PURCHASE AGREEMENT

Exhibit 2.1

Execution Copy

 

THE WILLIAM L. BONNELL COMPANY, INC.

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BON L HOLDINGS CORPORATION

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IDLEWOOD PROPERTIES, INC.

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WXP HOLDINGS, INC.

 

 

	PURCHASE AGREEMENT
	January 6, 2008

 

 

 

 

 

 

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TABLE OF CONTENTS

 

Page

 

ARTICLE 1

ARTICLE 2

ARTICLE 3

ARTICLE 4

 

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TABLE OF CONTENTS

(continued)

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ARTICLE 5

ARTICLE 6

ARTICLE 7

 

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TABLE OF CONTENTS

(continued)

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ARTICLE 8

ARTICLE 9

 

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TABLE OF CONTENTS

(continued)

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ARTICLE 10

ARTICLE 11

 

 

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THIS PURCHASE AGREEMENT is made January 6, 2008

AMONG:

The William L. Bonnell Company, Inc. , a corporation governed by the laws of the Sate of Georgia,

(the “ Guarantor ”)

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Bon L Holdings Corporation , a corporation governed by the laws of the Commonwealth of Virginia,

(the “ Seller ”)

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Idlewood Properties, Inc. , a corporation governed by the laws of the Commonwealth of Virginia,

(“ Idlewood Properties ”)

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WXP Holdings, Inc. , a corporation governed by the laws of Delaware,

(the “ Purchaser ”).

 

RECITALS:

 

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THEREFORE , the Parties agree as follows:

ARTICLE 1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

Whenever used in this Agreement, the following words and terms have the meanings set out below:

“ Accounts Payable ” means amounts owing by a Subject Company to any third party Person determined and classified in current liabilities in accordance with GAAP consistently applied;

“ Accounts Receivable ” means accounts receivable, bills receivable, trade accounts, book debts and insurance claims recorded as receivable in the Books and Records and other amounts due or deemed to be due to a Subject Company from a third party Person, net of an appropriate allowance for doubtful accounts and sales returns, determined and classified in current assets in accordance with GAAP consistently applied;

“Accrued Liabilities” means liabilities of a Subject Company incurred but which are not yet due and payable, determined and classified in current liabilities in accordance with GAAP consistently applied;

“ Affiliate ” has the meaning given to “ affiliate ” in the CBCA, as at the date hereof;

“ Agreement ” means this Purchase Agreement and the Disclosure Letter, including all schedules, exhibits, and all amendments or restatements, as permitted, and references to “ Article ” or “ Section ” mean the specified Article or Section of this Agreement;

“ Apolo ” means Apolo Tool & Die Manufacturing Inc., a corporation governed by the laws of Canada;

“ Balance Sheet ” means the combined balance sheet of the Subject Companies as at November 25, 2007, forming part of the Financial Statements;

“ Benefit Plans ” means material plans, arrangements, agreements, programs, policies, practices or undertakings, whether oral or written formal or informal, funded or unfunded, insured or uninsured, registered or unregistered to which a Subject Company is a party or bound or in which the Employees participate or under which a Subject

 

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Company has, or will have, any liability or contingent liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to any of its Employees, directors or officers, individuals working on contract with a Subject Company or other individuals providing services to a Subject Company of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such persons), excluding Statutory Plans;

“ Bon L Canada ” means Bon L Canada Inc., a corporation governed by the laws of Canada;

“ Bon L Canada Shares ” means all of the issued and outstanding shares in Bon L Canada other than the New Share;

“ Books and Records ” means books and records of the Subject Companies, including tax, financial, corporate, operations and sales books, records, books of account, sales and purchase records, lists of suppliers and customers, formulae, business reports, plans and projections and all other documents, surveys, plans, files, records, assessments, correspondence, and other data and information, financial or otherwise, including all data, information and databases stored on computer-related or other electronic media;

“ Business Day ” means any day, other than a Saturday or Sunday, on which the principal commercial banks located in Toronto, Ontario and Atlanta, Georgia are open for commercial banking business during normal banking hours;

“ CBCA ” means Canada Business Corporation Act ;

“ Claims ” means claims, demands, complaints, grievances, actions, applications, suits, causes of action, Orders, charges, indictments, prosecutions, informations or other similar processes, assessments or reassessments, judgments, debts, liabilities, expenses, costs, damages or losses, contingent or otherwise, including loss of value, reasonable professional fees, including fees and disbursements of legal counsel on a full indemnity basis, and all actual and documented costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing;

“ Closing ” means the completion of the transactions contemplated by Section 2.1;

“Closing Cash” means the combined balance of cash and highly liquid investments with original maturities of three months or less of the Subject Companies as at the Closing Date, net of any unpaid cheques, negative cash balances or drafts drawn thereon, determined in accordance with GAAP consistently applied;

“ Closing Date ” means the later of (i) February 12, 2008 and (ii) the date that is 5 Business Days after the satisfaction of the conditions precedent set out in Articles 7 and 8, provided that the Closing Date shall not be later than February 29, 2008 without the written agreement of the Parties;

“ Closing Date Financial Statements ” means the combined balance sheet and combined statement of the Closing Net Working Capital of the Subject Companies as at 12:01 a.m. on the Closing Date and the combined statement of income or loss of the Subject

 

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Companies for the interim period then ending, prepared by the Purchaser in accordance with GAAP consistent with past practice, with full cooperation of the Seller, as finally determined in accordance with the provisions of Section 3.4 and 3.6;

“ Closing Net Working Capital ” means as at 12:01 a.m. on the Closing Date:

and, for greater certainty, no amount that is included in the calculation of Indebtedness for purposes of Section 3.4, 3.5 or 3.6 shall be included in the calculation of Closing Net Working Capital;

“ Closing Time ” means 10:00 o’clock a.m. (Toronto time) on the Closing Date or such other time on such date as the Parties may agree in writing as the time at which the Closing shall take place;

“ Collective Agreements ” means the collective agreements by which a Subject Company is bound;

“ Confidentiality Agreement ” means the Confidentiality Agreement dated October 17, 2007 between Signature Aluminum, Inc. and Tredegar Corporation as amended by letter agreement dated the date hereof;

“ Contracts ” means oral and written contracts, licences, leases, agreements, obligations, commitments, entitlements or engagements to which a Subject Company is a party or by which it is bound, and includes any quotations, orders, proposals or tenders which remain open for acceptance and warranties and guarantees (but excluding statutory warranties and warranties implied by common law);

“ DB Pension Plan ” means a Pension Plan, as of the Closing Date, that is a registered pension plan and that provides benefits on a defined benefit basis, in whole or in part;

“ Deficit Funding Position ” means, in respect of each DB Pension Plan, the amount, if any, by which the fair market value of related assets is below the greater of solvency liabilities or wind-up liabilities using the methods and assumptions disclosed in the most recent actuarial report for such DB Pension Plan which methods and assumptions are in compliance with applicable Laws, current industry standards (including provision for expenses, but without provision for the present value of future special payments) and properly reflect the terms of the applicable DB Pension Plan and the benefits payable thereunderwith any adjustments necessary to reflect any changes in the benefits under any DB Pension Plan in effect prior to the Closing Date;

 

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“ Disclosure Letter ” means the disclosure letter from the Seller to the Purchaser dated the date of, and delivered concurrently with, this Agreement;

“ Employees ” means individuals employed by a Subject Company on a full-time, part-time or temporary basis (including officers), including those employees on disability leave, parental leave or other absence;

“ Employment Contracts ” means Contracts, other than Benefit Plans, in writing between an Employee and a Subject Company;

“ Encumbrances ” means pledges, liens, charges, security interests, leases, title retention agreements, mortgages, hypothecs, options, adverse claims, easements, servitudes or encumbrances of any kind or character whatsoever;

“ Environment ” means air, land, water, all organic and inorganic matter and all living organisms and includes surface water, ground water, land surface, soil, subsurface strata and all layers of the atmosphere;

“ Environmental Approvals ” means permits, certificates, licences, authorizations, consents, agreements, instructions, directions, registrations, or approvals required by a Governmental Authority pursuant to an Environmental Law relating to the operations, business or assets of the Subject Companies;

“ Environmental Laws ” means all applicable Laws in respect of the Environment, public or occupational health or safety, and the manufacture, importation, handling, transportation, storage, disposal and treatment of Hazardous Substances, including the Canadian Environmental Protection Act , the Fisheries Act (Canada), the Environmental Protection Act (Ontario), the Ontario Water Resources Act , Environment Quality Act (Quebec) and all regulations promulgated pursuant to the foregoing;

“ Estimated Closing Cash ” means the good faith estimate of Closing Cash delivered by the Seller to the Purchaser at least two Business Days prior to the Closing Date;

“ Estimated Closing Net Working Capital ” means the good faith estimate of Closing Net Working Capital delivered by the Seller to the Purchaser at least two Business Days prior to the Closing Date;

“ Estimated Indebtedness ” means the good faith estimate of Indebtedness as at the Closing Date delivered by the Seller to the Purchaser at least two Business Days prior to the Closing Date;

“ Exchange Rate ” means, for a given day, US dollar daily noon rate or closing rate, as applicable, (vis a vis the Canadian dollar) as published by the Bank of Canada on its website onthat day;

“ Financial Statements ” means the combined financial statements of the Subject Companies consisting of:

 

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all prepared in accordance with GAAP consistently applied throughout the periods to which they relate,a copy of which is annexed as Section 1.1(a) of the Disclosure Letter;

“ GAAP ” means United States generally accepted accounting principles, as in effect from time to time, subject to the exceptions set forth in Section 1.1(b) of the Disclosure Letter;

“ Governmental Authorities ” means governments, regulatory authorities, governmental departments, agencies, commissions, bureaus, officials, ministers, Crown corporations, courts, bodies, boards, tribunals or dispute settlement panels or other law, rule or regulation-making organizations or entities:

“ Governmental Authorizations ” means authorizations, approvals, licences or permits issued to a Subject Company by or from any Governmental Authority;

“ Hazardous Substances ” means any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of them that may impair the Environment, injure or damage property or plan or animal life or harm or impair the health of any individual and includes any contaminant, waste, substance or material defined by Environmental Law as hazardous, toxic or dangerous or any other substance or material prohibited, regulated or reportable pursuant to any Environmental Law;

“ Hedge Escrow Agreement ” has the meaning given in Section 2.1;

“ Hedging Contracts ” means futures, options or other derivative contracts entered into by the Seller or an Affiliate thereof on behalf of the Subject Companies to hedge related margin exposure on fixed-price forward sales contracts, each of which (including the related fixed-price forward sales contracts) are listed in Section 1.1(c) of the Disclosure Letter as such Section 1.1(c) of the Disclosure Letter may be amended from time to time in accordance with Section 9.1(a)(i) of this Agreement;

“ Incur ” or “ Incurred ” means, in relation to contributions to a DB Pension Plan, any contributions to a DB Pension Plan made by Bon L Canada when paid when due and owing to such plan under applicable Laws and as determined pursuant to filed actuarial

 

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valuations and, in the context of a full or partial plan wind-up of a DB Pension Plan, on the payment of any amount owing by Bon L Canada under applicable Laws ;

“ Indebtedness ” means, with respect to the Subject Companies at any date, without duplication: (i) all obligations for borrowed money or in respect of loans or advances, (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) all obligations in respect of letters of credit and bankers’ acceptances, (iv) all obligations arising from deferred compensation arrangements and employee bonuses (to the extent not accrued for in Closing Net Working Capital) and any payments triggered by the transactions contemplated by this Agreement, (v) all obligations secured by an Encumbrance, (vi) all purchased money debt and capital lease obligations determined in accordance with GAAP consistently applied, (vii) all notes and accounts payable to any Affiliates of the Subject Companies or any officers or employees thereof, (viii) deferred revenue obligations, (ix) contingent liabilities or any liabilities incurred outside the ordinary course of business, (x) Accounts Payable more than 60 days past due as at the Closing Date, (xi) legal and professional fees (to the extent not accrued for in Closing Net Working Capital), (xii) all guaranties, accrued interest, prepayment fees or penalties related to any of the foregoing and (xiii) any excess of the projected benefit obligation over the fair value of related plan assets for postretirement benefit plans other than Pension Plans, determined as at December 30, 2007 in accordance with GAAP consistently applied (the GAAP accounting rates shall be based on actuarial methodology that is consistent with the December 31, 2006 valuation provided to Purchaser which valuation resulted in a projected benefit obligation of approximately Cdn. $65,000); for greater certainty, “ Indebtedness ” of a Subject Company shall not include any obligations of such Subject Company in respect of or relating to any Pension Plans;

“ Indemnified Party ” has the meaning given in Section 10.3;

“ Indemnifying Party ” has the meaning given in Section 10.3;

“ Independent Auditor ” means Ernst & Young;

“ Information Technology ” means computer hardware, software in source code and object code form (including documentation, interfaces and development tools), websites for the Subject Companies, databases, telecommunications equipment and facilities and other information technology systems owned, used or held by a Subject Company;

“ Intellectual Property ” means intellectual property rights, whether registered or not, owned, used or held by a Subject Company;

“ Intercompany Accounts ” means all balances related to Indebtedness, including any intercompany Indebtedness (including intercompany trade payables and receivables) between the Seller and/or its Affiliates (other than the Subject Companies) on the one hand, and a Subject Company, on the other hand;

“ Inventories ” means all inventories of aluminium and alloy wheresoever situate owned by each of the Subject Companies including all such inventories of raw materials, work-in-progress, finished goods and scrap and valued at average cost in accordance with GAAP consistently applied;

 

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“ Laws ” means currently existing applicable statutes, by-laws, rules, regulations, Orders, ordinances or judgments, in each case of any Governmental Authority having the force of law;

“ Leased Real Property ” means lands and/or premises which are used by a Subject Company which are leased, subleased, licensed or otherwise occupied by a Subject Company and the interest of the Subject Companies in plants, buildings, structures, fixtures, erections, improvements, easements, rights of way, spur tracks and other appurtenances situate on or forming part of such premises;

“ Material Adverse Effect ” means any change, effect or circumstance that is materially adverse to the business, assets, financial condition or results of operations of the Subject Companies, taken as a whole; but shall exclude any Material Adverse Effect arising out of any of the following: (i) any change, effect or circumstance relating generally to financial markets or general economic conditions including fluctuations in currency; (ii) any change, effect or circumstance relating to conditions generally affecting the industry in which the Subject Companies operate; (iii) war, act of terrorism, civil unrest or similar event; (iv) any generally applicable change in Laws or interpretation thereof; (v) any change in the market price of products in the industry in which the Subject Companies operate; (vi) any change in the price of raw materials used to a significant degree by a Subject Company; (vii) any failure of a Subject Company to meet projections in respect of that Subject Company; (viii) any change, effect or circumstance resulting from an action required by this Agreement; or (ix) any change, effect or circumstance caused by the announcement of this Agreement or the transactions contemplated by this Agreement provided, however, that any such change, effect or circumstance described in clauses (i) to (vi) does not have a materially disproportionate effect on the business, assets, financial condition or results of operations of the Subject Companies, taken as a whole; and provided further that in the case of the fluctuations in currency described in clause (i) any such change, effect or circumstance does not have a materially disproportionate effect on the Subject Companies, taken as a whole, compared to similarly situated companies;

“ Material Contract ” means any (i) written Contract for the employment of any officer, individual employee or other Person on a full time, part-time, consulting or other basis or relating to loans to officers, directors, managers or Affiliates (excluding, for greater certainty, standard confidentiality agreements signed by the Employees of any Subject Company); (ii) Contract under which the Subject Companies have advanced or loaned any other Person an amount in excess $10,000 individually or in the aggregate; (iii) a Contract which contains (A) minimum purchase commitments for either Subject Company, (B) an escalation clause or (C) requires the purchase of all or substantially all of a Subject Company’s requirements for a particular product from one vendor, supplier or subcontractor; (iv) a Contract which contains any “most-favored-nations” or similar provisions; (v) a Contract prohibiting any Subject Company from freely engaging in any business or competing anywhere in the world or requiring it to exclusively purchase from or sell products to any Person or any “take or pay” Contract; and (vi) any lease of any Leased Real Property;

 

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“ Notice ” has the meaning given in Section 11.3;

“ Non-Competition Agreement ” has the meaning given in Section 2.1;

“ Objection Notice ” has the meaning given in Section 3.6;

“ Orders ” means orders, injunctions, judgments, administrative complaints, decrees, rulings, awards, assessments, directions, instructions, penalties or sanctions issued, filed or imposed by any Governmental Authority or arbitrator and includes Remedial Orders;

“ Owned Real Property ” means real property owned by a Subject Company, including plants, buildings, structures, fixtures, erections, improvements, and other appurtenances situate on or forming part of such real property;

“ Parties ” means the Seller, Idlewood Properties, the Guarantor and the Purchaser collectively, and “Party” means any one of them;

“ Pension Plans ” means Benefit Plans providing pensions, superannuation benefits or retirement savings including pension plans, top up pensions or supplemental pensions, “registered retirement savings plans” (as defined in the Income Tax Act (Canada)), “registered pension plans” (as defined in the Income Tax Act (Canada)) and “retirement compensation arrangements” (as defined in the Income Tax Act (Canada)) relating in each case to Employees;

“ Permitted Encumbrances ” means (i) the liens and encumbrances of record described in Section 1.1(d) of the Disclosure Letter and the applicable municipal by-laws, development agreements, subdivision agreements, site plan agreements, other agreements, building and other restrictions, easements, servitudes, rights of way and licences which do not in the aggregate materially adversely affect the use or value of theReal Property affected thereby and provided the same have been complied with in all material respects to the Closing Date including the posting of any required security for performance of obligations thereunder; (ii) defects or irregularities in title to the Real Property which are of a minor nature and do not materially adversely affect the use or value of the Real Property affected thereby and provided the same have been complied with in all material respects to the Closing Date; (iii) inchoate statutory liens for Taxes, assessments, governmental or utility charges or levies not yet due as at the Closing Date; (iv) rights of equipment lessors under Contracts provided the terms of such Contracts have been fully performed to the Closing Date; and (v) all Encumbrances affecting a landlord’s freehold interest in any Leased Real Property;

“ Person ” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, Governmental Authority, and where the context requires any of the foregoing when they are acting as trustee, executor, administrator or other legal representative;

“ Personal Information ” means information in the possession or under the control of the Seller about an identifiable individual;

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“ Personal Property ” means all machinery, equipment, furniture, motor vehicles and other chattels owned or leased by either of the Subject Companies (including those in possession of suppliers, customers and other third parties);

“ Personal Property Lease ” means a chattel lease, equipment lease, conditional sales contract and other similar agreement to which either Subject Company is a party or under which it has rights to use Personal Property;

“ Purchase Price ” means, collectively, the Purchased Shares Purchase Price and the Purchased Note Purchase Price, as adjusted pursuant to Article 3;

“ Purchased Interests ” means, collectively, the Purchased Shares and the Purchased Note;

“ Purchased Note ” means the promissory note issued by Bon L Canada in favour of Idlewood Properties dated October 1, 2007 and due October 1, 2012 in the principal amount of $34,388,796 (as reduced to the extent of any prepayments of principal amount) and bearing interest at the rate of 7.8% per annum;

“ Purchased Note Purchase Price ” has the meaning given in Section 3.1(b);

“ Purchased Shares ” means all of the issued and outstanding shares in the capital of Apolo;

“ Purchased Shares Purchase Price ” has the meaning given in Section 3.1(a);

“ Real Property ” means Owned Real Property and Leased Real Property;

“ Real Property Leases ” means those leases and subleases pursuant to which a Subject Company uses or occupies the Leased Real Property;

“ Release ” has the meaning prescribed in any Environmental Laws and includes any release, spill, leak, pumping, pouring, emission, emptying, discharge, injection, escape, leaching, disposal, dumping, deposit, spraying, burial, abandonment, incineration, seepage, migration, placement or introduction;

“ Remedial Orders ” means Orders issued, filed or imposed by any Governmental Authority pursuant to any Environmental Laws and include Orders requiring remediation of any site or any remediation or clean-up of any Hazardous Substance, or requiring that any Release be reduced, modified or eliminated;

“ Representative ” when used with respect to a Party means each director, officer, employee, agent, consultant, adviser and other representative of that Party who is involved in the transactions contemplated by this Agreement;

“ Statutory Plans ” means statutory benefit plans which a Subject Company is required to participate in or comply with, including the Canada and Quebec Pension Plans and plans administered pursuant to applicable health tax, workplace safety insurance and employment insurance legislation;

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“ Subject Companies ” means, jointly, Bon L Canada and Apolo and a “ Subject Company ” means any one of Bon L Canada and Apolo, as applicable;

“ Tangible Personal Property ” means machinery, equipment, furniture, furnishings, office equipment, computer hardware, materials, vehicles, material handling equipment, implements, parts, tools, jigs, dies, moulds, patterns, tooling and spare parts and tangible assets (other than Real Property and Inventory) owned or used or held by the Subject Companies;

“ Target Net Working Capital ” means the average net working capital of the Subject Companies computed using fiscal month ending balances from January 2007 to December 2007, inclusive, calculated using the methodology set out in Section 1.1(g) of the Disclosure Letter, such calculation to be provided by the Seller to the Purchaser and confirmed by the Purchaser within five Business Days with the reasonable cooperation of the Seller;

“ Tax Returns ” means returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by Law in respect of Taxes;

“ Taxes ” means taxes, duties, fees, premiums, assessments, imposts, levies and other similar charges imposed by any Governmental Authority under applicable Law, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, stamp, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all licence, franchise and registration fees and all employment insurance, health insurance and Canada, Québec and other government pension plan premiums or contributions;

“ Technical Information ” means know-how and related technical knowledge owned, used or held by a Subject Company;

“ Technology ” means Intellectual Property, Technical Information and Information Technology;

“ Transition Services Agreement ” has the meaning give in Section 2.1; and

“ U.S. Prime Rate ” means, on any day, the annual rate of interest set forth in Federal Reserve Publication H.15(519) or any successor publication as published by the Board of Governors of the U.S. Federal Reserve System opposite the caption “Bank prime loan”.

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In this Agreement:

 

Any reference to the knowledge or awareness of any Party means to the actual knowledge of such Party and, in the case of the knowledge of the Seller, the actual knowledge of Duncan Crowdis, Michael E. Jones, D. Andrew Edwards, Jim Laverty and Wilf Holland, after having

 

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conducted a reasonable inquiry of those with responsibility for or knowledge of the relevant facts and matters, and investigation of the relevant facts and matters.

1.4	Entire Agreement

This Agreement, the Confidentiality Agreement and the agreements and other documents required to be delivered pursuant to this Agreement, constitute the entire agreement between the Parties and set out all the covenants, promises, warranties, representations, conditions and agreements between the Parties in connection with the subject matter of this Agreement and such other documents and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, pre-contractual or otherwise. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, whether oral or written, pre-contractual or otherwise, express, implied or collateral, whether statutory or otherwise, between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement, the Confidentiality Agreement and any document required to be delivered pursuant to this Agreement and the Purchaser shall acquire the Purchased Interests as is and where is subject to the benefit of the representations and warranties in this Agreement. Each of this Agreement and the Confidentiality Agreement constitutes the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any proceedings involving it. Any cost estimates, projections or other predictions contained or referred to in any other material that has been provided to the Purchaser or any of its Affiliates, agents or representatives (including any due diligence presentations or documents, and in particular any descriptive memorandum transmitted to the Purchaser relating to any Subject Company and the sale of the Purchased Interests, and any supplements or addenda thereto) are not and shall not be deemed to be representations or warranties of the Seller or any of their respective Affiliates, agents, employees or representatives (except as set forth herein). This Agreement is not intended to confer any benefit upon any Person other than the Parties and, solely with respect to Article 10, the other Indemnified Parties.

ARTICLE 2

PURCHASE AND SALE

Subject to the provisions of this Agreement, at the Closing Time:

 

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(b)

the Purchaser shall pay the Purchased Shares Purchase Price and the Purchased Note Purchase Price as provided in Section 3.2;

(c)

the Seller shall deliver to the Purchaser:

 

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                              (iii)            such other documents and instruments as may be reasonably required by the Seller to                                                 complete the transactions contemplated herein.

2.2          Place of Closing

The Closing shall take place at the Closing Time at the offices of Osler, Hoskin & Harcourt LLP located at 1 First Canadian Place, 63 ^rd Floor, Toronto, Ontario, Canada M5X 1B8, or at such other place as may be agreed upon by the Seller and the Purchaser.

ARTICLE 3

PURCHASE PRICE

At the Closing Time, the Purchaser shall satisfy the Purchase Price by payment to the Seller and Idlewood Properties, in such proportions as the Seller and Idlewood Properties may direct, of $25,000,001 plus Estimated Closing Cash plus the Estimated Closing Net Working Capital less the Target Net Working Capital less the Estimated Indebtedness by wire transfer of immediately available funds pursuant to wire instructions furnished to the Purchaser by the Seller at least two Business Days prior to the Closing Date.

The Seller and the Purchaser shall jointly count and value the Inventories as of 12:01 a.m. on the Closing Date.

As soon as reasonably practicable after the Closing Date and in any event not later than 45 days thereafter, the Purchaser, with full cooperation of the Seller, shall cause to be prepared and delivered to the Seller and Idlewood Properties the Closing Date Financial Statements.

 

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3.5         Purchase Price Adjustments

 

Subject to Section 3.6, within 10 days after delivery by the Purchaser to the Seller and Idlewood Properties of the Closing Date Financial Statements, if the Closing Net Working Capital plus Closing Cash less Indebtedness (as at the Closing Date, except as specified in the definition of Indebtedness) exceeds the Estimated Net Working Capital plus Estimated Closing Cash less Estimated Indebtedness (as at the Closing Date, except as specified in the definition of Indebtedness), the Purchaser shall pay to the Seller and Idlewood Properties, in such proportionsas the Seller and Idlewood Properties may direct, the amount of the excess and if the Closing Net Working Capital plus Closing Cash less Indebtedness (as at the Closing Date, except as specified in the definition of Indebtedness) is less than the Estimated Net Working Capital plus Estimated Closing Cash less Estimated Indebtedness (as at the Closing Date, except as specified in the definition of Indebtedness), then the Seller and Idlewood Properties, in such proportions as the Seller and Idlewood Properties may direct, shall pay the Purchaser the amount of the difference.

 

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Independent Auditor shall be final and binding on the Parties (absent fraud or clerical error) and the Closing Date Financial Statements shall be finalized in accordance with such determination.

(c)

Audit Expenses – Any fees and expenses of the auditor of the Subject Companies in acting in accordance with this Section 3.6 shall be paid by the Subject Companies. The fees and expenses of the Independent Auditor in acting in accordance with this Section 3.6 shall be allocated by the Independent Auditor between the Purchaser and the Seller (on behalf of itself and Idlewood Properties) based on the percentage which the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party. As an example and for illustrative purposes only, if the Purchaser contends that there should be a Purchase Price decrease of $1,000,000, the Seller contends that there should be no Purchase Price decrease and the Independent Auditor determines that there should be a Purchase Price decrease of $300,000, then the Purchaser shall pay 70% of the fees and expenses of the Independent Auditor and the Seller (on behalf of itself and Idlewood Properties) shall pay 30% of such fees and expenses.

The amounts paid as adjustments under Sections 3.5 and 3.6 shall be paid together with interest thereon calculated and compounded monthly from the Closing Date to the date of payment, at the rate per annum equal to 5.5%, less any applicable withholding taxes.

Any payment made by the Purchaser to the Seller and Idlewood Properties pursuant to Sections 3.2, 3.5 and 3.6 shall constitute an increase in the Purchase Price and any payment made by the Seller and Idlewood Properties to the Purchaser pursuant to Sections 3.2, 3.5 and 3.6 shall constitute a reduction of the Purchase Price. If the Purchase Price shall be adjusted pursuant to Section 3.2, Section 3.5 or Section 3.6, the amount of adjustment required shall be allocated first to the Purchased Note and any excess of the Purchase Price over the stated principal amount of the Purchased Note shall be allocated to the Purchased Shares. Each of the Parties shall report the purchase and sale of the Purchased Interests in any Tax Returns in accordance with the provisions of Section 3.8.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller (and solely with respect to the representations given by Idlewood Properties in Section 4.3(a), 4.3(c), 4.5, 4.7, 4.20(d), 4.27, 4.31, 4.32 and 4.38 Idlewood Properties and the Seller, jointly and severally), as of the date hereof and as of the Closing Date, represent and warrant to the Purchaser the matters set out below and acknowledge that the Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement. Disclosure of a fact or matter to the Purchaser in any section of the Disclosure Letter shall be sufficient disclosure for another representation or warranty under this Agreement if (a) a specific cross-reference is made to or from the appropriate section of the Disclosure Letter for such other representation or warranty or (b) the disclosure is described in sufficient detail such that the qualification of the other representation or warranty is reasonably apparent.

 

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Neither Subject Company owns, nor has any direct or indirect interest in, any shares or has an ownership interest in any other Person.

 

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The authorized and issued share capital of each Subject Company set forth in Section 4.4 of the Disclosure Letter is true and complete. All of the Purchased Shares have been duly and validly issued and are outstanding as fully paid and non-assessable shares. The New Share, upon receipt of consideration therefor, shall be fully paid and non-assessable. No options, warrants or other rights to purchase shares or other securities of a Subject Company and no securities or obligations convertible into or exchangeable for shares or other securities or phantom participations of a Subject Company have been authorized or agreed to be issued or are outstanding. Except as disclosed in Section 4.4 of the Disclosure Letter, there are no shareholders’ agreements governing the affairs of a Subject Company or the relationship, rights and duties of its shareholders, nor are there any voting trusts, pooling arrangements or other similar agreements with respect to the ownership or voting of any shares in the capital of a Subject Company. As of the Closing Date, the representation and warranties in this Section 4.4 shall be deemed to have been amended to reflect the cancellation of the Bon L Canada Shares and the issuance of the New Share, in each case, as contemplated in Section 2.1(a).

 

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to any of the Purchased Interests at law or in equity. To the knowledge of the Seller, there are no grounds on which any such Claim might be commenced and there is no Order outstanding against or affecting the Seller or Idlewood Properties which, in any such case, affects adversely or might affect adversely the ability of the Seller or Idlewood Properties to enter into this Agreement or to perform its obligations hereunder.

Except as disclosed in Section 4.6 of the Disclosure Letter, neither Subject Company is a party to, bound or affected by or subject to any:

which would be materially violated, breached by, or under which a material default would occur or a material Encumbrance or other right would be created, triggered or accelerated as a result of the execution and delivery of, or the performance of obligations under, this Agreement or any other agreement to be entered into under the terms of this Agreement. There has been no sale, assignment, subletting, licensing or granting of any rights in or other disposition of or in respect of any of a Subject Company’s assets or any granting of any agreement or right capable of becoming an agreement or option for the purchase, assignment, subletting, licensing or granting of any rights in or other disposition of any of such assets other than pursuant to the provisions of, or as disclosed in, this Agreement or pursuant to purchase orders for Inventory accepted by a Subject Company in the ordinary course of business.

No approval, Order, consent of or filing with any Governmental Authority is required, in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be delivered under this Agreement or the performance of the obligations of Seller or of Idlewood Properties under this Agreement or any other documents and agreements to be delivered under this Agreement other than those approvals, Orders, consents or filings where any failure to obtain or perform would not be material.

The Financial Statements of the Subject Companies have been prepared in accordance with GAAP consistently applied throughout the periods to which they relate, are accurate and complete, and present fairly in all material respects:

 

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Neither Subject Company has incurred any liabilities or obligations (whether accrued, absolute, contingent or otherwise), which continue to be outstanding, except as disclosed in the Financial Statements, in Section 4.9 of the Disclosure Letter, or current liabilities incurred in the ordinary course of business which are not material.

Except as set forth in Section 4.10 of the Disclosure Letter and except as contemplated by this Agreement, since November 25, 2007:

 

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respective Affiliates on one hand, and a Subject Company, on the other hand) to any other Person or incurred any other liability or obligation to any other Person which is required to be classified as a liability on the liability side of a balance sheet in accordance with GAAP;

 

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Except as disclosed in Section 4.12 of the Disclosure Letter, all material Tangible Personal Property necessary for the operation of the business of each Subject Company as currently operated is in satisfactory operating condition and repair having regard to normal wear and tear, its use, age and scheduled maintenance. Section 4.12 of the Disclosure Letter includes a list of any required maintenance or repair items reasonably expected to have a cost in excess of $15,000.

All Inventories are valued on the books of the Subject Companies at average cost in accordance with GAAP. Subject to reasonable allowance for obsolescence, the Inventories consist of items that are current and of good and merchantable quality and not subject to any write-down or write-off. The portion of the Inventories consisting of finished products is saleable in the ordinary course of business. Current Inventory levels are consistent with the level of Inventories that has been maintained in the operation of the businesses of the Subject Companies prior to the date hereof in accordance with the operation of such businesses in the ordinary course of business. Section 4.13 of the Disclosure Letter sets out a complete and accurate list of all locations where the Inventories are situate, including a brief description of the type and amount of such Inventories situate at each location.

The Accounts Receivable and Accounts Payable are bona fide . All Accounts Receivable and Accounts Payable are recorded in the financial records of each Subject Company, as the case may be. The Accounts Receivable are valid obligations which arose in the ordinary course of business. As of date hereof, to the Seller’s knowledge except as disclosed in Section 4.14 of the Disclosure Letter no Account Receivable in excess of $50,000 is subject to any valid dispute, set off or counterclaim. Except as set forth in Section 4.14 of the Disclosure Letter, none of the Accounts Receivable is due from an Affiliate of a Subject Company. Except as set forth in Section 4.14 of the Disclosure Letter, the Accounts Payable are valid obligations which arose in the ordinary course of business. Except as set forth in Section 4.14 of the Disclosure Letter, none of the Accounts Payable is due to an Affiliate of a Subject Company. Except as set forth in Section 4.14 of the Disclosure Letter, all amounts owing by a Subject Company to any Person have been paid in the ordinary course of business without undue delay.A true and complete list of the Accounts Receivable and the Accounts Payable, as at November 25, 2007 is set forth in Section 4.14 of the Disclosure Letter and such list shall be updated before Closing to include a true and complete list of the Accounts Receivable and the Accounts Payable, as at December 30, 2007 as soon as such numbers are available.

Section 4.15 of the Disclosure Letter lists all of the material licences, permits, authorizations, approvals or other evidence of authority issued or granted to, conferred upon, or otherwise created for, a Subject Company by any Governmental Authority (collectively, the “ Licences ”) and identifies those that by their terms are not transferable. The Licences are the only licences,

 

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permits, approvals or evidences of authority of any Governmental Authority required for the operation of the Subject Companies respective businesses and are held by the applicable Subject Company free and clear of any and all Encumbrances. The business of each Subject Company is being conducted by it in accordance with all terms and conditions of the Licences and in material compliance with applicable Law. All the Licences are valid and are in full force and effect, neither Subject Company is in violation of any material term or provision or requirement of any Licence, and no Person has threatened to revoke, amend or impose any condition in respect of, or commenced proceedings to revoke, amend or impose conditions in respect of, any Licence. Except as specifically disclosed in this Agreement, no Governmental Authorization is required in connection with the transactions contemplated by this Agreement or in order to maintain any Licence in full force and effect and in good standing after Closing.