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
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TABLE OF CONTENTS
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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
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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
-- Bill
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 Gabriel Bitton
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 316 Canada.
"316 PURCHASE PRICE" is defined in SECTION 3.2(C).
"368 CANADA" is defined in the preamble to this Agreement.
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"368 CANADA
SHARES" means the issued and outstanding 100 Class "A"
shares in the share capital of 368 Canada.
"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.
"BILL OF SALE" means the Bill of Sale and Assignment of Contract
Rights
in the form of EXHIBIT C.
"BITTON BROTHERS" means Charles Bitton, David Bitton, Gabriel Bitton,
Gilbert Bitton and Michael Bitton.
"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).
3
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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
4
<PAGE>
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).
5
<PAGE>
"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
6
<PAGE>
EXHIBIT F-1 with respect to Gabriel Bitton 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
<PAGE>
"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
<PAGE>
"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 MARK" 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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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).
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<PAGE>
"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,
15
<PAGE>
provincial, state,
municipal,
territorial, 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 MARK" 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
<PAGE>
"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 368 Canada
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
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(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 368 Canada 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 316 Canada 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, Cassels & Graydon
LLP, Suite 2200, 600
de Maisonneuve
Boulevard West,
Montreal, Quebec H3A 3J2, 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
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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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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
23
<PAGE>
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 Bill
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
<PAGE>
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.
25
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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.
31
<PAGE>
(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
418 Canada. 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
<PAGE>
(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
<PAGE>
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.
