, the "ACQUIRED SUBSIDIARIES") and for each Acquired
Subsidiary (a) its name and jurisdiction of creation, formation, or
organization, (b) if such Acquired Subsidiary is a corporation, (i) the number
of authorized Equity Interests of each class of its Equity Interests, (ii) the
number of issued and outstanding Equity Interests of each class of its Equity
Interests, the names of the holders thereof, and the number of Equity Interests
held by each such holder, and (iii) the number of Equity Interests held in
treasury, and (c) if such Acquired Subsidiary is not a corporation, (i) the
class of Equity Interests created under such Acquired Subsidiary's
Organizational Documents and (ii) the holder(s) of such Equity Interests. Each
Acquired Subsidiary is a Private Issuer. All of the issued and outstanding
Equity Interests of each Acquired Subsidiary (A) that is a corporation have been
duly authorized and are validly issued,
34
fully paid, and nonassessable and (B) that is not a corporation (i) have been
duly created pursuant to the Laws of the jurisdiction of such Acquired
Subsidiary, (ii) have been issued and paid for in accordance with the
Organizational Documents governing such Acquired Subsidiary, and (iii) are fully
paid and non-assessable and require no further capital contribution, loans, or
credit support. Acquired Entities hold of record and own beneficially all of the
outstanding Equity Interests of Acquired Subsidiaries, free and clear of any
Encumbrances (other than restrictions under the Securities Act and state
securities Laws). No Commitments exist or are authorized with respect to any
Acquired Subsidiaries or their Equity Interests and no such Commitments will
arise in connection with the Transactions. No Acquired Subsidiary is obligated
to redeem or otherwise acquire any of its Equity Interests. No Acquired Entity
controls, directly or indirectly, or has any direct or indirect Equity Interest
in any Person that is not an Acquired Subsidiary.
6.8 FINANCIAL STATEMENTS
Set forth on SCHEDULE 6.8 are the following financial statements
(collectively the "FINANCIAL Statements"):
(a) audited combined balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for
the fiscal years ended December 31, 2003, December 31, 2004
and December 31, 2005 (the "MOST RECENT YEAR END") for Target
Companies (consolidated with each Target Company's
Subsidiaries) and Trust; and
(b) unaudited combined balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for
the nine months ended September 30, 2006 (the "BALANCE SHEET
DATE") for Target Companies (consolidated with each Target
Company's Subsidiaries) and Trust (the "INTERIM FINANCIAL
STATEMENTS").
The Financial Statements have been prepared in accordance with Canadian
GAAP applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of Acquired Entities and Trust on a
combined basis as of such dates and the results of operations of Acquired
Entities and Trust on a combined basis for such periods, are consistent with the
books and records of Acquired Entities and Trust, and include a reconciliation
to US GAAP prepared in accordance with Item 17 of Form 20-F promulgated by the
SEC; PROVIDED, HOWEVER, that the Interim Financial Statements are subject to
normal year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items. Since the Balance
Sheet Date neither Trust nor any Acquired Entity has effected any change in any
method of accounting or accounting practice, except for any such change required
because of a concurrent change in Canadian GAAP.
6.9 SUBSEQUENT EVENTS
Except as set forth in SCHEDULE 6.9, since the Balance Sheet Date, each
Acquired Entity and Trust has operated in the Ordinary Course of Business and,
as of the date hereof, there have been no events, series of events or the lack
of occurrence thereof which, singularly or in the
35
aggregate, have had a Material Adverse Effect. Without limiting the foregoing,
except as set forth in SCHEDULE 6.9, since the Balance Sheet Date, none of the
following have occurred:
(a) Neither Trust nor any Acquired Entity has sold, leased,
transferred, or assigned any assets other than for a fair
consideration in the Ordinary Course of Business and sales of
assets have not exceeded $25,000 singularly or $50,000 in the
aggregate.
(b) Trust has not sold, leased, transferred, or assigned any
Purchased Assets.
(c) Neither Trust nor any Acquired Entity has entered into any
Contract (or series of related Contracts) either involving
more than $30,000 or outside the Ordinary Course of Business.
(d) No Security Interest has been imposed upon any assets of any
Acquired Entity or Trust.
(e) Neither Trust nor any Acquired Entity has made any capital
expenditure (or series of related capital expenditures)
involving more than $25,000 individually, $50,000 in the
aggregate, or outside the Ordinary Course of Business.
(f) Neither Trust nor any Acquired Entity has made any capital
investment in, any loan to, or any acquisition of the
securities or assets of, any other Person involving more than
$25,000 singularly, $50,000 in the aggregate, or outside the
Ordinary Course of Business.
(g) Neither Trust nor any Acquired Entity has issued any note,
bond, or other debt security or created, incurred, assumed, or
guaranteed any Liability for borrowed money or capitalized
lease Contract either involving more than $15,000 individually
or $30,000 in the aggregate.
(h) Neither Trust nor any Acquired Entity has delayed or postponed
the payment of accounts payable or other Liabilities either
involving more than $15,000 singularly, $30,000 in the
aggregate, or outside the Ordinary Course of Business.
(i) Neither Trust nor any Acquired Entity has canceled,
compromised, waived, or released any Action (or series of
related Actions) either involving more than $15,000 or outside
the Ordinary Course of Business.
(j) Neither Trust nor any Acquired Entity nor any of their
respective Affiliates, customers, or licensees has granted, or
has become party to any Contracts granting, any rights with
respect to any Intellectual Property.
(k) There has been no change made or authorized to be made to the
Organizational Documents of any Acquired Entity or Trust.
(l) No Acquired Entity has issued, sold, or otherwise disposed of
any of its Equity Interests.
36
(m) No Acquired Entity has declared, set aside, or paid any
dividend or made any distribution with respect to its Equity
Interests (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its Equity Interests.
(n) Neither Trust nor any Acquired Entity has experienced any
damage, destruction, or loss (whether or not covered by
insurance) to its properties involving more than $25,000
singularly or $50,000 in the aggregate.
(o) Neither Trust nor any Acquired Entity has made any loan to, or
entered into any other transaction with, any of its directors,
officers, employees, trustees, or beneficiaries.
(p) No Acquired Entity has entered into any collective bargaining
Contract, or any employment Contract not terminable by the
Acquired Entity upon no more than sixty (60) days notice at no
cost to the Acquired Entity, or modified the terms of any such
existing Contract.
(q) No Acquired Entity has committed to pay any bonus or granted
any increase in the base compensation (i) of any director or
officer, or an employee who is also a Seller or an Affiliate
of Seller, or (ii) outside of the Ordinary Course of Business,
of any of its other employees.
(r) No Acquired Entity has adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or
similar Contract for the benefit of any of its directors,
officers, or employees (or taken any such action with respect
to any other Employee Benefit Plan).
(s) No Acquired Entity has made any other change in employment
terms for any of its officers, directors or employees outside
the Ordinary Course of Business.
(t) No Acquired Entity has made or pledged to make any charitable
or other capital contribution either involving more than
$15,000 (individually or in the aggregate) or outside the
Ordinary Course of Business.
(u) Neither Trust nor any Acquired Entity has committed to any of
the foregoing.
6.10 LIABILITIES
Except as set forth on SCHEDULE 6.10, neither Trust nor any Acquired
Entity has any liabilities required to be disclosed on the Interim Financial
Statements in accordance with Canadian GAAP, except for (a) liabilities
reflected in the Interim Financial Statements and not heretofore paid or
discharged, and (b) liabilities that have arisen after the Balance Sheet Date in
the Ordinary Course of Business which are not material. 6.11 LEGAL COMPLIANCE
Each Acquired Entity has complied in all material respects with all
applicable Laws, and no Action is pending or, to each Seller Party's Knowledge,
threatened against it alleging any such failure to comply. No material
expenditures are, or based on applicable Law will be, required of any Acquired
Entity for it and its business and operations to remain in compliance with
applicable Law.
37
6.12 TAX MATTERS
(a) Each Acquired Entity has prepared and filed with all
appropriate Governmental Bodies all Tax Returns required to be
filed in respect of Taxes within the times and in the manner
prescribed by applicable Law for all fiscal periods ending
prior to the date hereof and will continue to do so in respect
of all fiscal periods ending before the Closing Date and,
where applicable, has been assessed with respect to all fiscal
periods up to and including those set forth in SCHEDULE
6.12(A) and has given no waiver of any limitation period for
collection, assessment or reassessment of Tax to any
Governmental Body. All such Tax Returns were accurate, correct
and complete in all material respects; accurately reflect the
facts regarding the income, business, assets, operations,
activities, status, or other matters of each Acquired Entity
or any other information required to be shown or considered
thereon. No Acquired Entity currently is the beneficiary of
any extension of time within which to file any Tax Return.
Each Acquired Entity has paid in full all Taxes as reflected
on all such Tax Returns, including on all assessments in
respect of all such returns, and has paid, and will continue
paying, all installments and made all other remittances on
account of Tax required to be paid by such corporation in
respect of all periods for which a Tax Return has not been
filed. Without limiting in any manner whatsoever the effect
and validity of SECTION 6.12(A) and any Tax matters addressed
in this Agreement, all Tax Returns that may have been prepared
and filed after the time prescribed by applicable Law, if any,
have not and will not result in any adverse Tax consequences
for the Acquired Entity so concerned or any other Acquired
Entities. For greater certainty, subject only for having been
filed after the prescribed time, such Tax Returns remain
subject to all Tax matters addressed in this Agreement.
(b) Except as provided in SCHEDULE 6.12(B), no Tax Return of any
Acquired Entity has been reassessed by any Governmental Body.
To each Seller Party's Knowledge, except as provided in
SCHEDULE 6.12(B), there is no review, audit, request, Action,
demand or reassessment in respect of any Tax Return or Tax
liability of any Acquired Entity at present in course, pending
or threatened by any Governmental Body. No Seller Party has
Knowledge of any contingent Tax liabilities or any grounds for
an assessment or reassessment of an Acquired Entity, other
than as disclosed in SCHEDULE 6.12(B).
(c) Each Acquired Entity has paid in full all Taxes required by
applicable Law to be paid on or prior to the date hereof, and
is not and will not be liable for any Taxes in respect of any
fiscal period ending on or before the Closing Date, nor in
respect of such portion of a fiscal period ending after the
Closing Date which, for purposes of this
38
Agreement, is deemed to end on the Closing Date, other than
Tax liabilities the amount of which shall have been accrued in
the Financial Statements (rather than in any notes thereto).
(d) Each Acquired Entity has withheld or deducted, and will
continue to do so until the Closing Date, from each payment
made or owed to its present and former officers, directors,
employees, independent contractors, shareholders, Affiliates,
creditors, other third party, and to all Persons who are
non-residents of Canada for the purposes of the INCOME TAX ACT
(Canada), all amounts which it is required by any applicable
Law to which it is subject to withhold or deduct and has duly
remitted, and will continue to do so until the Closing Date,
all amounts so withheld or deducted to the proper Governmental
Authority thereof within the delays and in the manner required
by applicable Law. Each Acquired Entity has charged, collected
and remitted, and will continue to do so, on a timely basis
and in the manner required by applicable Law all Taxes on any
sale, supply or delivery whatsoever, made by it or on its
behalf. The Interim Financial Statements (rather than in the
notes thereto) show adequate reserves for all such amounts and
Taxes not required by applicable Law to be remitted on or
before the Closing Date.
(e) Except as provided in SCHEDULE 6.12(E) which confirms the
subject Acquired Entity and the applicable jurisdiction, to
each Seller Party's Knowledge, none of Acquired Entities has
ever been nor is required to file any Tax Return or to pay
Taxes with any Governmental Body located in any jurisdiction
outside Canada. No action has ever been initiated or, to each
Seller Party's Knowledge, threatened by a Governmental Body in
a jurisdiction with respect to a fiscal period for which an
Acquired Entity did not file a Tax Return in such jurisdiction
that it is or may be subject to Tax by that jurisdiction for
such period. There are no Encumbrances on any Assets that
arose in connection with any failure (or alleged failure) to
pay any Tax.
(f) Sellers have delivered or has made available to Parent correct
and complete copies of all Tax Returns, reports and statements
of deficiencies assessed or reassessed against or agreed to by
any Acquired Entity for all fiscal periods or other periods
for which the relevant limitation period or prescription in
any applicable Laws has not expired, including written
communications relating thereto from any Governmental Body and
the responses, if any, of the Acquired Entity to such
communication. SCHEDULE 6.12(F) indicates such periods that
have not been audited.
(g) No Acquired Entity will at any time be deemed to have a
capital gain pursuant to Subsection 80.03(2) of the INCOME TAX
ACT (Canada) or any analogous Canadian provincial legislative
provision as a result of any transaction or event taking place
in any taxation year ending on or prior to the Closing Date.
(h) There are no circumstances existing which could result in the
application of Sections 78, 80, 160, or 247 of the INCOME TAX
ACT (Canada) or any equivalent Canadian provincial provision
to any Acquired Entity.
(i) There is no contract, plan, or arrangement, including but not
limited to the provisions of this Agreement, covering any
employee or former employee of an Acquired
39
Entity that, individually or collectively, could give rise to
the payment after the Closing Date of any amount that would
not be deductible by such entity as an expense under any
applicable Law other than reimbursements of a reasonable
amount of entertainment expenses and other non-deductible
expenses that are commonly paid by similarly situated
businesses in reasonable amounts.
(j) There is no tax sharing agreement, tax indemnity obligation,
or similar written or unwritten agreement, understanding, or
practice with respect to Taxes (including any advance pricing
agreement, closing agreement, or other arrangement relating to
Taxes) that will require any payment by any Acquired Entity to
any other Person as a transferee or successor by contract or
otherwise.
(k) No Acquired Entity has filed a consent under Code Section
341(f) concerning collapsible corporations.
(l) No Acquired Entity has been a United States real property
holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii).
(m) Each Acquired Entity has disclosed on its Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Code Section 6662.
(n) No Acquired Entity is a party to any Tax allocation or sharing
Contract (other than a group the common parent of which is or
was a Target Company).
(o) No Acquired Entity (i) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other
than a group the common parent of which is or was a Target
Company) or (ii) has any Liability for the Taxes of any Person
(other than each Acquired Entity) under Treas. Reg. Section
1.1502-6 or similar Law, as a transferee or successor, by
Contract, or otherwise.
(p) The unpaid or unremitted Taxes of Acquired Entities (i) did
not, as of the Balance Sheet Date, exceed the reserve for Tax
Liability (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth on the face of the Interim Financial
Statements (other than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom
and practice of Acquired Entities in filing their Tax Returns.
Since the Balance Sheet Date, no Acquired Entity has incurred
any liability for Taxes outside the Ordinary Course of
Business consistent with past custom and practice.
(q) No Acquired Entity will be required to include any item of
income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending
after the Closing Date as a result of any: (A) change in
method of accounting for a taxable period ending on or prior
to the Closing Date; (B) "closing agreement" as described in
Code section 7121 (or any corresponding or similar provision
of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C)
40
intercompany transactions or any excess loss account described
in Treasury Regulations under Code Section 1502 (or any
corresponding or similar provision of state, local or foreign
income Tax law); (D) installment sale or open transaction
disposition made on or prior to the Closing Date; or (E)
prepaid amount received on or prior to the Closing Date.
6.13 TITLE TO AND CONDITION OF ASSETS; RETAIL STORES
(a) Acquired Entities have good, and indefeasible title to, or a
valid leasehold interest in, all buildings, machinery,
equipment, and other tangible assets located on their
premises, shown on the Interim Financial Statements, or
acquired after the Balance Sheet Date, which are necessary for
the conduct of their business as currently conducted, in each
case free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of
Business since the Balance Sheet Date and Security Interests
listed on SCHEDULE 6.13(A). Each such tangible asset has been
maintained in accordance with normal industry practice and, is
in good operating condition (subject to normal wear and tear).
(b) Trust has good and indefeasible title to the cash and cash
equivalents that comprise part of the Purchased Assets free
and clear of all Security Interests, except to the extent
listed on SCHEDULE 6.13(B).
(c) Since December 31, 2005, the Acquired Entities have built or
are in the process of building seven (7) retail stores. As of
the date of this Agreement, the Acquired Entities own and
operate a total of forty four (44) retail stores. SCHEDULE
6.13(C) lists the approved capital expenditures and
development committee economic model for the current retail
stores built or under construction since December 31, 2005.
6.14 REAL PROPERTY
(a) No Acquired Entity owns (or has ever owned) any real property.
(b) SCHEDULE 6.14(B) lists and describes briefly all real property
leased or subleased to each Acquired Entity, each lease and
sublease Contract, and in respect of each such Contract: the
municipal address and applicable unit or premises leased at
the date of such contract and any amendments; the parties
thereto; the area of the space subject thereto; the remaining
term and any unexpired options to extend or renew; the current
basic and percentage rent; the amount of any prepaid rent;
deposit, guarantee, indemnity or security; any current or
future rent-free period, all of such information being true
and accurate. Sellers have made available to Parent correct
and complete copies of the lease and sublease Contracts (as
amended to date) listed in SCHEDULE 6.14(B). Except as set
forth in SCHEDULE 6.14(B), with respect to each lease and
sublease Contract required to be listed in such schedule:
(i) the Contract is Enforceable and unamended;
(ii) the Contract will continue to be Enforceable on
identical terms following the consummation of the
Transactions;
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(iii) no Acquired Entity (and to each Seller Party's
Knowledge without investigation beyond the Seller
Party), no counter-party is in Breach of such
Contract, and no event has occurred which, with
notice or lapse of time, would constitute a material
Breach by an Acquired Entity thereunder;
(iv) no party to the Contract has delivered a written
demand for early termination thereof;
(v) there are no Actions, Orders, or forbearances in
effect as to the Contract;
(vi) with respect to each sublease Contract, the
representations and warranties set forth in SECTIONS
6.14(B)(I) - (V) are, to each Seller Party's
Knowledge without investigation beyond the Seller
Party, true and correct with respect to the
underlying lease Contract;
(vii) no Acquired Entity has granted or suffered to exist
any Security Interest in the leasehold or
subleasehold Contract save for the Security Interests
listed on SCHEDULE 6.13(A);
(viii) the Contract has not been assigned in favor of any
Person;
(ix) all facilities leased or subleased under the Contract
have received all Permits required in connection with
the operation thereof by the Seller Parties and have
been operated and maintained in all material respects
in accordance with applicable Laws; and
(x) all facilities leased or subleased under the Contract
are supplied with utilities and other services
necessary for the operation of said facilities.
6.15 INTELLECTUAL PROPERTY
(a) Neither Trust nor any Acquired Entity owns any Patents or
registered Copyrights.
(b) SCHEDULE 6.15(B) contains a complete and accurate list of (i)
all Marks that are owned by or licensed to any Acquired Entity
(each such Xxxx listed or required to be listed in SCHEDULE
6.15(B) is referred to herein as a "LISTED XXXX"), and (ii)
for each Listed Xxxx, the countries, states or other
jurisdictions (the "JURISDICTIONS") in which such Listed Xxxx
is registered or in which a registration application is
pending, the registration or application number, the dates of
registration (or application), the classes of registration and
the name of the Person in which each Listed Xxxx is
registered. All Listed Marks that have been registered in a
Jurisdiction are currently in compliance with all formal legal
requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal
applications) and, to each Seller Party's Knowledge and except
as disclosed in SCHEDULE 6.15(B), are valid and Enforceable.
Except as disclosed in SCHEDULE 6.15(B), no Listed Xxxx is now
involved in any opposition, invalidation, or cancellation and,
to each Seller Party's Knowledge and except as disclosed in
SCHEDULE 6.15(B), no such action is threatened with the
respect to any such Listed Xxxx. As of the Closing, to each
Seller Party's Knowledge and except as
42
disclosed in SCHEDULE 6.15(B), each Acquired Entity will have
the exclusive ownership of and right to use the Listed Marks
now owned by such Acquired Entity and at least the
nonexclusive right to use the Listed Marks now licensed to
such Acquired Entity, in each case, in the Jurisdictions and
for the classes of registration under which the Licensed Marks
are now used by such Acquired Entity to the fullest extent
permitted under applicable trademark law. No Person has any
right, by Contract or otherwise, to acquire from Trust, any
Acquired Entity, Sarafina Invest Limited, Hurstwood Limited,
Beldene Limited, or any Affiliate of any of the foregoing,
beneficial or legal ownership of any Listed Xxxx.
(c) SCHEDULE 6.15(C) contains a complete and accurate list of (i)
all Marks that are owned by or licensed to Trust (each such
Xxxx listed or required to be listed in SCHEDULE 6.15(C) is
referred to herein as a "TRUST XXXX"), and (ii) for each Trust
Xxxx, the Jurisdictions in which such Trust Xxxx is registered
or in which a registration application is pending, the
registration or application number, the dates of registration
(or application), the classes of registration and the name of
the Person in which each Trust Xxxx is registered. All Trust
Marks that have been registered in a Jurisdiction are
currently in compliance with all formal legal requirements
(including the timely post-registration filing of affidavits
of use and incontestability and renewal applications) and, to
each Seller Party's Knowledge and except as disclosed in
SCHEDULE 6.15(C), are valid and Enforceable. Except as
disclosed in SCHEDULE 6.15(C), no Trust Xxxx is now involved
in any opposition, invalidation, or cancellation and, to each
Seller Party's Knowledge and except as disclosed in SCHEDULE
6.15(C), no such action is threatened with the respect to any
such Trust Xxxx. As of the Closing, after giving effect to the
Trademark Purchase and immediately prior to the sale of the
Purchased Assets to Buyer Parties, to each Seller Party's
Knowledge and except as disclosed in SCHEDULE 6.15(C), Trust
will have the exclusive right to use, and Trust and 368 Canada
collectively will have exclusive ownership of, Trust Marks
listed on SCHEDULE 6.15(C) in the Jurisdictions and for the
classes of registration under which the Licensed Marks are now
used by Trust to the fullest extent permitted under applicable
trademark law, subject only to the rights of third parties
under the Contracts listed on SCHEDULE 6.18. No Person has any
right, by Contract or otherwise, to acquire from Trust, any
Acquired Entity, Sarafina Invest Limited, Hurstwood Limited,
Beldene Limited, or any Affiliate of any of the foregoing,
beneficial or legal ownership of any Trust Xxxx.
(d) To each Seller Party's Knowledge, the Acquired Entities own or
have the right to use pursuant to an Enforceable Contract all
Intellectual Property necessary to operate Acquired Entities'
businesses as currently conducted. Each item of Intellectual
Property that each Acquired Entity owned or used immediately
prior to the Closing will be owned or available for use by
such Acquired Entity on identical terms and conditions
immediately subsequent to the Closing. Each Acquired Entity
has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(e) Seller Parties have delivered or will prior to Closing deliver
to Parent correct and complete copies of all written
documentation evidencing ownership and
43
prosecution (if applicable) of each item of any Acquired
Entity's Intellectual Property. With respect to each such item
of Intellectual Property and except as disclosed in SCHEDULE
6.15(E):
(i) to each Seller Party's Knowledge, an Acquired Entity
possesses all right, title, and interest in and to
the item, free and clear of any Security Interest;
(ii) the item is not subject to any outstanding Order;
(iii) no Action is pending or, to each Seller Party's
Knowledge, threatened which challenges the
Enforceability, use, or ownership of the item;
(iv) no Acquired Entity has ever agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to
the item; and
(v) except as disclosed in SCHEDULE 6.15(E), no Seller
Party has Knowledge of any covenants, rights of any
other Person, or other restriction on or in respect
of the ability to sell wares presently being sold by
any Acquired Entity in association with any of the
Marks anywhere in world, including, without
limitation, Marks containing or consisting of the
words REQUEST or BUFFALO.
(f) Except as disclosed in SCHEDULE 6.15(F), no Seller or Acquired
Entity has received any notice alleging that any Acquired
Entity has interfered with, infringed upon, misappropriated,
or otherwise violated or come into conflict with any other
Person's Intellectual Property (including any claim that any
Acquired Entity must license or refrain from using any other
Person's Intellectual Property). To each Seller Party's
Knowledge and except as disclosed in SCHEDULE 6.15(F), no
third Person has any Intellectual Property that interferes or
would be likely to interfere with any Acquired Entity's use of
any of its Intellectual Property. To each Seller Party's
Knowledge and except as disclosed in SCHEDULE 6.15(F), no
Acquired Entity will interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of any other Person as a result
of the continued operation of its businesses as currently
conducted. To each Seller Party's Knowledge and except as
disclosed in SCHEDULE 6.15(F), no other Person has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with any Acquired Entity's Intellectual Property.
6.16 INVENTORY
Acquired Entities' inventory, whether reflected on the Financial
Statements or not, consists of raw materials and supplies, manufactured and
processed parts, goods in process, and finished goods, all of which is
merchantable and, except as has been written down on the face of the Interim
Financial Statements (rather than the notes thereto), none of which has been in
inventory for more than one hundred twenty (120) days or is damaged. Any
inventory that has been written down has either been written off or written down
to its net realizable value. There has been no change in inventory valuation
standards or methods with respect to the inventory of Acquired Entities in the
prior three years. No Acquired Entity holds any items of inventory on
44
consignment from other Persons and no other Person holds any items of inventory
on consignment from any Acquired Entity.
6.17 ACQUIRED ENTITY CONTRACTS
Except as otherwise disclosed in SCHEDULES 6.14(B), 6.21, and 6.26,
SCHEDULE 6.17 lists the following Contracts to which any Acquired Entity is a
party:
(a) Any Contract (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease
payments in excess of $15,000 per annum.
(b) Any Contract (or group of related Contracts) for the purchase
or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period
of more than one year, result in a material loss to any
Acquired Entity, or involve annual consideration in excess of
$30,000.
(c) Any Contract concerning a limited liability company,
partnership, joint venture or similar arrangement. (d) Any
Contract (or group of related Contracts) under which any
Acquired Entity has created, incurred, assumed, or guaranteed
any Liability for borrowed money or any capitalized lease in
excess of $15,000 per annum, or under which the Contract has
imposed or the Acquired Entity has suffered to exist an
Encumbrance on any of its assets.
(e) Any Contract restricting any Acquired Entity's right to
compete.
(f) Any Contract with any Seller or any Affiliates of any Seller
other than Acquired Entities.
(g) Any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
similar Contract for the benefit of its current or former
directors, officers, and employees.
(h) Any collective bargaining Contract.
(i) Any Contract for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $40,000 or providing
severance benefits.
(j) Any Contract under which it has advanced or loaned any amount
to any of its directors or officers or any Seller or Affiliate
or any Seller or, outside the Ordinary Course of Business, to
its employees that are not Sellers or Affiliates of any
Seller.
(k) Any Contract pursuant to which any Acquired Entity has granted
to a Person rights under or with respect to any of the
Acquired Entity's Intellectual Property.
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(l) Any Contract pursuant to which any Acquired Entity has
obtained from a Person rights under or with respect to any of
the Acquired Entity's Intellectual Property.
(m) Any other Contract (or group of related Contracts) the
performance of which involves receipt or payment of annual
consideration in excess of $40,000.
Sellers have delivered to Parent a correct and complete copy of each
written Contract (as amended to date) listed in SCHEDULE 6.17 and a written
summary setting forth the terms and conditions of each oral Contract referred to
in SCHEDULE 6.17. With respect to each such Contract:
(i) the Contract is Enforceable and unamended;
(ii) the Contract will continue to be Enforceable on
identical terms following the consummation of the
Transactions;
(iii) no Acquired Entity (and to each Seller Party's
Knowledge, no counter-party) is in material Breach of
such Contract, and no event has occurred which, with
notice or lapse of time, would constitute a Breach by
any Acquired Entity thereunder; and
(iv) no party to the Contract has delivered a written
demand for early termination thereof;
(v) the Contract has not been assigned in favor of any
Person;
(vi) no Consent is required from any Person as a result of
the Transactions (for assignment, change of control
or otherwise); and
(vii) there are no renegotiations of, attempts to
renegotiate or outstanding rights to renegotiate any
material amounts paid or payable to any Acquired
Entity under such Contract with any Person having the
contractual or statutory right to demand or require
such renegotiation and no such Person has made
written demand for such renegotiation.
6.18 TRUST CONTRACTS
(a) SCHEDULE 6.18 lists each Contract pursuant to which (a) Trust
has granted to a Person rights under or with respect to any of
Trust's Intellectual Property, and (b) Trust has obtained from
a Person rights under or with respect to any of Trust's
Intellectual Property.
(b) Trust has delivered to Parent a correct and complete copy of
each written Contract (as amended to date) listed in SCHEDULE
6.18 and a written summary setting forth the terms and
conditions of each oral Contract referred to in SCHEDULE 6.18.
With respect to each such Contract:
(i) the Contract is Enforceable and unamended;
46
(ii) upon the Closing, the Contract will continue to be
Enforceable on identical terms in effect immediately
prior to the Closing, except to the extent such
Contract is amended or terminated prior to the
Closing as contemplated by this Agreement;
(iii) Trust (and to each Seller Party's Knowledge, no
counter-party) is in Breach of such Contract, and no
event has occurred which, with notice or lapse of
time, would constitute a Breach by Trust thereunder;
(iv) no party to the Contract has delivered a written
demand for early termination thereof;
(v) the Contract has not been assigned in favor of any
Person;
(vi) no Consent is required from any Person as a result of
the Transactions (for assignment, change of control
or otherwise); and
(vii) there are no renegotiations of, attempts to
renegotiate or outstanding rights to renegotiate any
material amounts paid or payable to Trust under such
Contract with any Person having the contractual or
statutory right to demand or require such
renegotiation and no such Person has made written
demand for such renegotiation.
(c) Trust has not received any prepayments, advances or other
amounts from Persons that have rights to Trust's Intellectual
Property with respect to rights or obligations for periods or
activities occurring from and after the Closing, including,
without limitation, advance payments of royalties not recouped
or earned as of the Closing.
6.19 RECEIVABLES
All of the Receivables represent bona fide transactions, and arose in
the Ordinary Course of Business of Acquired Entities, and are reflected properly
in their books and records. All of the Receivables are good and collectible
receivables in accordance with past practice and the terms of such Receivables,
without set off or counterclaims, subject only to the reserve for bad debts set
forth on the face of the Interim Financial Statements (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the Ordinary Course of Business of Acquired Entities, consistent
with Canadian GAAP. No customer or supplier of any Acquired Entity has any basis
to believe that it has or would be entitled to any payment terms other than
terms in the Ordinary Course of Business, including any prior course of conduct.
6.20 POWERS OF ATTORNEY
Except as set forth in SCHEDULE 6.20 and for revocable powers of
attorney related to the management of trademarks, there are no outstanding
powers of attorney executed on behalf of any Acquired Entity.
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6.21 INSURANCE
SCHEDULE 6.21 sets forth the following information with respect to each
insurance policy Contract (including policies providing property, casualty,
liability, and workers' compensation coverage, and bond and surety arrangements)
to which any Acquired Entity has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past three years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each insurance policy Contract:
(i) the Contract is Enforceable and unamended;
(ii) the Contract will continue to be Enforceable on
identical terms following the consummation of the
Transactions;
(iii) no Acquired Entity (and to each Seller Party's
Knowledge, no counter-party) is in material Breach of
such Contract, and no event has occurred which, with
notice or lapse of time, would constitute a Breach by
an Acquired Entity thereunder;
(iv) the Contract has not been assigned in favor of any
Person; and
(v) no party to the Contract has delivered a written
demand for early termination thereof.
No insurance that any Acquired Entity has ever carried has been
canceled nor, to each Seller Party's Knowledge, has any such cancellation been
threatened. No Acquired Entity has ever been denied coverage nor, to each Seller
Party's Knowledge, has any such denial been threatened. Each Acquired Entity has
been covered during the past three years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during such
period. SCHEDULE 6.21 also describes any self-insurance arrangements affecting
any Acquired Entity.
48
6.22 LITIGATION
(a) SCHEDULE 6.22 sets forth each instance in which any Acquired
Entity (a) is subject to any outstanding Order or (b) is a
party, the subject of, or, to each Seller Party's Knowledge,
is threatened to be made a party to or the subject of any
Action. No Action required to be set forth in SCHEDULE 6.22
questions the Enforceability of this Agreement or the
Transactions, or could result in any Material Adverse Change,
and Seller Parties have no basis to believe that any such
Action may be brought or threatened against any Acquired
Entity.
(b) SCHEDULE 6.22 sets forth, to each Seller Party's Knowledge,
each instance where, due either to (a) rights asserted by
another Person, (b) a covenant granted by any Seller or
Acquired Entity or any predecessor-in-interest or Affiliate
thereof, or (c) any Order, there is any restriction on the
ability of any Acquired Entity or its Affiliates to carry on
the business currently carried on by such Acquired Entity
anywhere in the world, whether or not such restriction results
in a Material Adverse Change.
6.23 PRODUCT WARRANTY
To each Seller Party' Knowledge, each product manufactured, sold,
leased, or delivered by Acquired Entities has been in conformity with all
applicable Law, Contracts, and all express and implied warranties, and no
Acquired Entity has any Liability (and there is no basis for any present or
future Action against any of them giving rise to any Liability) for replacement
or repair thereof or other Damages in connection therewith, subject only to the
reserve for product warranty claims set forth on the face of the Interim
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the Ordinary Course
of Business of Acquired Entities, consistent with Canadian GAAP. No product
designed, manufactured, sold, leased, or delivered by any Acquired Entity is
subject to any guaranty, warranty, or other indemnity or similar Liability
beyond the applicable standard terms and conditions of sale or lease. SCHEDULE
6.23 includes copies of the standard terms and conditions of sale or lease for
each Acquired Entity (containing applicable guaranty, warranty, and similar
Liability indemnity provisions).
6.24 PRODUCT LIABILITY
No Acquired Entity has any Liability (and to each Seller Party's
Knowledge, there is no basis for any present or future Action against any of
them giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
designed, manufactured, sold, leased, or delivered by any Acquired Entity.
6.25 LABOR AND EMPLOYEES
(a) SCHEDULE 6.25(A) lists all the employees, consultants and
independent contractors providing services to each Acquired
Entity by their employee number without providing their names
with, where applicable, their respective position. SCHEDULE
6.25(A) also includes another list with the salary or
financial compensation, location, unionized or non-unionized
status, years of service, and whether or not a written
agreement was signed, with respect to all the employees,
consultants and independent
49
contractors providing services to each Acquired Entity. All
Employee Agreements have been disclosed and a copy of each
written Employee Agreement has been provided to Buyer Parties
prior to the Closing Date. No Employee Agreement contains any
provision triggering the payment of any financial compensation
in relation to the Transactions.
(b) Except as disclosed in SCHEDULE 6.25(A), Acquired Entities
have complied at all times and are in compliance with all
applicable Laws in relation to employment, labor relations,
workers' compensation, and pay equity.
(c) The location, and position of each key employee is listed in
SCHEDULE 6.25(A) (the "KEY EMPLOYEES").
(d) To each Seller Party's Knowledge, no executive, Key Employee,
or group of employees has any plans to terminate employment
with any Acquired Entity; PROVIDED, HOWEVER, that, with
respect to each executive officer of an Acquired Entity, the
determination of whether any Seller Party has Knowledge of any
such executive's plans to terminate employment with any
Acquired Entity shall be made without reference to such
executive's Knowledge.
(e) Except as disclosed in SCHEDULE 6.25(E), no Acquired Entity is
bound by any bargaining certificate or is a party to or bound
by any collective bargaining Contract, nor has any of them
experienced any strikes or lockouts in the last five (5)
years. To each Seller Party's Knowledge, there is no
organizational effort currently being made or threatened by or
on behalf of any labor union with respect to any Acquired
Entity's employees.
(f) No Acquired Entity has committed any unfair labor practice (as
determined under any Law) and there is no complaint, claim or
any other legal procedure filed or, to each Seller Party's
Knowledge, threatened against any Acquired Entity.
6.26 EMPLOYEE BENEFITS
(a) SCHEDULE 6.26 lists each Employee Benefit Plan that is now
sponsored, maintained, contributed to, or required to be
contributed to, or with respect to which any withdrawal
Liability (within the meaning of Section 4201 of ERISA) has
been incurred, by any Acquired Entity or any ERISA Affiliate
for any employee's benefit, and pursuant to which any Acquired
Entity or any ERISA Affiliate has or may have any Liability.
(b) None of Acquired Entities is party to, bound by or has any
obligations in relation to any Canadian Pension Plan.
(c) Sellers have made available to Parent correct and complete
copies of all Employee Benefit Plans required to be listed on
SCHEDULE 6.26 and, if applicable, the plan Contracts and
summary plan descriptions and any modifications thereto, the
most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, the
three (3) more recent actuarial valuations and financial
reports, whether or not filed with the competent authorities,
and all related trust, insurance, and
50
other funding Contracts that implement each such Employee
Benefit Plan and any modifications thereto.
(d) Each such Employee Benefit Plan (and each related trust,
insurance Contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the
Code, other Laws, and its own terms.
(e) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-l's, and Summary
Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan,
if applicable. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan that is an Employee
Welfare Benefit Plan.
(f) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have
been paid to each such Employee Benefit Plan that is an
Employee Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date that are not yet
due have been paid to each such Employee Pension Benefit Plan
or accrued in the Ordinary Course of Business by Acquired
Entities. All premiums or other payments that are due for all
periods ending on or before the Closing Date have been paid or
accrued on the Financial Statements with respect to each such
Employee Benefit Plan that is an Employee Welfare Benefit
Plan.
(g) No Employee Benefit Plan is an Employee Pension Benefit Plan
that is intended to meet the requirements of a "qualified
plan" under Code Section 401(a).
(h) With respect to each Employee Benefit Plan that any Acquired
Entity or any ERISA Affiliate sponsors or in the last seven
years sponsored, maintains, or in the last seven years has
maintained or to which any of them contributes, has ever
contributed, or has ever been required to contribute:
(i) no such Employee Benefit Plan is subject to Title IV
of ERISA;
(ii) there have been no Prohibited Transactions with
respect to any such Employee Benefit Plan;
(iii) no Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply
with the requirements of applicable Law in connection
with the administration or investment of the assets
of any such Employee Benefit Plan; and
(iv) no Action with respect to the administration or the
investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is
pending or, to each of the Seller Party's Knowledge,
threatened, and no Acquired Entity has incurred, and
no Seller Party has any reason to expect that any
Acquired Entity will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal
51
Liability) or under the Code with respect to any such
Employee Benefit Plan that is an Employee Pension
Benefit Plan.
(i) No Acquired Entity or any ERISA Affiliate contributes to, ever
has contributed to, or ever has been required to contribute to
any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(j) No Acquired Entity or any ERISA Affiliate (i) maintains or
contributes to any Employee Benefit Plan that provides, or has
any Liability to provide, life insurance, medical, severance
or other employee welfare benefits to any employee or any
dependent of any employee upon his or her retirement or
termination of employment, except as may be required by Code
Section 4980B; or (ii) has ever represented, promised or
Contracted (whether in oral or written form) to any employee
(either individually or to employees as a group) that such
employee(s) or dependents would be provided with life
insurance, medical, severance or other employee welfare
benefits upon their retirement or termination of employment,
except to the extent required by Code Section 4980B.
(k) Except as disclosed in SCHEDULE 6.26, the execution of this
Agreement and the consummation of the Transactions will not
(either alone or upon the occurrence of any additional or
subsequent events) (i) constitute an event under any Employee
Benefit Plan, Employee Agreement, trust, or loan that will or
may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits, or obligation to
fund benefits with respect to any employee, or (ii) result in
the triggering or imposition of any restrictions or
limitations on the right of any Acquired Entity or the any
Buyer Party to amend or terminate any Employee Benefit Plan
and receive the full amount of any excess assets remaining or
resulting from such amendment or termination, subject to
applicable Taxes. No payment or benefit that has been made,
will be made, or may be made by any Acquired Entity, any Buyer
Party, or any of their respective Affiliates with respect to
any Acquired Entity's employee will be characterized as an
"excess parachute payment," within the meaning of Code Section
280G(b)(l).
6.27 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS
Except as set forth in SCHEDULE 6.27, (a) each Acquired Entity is in
compliance in all material respects with all Environmental, Health and Safety
Requirements in connection with owning, using, maintaining, or operating its
business or assets; (b) each location at which any Acquired Entity operates its
business is in compliance, in all material respects, with all Environmental,
Health and Safety Requirements; and (c) there are no pending or, to each Seller
Party's Knowledge, threatened Actions by any Person that any Acquired Entity's
properties or assets is not, or that its businesses has not been conducted, in
compliance with all Environmental, Health and Safety Requirements.
6.28 CUSTOMERS AND SUPPLIERS
SCHEDULE 6.28 lists Acquired Entities' (a) 10 largest customers in
terms of sales during (i) the 12 month period ended as of the Most Recent Year
End and (ii) the nine month period
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ended as of the Balance Sheet Date and states the approximate total sales by
Acquired Entities to each such customer during such periods, respectively and
(b) ten largest suppliers during the 12 month period ended as of the Most Recent
Year End and the nine month period ended as of the Balance Sheet Date. Except as
set forth in SCHEDULE 6.28, no Seller Party has received notice of termination
or an intention to terminate the relationship with Acquired Entities from any
customer or supplier.
6.29 PERMITS
Acquired Entities possess all Permits required to be obtained for their
businesses and operations. SCHEDULE 6.29 sets forth a list of all such Permits.
Except as set forth in SCHEDULE 6.29, with respect to each such Permit:
(a) it is valid, subsisting and in full force and effect;
(b) there are no violations of such Permit that would result in a
termination of such Permit;
(c) if applicable, no Acquired Entity has received written notice
that such Permit will not be renewed; and
(d) the Transactions will not adversely affect the validity of
such Permit or cause a cancellation of or otherwise adversely
affect such Permit.
6.30 CERTAIN BUSINESS RELATIONSHIPS WITH ACQUIRED ENTITIES
Except as set forth on SCHEDULE 6.30, no Seller or any of its
Affiliates has been involved in any business arrangement or relationship with
any Acquired Entity at any time since January 1, 2003, and no Seller or any of
its Affiliates owns any asset that is used in any Acquired Entity's business.
6.31 PROXY STATEMENT
None of the information to be supplied in writing by any Seller Party
or Acquired Entity for inclusion in the Proxy Statement will, on the date the
Proxy Statement (or any amendment or supplement thereto) is first mailed to
shareholders of Parent, or will at the time of the Special Meeting contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading.
ARTICLE 7.
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the earlier of the Closing and the Termination
Date:
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7.1 GENERAL
Each Party shall use its Commercially Reasonable Efforts to take all
actions and to do all things necessary to consummate, make effective, and comply
with all of the terms of this Agreement and the Transactions applicable to it
(including satisfaction, but not waiver, of the Closing conditions for which it
is responsible or otherwise in control, as set forth in ARTICLE 9).
7.2 NOTICES AND CONSENTS
(a) Each Seller Party shall give any notices to third parties, and
shall use its Best Efforts to obtain any third party Consents
listed or required to be listed on SCHEDULES 5.1(C), 5.3(C),
or 6.3, or that Parent reasonably may otherwise request in
connection with the matters referred to in SECTIONS 5.1(C),
5.3(C) and 6.3. Each Seller Party shall give any notices to,
make any filings with, and use its Best Efforts to obtain any
Consents of Governmental Bodies, if any, required or
reasonably deemed advisable by Buyer pursuant to any
applicable Law in connection with the Transactions including
in connection with the matters referred to in SECTIONS 5.1(C),
5.3(C) and 6.3.
(b) Each Buyer Party shall give any notices to third parties, and
shall use its Best Efforts to obtain any third party Consents
listed or required to be listed on SCHEDULE 5.2(C), or that
Sellers reasonably may otherwise request in connection with
the matters referred to in SECTION 5.2(C). Each Buyer Party
shall give any notices to, make any filings with, and use its
Best Efforts to obtain any Consents of Governmental Bodies, if
any, required or reasonably deemed advisable by Sellers
pursuant to any applicable Law in connection with the
Transactions including in connection with the matters referred
to in SECTION 5.2(C).
(c) Each Party shall cooperate and use its Best Efforts to agree
jointly on a method to overcome any objections by any
Governmental Body to the Transactions.
(d) Nothing in this SECTION 7.2 will require that (i) Parent or
its Affiliates divest, sell, or hold separately any of its
assets or properties, or (ii) Parent, its Affiliates, or
Acquired Entities take any actions that could affect the
normal and regular operations of Parent, its Affiliates, or
Acquired Entities after the Closing.
7.3 OPERATION OF BUSINESS
(a) Each Seller Party covenants and agrees to ensure that no
Acquired Entity or Trust shall engage in any practice, take
any action, or enter into any transaction outside the Ordinary
Course of Business or engage in any practice, take any action,
or enter into any transaction of the sort described in SECTION
6.9, except that (i) an Acquired Entity (but not Trust) may
engage in any practice, take any action, or enter into any
transaction described in SECTIONS 6.9(A), 6.9(C), 6.9(E),
6.9(F), 6.9(G), 6.9(H), 6.9(I), 6.9(J), 6.9(N), 6.9(P), or
6.9(T) that is in the Ordinary Course of Business, and (ii)
Trust may enter into Contracts granting third parties rights
to the Trust Marks in the Ordinary Course of Business so long
as such Contracts constitute Purchased Assets hereunder.
Subject to compliance with applicable Law, from the date
hereof until the earlier to occur of the
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Closing or the Termination Date, Seller Parties shall confer
on a regular and frequent basis with one or more
representatives of Parent to report on operational matters and
the general status of Acquired Entities' ongoing business,
operations and finances and promptly provide to Parent or its
representatives copies of all material filings they make with
any Governmental Body during such period. Notwithstanding
SECTION 13.5, Seller Parties may request consent to any
activity under this SECTION 7.3 by communicating such request
in writing or by electronic mail to the Vice President of
Finance (or such Person as may be designated by such Person)
of Parent. Consent shall be deemed to be given if such Person
does not respond to Seller Parties in writing or by electronic
mail on or before 5:00 p.m., Pacific time, on the third (3rd)
business day following the day on which such Person receives
such request in writing or by electronic mail from Seller
Parties.
(b) Notwithstanding SECTION 7.3(A) to the contrary, not later than
ten (10) business days prior to the Closing, subject to Buyer
Parties' prior written consent, which consent shall not be
unreasonably withheld, Sellers may cause any of the Acquired
Entities to increase its stated capital or issue a stock
dividend on the Shares held by any of the Sellers, or pay to a
Seller a dividend in cash or in the form of a note, provided
that (i) any such cash dividend or note dividend is solely
used by such Seller to subscribe for share capital of the
Acquired Entity immediately following the distribution
thereof, (ii) such transaction does not cause and is not
reasonably likely to cause an adverse Tax consequence for any
Acquired Entity or Buyer Party, and (iii) if an Acquired
Entity issues a stock dividend to a Seller, the securities
that comprise such stock dividend shall, without any further
action of the parties, become part of the Shares of such
Acquired Entity for all purposes under this Agreement, and
shall be transferred and sold to the applicable Buyer Party at
the Closing in the same manner and to the same extent as all
other Shares to be transferred by such Seller at the Closing,
for the same total consideration to such Seller set forth in
this Agreement (i.e., no additional consideration for
securities issued as a stock dividend).
(c) Notwithstanding SECTION 7.3(A) to the contrary, not later than
ten (10) business days prior to the Closing, subject to Buyer
Parties' prior written consent, which consent shall not be
unreasonably withheld, any Seller may amalgamate, merger,
wind-up, liquidate, proceed to dissolution with or into
another Seller, or transfer all or part of Shares of any of
the Acquired Entities to another Seller, provided that (i) any
such transaction does not cause and is not reasonably likely
to cause an adverse Tax consequence for any Acquired Entity or
Buyer Party, and (ii) adequate provision is made for the
purchase and sale of the Shares held by such Seller from the
Seller surviving such transaction, which Shares shall be
transferred and sold to the applicable Buyer Party at the
Closing for the same total consideration for such Shares as
set forth in this Agreement.
(d) Each Seller Party covenants and agrees to ensure that the
maximum indebtedness of Trust and the Acquired Entities to
HSBC Bank Canada and its Affiliates does not at any time
exceed $25,000,000 (or the equivalent in Canadian Dollars at
the Exchange Rate) in principal amount.
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7.4 PRESERVATION OF BUSINESS
Each Seller Party covenants and agrees to ensure that Trust and each
Acquired Entity shall conduct its business in substantially the same manner as
it has been previously conducted, including maintaining its physical facilities
and its relationships with lessors, licensors, licensees, suppliers, customers,
officers, employees, and any other Person having business relationships with
Trust or such Acquired Entity.
7.5 ACCESS TO BUSINESS INFORMATION
Each Seller Party covenants and agrees to ensure that Trust and each
Acquired Entity shall permit representatives of Parent (including financing
providers) to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of Trust or Acquired
Entities, to all premises, properties, personnel, books, records, Contracts and
documents pertaining to Trust and such Acquired Entity and shall furnish copies
of all such books, records, Contracts and documents and all financial, operating
and other data, and other information as Parent may reasonably request.
7.6 NOTICE OF DEVELOPMENTS
Seller Parties shall give prompt written notice to Parent of any
development occurring after the date of this Agreement, or with respect to
representations and warranties that are qualified by Knowledge, any item about
which such Person did not have Knowledge on the date of this Agreement, which in
each case causes or reasonably could be expected to cause a Breach of any of the
representations and warranties in SECTIONS 5.1 or 5.3 or ARTICLE 6. Parent shall
give prompt written notice to Sellers and Trust of any development occurring
after the date of this Agreement, or with respect to representations and
warranties that are qualified by Knowledge, any item about which such Person did
not have Knowledge on the date of this Agreement, which causes or reasonably
could be expected to cause a Breach of any of the representations and warranties
in SECTION 5.2. No disclosure by any Party pursuant to this SECTION 7.6 shall be
deemed to amend or supplement the Schedules or to prevent or cure any
misrepresentation or Breach of any representation, warranty, or covenant.
7.7 EXCLUSIVITY
No Seller Party will (a) solicit, initiate, or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
Equity Interests or any substantial portion of the assets of Trust or any
Acquired Entity (including any acquisition structured as a merger,
consolidation, or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Seller will vote its Shares in
favor of any such transaction. Seller Parties will notify Buyer immediately if
any Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing and the terms of any such proposal, offer, inquiry, or contact.
No Buyer Party or any of its Affiliates will (a) solicit, initiate, or
encourage the submission of any proposal or offer from any Person with respect
to a merger, acquisition or similar transaction involving the purchase of all or
substantially all of the assets or equity
56
securities of a third party (including any acquisition structured as a merger,
consolidation, or share exchange), or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing.
7.8 AFFILIATED TRANSACTIONS
Except as disclosed on SCHEDULE 7.8, Seller Parties shall cause all
Contracts and transactions by and between any Seller, Trust or any Affiliate of
any Seller (other than an Acquired Entity), on the one hand, and Acquired
Entities, on the other hand, to be terminated effective as of the Closing,
without any cost or continuing obligation to Acquired Entities or any Buyer
Party, and shall deliver to Parent evidence of such terminations that is
reasonably acceptable to Parent.
7.9 REPAYMENT OF CERTAIN LIABILITIES OF SELLERS AND TRUST
At or prior to the Closing, each Seller and Trust shall satisfy, pay in
full, or discharge all Liabilities that such Seller or Trust or any of their
respective Affiliates (other than an Acquired Entity) may have to Acquired
Entities, including the Liabilities described on SCHEDULE 7.9, other than up to
$400,000 of such Liabilities to be forgiven by the Acquired Entities prior to
the Closing as expressly provided for on SCHEDULE 7.9. Sellers and Trust shall
provide evidence to Parent of such repayment, discharge, or forgiveness in form
and substance reasonably acceptable to Parent.
7.10 DISCHARGE OF CERTAIN LIABILITIES PAYABLE TO SELLERS AND TRUST
At or prior to the Closing, each Acquired Entity shall satisfy, pay in
full or discharge all Liabilities it may have to any Seller or Trust or any of
their respective Affiliates (other than an Acquired Entity), all of which
Liabilities are described on SCHEDULE 7.10. Acquired Entities shall provide
evidence to Parent of such repayment, discharge, or forgiveness in form and
substance reasonably acceptable to Parent.
7.11 SHAREHOLDERS MEETING; PROXY STATEMENT
(a) If required by Parent's articles of incorporation, as amended
and now or hereafter in effect, and/or applicable law in order
to consummate the Transactions, Parent shall use Commercially
Reasonable Efforts to take all action necessary in accordance
with the CGCL and Parent's articles of incorporation and
bylaws, each as amended and now or hereafter in effect, duly
to call, give notice of, convene and hold a meeting of
Parent's shareholders (the "SPECIAL MEETING") as promptly as
practicable following the date of this Agreement for the
purpose of considering and taking action upon this Agreement
and the Transactions.
(b) If required under applicable law, Parent shall prepare and
file with the SEC a preliminary proxy or information statement
relating to this Agreement and the Transactions and obtain and
furnish the information required to be included by the SEC in
the Proxy Statement and, after consultation with Seller
Parties, respond promptly to any comments made by the SEC with
respect to the preliminary proxy or information
57
statement and cause a definitive proxy or information
statement, including any amendments or supplements thereto
(the "PROXY STATEMENT") to be mailed to its shareholders at
the earliest practicable date, provided that no amendments or
supplements to the Proxy Statement will be made by Parent
without consultation with Seller Parties and their counsel.
The Parties shall cooperate with each other in the preparation
of the Proxy Statement, and Parent shall notify Seller Parties
of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information
and shall provide to Seller Parties promptly copies of all
correspondence between Parent or any representative of Parent
and the SEC. Parent shall give Seller Parties and their
counsel the opportunity to review and comment thereon. If at
any time after the date the Proxy Statement is mailed to
shareholders and prior to the Special Meeting any information
relating to Buyer Parties, Sellers, Acquired Entities, Trust,
or any of their respective Affiliates, officers or directors,
is discovered by any of the Parties which is required to be
set forth in an amendment or supplement to the Proxy Statement
so that the Proxy Statement will not include any untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify
the other party hereto and an appropriate amendment or
supplement describing such information shall be promptly filed
with the SEC by Parent and to the extent required by law,
disseminated to Parent's shareholders. Seller Parties agree
that (i) they will provide Parent with all information
concerning Sellers, Trust, and Acquired Entities and their
respective Affiliates necessary or appropriate to be included
in the Proxy Statement, (ii) at the Special Meeting or any
postponement or adjournment thereof (or at any other meeting
at which the Transactions or this Agreement are considered by
shareholders), they will vote, or cause to be voted, all of
the shares of Parent Common Stock then owned by them, or any
of their Affiliates, if any, in favor of adoption of this
Agreement and the Transactions, and (iii) they will promptly
notify Parent of any request by the SEC and use Commercially
Reasonable Efforts to assist Parent in responding promptly to
all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the
SEC, Parent shall mail the Proxy Statement to the shareholders
of Parent.
7.12 PUBLICITY
Buyer Parties will consult with Seller Parties before issuing, and
provide Sellers reasonable time and opportunity to review and comment upon, and
use reasonable efforts to agree on the form and substance of, any press release
or other public statement with respect to the Transactions, and shall not issue
any such press release or make such other public announcement prior to such
consultation, except as required under applicable Laws (including securities
Laws). Seller Parties will not issue any press release or other statements to
any third party (other than to their respective agents) with respect to the
Transactions without the express written consent of the Parent.
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7.13 TRADEMARK PURCHASE
Prior to the Closing, Trust shall acquire the Trust Marks pursuant to
and in accordance with the Trademark Purchase Agreements.
7.14 RIGHTS TO NAME
The Sellers shall procure and cause Xxxxx Xxxxxx, without further
consideration payable by the Buyer Parties or the Acquired Entities, to enter
into an agreement with Buyer, in a form that is mutually acceptable to Buyer
Parties and Xxxxx Xxxxxx, that provides in substance that: (a) subject to the
exclusions below, Buyer and its Affiliates collectively shall have a fully-paid
up, fully transferable and sub licensable, exclusive license to use his name,
surname signature, likeness and other personal indicia ("PERSONAL INDICIA") in
perpetuity in association with the operation of a business in the field of
apparel and apparel accessories, including clothing, footwear, belts, totes,
leather goods, and hats, and fragrances ("RESTRICTED AREAS"); (b) a covenant
that Xxxxx Xxxxxx will not use his Personal Indicia in perpetuity in conjunction
with goods or services in the Restricted Areas; but (c) notwithstanding the
foregoing, Xxxxx Xxxxxx shall be free to use his Personal Indicia in association
with all activities other than in the Restricted Areas. Additionally, the
agreement with Xxxxx Xxxxxx shall restrict Buyer and its Affiliates from using
the Personal Indicia in association with merchandise sold through certain lower
tier distribution channels (budget and mass market retailers) if the Personal
Indicia was not used previously in connection with the sale of merchandise by
Buyer or the Acquired Entities through such distribution channels prior to the
Closing or after the Closing while Xxxxxxx Xxxxxx serves as the Senior Officer
of Buyer.
7.15 SECURITY AGREEMENT AND INTERCREDITOR AGREEMENT
(a) At Closing, the Buyer Parties and the Sellers shall execute
and deliver a Security Agreement in form and substance
reasonably acceptable to Buyer Parties and the Sellers (the
"SECURITY AGREEMENT"), pursuant to which the Buyer Parties
will grant the Sellers, as security for the Buyer Parties'
obligations to make the Future Payments (the "SELLER
OBLIGATIONS"), a first priority Security Interest in the
Seller Priority Collateral and a Security Interest, ranking
second in priority only to the Security Interest of Guggenheim
therein to the extent securing the Senior Obligations, in the
Trust Marks and all proceeds thereof (the "SELLER SUBORDINATED
COLLATERAL" and together with the Seller Priority Collateral,
the "COLLATERAL"). Sellers acknowledge and agree that Buyer
Parties shall be free to grant a Security Interest in the
Collateral to Guggenheim provided that Sellers' Security
Interest in the Seller Priority Collateral pursuant to the
Security Agreement shall have priority over any other Security
Interests in the Collateral.
(b) At Closing, the Sellers shall execute and deliver an
Intercreditor Agreement with Guggenheim, GMAC CF and other
lenders to Buyer Parties, in form and substance acceptable to
Sellers, Guggenheim and the other lenders a party thereto (the
"INTERCREDITOR AGREEMENT"), and containing, among other terms
and conditions, the following terms and conditions:
59
(i) The Sellers acknowledge and agree that each of
Guggenheim and certain other lenders of the Buyer
Parties has been or will be granted a Security
Interest in the Collateral and that Sellers have no
right or interest in any other property of the Buyer
Parties, other than the Collateral.
(ii) Except for Guggenheim's first priority (to the extent
it secures the Senior Obligations) Security Interest
in the Seller Subordinated Collateral, the Security
Interests of each of Guggenheim, GMAC CF and any
other secured creditors of Buyer Parties in the
Collateral will be subordinated to Sellers' Security
Interest in the Collateral.
(iii) Each of the Sellers will agree to subordinate its
Security Interest in the Seller Subordinated
Collateral to the Security Interest of Guggenheim to
the extent such Security Interest secures the Senior
Obligations.
(iv) The Sellers will agree not to exercise any remedies
or rights under this Agreement and the Security
Agreement (the "SELLER DOCUMENTS") with respect to
any Collateral, other than as set forth below with
respect to Seller Priority Collateral.
(v) The Sellers will agree not to exercise any remedies
or rights under the Seller Documents with respect to
the Collateral, provided that such standstill will
terminate with respect to the Seller Priority
Collateral on a date which is 180 days following
delivery of a notice of a Payment Default following a
Payment Default under the Seller Documents.
(vi) The Sellers will xxxxx Xxxxxxxxxx a right (but not an
obligation) to purchase all of the Seller Obligations
after the occurrence of a breach under any of the
Seller Documents.
(vii) Sellers will agree that, if an event of default with
respect to the Senior Obligations has occurred and is
continuing and Sellers have received written notice
of such event of default, all payments of the Seller
Obligations shall be subordinate and junior in right
of payment to the Senior Obligations, provided that
such subordination shall continue only for a period
of 180 days following delivery of a notice by Sellers
to Guggenheim of a Payment Default following a
Payment Default under the Seller Documents.
(viii) The Sellers and Guggenheim will agree to grant to
GMAC CF a nonexclusive, royalty-free license to use
the Collateral to sell or otherwise dispose of any
inventory (including raw materials, work-in-process
and finished goods) on hand or ordered, against which
inventory GMAC CF has directly loaned amounts to the
Buyer Parties and which inventory secures such
financing arrangements between GMAC CF, on the one
hand, and the Buyer Parties and any of their
respective Affiliates and Subsidiaries, on the other
hand. The license will be similar in substance to the
limited license granted to GMAC CF with respect to
American Rag(R) and other trademarked apparel
inventory as provided for in that
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certain Intercreditor Agreement, dated as of June 16,
2006, between GMAC CF and Guggenheim.
(c) For purposes of this SECTION 7.15, the following terms shall
have the following meanings: "PAYMENT DEFAULT" means the
failure by the Buyer Parties to make any payment on the Seller
Obligations when due (after giving effect to any grace
periods) which has continued for a period of fifteen (15)
days; "SELLER PRIORITY COLLATERAL" means Contracts
constituting part of the Purchased Assets and pursuant to
which Trust has granted to a Person rights under or with
respect to any of Trust's Intellectual Property and the
proceeds thereof, all renewals of any of the forgoing
Contracts for an additional term, and all new Contracts that
replace any of the forgoing Contracts entered into with the
existing licensee or any new licensee, so long as such renewal
or replacement Contract grants substantially the same rights
with respect to substantially the same merchandise in
substantially the same territory provided for in the original
Contract being renewed or replaced; and "SENIOR OBLIGATIONS"
means the obligations of the Buyer Parties and/or their
Affiliates to Guggenheim and the lenders under the Credit
Agreement, dated June 16, 2006, among Parent, Guggenheim, the
lenders thereunder and other parties thereto, as the same is
amended, restated, renewed, extended or otherwise modified
from time to time, but solely with respect to up to
$65,000,000 in principal amount of advances made by Guggenheim
and such lenders to Buyer Parties or their Affiliates (which
amount shall be reduced by the amount of any repayments of
principal on the Senior Obligations after the Closing).
7.16 DISCHARGE OF CERTAIN SECURITY INTERESTS OF ACQUIRED ENTITIES
At or prior to the Closing, each Seller Party shall discharge or caused
to be discharged the Security Interest listed on SCHEDULE 7.16 and shall provide
confirmation of the discharges received from the relevant authorities to the
Buyer Parties.
7.17 ANCILLARY AGREEMENTS
At the Closing, the Sellers shall procure and cause each of the Bitton
Brothers to enter into each Ancillary Agreement to which such Bitton Brother is
a party.
7.18 TAX RETURNS; AFFIDAVIT
Prior to Closing, the Sellers shall cause each Acquired Entity to have
prepared and filed with all appropriate Governmental Bodies all Tax Returns in
respect of Taxes required to be filed by applicable Law on or prior to Closing.
At or immediately before Closing, Sellers Parties shall deliver to Parent an
affidavit, under penalties of perjury, stating that Buffalo US is not and has
not been a United States real property holding corporation, dated as of the
Closing Date and in form and substance required under Treasury Regulations
Sections 1.897-2(h) and 1.1445-2(c)(3) so that Parent is exempt from withholding
any portion of the US Buffalo Purchase Price.
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ARTICLE 8.
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
8.1 GENERAL
In case at any time after the Closing any further action is necessary
to carry out the purposes of this Agreement, each Party shall take such further
action (including executing and delivering such further instruments and
documents) as any other Party reasonably may request, all at the requesting
Party's sole cost and expense (unless the requesting Party is entitled to
indemnification therefor under ARTICLE 11). After the Closing, Buyer shall be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to Acquired Entities.
8.2 LITIGATION SUPPORT
So long as any Party actively is contesting or defending against any
Action in connection with (a) the Transactions or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any Acquired Entity or the Purchased Assets, each other Party shall
cooperate with such Party and such Party's counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
books and records as will be necessary in connection with the contest or
defense, at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party or one of its Affiliates is entitled
to indemnification therefor under ARTICLE 11).
8.3 TRANSITION
No Seller or Trust shall take any action that is designed or intended
to have the effect of discouraging any lessor, licensor, licensee, customer,
supplier, or other business associate of any Acquired Entity or relating to the
Purchased Assets from maintaining at least as favorable business relationships
with Acquired Entities or Buyer Parties after the Closing as it maintained with
Acquired Entities or Trust prior to the Closing. Each Seller and Trust shall,
and shall cause its Affiliates to, refer all customer, supplier, and other
inquiries relating to the businesses of Acquired Entities or the Purchased
Assets to Buyer Parties or an Affiliate thereof.
8.4 CONFIDENTIALITY
Each Seller and Trust shall treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement. If Trust or any Seller is ever
requested or required (by oral question or request for information or documents
in any Action) to disclose any Confidential Information, Trust or such Seller
shall notify Parent promptly of the request or requirement so that Parent may
seek an appropriate protective Order or waive compliance with this SECTION 8.4.
If, in the absence of a protective Order or the receipt of a waiver hereunder,
Trust or any Seller that, on the written advice of counsel, is compelled to
disclose any Confidential Information to any Governmental Body, arbitrator, or
mediator or else stand Liable for contempt, Trust or that Seller may disclose
the
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Confidential Information to the Governmental Body, arbitrator, or mediator;
PROVIDED, HOWEVER; that the disclosing Party shall use its Commercially
Reasonable Efforts to obtain, at the request of Parent, an Order or other
assurance that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as Parent may designate.
8.5 RELEASE
(a) Trust and each Seller, on behalf of such Person and each of
such Person's heirs, representatives, successors, and assigns,
hereby releases and forever discharges each Acquired Entity,
and each of its respective officers, directors, managers,
employees, agents, stockholders, controlling persons,
representatives, Affiliates, successors, assigns
(individually, a "RELEASEE" and collectively, "Releasees")
from any and all Actions, Orders, Damages, Liabilities, and,
except as expressly contemplated by this Agreement and the
Ancillary Agreements, Contracts whatsoever, whether known or
unknown, suspected or unsuspected, both at Law and in equity,
which such Person or any of such Person's respective heirs,
representatives, successors or assigns now has, have ever had
or may hereafter have against the respective Releasees arising
on or prior to the Closing Date or on account of or arising
out of any matter, cause, or event occurring on or prior to
the Closing Date including any rights to indemnification or
reimbursement from any Acquired Entity, whether pursuant to
their respective Organizational Documents, Contract or
otherwise and whether or not relating to Actions pending on,
or asserted after, the Closing Date; PROVIDED, HOWEVER, that
nothing contained herein will operate to release any
obligations of any Acquired Entity arising under this
Agreement and the Ancillary Agreements. Trust and each Seller
hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any cause of Action, or commencing,
instituting or causing to be commenced, any Action, of any
kind against any Releasee, based upon any matter purported to
be released hereby.
(b) Each Acquired Entity, on behalf of such Person and each of
such Person's heirs, representatives, successors, and assigns,
hereby releases and forever discharges each of Sellers and
Trust, and each of its respective officers, directors,
managers, employees, agents, stockholders, controlling
persons, representatives, Affiliates, successors, assigns
(individually, a "SELLER RELEASEE" and collectively, "SELLER
RELEASEES") from any and all Actions, Orders, Damages,
Liabilities, and, except as expressly contemplated by this
Agreement and the Ancillary Agreements, Contracts whatsoever,
whether known or unknown, suspected or unsuspected, both at
Law and in equity, which such Person or any of such Person's
respective heirs, representatives, successors or assigns now
has, have ever had or may hereafter have against the
respective Seller Releasees on or prior to the Closing Date or
on account of or arising out of any matter, cause, or event
occurring on or prior to the Closing Date whether or not
relating to Actions pending on, or asserted after, the Closing
Date; PROVIDED, HOWEVER, that nothing contained herein will
operate to release any obligations of any of Seller Party or
Trust arising under this Agreement and the Ancillary
Agreements. Each Acquired Entity hereby irrevocably covenants
to refrain from, directly or indirectly, asserting any cause
of Action, or commencing, instituting or causing to be
commenced, any Action, of any kind against any Seller
Releasee, based upon any matter purported to be released
hereby.
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8.6 STOCK CERTIFICATES
(a) Each stock certificate representing Buyer Exchangeable Shares
will be imprinted with a legend substantially in the following
form:
UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR
(4) MONTHS AND A DAY AFTER THE LATER OF (I) [CLOSING DATE] AND (II) THE
DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
NEITHER THE SECURITIES EVIDENCED BY THIS CERTIFICATE NOR THE SECURITIES
ISSUABLE IN EXCHANGE THEREOF HAVE BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY,
NOR ANY SECURITIES ISSUABLE IN EXCHANGE THEREOF, NOR ANY INTEREST OR
PARTICIPATION THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION.
(b) Each stock certificate representing Parent Shares will be
imprinted with legends substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT
RESTRICTING THEIR TRANSFER, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE COMPANY AND WILL BE FURNISHED TO ANY PROSPECTIVE PURCHASERS ON
REQUEST. THE AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN
RESTRICTIONS ON THE SALE,
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TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE."
8.7 BOARD REPRESENTATION
Effective upon the Closing, Parent shall appoint Xxxxxxx Xxxxxx and
Xxxxx Xxxxxxx or, if either or both of Xxxxxxx Xxxxxx or Xxxxx Xxxxxxx is
unwilling to serve or is unable to serve due to death or disability or for the
reasons described in clause (ii) of this paragraph, any other nominee of Sellers
reasonably acceptable to Parent (Xxxxxxx Xxxxxx and Xxxxx Xxxxxxx or such other
nominee, the "SELLER NOMINEES") to serve on Parent's Board of Directors.
Following the Closing and until the earlier of (a) the fifth anniversary of the
Closing Date and (b) the date that Sellers and their Affiliates as of the
Closing Date collectively "beneficially own" (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act) less than
five million shares (as adjusted for stock splits, reverse stock splits, etc.)
of the issued and outstanding Parent Common Stock, Parent shall use its best
efforts to nominate the Seller Nominees as nominees of Parent's Board of
Directors for reelection as directors at each shareholders meeting at which the
Seller Nominees' seats on Parent's Board of Directors are being voted upon;
PROVIDED, HOWEVER, that Parent shall not be required to nominate a Seller
Nominee (i) if the Seller Nominee does not agree to be named as a nominee and
provide all information required to be included in Parent's proxy statement for
the applicable shareholders meeting or otherwise required to be disclosed by
Parent or (ii) the Seller Nominee is prohibited or disqualified from serving on
the Board of Directors of Parent pursuant to any order, judgment, or decree of
any Governmental Authority.
Parent will indemnify the Seller Nominees to the fullest extent
permitted by Law against any liability for any act or omission relating to his
appointment as director of Parent. Nothing in this Agreement limits the rights
of a Seller Nominee to claim indemnity apart from the provisions of this
Agreement, if he is entitled to such indemnity. Parent will purchase and
maintain customary directors and officers' insurance coverage for the benefit of
the Seller Nominees and all other members of Parent's Board of Directors, in
such amounts and on such terms as are approved by Parent's Board of Directors.
8.8 TREATMENT OF CERTAIN TAX MATTERS POST-CLOSING
The following provisions shall govern the allocation of responsibility
as between Buyer Parties and Sellers for certain Tax matters following the
Closing Date:
(a) TAXABLE PERIODS AND ALLOCATION OF TAXES. The Target Companies
shall, unless prohibited by applicable Law, close the taxable
period of each of Acquired Entities as of the close of the
Closing Date. For purposes of this Section, in the case of any
Taxes that are imposed on a periodic basis and are payable for
a Taxable period which begins before the Closing Date and ends
after the Closing Date, the portion of such Tax which relates
to the portion of such Taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based
upon or related to income or receipts, be deemed to be the
amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator
of which is the number of days in the entire
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Taxable period, and (y) in the case of any Tax based upon or
related to income or receipts, be deemed equal to the amount
which would be payable if the relevant Taxable period ended on
the Closing Date. Any credits relating to a Taxable period
that begins before and ends after the Closing Date shall be
taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give
effect to the foregoing allocations of income, gains, loss,
deduction, and credits shall be made in a manner consistent
with prior practice of the applicable Target Company.
(b) CLOSING TAX RETURNS. The Target Companies shall prepare or
cause to be prepared and file or cause to be filed all Tax
Returns for Acquired Entities for all periods ending on or
prior to the Closing Date which are required to be filed after
the Closing Date and all Tax Returns for each Acquired Entity
for Tax periods which begin before the Closing Date and end
after the Closing Date (the "CLOSING TAX RETURNS"). The
applicable Acquired Entity shall cause copies of such Closing
Tax Returns (other than informational returns such as Forms
1099 and Forms W-2) to be delivered to Parent and Sellers at
least forty five (45) days prior to the filing date for their
review and approval, which shall not be unreasonably withheld
or delayed. Parent and Sellers shall give any comments on such
Closing Tax Returns in writing to the applicable Acquired
Entity, with a copy to Parent or Sellers, as applicable,
within ten (10) days following the delivery of the Closing Tax
Returns. The applicable Acquired Entity, Parent and Sellers
shall attempt in good faith mutually to resolve any
disagreements regarding such Closing Tax Returns prior to the
due date for filing thereof. Any disagreements regarding such
Closing Tax Returns which are not resolved by thirty (30) days
prior to the filing date for such Closing Tax Returns shall be
promptly referred to the Neutral Accounting Firm. The Neutral
Accounting Firm shall prepare the final Closing Tax Return
within twenty five (25) days of such referral, and such
preparation shall be final and binding on the Acquired Entity,
Parent and Sellers. The fees and expenses of the Neutral
Accounting Firm shall be paid by Parent and Sellers equally.
Closing Tax Returns shall so far as practicable be prepared
using elections consistent with past practices, and financial
statement Tax accruals for any timing differences from
financial statement income will be treated as Taxes paid or
payable for purposes of the allocations contained in this
paragraph.
(c) AMENDMENTS. Without the prior written consent of Sellers,
which consent shall not be unreasonably withheld, neither the
Acquired Entity nor Parent shall file or cause to be filed for
fiscal periods ending on or prior to the Closing Date or
deemed to end on the Closing Date for the purpose of this
Agreement, any amended Tax Return if any such filing affects
the obligation of Sellers to provide indemnification for any
Tax Liability of the Acquired Entity pursuant to this
Agreement.
(d) COOPERATION ON TAX MATTERS.
(i) After the Closing Date, Acquired Entities, Parent and
Sellers shall cooperate fully, as and to the extent
reasonably requested by the other parties, in
connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other
proceeding with respect to Taxes for which Sellers
are or may be partially or fully liable to the Seller
Indemnified Parties pursuant to this
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Agreement. Such cooperation shall include the
retention and (upon any other party's request) the
provision of records and information which are
reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a
mutually convenient basis to provide additional
information and explanation of any material provided
hereunder.
(ii) Parent and each Acquired Entity further agree, upon
request, to provide the other Parties with all
information that such Party may be required to report
pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder.
(e) TAX PROCEEDINGS. Notwithstanding any other provision contained
in this Agreement, after the Closing Date, in the case of any
audit, examination, or other proceeding with respect to Taxes
("TAX Proceeding") for which Sellers are or may be partially
or fully liable to the Seller Indemnified Parties pursuant to
this Agreement, the applicable Acquired Entity shall inform
Sellers within ten (10) business days after the receipt of any
notice of such Tax Proceeding. The Acquired Entity shall be
responsible for the management of the Tax Proceeding, provided
that Sellers shall have the right (1) to participate fully in
the Tax Proceeding, either personally or through a
representative (including separate counsel of its own choosing
at its sole cost and expense) to the extent it is affected by
such proceeding, (2) to receive copies of all correspondence
regarding the Tax Proceeding, and reasonable advance notice
from the Acquired Entity of any meetings, hearings or
proceedings, (3) to review in advance and comment on any
pleadings, briefs, or other documents to be filed, and (4) to
approve any judgment or settlement, closing or other agreement
with respect to any Tax Proceeding, which approval shall not
be unreasonably withheld or delayed.
(f) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this
Agreement, if any, shall be paid by the applicable Acquired
Entity when due, and such Acquired Entity shall, at its own
expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and,
if required by applicable Law, Buyer Parties shall, and shall
cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
(g) RETENTION OF DOCUMENTS. Each Acquired Entity agrees to retain
all books and records with respect to Tax matters pertinent to
such Acquired Entity relating to any taxable period beginning
before the Closing Date until the expiration of the
prescription period of the statute of limitations (and, to the
extent notified by Buyer Parties, any extensions thereof) of
the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority.
(h) TAX INDEMNIFICATION. Without limiting the rights of the Seller
Indemnified Parties to be indemnified pursuant to ARTICLE 11,
Sellers and Trust, jointly and severally, shall indemnify and
hold the Seller Indemnified Parties harmless from and pay any
and all Damages directly or indirectly resulting from,
relating to, arising out of,
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or attributable to (i) any Tax payable by or on behalf of any
Seller Party or Acquired Entity for any taxable period ending
on or prior to the Closing Date, (ii) Taxes of any member of a
consolidated or combined tax group of which any Seller Party
is, or was at any time, a member, for which any Acquired
Entity is jointly or severally liable as a result of its
inclusion in such group prior to the Closing Date, and (iii)
with respect to any Taxes payable by or on behalf of any
Acquired Entity due for period beginning before and ending
after the Closing Date (whether or not assessed prior to the
Closing Date), the Taxes allocable to the portion of such
period that ends on and includes the Closing Date ("SELLERS'
PRO RATA SHARE"). For purposes of calculating Sellers' Pro
Rata Share of Taxes described in clause (iii), the Closing
Date will be treated as the last day of a taxable period, and
the portion of any such Tax that is allocable to the taxable
period that is so deemed to end on the Closing Date will be:
(1) in the case of Taxes that are either (x) based upon or
related to income or receipts, (y) imposed in connection with
any sales or other transfer or assignment of property (real or
personal, tangible or intangible) other than transfers
pursuant to this Agreement, or (z) imposed on a periodic basis
and measured by the level of any item that is required to be
determined as of the Closing Date or that is reasonably
determinable as of the Closing Date and such determination is
made by a party in a manner reasonably acceptable to Parent
and Sellers, deemed equal to the amount that would be payable
if the period for which such Tax is assessed ended with the
Closing Date; and (2) in the cases of Taxes imposed on a
periodic basis and measured by the level of any item, other
than Taxes described in clause (1) hereof, will be deemed to
be the amount of such Taxes for the entire period (or, in the
case of such taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied
by a fraction the numerator of which is the number of calendar
days in the period ending with the Closing Date and the
denominator of which is the number of calendar days in the
entire period; and (3) exemptions, allowances or deductions
that are calculated on an annual basis such as the deduction
for depreciation, will be apportioned on a daily basis in the
same manner as Taxes under clause (2) hereof. Returns for
periods beginning before closing and ending after closing
shall so far as practicable be prepared using elections
consistent with past practices, and financial statement tax
accruals for any timing differences from financial statement
income will be treated as taxes paid or payable for purposes
of the allocations contained in this paragraph. For the
avoidance of doubt, the allocation of tax liabilities under
this paragraph shall be unaffected by the carryback of tax
losses, credits or other attributes attributable to periods
beginning after closing even though such carrybacks may have
the effect of reducing taxes paid or accrued for periods
covered by this tax allocation.
Notwithstanding anything in this SECTION 8.8(H) to the
contrary, Sellers and Trust will have no obligation to indemnify Seller
Indemnified Parties for Taxes to the extent adequate provision was made
therefor on the balance sheet included in the Interim Financial
Statements (other than in the notes thereto) or to the extent arising
after the Balance Sheet Date in the Ordinary Course of Business.
8.9 RESTRICTIVE COVENANT
The Buyer Parties and the Seller Parties agree that no portion of the
368 Purchase Price, Buffalo Inc. Purchase Price, 316 Purchase Price, Buffalo US
Purchase Price or the Asset
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Purchase Price be allocated to a "restrictive covenant" as that term is defined
for the purpose of the INCOME TAX ACT (Canada). However, if any portion of the
368 Purchase Price, Buffalo Inc. Purchase Price, 316 Purchase Price, Buffalo US
Purchase Price or the Asset Purchase Price is determined by tax authorities to
be in respect of a "restrictive covenant" (the "REALLOCATION"), then the Buyer
Parties and the Seller Parties agree to use their best effort in order that the
full amount of such portion be subject to an election under Section 56.4 of the
INCOME TAX ACT (Canada), or any other provision to the same effect, in order for
such amount to be treated as proceeds of disposition of the shares in the
capital of the Acquired Entities or as part of the cumulative eligible capital
account under subsection 14(5) of the INCOME TAX ACT (Canada). In this respect,
the consideration paid to the Sellers for the Shares of the Acquired Entities
and the consideration paid to the Sellers for entering into this Agreement will
be deemed to be and always to have been the corresponding amounts under the
Reallocation. Upon the Sellers' request, Parties shall file the prescribed form
in accordance with the INCOME TAX ACT (Canada) and any subsequent amendment. If
any Canadian provincial taxing authority proposes a similar provision, and it is
determined by such provincial tax authority that any portion of the 368 Purchase
Price, Buffalo Inc. Purchase Price, 316 Purchase Price, Buffalo US Purchase
Price or the Asset Purchase Price is in respect of a "restrictive covenant",
then the Seller Parties and the Buyer Parties shall make a similar provincial
election.
8.10 OPTION AWARDS
For a period of twenty-four (24) months following the Closing, the
Senior Officer shall have authority to provide for the grant to employees of
Buyer and its Subsidiaries (other than the Bitton Brothers), of options to
purchase up to an aggregate of 1,000,000 shares of Parent Common Stock pursuant
to, and in accordance with, the terms and conditions of Parent's 2006 Stock
Incentive Plan or such other plan approved for such purpose by Parent's Board of
Directors. The options shall have an exercise price equal to the fair market
value of Parent Common Stock on the date of grant, vest over four (4) years in
accordance with Parent's then current vesting schedule for similarly situated
employees, and otherwise be subject to Parent's form of option agreement for
similarly situated employees.
ARTICLE 9.
CLOSING CONDITIONS
9.1 CONDITIONS PRECEDENT TO OBLIGATION OF BUYER PARTIES
Buyer Parties' obligation to consummate the Transactions contemplated
to occur in connection with the Closing and thereafter is subject to the
satisfaction of each condition precedent listed below.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty set forth in SECTIONS 5.1 and 5.3
and ARTICLE 6 must have been accurate and complete in all
respects (without giving effect to any provisions including
the word "material" or words of similar import, or to
materiality, as reflected under Canadian GAAP, in the
representations in SECTION 6.8 relating to the Financial
Statements), as of the date of this Agreement, and must be
accurate and complete in all respects (without giving effect
to any provisions including the word "material" or words of
similar import,
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or to materiality, as reflected under Canadian GAAP, in the
representations in SECTION 6.8 relating to the Financial
Statements), as of the Closing Date, as if made on the Closing
Date (except as expressly provided in a representation or
warranty, as arising as a direct results of the implementation
of the Transaction Documents in accordance with their
respective terms and except for inaccuracies that individually
or in the aggregate could not reasonably be expected to result
in a Material Adverse Change (or Effect)).
(b) COMPLIANCE WITH OBLIGATIONS. Each Seller Party must have
performed and complied with all of its covenants to be
performed or complied with at or prior to Closing (singularly
and in the aggregate) in all material respects.
(c) NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Since
the date hereof there must have been no event, series of
events or the lack of occurrence thereof which, singularly or
in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect. Without limiting the
foregoing, (i) there must have been no Material Adverse
Change, (ii) there must not have been any action or inaction
by a Governmental Body, arbitrator, or mediator which caused
or could reasonably be expected to cause a Material Adverse
Change, and (iii) there must not have been any fire, flood,
casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage) which has
had or could reasonably be expected to have a Material Adverse
Effect.
(d) NO ADVERSE LITIGATION. There must not be pending or threatened
any Action by or before any Governmental Body, arbitrator, or
mediator which seeks to restrain, prohibit, invalidate, or
collect Damages arising out of the Transactions, or which, in
the reasonable judgment of Parent, makes it inadvisable to
proceed with the Transactions.
(e) SELLER PARTY CONSENTS. Seller Parties must have received
Consents to the Transactions and waivers of rights to
terminate or modify any rights or obligations of any Acquired
Entity from any Person (i) from whom such Consent is required,
including Consents listed on SCHEDULES 5.1(C), 5.3(C), and
6.3, and under any Contract listed or required to be listed in
SCHEDULES 6.17, 6.21, and 6.26, or under Law, or (ii) who as a
result of the Transactions, would have such rights to
terminate or modify such Contracts, either by their terms or
as a matter of Law, other than (A) Consents required under
real property leases to which the Acquired Entities are party,
(B) the Consent of HSBC Bank Canada, or (C) unless, in each
case, the failure to receive such consents or waivers either
individually or in the aggregate would not have a Material
Adverse Effect.
(f) BUYER PARTY CONSENTS. Buyer Parties must have obtained all
Consents listed on SCHEDULE 5.2(C).
(g) LIABILITIES. Prior to the Closing, Seller Parties must have
obtained and delivered to Parent full satisfactions or
releases of all Liabilities due to or from Acquired Entities
and Trust which are due to be satisfied or released under this
Agreement to or on behalf of (i) any Affiliate of Acquired
Entities, (ii) Trust or any Affiliate of Trust, or (iii)
Sellers or any Affiliate of Sellers.
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(h) LEGAL OPINIONS. Parent shall have received from Stikeman
Elliot, LLP, counsel for Seller Parties, written opinions,
dated as of the Closing Date, addressed to Parent, in form and
substance reasonable satisfactory to Parent.
(i) SHAREHOLDER APPROVAL. Parent shall have obtained Shareholder
Approval.
(j) DISSENTING SHARES. The holders of no more than 4.99% of the
Parent Common Stock shall have exercised their right to
dissent from the Transactions under the applicable provisions
of the CGCL.
(k) NO ORDER OR INJUNCTION. There must not be issued and in effect
any Order restraining or prohibiting the Transactions.
(l) EMPLOYMENT AGREEMENTS. Each of the Bitton Brothers shall have
executed and delivered to Buyer the Employment Agreements.
(m) NON-COMPETITION AGREEMENTS. Each of the Bitton Brothers shall
have executed and delivered to Parent the Non-Competition
Agreements.
(n) INTERCREDITOR AGREEMENT; SECURITY AGREEMENT. Each of the
Intercreditor Agreement and Security Agreement contemplated by
SECTION 7.15 shall have been executed and delivered by all
parties thereto.
(o) REGISTRATION RIGHTS AGREEMENT. Each Seller receiving Buyer
Exchangeable Shares at Closing shall have executed and
delivered to Parent the Registration Rights Agreement.
(p) STANDSTILL AGREEMENT. Each Seller receiving Buyer Exchangeable
Shares at Closing and the Bitton Brothers shall have executed
and delivered to Parent the Standstill Agreement.
9.2 CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS AND TRUST
Trust's and each Seller's obligation to consummate the Transactions contemplated
to occur in connection with the Closing and thereafter is subject to the
satisfaction of each condition precedent listed below.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty set forth in SECTION 5.2 must have
been accurate and complete in all respects (without giving
effect to any provisions including the word "material" or
words of similar import, or to materiality, as reflected under
US GAAP, in the representations in SECTION 5.2(F) relating to
the financial statements of Parent), as of the date of this
Agreement, and must be accurate and complete in all respects
(without giving effect to any provisions including the word
"material" or words of similar import, or to materiality, as
reflected under US GAAP, in the representations in SECTION
5.2(F) relating to the financial statements of Parent), as of
the Closing Date, as if made on the Closing Date (except as
expressly provided in a representation or warranty, as arising
as a direct
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results of the implementation of the Transaction Documents in
accordance with their respective terms and except for
inaccuracies that individually or in the aggregate could not
reasonably be expected to result in a Parent Material Adverse
Change (or Effect)).
(b) COMPLIANCE WITH OBLIGATIONS. Each Buyer Party must have
performed and complied with all its covenants and obligations
required by this Agreement to be performed or complied with at
or prior to Closing (singularly and in the aggregate) in all
material respects.
(c) NO PARENT MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY.
Since the date hereof there must have been no event, series of
events or the lack of occurrence thereof which, singularly or
in the aggregate, has had or could reasonably be expected to
have a Parent Material Adverse Effect. Without limiting the
foregoing, (i) there must have been no Parent Material Adverse
Change, (ii) there must not have been any action or inaction
by a Governmental Body, arbitrator, or mediator which caused
or could reasonably be expected to cause a Parent Material
Adverse Change, and (iii) there must not have been any fire,
flood, casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage) which has
had or could reasonably be expected to have a Parent Material
Adverse Effect.
(d) NO ADVERSE LITIGATION. There must not be pending or threatened
any Action by or before any Governmental Body, arbitrator, or
mediator which seeks to restrain, prohibit, invalidate, or
collect Damages arising out of the Transactions, or which, in
the reasonable judgment of Seller Parties, makes it
inadvisable to proceed with the Transactions.
(e) BUYER PARTY CONSENTS. Buyer Parties must have obtained all
Consents listed in SCHEDULE 5.2(C).
(f) NO ORDER OR INJUNCTION. There must not be issued and in effect
any Order restraining or prohibiting the Transactions.
(g) LEGAL OPINION. Trust and Sellers shall have received from
Xxxxxx, Xxxxxxxx & Markiles LLP and Pillsbury Xxxxxxxx Xxxx
Xxxxxxx LLP (or such other counsel reasonable acceptable to
Sellers), each counsel for Buyer Parties, written opinions,
dated as of the Closing Date, addressed to such Parties, in
form and substance reasonable satisfactory to such Parties.
(h) SHAREHOLDER APPROVAL. Parent shall have obtained Shareholder
Approval
(i) DISSENTING SHARES. The holders of no more than 4.99% of the
Parent Common Stock shall have exercised their right to
dissent from the Transactions under the applicable provisions
of the CGCL.
(j) REGISTRATION RIGHTS AGREEMENT. Parent shall have executed and
delivered to each Seller receiving Buyer Exchangeable Shares
at Closing the Registration Rights Agreement.
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(k) INTERCREDITOR AGREEMENT; SECURITY AGREEMENT. Each of the
Intercreditor Agreement and Security Agreement contemplated by
SECTION 7.15 shall have been executed and delivered by all
parties thereto.
ARTICLE 10.
TERMINATION
10.1 TERMINATION OF AGREEMENT
The Parties may terminate this Agreement as provided below:
(a) Parent and Sellers may terminate this Agreement as to all
Parties by mutual written consent at any time prior to the
Closing.
(b) Parent or Sellers may terminate this Agreement upon delivery
of notice if the Closing has not occurred prior to the
Expiration Date, PROVIDED that the Party delivering such
notice (or in the case of a delivery by Sellers, each Seller
Party) shall not have caused such failure to close as a result
of such Party's default hereunder. In the event the
preliminary Proxy Statement related to the Shareholder
Approval has not been filed with the SEC by December 31, 2006,
Parent or Sellers may terminate this Agreement upon delivery
of notice prior to January 19, 2007.
(c) Parent may terminate this Agreement within thirty (30) days of
giving written notice to Sellers at any time prior to the
Closing if there has been a Material Adverse Change (or
Effect) or Trust or any Seller has Breached any
representation, warranty, or covenant contained in this
Agreement (without giving effect to materiality for any
provisions including the word "MATERIAL" or words of similar
import and SECTION 6.8), provided such Breach, individually or
in the aggregate, could reasonably be expected to result in a
Material Adverse Change (or Effect), and such Material Adverse
Change (or Effect) or Breach has not been remedied within ten
(10) days of the receipt of such notice by Seller.
(d) Sellers may terminate this Agreement within thirty (30) days
of giving written notice to Parent at any time prior to the
Closing if there has been a Parent Material Adverse Change (or
Effect) or if any Buyer Party has Breached any representation,
warranty, or covenant contained in this Agreement (without
giving effect to materiality for any provisions including the
"MATERIAL" or words of similar import and SECTION 5.2(F),
provided such Breach, individually or in the aggregate, could
reasonably be expected to result in a Parent Material Adverse
Change (or Effect) and such Parent Material Adverse Change (or
Effect) or Breach has not been remedied within ten (10) days
of the receipt of such notice by Parent.
(e) Parent may terminate this Agreement by giving notice to
Sellers on or before the Expiration Date that it has not
obtained or reasonably believes that it will be unable to
obtain on terms and conditions reasonably satisfactory to
Parent all of the financing it needs to consummate the
Transactions.
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(f) Parent may terminate this Agreement by giving notice to
Sellers on or before the Expiration Date if Shareholder
Approval was not obtained at a special meeting of Parent's
shareholders at which Shareholder Approval was sought by
Parent.
10.2 EFFECT OF TERMINATION
(a) Except for the obligations under ARTICLE 2, this ARTICLE 10
and ARTICLE 13, if this Agreement is terminated under SECTION
10.1, then, except as provided in this SECTION 10.2 all
further obligations of the Parties under this Agreement shall
terminate.
(b) If Parent terminates this Agreement pursuant to SECTION
10.1(C), then the rights of Buyer Party(ies) to pursue all
legal remedies for Damages such Buyer Party(ies) suffer shall
survive such termination unimpaired and no election of
remedies shall have been deemed to have been made; PROVIDED,
HOWEVER, that Seller Parties shall not be liable, in the
aggregate, for any Damages in excess of $5,000,000.
(c) If Sellers terminate this Agreement pursuant to 10.1(D),
Buffalo International shall be entitled to retain the Deposit
as contemplated by SECTION 2.1(B) as the Sellers' sole and
exclusive remedy and as liquidated damages, and all further
obligations of the Parties under this Agreement shall
terminate.
(d) If Parent or Sellers, as the case may be, terminate this
Agreement pursuant to SECTIONS 10.1(B) or 10.1(E), then
Buffalo International shall be entitled to retain the Deposit
as contemplated by SECTION 2.1(B) as the Sellers Parties' sole
and exclusive remedy and as liquidated damages with respect to
such termination of this Agreement, and all further
obligations of the Parties under this Agreement shall
terminate.
(e) If Parent terminates this Agreement pursuant to SECTION
10.1(F), then Parent shall pay to Sellers the Termination Fee,
on the tenth (10th) business day following final determination
of the Termination Fee as provided in SECTION 10.2(E), by wire
transfer in immediately available funds, to compensate Sellers
for, among other things, their expenses and management time in
pursuing the Transactions and for lost opportunity costs.
Seller Parties agree that such payment shall be Seller
Parties' sole and exclusive remedy and as liquidated damages
with respect to such termination of this Agreement, and all
further obligations of the Parties under this Agreement shall
terminate.
(f) The "TERMINATION FEE" shall be an amount equal to Seller
Parties' actual and reasonable, documented, out-of-pocket,
third party transaction costs and expenses incurred in
connection with the structuring and negotiation of (i) the
term sheet dated May 17, 2006 delivered by Parent to Buffalo
Inc., (ii) this Agreement and the Ancillary Agreements, and
(iii) the Transactions (including, without limitation, all
reasonable fees and expenses of counsel and independent
auditors), provided that Seller Parties have provided Parent
with copies of reasonably detailed invoices, receipts or other
adequate documentation substantiating all such costs and
expenses. Notwithstanding anything to the contrary in this
SECTION 10.2, in no event shall Parent have any obligation to
pay such
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costs and expenses, or any portion thereof, to the extent that
any Seller Party has already deducted the amount of such costs
and expenses from funds deposited with Seller Parties by
Parent or any third party in connection with the Transactions
unless Seller Parties thereafter reimburse Parent or any such
third party for any amounts so deducted. If Parent disputes
any the amount of such costs and expenses, the parties agree
to negotiate in good faith to resolve any dispute between them
regarding the Termination Fee. If the negotiations do not
resolve the dispute to the reasonable satisfaction of both
parties, then each party shall nominate one senior officer of
the rank of Vice President or higher as its representative.
These representatives shall, within thirty (30) days of a
written request by either party to call such a meeting, meet
in person and alone (except for one assistant for each party)
and shall attempt in good faith to resolve the dispute. If the
disputes cannot be resolved by such senior managers in such
meeting, the parties agree that they shall, if requested in
writing by either party, meet within thirty (30) days after
such written notification for one (1) day with an impartial
mediator and consider dispute resolution alternatives other
than litigation. If an alternative method of dispute
resolution is not agreed upon within thirty (30) days after
the one (1) day mediation, either party may begin litigation
proceedings. This procedure shall be a prerequisite before
taking any additional action hereunder; provided, however,
that if the timeframe imposed by this procedure could
materially adversely affect a party's rights or remedies under
any dispute, then the above procedure shall not apply to such
party with respect to such dispute.
ARTICLE 11.
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
(a) Each representation and warranty of Sellers contained in
SECTION 5.1 and Trust contained in SECTION 5.3 and any
certificate related to such representations and warranties
shall survive the Closing and shall continue in full force and
effect, forever, except for the representations and warranties
set forth in SECTIONS 5.1(E) and 5.3(D) which and shall
continue in full force and effect until the applicable statute
of limitations expires (or for 7 years if there is no
applicable statue of limitations). Each representation and
warranty of Seller Parties contained in ARTICLE 6 and any
certificate related to such representations and warranties
shall survive the Closing and shall continue in full force and
effect for two years thereafter, except (i) the
representations and warranties set forth in SECTIONS 6.4 and
6.26, which shall survive the Closing and shall continue in
full force and effect until the applicable statute of
limitations expires (or for 7 years if there is no applicable
statute of limitations), (ii) the representations and
warranties set forth in SECTIONS 6.1, 6.2, 6.5 and 6.7, which
shall survive the Closing and shall continue in full force and
effect forever, and (iii) the representations and warranties
set forth in SECTION 6.12 which shall survive the Closing and,
notwithstanding such Closing, and the receipt by the Buyer
Parties of any opinion, certificate or other document, shall
continue in full force and effect for the benefit of the
Seller Indemnified Parties until the date that is ninety (90)
days after the relevant Governmental Body is no longer
entitled to assess or reassess the subject Acquired Entity in
respect of the Taxes in question, having regard, without
limitation, to (a) any waiver given by such Acquired Entity in
respect of such
75
Taxes; and (b) any entitlement of a Governmental Body to
assess or reassess such Acquired Entity without limitation in
the event of fraud or misrepresentation attributable to
neglect, carelessness or willful default.
(b) Each representation and warranty of Buyer Parties contained in
SECTION 5.2 and any certificate related to such
representations and warranties shall survive the Closing and
shall continue in full force and effect for two years
thereafter, except (i) the representations and warranties set
forth in SECTION 5.2(D), which shall survive the Closing and
shall continue in full force and effect until the applicable
statute of limitations expires (or for 7 years if there is no
applicable statute of limitations) and (ii) the
representations and warranties set forth in SECTIONS 5.2(A)
and 5.2(B), which shall survive the Closing and shall continue
in full force and effect forever.
(c) Each other provision in this Agreement or any certificate or
document delivered pursuant hereto will survive for the
relevant statute of limitations period, unless a different
period is expressly contemplated herein or thereby.
(d) Where a notice of a claim is given in accordance with this
Agreement in respect of a representation, warranty or
obligation of the Seller Parties relating to Taxes, the
representation, warranty or obligation to which such notice
applies shall survive in respect of such claim until the final
determination or settlement of such claim.
11.2 INDEMNIFICATION PROVISIONS FOR PARENT'S BENEFIT
Sellers and Trust, jointly and severally, shall indemnify and hold the
Seller Indemnified Parties harmless from and pay any and all Damages directly or
indirectly resulting from, relating to, arising out of, or attributable to any
one of the following:
(a) Any Breach of any representation or warranty any Seller Party
has made in this Agreement as if such representation or
warranty were made on and as of the Closing Date.
(b) Any Breach by any Seller Party of any covenant or obligation
of any Seller Party in this Agreement.
(c) All Liabilities of Trust or related to the Purchased Assets or
operation by Trust of its business prior to Closing other than
Assumed Liabilities.
11.3 INDEMNIFICATION PROVISIONS FOR TRUST'S AND SELLERS' BENEFIT
Buyer Parties shall indemnify and hold the Parent Indemnified Parties
harmless from and pay any and all Damages, directly or indirectly, resulting
from, relating to, arising out of, or attributable to any of the following:
(a) Any Breach of any representation or warranty any Buyer Party
has made in this Agreement as if such representation or
warranty were made on and as of the Closing Date.
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(b) Any Breach by any Buyer Party of any covenant or obligation of
any Buyer Party in this Agreement.
(c) The payment, performance, and satisfaction when due of the
Assumed Liabilities.
11.4 INDEMNIFICATION CLAIM PROCEDURES
(a) If any third party notifies any Indemnified Party with respect
to the commencement of any Action that may give rise to a
claim for indemnification against any Indemnitor under this
ARTICLE 11 (an "INDEMNIFICATION CLAIM"), then such Indemnified
Party shall promptly give notice to the Indemnitor. The
failure to give such notice shall not affect whether an
Indemnitor is liable for reimbursement hereunder, unless the
defense of such Action is materially and irrevocably
prejudiced by the Indemnified Party's failure to give such
notice.
(b) Unless provided otherwise in this Agreement, an Indemnitor
shall have the right to defend against an Indemnification
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party if (i) within fifteen (15) days
following the receipt of notice of the Indemnification Claim
the Indemnitor notifies the Indemnified Party in writing that
the Indemnitor shall indemnify the Indemnified Party from and
against the entirety of any Damages the Indemnified Party may
suffer resulting from, relating to, arising out of, or
attributable to the Indemnification Claim, (ii) the
Indemnification Claim involves only money Damages and does not
seek an injunction or other equitable relief, (iii) settlement
of, or an adverse judgment with respect to, the
Indemnification Claim is not in the good faith judgment of the
Indemnified Party likely to establish a precedential custom or
practice materially adverse to the continuing business
interests of the Indemnified Party, and (iv) the Indemnitor
continuously conducts the defense of the Indemnification Claim
actively and diligently.
(c) So long as the Indemnitor is conducting the defense of the
Indemnification Claim in accordance with SECTION 11.4(B), (i)
the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the
Indemnification Claim, (ii) the Indemnified Party shall not
consent to the entry of any Order with respect to the
Indemnification Claim without the prior written Consent of the
Indemnitor (not to be withheld unreasonably), and (iii) the
Indemnitor shall not Consent to the entry of any Order with
respect to the Indemnification Claim without the prior written
Consent of the Indemnified Party (not to be withheld
unreasonably, provided that it shall not be deemed to be
unreasonable for an Indemnified Party to withhold its Consent
(A) with respect to any finding of or admission (1) of any
Breach of any Law, Order or Permit, (2) of any violation of
the rights of any Person, or (3) which Indemnified Party
believes could have a material adverse effect on its business,
including on any other Actions to which the Indemnified Party
or its Affiliates are party or to which Indemnified Party has
a good faith belief it may become party, or (B) if any portion
of such Order would not remain sealed).
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(d) If any condition in SECTION 11.4(B) is or becomes unsatisfied,
(i) the Indemnified Party may defend against an
Indemnification Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain
any Consent from, any Indemnitor in connection therewith),
provided that the Indemnified Party may not concede, settle or
compromise any Indemnification Claim without the Consent of
the Indemnitor which will not be unreasonably withheld, (ii)
each Indemnitor shall, unless such the Indemnification Claim
is being contested by the Indemnitor, jointly and severally be
obligated to reimburse the Indemnified Party promptly and
periodically for the Damages relating to defending against the
Indemnification Claim, and (iii) each Indemnitor shall remain
jointly and severally Liable for any Damages the Indemnified
Party may suffer relating to the Indemnification Claim to the
fullest extent provided in this ARTICLE 11.
(e) In the event any Indemnified Party shall have a claim against
any Indemnitor that does not involve an Indemnification Claim
(i.e., a direct claim), the Indemnified Party shall deliver
notice of such claim with reasonable promptness to the
Indemnitor. The failure to give such notice shall not affect
whether an Indemnitor is liable for reimbursement unless such
failure has resulted in the loss of substantive rights with
respect to the Indemnitor's ability to defend such claim, and
then only to the extent of such loss. If the Indemnitor
notifies the Indemnified Party that it does not dispute the
claim described in such notice or fails to notify the
Indemnified Party within forty five (45) days after delivery
of such notice by the Indemnified Party whether the Indemnitor
disputes the claim described in such notice, the Damages in
the amount specified in the Indemnified Party's notice shall
be conclusively deemed a liability of the Indemnitor and the
Indemnitor shall pay the amount of such Damages to the
Indemnified Party on demand.
(f) Each Party hereby consents to the non-exclusive jurisdiction
of any Governmental Body, arbitrator, or mediator in which an
Action is brought against any Indemnified Party for purposes
of any Indemnification Claim that an Indemnified Party may
have under this Agreement with respect to such Action or the
matters alleged therein, and agrees that process may be served
on such Party with respect to such claim anywhere in the
world.
11.5 LIMITATIONS ON INDEMNIFICATION LIABILITY
Any claims any Indemnified Party makes under this ARTICLE 11 shall be
limited as follows:
(a) The amount of Damages required to be paid for Damages shall be
reduced to the extent of any amounts an Indemnified Party
actually receives pursuant to the terms of the insurance
policies (if any) covering such Indemnification Claim.
(b) All indemnification obligations shall be limited to Damages.
(c) Any Liability of any Acquired Entity to any Seller Indemnified
Party under this Agreement shall terminate for all purposes
upon the Closing and have no
78
further force or effect. Although the representations and
warranties made in ARTICLE 6 are made jointly and severally by
Seller Parties (including Target Companies), Sellers and Trust
are solely responsible for any and all indemnification of the
Seller Indemnified Parties hereunder. Further, neither Trust
nor Sellers shall have any claim for contribution against any
Acquired Entity. Knowledge of any Acquired Entity (including
Knowledge of any officer, director or other employee of any
Acquired Entity) shall not be imputed to any Buyer Party for
any purpose.
(d) Neither the Sellers and Trust, nor the Buyer Parties, shall
have Liability for money Damages related to Breaches of the
representations and warranties in ARTICLE 5 or ARTICLE 6
unless and until the aggregate Damages claimed under SECTION
11.2 or SECTION 11.3, as applicable, exceed $500,000; PROVIDED
that the limitation contemplated hereby will not be applicable
with respect to (A) Breaches of SECTIONS 5.1(B), 5.1(F),
5.2(B), 5.2(E), 5.3(B), 6.2, 6.5, or 6.12, (B) instances of
fraud, willful misconduct or gross negligence by the
applicable Indemnitor, and (C) matters covered by SECTION
8.8(H); and PROVIDED, further, that once such amount exceeds
$500,000, the applicable Indemnified Parties will be entitled
to recover all amounts to which they are entitled in excess of
$500,000.
(e) The aggregate Liability of Sellers and Trust, and the
aggregate Liability of Buyer Parties, for money Damages under
this Agreement related to Breaches of the representations and
warranties herein will not exceed $7,000,000; PROVIDED that
the limitation contemplated hereby will not be applicable with
respect to (A) Breaches of SECTIONS 5.1(B), 5.1(F), 5.2(B),
5.2(E), 5.3(B), 6.2, 6.5, or 6.12, with respect to which the
aggregate Liability for money Damages shall not exceed
$110,000,000, (B) instances of fraud, willful misconduct or
gross negligence by the applicable Indemnitor, and (C) matters
covered by SECTION 8.8(H), with respect to which the aggregate
Liability for money Damages shall not exceed $110,000,000.
(f) Excluding instances of fraud, willful misconduct or gross
negligence by any of the Parties, and other than to the extent
covered by the indemnification provisions of SECTION 8.8(H),
if the Closing occurs the indemnification provisions of this
ARTICLE 11 shall be the exclusive remedy with respect to the
Breach of this Agreement.
(g) A claim for any matter not involving a third party may be
asserted by notice to the Party from whom indemnification is
sought.
11.6 SET-OFF RIGHTS; LIMITATION ON CASH RECOVERY; OTHER MATTERS
(a) Buyer Parties shall have the right and option, but not the
obligation, of setting off all or any part of any Damages a
Seller Indemnified Party suffers and for which it is entitled
to indemnification by Sellers and Trust under this Agreement
by notifying Sellers and Trust that the applicable Buyer Party
is reducing the amount of the Future Payments by the amount of
such Damages, provided however that Buyer Parties shall not
have the right or option to effect a set off in respect of any
portion of any Damages that is disputed by a Seller or Trust,
in which case SECTION 11.6(C) shall apply.
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Any offset against Future Payments shall be applied against
the next scheduled payment of any Future Payment.
(b) Any offset against amounts outstanding under the Buyer Notes
shall affect the timing and amount of payments required under
the Buyer Notes in the same manner as if Buyer had made a
permitted prepayment (without premium or penalty) thereunder.
(c) If at the time of any scheduled Future Payment there is
pending or, to any Party's Knowledge, threatened, a claim for
Damages with respect to which Parent believes in good faith
that a Seller Indemnified Party is entitled to be indemnified
by Sellers and Trust under this Agreement and such claim has
not been finally resolved, a portion of the next scheduled
Future Payments sufficient to satisfy the amount of Damages
shall be withheld by the applicable Buyer Party and deposited
with an escrow agent on terms reasonably acceptable to Parent
and the applicable Seller Indemnified Parties. Upon final
determination of Damages, if any, for which Seller Indemnified
Parties are entitled to indemnification under this Agreement,
the amount of the scheduled Future Payments so withheld shall
be reduced by the amount of such Damages and the balance, if
any, shall be paid in accordance with the terms of obligation
creating such Future Payments.
(d) A Buyer Party's exercise, if in good faith, of its withholding
and set off rights in accordance with this SECTION 11.6 shall
not constitute an event of default under this Agreement or any
Ancillary Agreement or any related security documents. Neither
the exercise of nor failure to exercise its rights under this
SECTION 11.6 will constitute an election of remedies or limit
any Buyer Party in any matter in the enforcement of any other
remedies available to it.
(e) Subject to Buyer Parties' right and option to set off all or
any part of any Damages a Seller Indemnified Party suffers
against Future Payments as provided for in this SECTION 11.6,
if Sellers and Trust have an obligation to pay Damages to a
Seller Indemnified Party under this ARTICLE 11, such Damages
shall be paid as follows: (i) an amount equal to the lesser of
(A) 40% of such Damages and (B) the then-remaining outstanding
balance under the Buyer Notes shall be set off against (and
reduce the amount outstanding under) the Buyer Notes; and (ii)
the remaining amount of such Damages shall be paid in cash.
(f) Any Damages paid by Sellers and Trust in satisfaction of its
indemnification obligations under this under this ARTICLE 11
shall be treated by Sellers and Trust and Buyer Parties as an
adjustment to the purchase price paid for the Purchased Assets
or the Shares to which the Damages paid relate, as the case
may be.
ARTICLE 12.
EARN-OUT
12.1 EARN-OUT
(a) As additional consideration for the Shares, Buyer Parties
shall pay to each Seller, a portion of the Earn-Out Amount, if
any, equal to the product of such Seller's
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Earn-Out Share TIMES the Earn-Out Amount for the applicable
Calculation Period. The Earn-Out Amount shall be paid in cash
and otherwise in accordance with the terms and conditions of
this ARTICLE 12. The Earn-Out Amount, if any, shall be payable
by Buyer with respect to the Buffalo Inc. Shares, 000 Xxxxxx
Shares, and 368 Canada Shares (and allocated as an adjustment
to the purchase price for such Shares in a reasonable manner),
and by Parent with respect to the Buffalo US Shares.
(b) Within one hundred twenty (120) days of the end of each
Calculation Period, Parent shall deliver to Sellers a schedule
setting forth the Parent's determination of whether the
Earn-Out Amount for such period was earned together with the
Parent's calculation of Adjusted Earnings for such period; the
Parent's determination shall be based on the audited financial
statements of Buyer and Parent for the period ended as at the
end of the then relevant Calculation Period (the "PROPOSED
EARN-OUT AMOUNT"). The Proposed Earn-Out Amount will be
subject to Sellers' review. In reviewing the Proposed Earn-Out
Amount, Sellers shall have the right to communicate with, and
to review the work papers, schedules, memoranda, details of
reconciliation entries and other documents Buyer, Parent or
the auditors for Buyer and Parent prepared or reviewed in
determining the Proposed Earn-Out Amount for such period and
thereafter shall have reasonable access to all relevant books
and records, all to the extent Sellers reasonably require to
complete their review of Parent's determination of the
Proposed Earn-Out Amount. Within forty five (45) days after
its receipt of Parent's calculation of the Proposed Earn-Out
Amount, Sellers shall advise Parent whether, based on such
review, they have any exceptions to such determination and
related calculations. Unless Sellers deliver to Parent within
such forty five (45) day period a letter describing their
exceptions to Parent's calculation of the applicable Adjusted
Earnings and the corresponding Earn-Out Amount as set forth in
the schedule delivered by Parent described in this SECTION
12.1(B), the Proposed Earn-Out Amount for the applicable
Calculation Period will be conclusive and binding on Buyer
Parties and Sellers as to the Adjusted Earnings and as to
whether the Earn-Out Amount for such period is payable. If the
Sellers deliver such letter, the Parties shall follow the
procedures for resolution of disputes set forth in SECTION
12.5.
(c) Within five (5) business days of the determination of the
applicable Earn-Out Amount under this SECTION 12.1 or SECTION
12.5, Buyer shall pay to Sellers an amount equal to such
amount.
(d) Subject to SECTION 12.2, Buyer Parties' obligations under this
ARTICLE 12 will survive, and Buyer shall have the obligation
to pay all Earn-Out Amounts, if any, in accordance with this
ARTICLE 12, notwithstanding the cessation of employment for
any reason (including as a result of death, disability,
retirement or voluntary termination of service) of any or all
of the Bitton Brothers.
12.2 RETIREMENT OF EARN OUT
Within ten (10) business days after the occurrence of an Acceleration
Event, Buyer shall have the obligation to terminate payment of future Earn-Out
Amounts by making a lump sum payment in cash to each Seller equal to such
Seller's share of the Accelerated Earn-Out Amount determined by multiplying such
Seller's Earn-Out Share by the Accelerated Earn-Out Amount.
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12.3 CERTAIN DEFINITIONS
For this Agreement, the following terms shall have the indicated
meanings:
(a) "ACCELERATED EARN OUT AMOUNT" means the amount equal to the
net present value of the aggregate remaining Earn Out Amounts,
calculated as if all of such remaining Earn-Out Amounts would
have been earned in full. In determining the net present value
of such Earn Out Amounts, a discount rate equal to 7.0% will
be used.
(b) "ACCELERATION EVENT" means the occurrence of any of the
following events: (i) a Change of Control occurs; (ii) Xxxxxxx
Xxxxxx'x employment with Buyer is terminated by Buyer other
than for "Cause" or "permanent disability" or Xxxxxxx Xxxxxx
resigns for "Good Reason" (as such terms are defined in the
Employment Agreement contemplated herein to be entered into by
Xxxxxxx Xxxxxx, Buyer and Parent at Closing); (iii) if Parent
and Buyer fails to pay any Earn-Out Amount within thirty (30)
days of the date such payment is required to be made in
accordance with this SECTION 12; (iv) at any time Parent or
Buyer is in Breach of any material obligation on its part to
be performed pursuant to SECTION 12.6 and such Breach has not
been cured within thirty (30) days of receipt by Parent of
notice of such Breach. For avoidance of doubt, an Acceleration
Event shall not occur if Xxxxxxx Xxxxxx'x employment is
terminated by Buyer for "Cause" in accordance with the
Employment Agreement contemplated hereby or as a result of the
death, "permanent disability," or voluntary termination other
than for "Good Reason" of such employment by Xxxxxxx Xxxxxx.
(c) "ACQUIRED BUSINESS" means the business comprised of the
combined businesses of the Acquired Entities and the Purchased
Assets.
(d) "ADJUSTED EARNINGS" means the net income, including a
provision for all year-end accounting adjustments, consistent
with Canadian GAAP and accounting policies of the Target
Companies used as of the Closing, of the Acquired Business for
the relevant Calculation Period, including the following
adjustments:
(i) INCREASES TO ADJUSTED EARNINGS. To the extent
included in combined net income of the Acquired
Business, Adjusted Earnings for each Calculation
Period shall be increased by the following without
duplication:
(A) Interest expense accrued, including, without
limitation, cash interest, payment-in-kind
interest and amortization of original issue
discount.
(B) Provision for Taxes based on or measured by
income.
(C) The amount of depreciation and amortization
expense, or impairment of goodwill and
intangible assets.
(D) Any expenses the Acquired Business directly
incurred in connection with the financing of
the Transactions by Parent or any
refinancing of such debt.
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(E) Any expenses the Acquired Business incurred
in connection with the Transactions,
including all related additional costs
incurred in order to conform all financial
statements to US GAAP.
(F) Direct costs, including professional fees,
incurred in connection with any new credit
facility for the Acquired Business which
replaces the credit facility in effect at
the Closing.
(ii) DECREASES IN ADJUSTED EARNINGS. To the extent
included in combined net income of the Acquired
Business for a Calculation Period, Adjusted Earnings
for each Calculation Period shall be reduced by an
amount equal to all charges, expenses, claims, and
monies, if any, Parent or its Affiliates (other than
the Acquired Entities) pay or incur during the
Calculation Period, and that are not otherwise
reimbursed, related primarily to the Acquired
Entities' business, assets, and operations during the
Calculation Period or the Purchased Assets.
(iii) EXCLUSIONS FROM ADJUSTED EARNINGS. To the extent
included in, or excluded from, the combined net
income of the Acquired Business for a Calculation
Period, Adjusted Earnings for each Calculation Period
shall not include the effect of the following without
duplication:
(A) The gain or loss from any sale, exchange, or
other disposition of assets other than in
the Ordinary Course of Business, except for
sales of inventory and sales or other
dispositions or impairment of assets in
connection with the closure of retail
stores.
(B) The gain or loss from the exchange of
securities, or any increase or reduction in
the carrying value of such securities.
(C) Gains or losses from the condemnation of the
Acquired Entities' assets or the Purchased
Assets. (D) Insurance proceeds in excess of
basis of damaged or destroyed assets and any
proceeds of "key-man" life insurance or
permanent disability insurance.
(E) All income or expense relating to the
operations or business of any Person
acquired after the date of this Agreement.
(iv) If any product line or brand of the Acquired Entities
should be sold or otherwise transferred to, or if any
Acquired Entity is merged or consolidated with,
Parent or an Affiliate of Parent that is not an
Acquired Entity without the prior consent of the
Sellers after the Closing Date, then the Adjusted
Earnings related to such disposed of asset or the
business of such merged or consolidated Acquired
Entity after the effective date of such disposal
shall be included in the Adjusted Earnings for
purposes of determining the Earn-Out Amount.
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(v) To the extent any Acquired Entity's employees are
provided with employee benefit programs available to
Parent's employees instead of or in addition to those
currently provided to such employees, any additional
costs or savings shall be excluded from the
calculation of Adjusted Earnings.
(vi) All inter-company revenues and inter-company expenses
generated between the Acquired Entities, on the one
hand, and Parent or any of its Affiliates that is not
an Acquired Entity, on the other hand, shall be
excluded from the Adjusted Earnings for purposes of
determining the Earn-Out Amount, unless Parent and
Xxxxxxx Xxxxxx shall otherwise agree.
(vii) Any other adjustments to which Parent and Sellers
agree will be taken into account in determining
Adjusted Earnings.
(e) "EARN-OUT AMOUNT" means the dollar amount set forth on
SCHEDULE 12, to be due and payable upon achievement of the
Adjusted Earnings target set forth on SCHEDULE 12 (each, a
"TARGET") for each of the applicable twelve month periods set
forth on SCHEDULE 12 (each a "CALCULATION PERIOD"). In the
event of a Surplus for any Calculation Period, then (i) first,
if the amount of the Surplus for any Calculation Period (other
than the first Calculation Period) equals or exceeds the
amount of any Shortfall for the immediately preceding
Calculation Period, Buyer shall pay to each Seller such
Seller's Earn-Out Share of the Earn-Out Amount for such
immediately preceding Calculation Period, and (ii) second, the
amount of the Surplus, if any, for any Calculation Period
(other than the final Calculation Period) in excess of any
Shortfall for the immediately preceding Calculation Period
shall be applied and added to Adjusted Earnings for the
immediately following Calculation Period.
(f) "EARN-OUT SHARE" means, with respect to a Seller, such
Seller's proportionate share of any Earn-Out Amount as set
forth on EXHIBIT A, which amount is based on the consolidated
Adjusted Earnings of the Acquired Business acquired from such
Seller over the total consolidated Adjusted Earnings of the
Acquired Business for the nine months ended September 30,
2006.
(g) "SHORTFALL" means, with respect to any Calculation Period in
which the Adjusted Earnings were less than the corresponding
Target, the difference between such Target and the Adjusted
Earnings attributable to such Calculation Period.
(h) "SURPLUS" means, with respect to any Calculation Period, the
amount, if any, by which the Adjusted Earnings for such period
exceeds the corresponding Target.
12.4 ACCOUNTING AND OTHER GENERAL PRINCIPLES
For purposes of making calculations in this ARTICLE 12, the following
provisions will apply.
(a) Adjusted Earnings of the Acquired Business shall be calculated
in Canadian Dollars.
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(b) Adjusted Earnings of the Acquired Business shall be determined
in accordance with Canadian GAAP and the accounting policies
of the Target Companies used as of the Closing on a basis
consistent with the Financial Statements.
(c) Inventory will be accounted for on a basis consistent with the
method under Canadian GAAP and the accounting policies of the
Target Companies used as of the Closing as reflected in the
Financial Statements.
(d) No gain, loss, income, or expense or recognition or
non-recognition of revenue resulting from a change in the
Acquired Entities' accounting methods, principles, or
practices from those in effect as of the Closing as reflected
in the Financial Statements will be taken into account.
(e) Any account receivable that is not collected in full within
one hundred twenty (120) days after the date it first becomes
due and payable shall be deducted from revenue in the period
in which it is determined to be uncollectible, net of any
allocated bad debt reserve, and to the extent it has not been
treated as deferred revenue (and excluded from earnings),
subject to inclusion in revenue in a later period, if, as, and
when collected.
12.5 RESOLUTION OF CONFLICTS
If Parent and Sellers are unable to agree on the Adjusted Earnings for
any Calculation Period (the "DISPUTED AMOUNT"), then (A) for twenty (20) days
after the Parent receives the letter describing Sellers' exceptions to Parent's
calculation of the Disputed Amount, Sellers and Parent will use their
Commercially Reasonable Efforts to agree on the calculation of the Disputed
Amount and (B) lacking such agreement, the matter will be referred to an
independent accounting firm selected by Parent and the Sellers, who will
determine the correct Disputed Amount within sixty (60) days of such referral,
which determination will be final and binding on Buyer Parties and Sellers for
all purposes. The non-prevailing party in such dispute shall be determined by
the independent accounting firm and shall be the party whose calculation of the
Adjusted Earnings in dispute was furthest from the Adjusted Earnings as
determined by the independent accounting firm. The Purchaser and the Sellers
shall each bear and pay 50% of the fees and other expenses of the independent
accounting firm in connection with the dispute resolution process set forth in
this SECTION 12.5; provided, however, that if the difference between the
non-prevailing party's calculation of the Adjusted Earnings in dispute and the
actual Adjusted Earnings (as determined by the independent accounting firm) is
greater than 5% of the actual Adjusted Earnings, then the non-prevailing party
shall be responsible for reimbursing the prevailing party for all of its
reasonable out-of-pocket costs and expenses incurred in connection with the
resolution of the dispute, including all reasonable attorneys' fees, accounting
fees and experts' fees, and shall also be responsible for paying all of the
costs associated with the dispute resolution process provided for by this
SECTION 12.5, including all fees and expenses of the independent accounting firm
in connection with the dispute resolution process.
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12.6 MANAGEMENT OF ACQUIRED BUSINESS
(a) PRESIDENT, BUFFALO DIVISION; CHIEF EXECUTIVE OFFICER. Promptly
following the Closing, Xxxxxxx Xxxxxx shall be appointed as
the President, Buffalo Division of Parent and Chief Executive
Officer of Buyer (the "SENIOR OFFICER"). Until the earlier of
the end of the final Calculation Period or the termination of
the Senior Officer's employment with Buyer (through such
individual's voluntarily termination, due to such individual's
death or "permanent disability" or due to such individual's
termination for or without "Cause," as such terms are defined
in such individual's employment agreement with Buyer or an
Affiliate of Buyer), Xxxxxxx Xxxxxx shall have the title and
customary responsibilities of President, Buffalo Division of
Parent and Chief Executive Officer of Buyer and shall, subject
to the control of the Board of Directors of Parent (the
"PARENT BOARD"), have general supervision, direction and
control of the day-to-day operations, the business and the
officers of Buyer. Notwithstanding anything to the contrary
contained in this Agreement, the Parent Board shall have the
authority to terminate the employment of the Senior Officer
for "Cause" (as such term is defined in such individual's
employment agreement with Buyer).
(b) MANAGEMENT OF THE ACQUIRED BUSINESS. From Closing through the
end of the final Calculation Period, subject to the
supervisory and enumerated powers of the Parent Board, the
day-to-day management of Buyer shall be conducted by the
executive officers of Buyer in accordance with the Budgets and
business plans approved by the Parent Board; PROVIDED,
HOWEVER, that Buyer shall at all times be subject to the
Parent's policies and procedures relating to corporate
governance, internal financial and disclosure controls,
internal audit policies, documentation of contracts,
contractual obligations of Parent which affect or involve
Buyer, compensation and benefits and regulatory and legal
compliance. All officers of Buyer (other than the Chief
Executive Officer of Buyer) shall report to Buyer's Chief
Executive Officer.
(c) BOARD MEETINGS AND APPROVAL. From Closing until the end of the
final Calculation Period: (i) the Parent Board shall hold at
least one regularly scheduled meeting per calendar quarter at
which the operation of the Acquired Business will be
discussed; (ii) the overall strategic direction of Buyer shall
at all times be as contemplated by the Budgets and the
business plans approved by the Parent Board in accordance with
the applicable provisions of this SECTION 12.6, but otherwise
shall be the responsibility of the executive officers of
Buyer; and (iii) approval of a majority of the members of the
Parent Board shall be required to review and approve actions
customarily approved by a board of directors, including
ordinary course business plans and Budgets of Buyer.
(d) APPROVAL OF ANNUAL BUDGETS. From Closing until the end of the
final Calculation Period, at least sixty (60) days prior to
the beginning of each calendar year during any Calculation
Period, the Senior Officer shall provide to each member of the
Parent Board a proposed annual budget with respect to such
calendar year and for each calendar month in such calendar
year for each of the following businesses of the Acquired
Business (collectively, the "BUDGETS"): (i) the retail
business (the "RETAIL BUDGET"); (ii) the wholesale business,
(iii) the private label/private brands business, (iv) the
trademark licensing business; and (v) the Acquired Business as
a whole (the
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"CONSOLIDATED BUDGET"). The Parent Board shall meet prior to
the beginning of such calendar year to consider the proposed
Budgets, and approve final Budgets for such calendar year. Any
modifications to the Budgets, including any Revised Budgets,
must be approved by the Parent Board. Notwithstanding the
foregoing, the Budgets for calendar year 2007 shall be
submitted by Senior Officer to the Parent Board no later than
sixty (60) days following the Closing, and shall be considered
and, if acceptable, approved by the Parent Board within thirty
(30) days following the initial submission of such Budgets.
(e) QUARTERLY BUDGET UPDATES. Following each calendar quarter, the
Senior Officer shall provide each member of the Parent Board
with a summary of the financial and operating results of each
of the businesses of the Acquired Business for which a Budget
is prepared and for the Acquired Business as a whole for the
most recently completed calendar quarter and year-to-date
period with a comparison to the Budgets for such quarter and
year-to-date period (the "PERFORMANCE SUMMARY"). If the
Performance Summary for such period shows a negative variance
to any of the Budgets of more than five percent (5%) with
respect to earnings before interest expenses, taxes,
depreciation and amortization (or EBITDA) for the applicable
period or periods, then the Senior Officer shall deliver with
such Performance Summary a revised Budget for the applicable
calendar year and the remaining portion of such calendar year
(the "REVISED Budgets"). The Parent Board shall meet as soon
as practicable following delivery of such Revised Budgets to
consider the proposed Revised Budgets, and approve final
Revised Budgets on terms acceptable to the Parent Board.
(f) DEVIATIONS FROM BUDGETS.
(i) In no event shall the Senior Officer or other
officers of Buyer take or commit to take any of the
following actions unless such actions are included in
the Budgets approved by the Parent Board or are
otherwise approved by the Parent Board: (A) make,
approve or authorize any capital expenditures in
excess of 105% of the amount authorized in the
Budgets; (B) incur any indebtedness in excess of 105%
of the amount authorized in the Budgets (other than
trade payables incurred in the ordinary course of
business); (C) open or commit to any new retail
locations, by executing a lease agreement or
otherwise; or (D) enter into any new line of business
that does not constitute part of the Acquired
Business as of the Closing Date or that previously
has been approved by the Parent Board.
(ii) If the Senior Officer is obligated to deliver a
Revised Budget as provided for in this SECTION 12.6,
then, notwithstanding prior approval as part of the
Budgets then in effect, in no event shall the Senior
Officer or other officers of Buyer take or commit to
take any of the actions described in SECTION
12.6(F)(I)(A) TO (D) unless and until such actions
are included in a Revised Budget submitted and
approved by the Parent Board in accordance with
SECTION 12.6(E) or otherwise approved by the Parent
Board; PROVIDED, HOWEVER, that Buyer may take any
such action to the extent Buyer is obligated to take
such action pursuant to an Enforceable Contract
entered into with a third party prior to Buyer's
delivery of the applicable Performance Summary.
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(g) EXCULPATION AND FIDUCIARY DUTIES. The Sellers hereby agree
that none of the members of the Parent Board shall have any
liability (express, implied or otherwise) to any Seller or
other person for failure of the Acquired Business to achieve
any of the financial results required for any Earn-Out Amount
to become payable to the Sellers. Members of the Parent Board
shall owe their fiduciary duties to Parent and its
shareholders and not to any employee, creditor, or other
person.
12.7 CONTRIBUTIONS TO BUYER
(a) Within five (5) business days following the final
determination of the Earn-Out Amount for any Calculation
Period, and in any event within one hundred twenty (120) days
following the end of each Calculation Period, Parent shall
make a cash contribution to Buyer (each, a "PARENT
CONTRIBUTION") in an amount equal to the Parent Contribution
Amount.
(b) For purposes of this Agreement, the term "PARENT CONTRIBUTION
AMOUNT" means, with respect to a Parent Contribution, an
amount equal to: (i) the sum of the amount of any payments of
principal due under the Buyer Notes in the calendar year the
Parent Contribution is to be made plus the Earn-Out Amount, if
any, due for the Calculation Period ending on December 31st of
the immediately preceding calendar year; LESS (ii) (A) the
amount of the cumulative after tax profits of Buyer on a
consolidated basis from January 1, 2007 through December 31st
of the immediately preceding calendar year MINUS (B) the
cumulative amount of any after tax profits of Buyer on a
consolidated basis applied to reduce prior Parent
Contributions (if any) in accordance with this definition.
ARTICLE 13.
MISCELLANEOUS
13.1 SCHEDULES
(a) The disclosures in the Schedules, and those in any supplement
thereto, relate only to the representations and warranties in
the Section or paragraph of the Agreement to which they
expressly relate and not to any other representation or
warranty in this Agreement.
(b) If there is any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than
an exception expressly set forth as in the Schedules with
respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will
control.
(c) Nothing in the Schedules will be deemed adequate to disclose
an exception to a representation or
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warranty made herein, unless the Schedules identify the
exception with reasonable particularity and describes the
relevant facts in reasonable detail.
(d) The mere listing (or inclusion of a copy) of a document or
other item in a Schedule will not be deemed adequate to
disclose an exception to a representation or warranty made in
this Agreement (unless the representation or warranty pertains
to the existence of the document or other item itself).
(e) Disclosure of any Contract or other matter in the Schedules,
whether or not in response to a requirement contained in this
Agreement to schedule material matters, or matters exceeding a
specific monetary threshold, shall not be deemed to be an
admission that such Contract or other matter is or could be
material, or necessarily will exceed such threshold merely
because of such disclosure.
13.2 ENTIRE AGREEMENT
This Agreement, together with the Exhibits and Schedules hereto, the
Ancillary Agreements, the confidentiality agreement between Buffalo Inc. and
Parent dated June 1, 2006 as amended to date, and the certificates, documents,
instruments and writings that are delivered pursuant hereto, constitutes the
entire agreement and understanding of the Parties in respect of its subject
matters and supersedes all prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they relate in any way
to the subject matter hereof or the Transactions, including the term sheet,
dated May 17, 2006, delivered by Parent to Buffalo Inc. Except as set forth in
any of the foregoing, there are no representations, warranties, covenants,
conditions or other agreements, express or implied, collateral, statutory or
otherwise among the Parties in connection with the subject matter of any of the
foregoing. Except as expressly contemplated by herein, there are no third party
beneficiaries having rights under or with respect to this Agreement.
13.3 SUCCESSORS
All of the terms, agreements, covenants, representations, warranties,
and conditions of this Agreement are binding upon, and inure to the benefit of
and are enforceable by, the Parties and their respective successors. If the
principal business, operations or a majority or substantial portion of the
assets of Trust or a Seller are assigned, conveyed, allocated or otherwise
transferred, including, by sale, merger, consolidation, amalgamation, conversion
or similar transactions, such receiving Person or Persons will automatically
become bound by the subject to the provisions of this Agreement, and Trust or
such Seller will cause the receiving Person or Persons to expressly assume its
obligations hereunder.
13.4 ASSIGNMENTS
No Party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of Buyer
Parties, Sellers and Trust; PROVIDED, HOWEVER, that any Buyer Party may (a)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates, (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases such Buyer Party nonetheless
shall remain responsible for the performance of all of its obligations
hereunder), and (c) after the Closing, assign any or all of its rights and
interests hereunder to Guggenheim and GMAC CF, as agent.
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13.5 NOTICES
All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice, request, demand, claim or other
communication hereunder will be deemed duly given if (and then three (3)
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to any Buyer Party and after Closing to Acquired Entities:
Attn: Xxxxxx Xxxx
c/o Tarrant Apparel Group
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to (which will not constitute notice):
Xxxxxx, Xxxxxxxx & Markiles LLP
Attn: Xxxx XxXxxxxx, Esq.
Xxxxxx, Xxxxxxxx & Markiles LLP
00000 Xxxxxxx Xxxx., 00xx Xxxxx
Xxxxxxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Sellers, Trust and before Closing to Acquired Entities:
Attn: Xxxxxxx Xxxxxx
000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to (which will not constitute notice):
Attn: Xxxxxx Xxxx and Xxxxx Xxxxxxxxxx
Stikeman Elliott LLP
0000 Xxxx-Xxxxxxxx Xxxx X.
00xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Tel: (000) 000-0000
Fax: (000) 000-0000
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Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
13.6 SPECIFIC PERFORMANCE
Each Party acknowledges and agrees that the other Parties would be
damaged irreparably if any provision of this Agreement is not performed in
accordance with its specific terms or is otherwise Breached. Accordingly, each
Party agrees that the other Parties will be entitled to an injunction or
injunctions to prevent Breaches of the provisions of this Agreement and to
enforce specifically this Agreement and its terms and provisions in any Action
instituted in any court having jurisdiction over the Parties and the matter,
subject to SECTIONS 13.7 and 13.11, in addition to any other remedy to which
they may be entitled, at Law or in equity.
13.7 SUBMISSION TO JURISDICTION; SERVICE OF PROCESS
(a) SUBMISSION TO JURISDICTION. Each Party submits to the
exclusive jurisdiction of the federal courts sitting in New
York City, New York, in any Action arising out of or relating
to this Agreement and agrees that all claims in respect of the
Action shall be heard and determined in any such court. Each
Party agrees that a final judgment in any Action so brought
shall be conclusive and may be enforced by Action on the
judgment or in any other manner provided at Law or in equity.
Each Party waives any defense of inconvenient forum to the
maintenance of any Action so brought and waives any bond,
surety, or other security that might be required of any other
party with respect thereto.
(b) WAIVER OF JURY TRIAL. THE PARTIES EACH HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS
RELATING HERETO OR ANY DEALINGS AMONG THEM RELATING TO THE
TRANSACTIONS. The scope of this waiver is intended to be all
encompassing of any and all Actions that may be filed in any
court and that relate to the subject matter of the
Transactions, including, Contract claims, tort claims, breach
of duty claims, and all other common Law and statutory claims.
Each of the Parties acknowledges that this waiver is a
material inducement to enter into a business relationship and
that they will continue to rely on the waiver in their related
future dealings. Each Party further represents and warrants
that it has reviewed this waiver with its legal counsel, and
that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR
IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR
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TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the
event of an Action, this Agreement may be filed as a written
consent to trial by a court.
(c) SERVICE OF PROCESS. Any Party may make service on any other
Party by sending or delivering a copy of the process to the
Party to be served at the address and in the manner provided
for the giving of notices in SECTION 13.7. Nothing in this
SECTION 13.7(C) shall affect any Party's right to bring any
Action arising out of or relating to this Agreement in any
other court or to serve legal process in any other manner
permitted at Law or in equity.
13.8 TIME
Time is of the essence in the performance of this Agreement.
13.9 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument.
13.10 HEADINGS
The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
13.11 GOVERNING LAW
This Agreement and the performance of the Transactions and obligations
of the Parties hereunder will be governed by and construed in accordance with
the laws of the State of New York, without giving effect to any choice of Law
principles.
13.12 AMENDMENTS AND WAIVERS
No amendment, modification, replacement, termination or cancellation of
any provision of this Agreement will be valid, unless the same will be in
writing and signed by Buyer and Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default,
misrepresentation, or Breach of warranty or covenant hereunder or affect in any
way any rights arising because of any prior or subsequent such occurrence.
13.13 SEVERABILITY
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision of
this Agreement, as applied to any Party or to any circumstance, is adjudged by a
Governmental Body, arbitrator, or mediator not to be enforceable in accordance
with its terms, the Parties agree that the Governmental Body, arbitrator, or
mediator making such determination will have the power to modify the provision
in
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a manner consistent with its objectives such that it is enforceable, and/or to
delete specific words or phrases, and in its reduced form, such provision will
then be enforceable and will be enforced.
13.14 EXPENSES
Buyer Parties will bear their own costs and expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Transactions including all fees and expenses of agents, representatives,
financial advisors, legal counsel and accountants. Seller Parties costs and
expenses (including any legal fees and expenses of any Seller Party) incurred in
connection with the preparation, execution and performance of this Agreement and
the Transactions shall be borne by Buffalo Inc.
13.15 CONSTRUCTION
The Parties have participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring any
Party because of the authorship of any provision of this Agreement. Any
reference to any federal, state, local, or foreign Law will be deemed also to
refer to Law as amended and all rules and regulations promulgated thereunder,
unless the context requires otherwise. words "include," "includes," and
"including" will be deemed to be followed by "without limitation." Pronouns in
masculine, feminine, and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to include the plural
and vice versa, unless the context otherwise requires. The words "this
Agreement," "herein," "hereof," "hereby," "hereunder," and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. All references to "$" shall mean currency of the
United States of America unless indicated otherwise. The Parties intend that
each representation, warranty, and covenant contained herein will have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the Party has
not breached will not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.
13.16 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES
The Exhibits, Annexes, Schedules, and other attachments identified in
this Agreement are incorporated herein by reference and made a part hereof.
13.17 JOINT AND SEVERAL OBLIGATIONS
Notwithstanding anything to the contrary in this Agreement, the
covenants and obligations of, and the representations and warranties made by or
attributable to, any Seller Party pursuant to this Agreement will be deemed to
be made by and attributable to each Seller Party, jointly and severally, and
each Buyer Party will have the right to pursue remedies against Trust and/or one
or more Sellers, or, before Closing, any Seller Party, without any obligation to
give notice to or pursue all Seller Parties or to give notice to or pursue any
individual Seller Party before pursuing any other Seller Party.
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13.18 REMEDIES
Except as expressly provided herein, the rights, obligations and
remedies created by this Agreement are cumulative and in addition to any other
rights, obligations, or remedies otherwise available at Law or in equity. Except
as expressly provided herein, nothing herein will be considered an election of
remedies.
13.19 ELECTRONIC SIGNATURES
(a) Notwithstanding the Electronic Signatures in Global and
National Commerce Act (15 U.S.C. Sec. 7001 et.seq.), the
Uniform Electronic Transactions Act, or any other Law relating
to or enabling the creation, execution, delivery, or
recordation of any Contract or signature by electronic means,
and notwithstanding any course of conduct engaged in by the
Parties, no Party will be deemed to have executed a
Transaction Document or other document contemplated thereby
(including any amendment or other change thereto) unless and
until such Party shall have executed such Transaction Document
or other document on paper by a handwritten original signature
or any other symbol executed or adopted by a Party with
current intention to authenticate such Transaction Document or
such other document contemplated.
(b) Delivery of a copy of a Transaction Document or such other
document bearing an original signature by facsimile
transmission (whether directly from one facsimile device to
another by means of a dial-up connection or whether mediated
by the worldwide web), by electronic mail in "portable
document format" (".pdf") form, or by any other electronic
means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as
physical delivery of the paper document bearing the original
signature. "Originally signed" or "original signature" means
or refers to a signature that has not been mechanically or
electronically reproduced.
(SIGNATURES CONTINUE ON FOLLOWING PAGES)
94
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first above written.
TARRANT APPAREL GROUP
By: /s/ Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
4366883 CANADA INC.
By: /s/ Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxx Xxxx
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
BUFFALO INTERNATIONAL INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------------
Title: President
-----------------------------------
3681441 CANADA INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------------
Title: President
-----------------------------------
BUFFALO CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------------
Title: President
-----------------------------------
(SIGNATURES CONTINUE ON FOLLOWING PAGE)
S-1
(SIGNATURES CONTINUED)
4183517 CANADA INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------------
Title: President
-----------------------------------
3979512 CANADA INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------------
Title: President
-----------------------------------
THE BUFFALO TRUST
By: BFL MANAGEMENT INC.
Title: TRUSTEE
By: /s/ Xxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxx Xxxxxxxx
--------------------------
Title: Director
--------------------------
S-2
