<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 18, 1996
COLD METAL PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New York 1-12870 16-1144965
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8526 South Avenue, Youngstown, Ohio 44514
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (330) 758-1194
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective June 18, 1996, Cold Metal Products, Inc. (the "Registrant"),
acting through its wholly owned subsidiary, Cold Metal Products Company, Ltd.,
increased its shareholding interest in Direct Steel Inc. ("Direct Steel") from
fifty percent to one hundred percent. Direct Steel, incorporated under the laws
of Ontario, Canada, operates a steel service center located in Concord, Ontario.
The Registrant acquired the shares of Direct Steel owned by Lance Dunlap, a
twenty-five percent shareholder of Direct Steel, following a redemption by
Direct Steel of the shares of Mara Dunlap, also a twenty-five percent
shareholder of Direct Steel, in a series of related transactions. The aggregate
consideration paid in connection with the transactions was approximately $2.6
million (U.S.), which was obtained from a combination of cash generated from the
operations of the Registrant and its subsidiaries including Direct Steel and
funds available under Registrant's committed facility with the Bank of New York.
The Registrant intends to continue the operations of Direct Steel.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
It is presently impractical to provide the financial statements
and schedules of Direct Steel Inc. required to be included
under this part (a). Such financial statements will be filed by
amendment to this Form 8-K as soon as practical, but in no
event later than sixty (60) days after the date of the filing
of this Form 8-K.
(b) Pro Forma Financial Data (Unaudited)
PRO FORMA CONSOLIDATED INCOME STATEMENT
---------------------------------------
The following unaudited pro forma income statement has
been derived from the Registrant's income statement for fiscal
1996 and adjusts such information to give effect to the
acquisition of the remaining outstanding shares of the
Registrant's equity affiliate, Direct Steel Inc. as if the
acquisition had occurred on April 1, 1995. In preparing the pro
forma results of operations for fiscal 1996, adjustments have
been made for amortization of goodwill, interest expense
related to borrowing used to finance the purchase price,
reduced administrative expenses resulting from the combination
of entities, and related tax effects. The pro forma income
statement is presented for informational purposes only and does
not purport to be indicative of the results of operations that
actually would have resulted if the application had been
consummated on April 1, 1995, nor which may result from future
operations.
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<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
March 31, 1996
-----------------------------------
Actual Pro Forma Pro Forma
Adjustments
(in thousands except per share amounts)
<S> <C> <C> <C>
Net sales $ 227,128 $ 45,912 $273,040
Cost of sales 205,727 40,886 246,613
------- ------ -------
Gross profit 21,401 5,026 26,427
Selling, general and administrative expenses 13,645 3,597 17,242
Income (loss) from equity investment (98) 98 --
Interest expense 2,918 1,626 4,544
------- ------ -------
Income before income taxes 4,740 (99) 4,641
Income taxes 1,685 72 1,757
------- ------ -------
Net income (loss) $ 3,055 $ (171) $ 2,884
======= ====== =======
Net income (loss) per share $ 0.40
=======
Average shares outstanding 7,172,271
=========
</TABLE>
PRO FORMA CONSOLIDATED BALANCE SHEET
----------------------------------------
Registrant's unaudited pro forma balance sheet gives
effect to the purchase of the remaining outstanding shares of
the Registrant's equity affiliate, Direct Steel Inc., as if the
transaction had occurred, for balance sheet purposes, on March
31, 1996. Pro forma adjustments were made to include the assets
and liabilities of the acquired company, eliminate
inter-company balances, record goodwill, and eliminate the
Registrant's Investment in Subsidiary that represented the 50%
interest in Direct Steel under the equity method.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------
March 31, 1996
--------------------------------
Actual Pro Forma Pro Forma
Adjustments
(in thousands except per share amounts)
<S> <C> <C> <C>
Assets:
Current assets $ 89,408 $ 11,000 $100,408
Property, plant and equipment 29,337 2,676 32,013
Goodwill -- 2,690 2,690
Other non-current assets 7,945 (1,465) 6,480
------- ------ -------
Total assets $126,690 $ 14,901 $141,591
======= ====== =======
Liabilities and shareholders' equity:
Current liabilities $ 37,958 $ 14,813 $ 52,771
Long-term debt 39,000 -- 39,000
Other liabilities 17,364 88 17,452
Shareholders' equity 32,368 -- 32,368
------- ------ -------
Total liabilities and shareholders' equity $126,690 $ 14,901 $141,591
======= ====== =======
</TABLE>
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(c) Exhibits
(1) 99 (a) Share Purchase Agreement dated June 17, 1996
(2) 99 (b) Share Purchase Agreement dated June 18, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLD METAL PRODUCTS, INC.
July 3, 1996 By /s/ James R. Harpster
-------------------------------------
James R. Harpster
President and Chief Executive Officer
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Exhibit Index Page
- ------------- ----
99(a) Share Purchase Agreement dated June 17, 1996 E-1
99(b) Share Purchase Agreement dated June 18, 1996 E-2
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Exhibit 99(a)
SHARE PURCHASE AGREEMENT
This Agreement, entered into on this 17th day of June, 1996, by and
among Direct Steel Inc., a corporation organized and existing under the laws of
the province of Ontario, Canada (hereinafter, "Direct"), 955404 Ontario Inc., a
corporation organized and existing under the laws of the province of Ontario,
Canada (hereinafter,"955404"), Lance Dunlap, an individual residing at 1 Palace
Pier Court, #2303, Etobicoke, Ontario, Canada ("Lance"), 9034-3344 Quebec Inc.,
a corporation incorporated under Part IA of the Quebec Companies Act
(hereinafter "Quebec Inc."), and Cold Metal Products Company, Ltd., a
corporation organized and existing under the laws of the province of Ontario,
Canada (hereinafter, "CMP"), hereby recites as a preamble:
RECITALS
--------
1. Prior to the sale of such shares on June 13, 1996 to Quebec Inc.
(which sale was subject to the Shareholders Agreement relating to Direct). Lance
was the owner of 25 Class D shares of Direct and 25 common shares of 955404
(hereinafter referred to collectively, together with the 25 common shares of
Direct Amalco (as hereinafter defined) to be exchanged for such shares upon the
amalgamation referred to in Section 7 hereof and any other shares of stock,
whatever class, of Direct, 955404 and Direct Amalco owned, or to be owned in the
case of Direct Amalco, by or for the benefit of Lance or Quebec Inc., as the
"Lance Shares").
2. Lance, Direct, 955404 and CMP are parties to a certain Shareholders
Agreement dated March 23, 1994 ("Shareholders Agreement").
3. Lance has transferred the Lance Shares to Quebec Inc.
4. Direct is currently indebted to Lance in the aggregate original
principal amount of $526,137 plus interest, as evidenced by (i) a promissory
note dated January 15, 1993 as amended by a Promissory Note Amending Agreement
dated March 23, 1994, and (2) two promissory notes dated March 23, 1994, and, in
addition, Lance holds a mortgage on the property of 955404 registered on May 24,
1994 in the amount of $200,000 which is to be paid as set out herein.
5. CMP wishes to purchase the Lance Shares and Quebec Inc. wishes to
sell to CMP the Lance Shares, all under the terms and conditions set forth in
this Agreement.
6. The parties wish to provide for termination of the Shareholders
Agreement.
E-1
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E-1
AGREEMENT
---------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the parties hereto hereby
agree as follows:
1. TRANSFER OF SHARES. Subject to the terms and conditions of this Agreement,
on the Closing Date, Lance shall cause Quebec Inc. to and Quebec Inc. shall
sell, transfer and deliver to CMP all right, title and interest in and to the
Lance Shares, free and clear of all liens and encumbrances whatsoever.
2. PAYMENTS TO LANCE AND QUEBEC INC. Subject to the terms and conditions of this
Agreement, and in consideration for the transfer of the Lance Shares pursuant to
Section 1 and the obligations, covenants, releases, representations and
warranties of Lance and Quebec Inc. set forth in this Agreement including
Sections 3,4,5 and 14, on the Closing Date:
a. Direct shall declare and pay to Quebec Inc. dividends on account of
Quebec Inc.'s shares of stock in Direct in the aggregate amount of
$525,000.
b. CMP shall pay to Quebec Inc., in accordance with the terms set forth
herein, the sum of $1,775,000 as follows:
(1) $900,000 shall be deposited with Escrow Agent (as
defined in Section 8 of this Agreement), (which funds,
together with interest earned thereon, shall
hereinafter be referred to as the "Escrow Fund") and
shall be held in escrow and paid to Quebec Inc.,
subject only to post-closing claims, in accordance
with the terms of the Escrow Agreement (as defined in
Section 8 of this Agreement), the Termination
Agreement (as hereinafter defined) and this Agreement.
(2) $875,000 shall be paid to Quebec Inc. at Closing in
immediately available funds.
c. Direct shall pay Lance the sum of $401,137 as payment in full of
Direct's indebtedness to Lance evidenced by that certain Promissory
Note dated January 15, 1993, as amended by a Promissory Note Amendment
Agreement dated March 23, 1994.
d. Direct shall pay to Lance the sum of $37,500 which sum shall fully and
forever discharge all past, present and future accrued interest on all
existing loans and indebtedness due and owing from Direct and/or
955404 to Lance, except that interest shall accrue from the Closing
Date with respect to the two promissory notes dated March 23, 1994 in
the aggregate principal amount of $125,000 (bearing interest at the
rate equal to the prime interest rate per annum charged
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from time to time by Canadian Imperial Bank of Commerce as announced and
in effect from time to time, plus 1.5% per annum), and otherwise in
accordance with the terms of those notes.
e. 955404 shall pay to Lance $200,000 in full and complete satisfaction of
the 955404 mortgage to Lance registered on
May 24, 1994, ("Lance Mortgage").
3. TERMINATION OF SHAREHOLDER'S AGREEMENT. The Shareholder's Agreement shall
terminate, effective immediately upon the Closing of the transactions
contemplated by this Agreement, without the necessity of further action on the
part of any of the parties hereto or thereto. For greater certainty the
provisions of the Shareholders Agreement which are to survive the termination of
that agreement, except as set forth herein shall be of no further force or
effect.
4. CONFIDENTIALITY, NON-COMPETITION AND NON-INTERFERENCE.
a. CONFIDENTIALITY.
(1) Lance acknowledges that, as a result of his
relationship with Direct (including as a director and
shareholder), Lance acquired, had access to and was
entrusted with certain matters or information which
are confidential to Direct, including, but not limited
to, all data (including trade secrets and proprietary
information), reports, formulations, interpretations,
forecasts and records containing or otherwise
reflecting information which concerns Direct and its
Affiliates, which are not available to the general
public, together with analyses, compilations, studies
or other documents, whether prepared by Lance or
others, which contain or otherwise reflect such
information, the disclosure of any of which
confidential information to competitors of Direct
would be detrimental to the interests of Direct and
its Affiliates. For purposes of this Agreement the
term "Affiliates" of Direct shall include 955404, CMP
and Cold Metal Products, Inc., the parent corporation
of CMP (hereafter, "CMP-US").
(2) Lance further acknowledges and agrees that the right
to maintain such information confidential constitutes
a proprietary right which Direct and its Affiliates
are entitled to protect. Accordingly, Lance covenants
and agrees with Direct and with each Affiliate of
Direct that for a period of five years following the
Closing Date, Lance will not disclose any of such
confidential information to any person, firm or
corporation, nor shall Lance use the same, and
thereafter shall not disclose or make any use of the
same, except with the prior written consent of Direct
and CMP. This Section does not apply to any
information that:
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a. is or becomes generally available to the
public other than as a result of a disclosure
in breach of this Agreement;
b. becomes available to Lance on a non-
confidential basis from a source other than
Direct or its Affiliates or their
representatives provided the person who
discloses to Lance is not under a
confidentiality obligation.
b. NON-COMPETITION AND NON-INTERFERENCE. Lance acknowledges
that as a result of his relationship with Direct (including
as a director and shareholder), Lance developed a close
working relationship with Direct's suppliers and/or
customers and gained a knowledge of Direct's operational
goals, product design, manufacturing processes, strategic
planning and budgetary objectives and other confidential
information described in paragraph 4(a)1 above, all of
which, if made available to a competitor or if used for
competitive purposes, would cause irreparable injury to
Direct. Accordingly, Lance covenants and agrees that:
(1) For a period of three years from the Closing Date,
Lance shall not, directly or indirectly, and
whether personally or as agent for another or as
an employee, partner, joint venturer, principal,
consultant, agent or owner of five percent or more
of any firm, association, syndicate or
corporation, engage in the manufacture, sale,
distribution or provision of any product or
service which competes, or is likely to compete,
with a product or service which is currently or in
the past was sold or provided by Direct within the
Cities of Toronto and Hamilton, Ontario, their
immediate surrounding suburbs of Newmarket,
Ontario, Concord, Ontario, Milton, Ontario and
Guelph, Ontario, as well as the municipalities of
London, Ontario and Kitchener-Waterloo, Ontario.
(2) For a period of five years from the Closing Date,
Lance shall not, directly or indirectly, and
whether personally or as agent for another or as
an employee, partner, joint venturer, principal,
consultant, agent or owner of five percent or more
of any firm, association, syndicate, or
corporation which competes with a product or
service which is currently or in the past was sold
or provided by Direct within the cities of Toronto
and Hamilton, Ontario, their immediate surrounding
suburbs of Newmarket, Ontario; Concord, Ontario;
Milton Ontario; Guelph, Ontario; as well as the
municipalities of London, Ontario and
Kitchener-Waterloo, Ontario, hire or take away, or
cause to be hired or taken away, any employee who
was employed by Direct or its Affiliates at any
time during the two years immediately preceding
the Closing Date including the Closing Date. The
employment of a person who was employed by Direct
or its Affiliates at any time during the two year
period immediately preceding the Closing Date
including the Closing Date by a firm, association,
syndicate,
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<PAGE> 5
corporation or other business which also employs
Lance and which competes with a product or
service which is currently or in the past was
sold or provided by Direct within the cities of
Toronto and Hamilton, Ontario, their immediate
surrounding suburbs of Newmarket, Ontario,
Concord, Ontario, Milton, Ontario and Guelph,
Ontario, as well as the municipalities of London,
Ontario and Kitchener-Waterloo, Ontario shall
also be prohibited by this Section. Following
such five year period, if Lance shall hire or
take away, or cause to be hired or taken away,
any such employee, Lance agrees that Lance shall
honour, and shall cause any corporation,
partnership or other business entity then
controlled by Lance, to honour, any contractual
obligation between such employee and Direct
relating to nondisclosure or use of confidential
matters and information of Direct or to
non-competition with Direct and shall use his
best efforts to cause any corporation,
partnership or business entity by which Lance
is employed to do the same.
(3) Lance acknowledges that the time limitations set
forth in subsections (1) and (2) of Section 4(b)
hereof are reasonable and properly required for
the adequate protection of the business of Direct
and its Affiliates. In the event that the three
year time limitation set forth in subsection (1)
of Section 4(b) hereof is held to be unenforceable
by a court of competent jurisdiction than the
period shall be two years from the Closing Date,
or if a two year period is held to be
unenforceable by a court of competent jurisdiction
than the period shall be one year from the Closing
Date. In the event that the five year time
limitation set forth in subsection (2) of Section
4(b) hereof is found to be unreasonable by a court
of competent jurisdiction, then Lance agrees to be
bound by a four year time limitation, and if such
four year time limitation is found to be
unreasonable by a court of competent jurisdiction,
then Lance agrees to be bound by a three year time
limitation, and if such three year limitation if
found to be unreasonable by a court of competent
jurisdiction, then Lance agrees to be bound to a
two year time limitation, and if such two year
limitation is found to be unreasonable by a court
of competent jurisdiction, then Lance agrees to be
bound to a one year time limitation.
(4) Lance acknowledges that the geographic
restrictions set forth in subsection (1) of
Section 4(b) hereof are reasonable and properly
required for the adequate protection of the
business of Direct and its Affiliates and in the
event that any such geographic restriction is
found to be unreasonable by a court, that they are
independent and severable for the purposes of this
Agreement.
c. Lance acknowledges, without prejudice to any and all
remedies available to Direct, or any of its Affiliates, that
an injunction is the only effective remedy for breach
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of Lance's covenants under this Section 4 of this Agreement.
Accordingly, Lance hereby agrees that Direct or any of its
Affiliates may apply for and obtain interim and permanent
injunctive relief and an accounting of all profits and
benefits arising out of such breach, which shall be in
addition to any other rights or remedies to which Direct or
such Affiliate may be entitled at law or as a result of this
Agreement. Lance acknowledges during the pending of
resolution of any dispute under this Section 4 that the
entire Escrow Fund shall be held as a reserve by the
Escrow Agent.
d. Lance agrees that the restrictions and covenants contained
in this Section 4 shall be construed independently of any
other provision of this Agreement, and the existence of any
alleged claim or cause of action by Lance against Direct, or
any of its Affiliates, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to
the enforcement by Direct, or any of its Affiliates of the
said covenants or restrictions provided, however, that if
any such restriction or covenant is held to be unenforceable
in any jurisdiction, such decision shall not affect any of
the other covenants or provisions of this Agreement or their
application.
e. Lance acknowledges and agrees that Direct and CMP have a
material interest in preserving Direct's confidential
information and the relationships Direct has developed with
its customers and suppliers against impairment by
competitive activities of former employees. Accordingly,
Lance agrees that the restrictions and covenants contained
in this Section 4 and Lance's agreement thereto by his
execution of this Agreement, and the restrictions and
covenants set forth in Section 3 of the Termination
Agreement and Lance's agreement thereto by his execution of
the Termination Agreement, constitute a material inducement
to Direct and CMP to enter into this Agreement and that
Direct and CMP would not enter into this Agreement absent
such inducement.
f. Lance further agrees and covenants that, for a period of
five years following the Closing hereof, Lance shall not,
except by joint statement of Lance and Direct consented and
agreed to by all the parties hereto, discuss or communicate
with any present or future supplier or customer or employee
of Direct or its Affiliates regarding the business or
affairs of Direct or its Affiliates. Lance and Quebec on the
one hand and the other parties on the other agree that
neither will make any communication which adversely or
negatively reflects on the other. By execution of this
Agreement, Lance hereby agrees that the foregoing
restriction and time limitation are reasonable. Nothing in
this Section shall prohibit Lance from identifying his
status as a former shareholder, officer, director of Direct
and 955404, his duties and responsibilities, the number of
years he was associated with Direct and 955404, the industry
in which Direct conducts its business or the products it
sold and his remuneration.
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5. REPRESENTATIONS OF WARRANTIES OF LANCE. Lance and Quebec, Inc., jointly and
severally, represent and warrant to Direct, 955404 and CMP, and acknowledge that
Direct, 955404 and CMP are relying on such representations and warranties, as
follows:
a. Lance owns Quebec Inc. which owns the Lance Shares free and
clear of all liens, claims, charges, encumbrances and
security interests and has full power and authority
to transfer and dispose of the Lance Shares free and clear
of any claim, suit, proceeding, call, voting trust, proxy,
restriction, security interest, lien or other encumbrance of
any kind whatsoever except as provided in the Shareholders
Agreement. When transferred by Quebec Inc. pursuant to
Section 1 hereof, good and marketable title to the Lance
Shares, free and clear of all liens, claims, suits,
proceedings, calls, voting trusts, proxies, restrictions,
security interests, charges, and other encumbrances of any
kind whatsoever, shall be vested in CMP. Lance and Quebec
Inc. are not non-residents of Canada as defined in the
Income Tax Act (Canada).
b. Schedule 5(b) contains a true and complete list, on and as
of the date of this Agreement and the Closing hereof, of all
indebtedness owed by Direct or 955404 to or for the benefit
of Lance as well as all notes, claims, charges, security
interests, liens, mortgages and encumbrances held by Lance
against Direct or 955404 or the property of Direct or 955404
(hereinafter referred to as the "Lance Instruments"). Except
as expressly provided in this Agreement, all debt
represented by the Lance Instruments including any debt not
set forth on Schedule 5b is waived or compromised at
Closing.
c. There is no outstanding right, subscription, warrant, call,
unsatisfied pre-emptive right, option or other agreement of
any kind to purchase or otherwise receive from Lance or
Quebec Inc. any shares of capital stock of Direct or 955404,
and there is no outstanding security of any kind convertible
into such capital stock of which Lance has actual knowledge.
d. After the redemption of the shares owned by Mara Dunlap or
her holding company by Direct Amalco the 25 common shares of
Direct Amalco will represent the entire ownership interest,
legal or equitable, direct or indirect, contingent or
absolute, of Lance and/or Quebec Inc. in Direct Amalco, and
Lance and/or Quebec Inc. have no other ownership interest,
legal or equitable, direct or indirect, contingent or
absolute, in Direct, 955404, or Direct Amalco or any shares
of stock thereof.
e. To the best of Lance's actual knowledge, neither Direct nor
955404 nor Direct Amalco are subject to any obligations or
liabilities to any other party, including, without
limitation, Lance or Quebec Inc.except for any liabilities
which:
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i. may arise as a result of those certain tax
adjustments and GST proposed by Revenue Canada by
letter on May 21, 1996; or
ii. were reflected on the draft audited financial
statements of Direct or 955404 as at March 31,
1996; or
iii. incurred in the ordinary course of business since
March 31, 1996 AND were subject to the usual
accounting process; or
iv. are professional fees and expenses that arise in
connection with this Agreement, the Termination
Agreement or the purchase of Mara Dunlap's shares
and the transactions contemplated hereby and
thereby; or
v. are listed in a letter dated June 17, 1996 from
Direct to Lance.
None of Direct Amalco, Direct or 955404 have any obligation or
liability for payment of items which are personal to Lance (as opposed
to corporate purpose items). Lance acknowledges that Revenue Canada
has asserted that Direct has paid or incurred an aggregate of $150,112
in respect of personal expenses of Lance (or family members) and Lance
represents there are no other such personal expenses which have been
paid or incurred by Direct, 955404 or Direct Amalco.
f. To the best of Lance's knowledge there is no pending or
threatened litigation, action or proceeding which would
affect the transactions contemplated by this agreement. To
the best of Lance's knowledge there is no pending or
threatened litigation, action, or proceeding against Direct
or 955404 except as set out in Section 5(e) above.
g. Quebec Inc. is duly organized, validly existing under the
laws of the province of Quebec, Canada. Quebec Inc. has all
the requisite corporate power and authority to enter into
this Agreement and consummate the transactions contemplated
hereby, and the execution of this Agreement and the
consummation of the transactions contemplated hereby have
been authorized by all necessary corporate action of Quebec
Inc., and will not conflict with, result in a breach of or
constitute a default under any material law, statute,
regulation, order or decree which is applicable to Quebec
Inc. Quebec Inc. is wholly owned and controlled by Lance.
h. This Agreement and the Escrow Agreement, and all other
agreements and documents executed in connection therewith,
shall constitute valid and binding obligations of Quebec
Inc. and Lance, enforceable against them in accordance with
their terms.
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As used herein, the terms "to the best of Lance's
knowledge," "to the best of Lance's actual knowledge," "of which Lance
has knowledge", and the like mean after reasonable inquiry by Lance.
6. REPRESENTATIONS AND WARRANTIES OF CMP.
a. CMP represents and warrants to Lance and Quebec Inc. that it
is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation,
that it has all requisite corporate power and authority to
enter into this Agreement and consummate the transactions
contemplated hereby, and that the execution of this
Agreement and the consummation of the transactions
contemplated hereby have been authorized by all necessary
corporate action of CMP.
b. CMP represents and warrants that this Agreement and the
Escrow Agreement, and all other agreements and documents
executed in connection therewith, shall constitute valid and
binding obligations of CMP, Direct and 955404 enforceable
against each of them in accordance with their terms;
c. CMP represents and warrants that to the best of CMP's actual
knowledge, neither Direct nor 955404 nor Direct Amalco are
subject to any obligations or liabilities to any other
party, including, without limitation, Lance or 9034-3344
Quebec Inc. except for any liabilities which:
i. may arise as a result of those certain
tax adjustments and GST proposed by
Revenue Canada by letter on May 21,
1996; or
ii. were reflected on the draft audited
financial statements of Direct or 955404
as at March 31, 1996; or
iii. incurred in the ordinary course of
business since March 31, 1996 AND were
subject to the usual accounting process;
or
iv. are professional fees and expenses that
arise in connection with this Agreement,
the Termination Agreement or the
purchase of Mara Dunlap's shares and the
transactions contemplated hereby and
thereby; or
v. are listed in a letter dated June 17,
1996 from Direct to Lance.
None of Direct Amalco, Direct or 955404 shall have any obligation or liability
for payment of items which are personal to Lance (as opposed to corporate
purpose items) whether or not CMP knows of such items.
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7. CLOSING. The Closing ("Closing") of the transactions contemplated by this
Agreement shall take place over two days, on June 17, 1996 and on June 18, 1996
at the offices of Morris Rose Ledgett ("Morris"), Suite 2700 Canada Trust Tower,
161 Bay Street, Toronto, Ontario, Canada, or at such other time and place as the
parties shall mutually agree. The transactions set forth in Section 2(a) shall
take place on the first of the two days, provided, however, that the payments
provided for in Section 2(a) shall be held in Escrow by Morris pending the
Closing of all the transactions contemplated in this Agreement. The "Closing
Date" shall mean the applicable date on which the Closing occurs. Unless
otherwise extended in writing by all the parties hereto, this Agreement shall
terminate at midnight on June 18, 1996 unless the Closing of the Agreement
occurs on or before June 18, 1996. On day two of the Closing, Direct and 955404
shall amalgamate, forming a new corporation referred to herein as "Direct
Amalco."
8. ESCROW AGREEMENT. At Closing, Lance, Quebec Inc., CMP and Montreal Trust
Company of Canada shall enter into and execute an Escrow Agreement in the form
of Exhibit A hereto ("Escrow Agreement"), which Agreement shall appoint Montreal
Trust Company of Canada as Escrow Agent ("Escrow Agent"). As more fully set
forth in the Escrow Agreement, the funds held by Escrow Agent pursuant to the
Escrow Agreement shall be held as security for the accuracy and completeness of,
and compliance by Lance and Quebec Inc. with, the representations, warranties,
covenants and agreements of Lance and Quebec Inc. set forth in this Agreement
and the Termination Agreement.
9. ITEMS TO BE DELIVERED BY LANCE AND QUEBEC INC. AT CLOSING. At Closing, Lance
and Quebec Inc., as the case may be, shall deliver the following to Direct,
955404 and/or CMP, as the case may be:
a. Share certificates with respect to the Lance Shares duly
endorsed and in proper form for transfer to CMP so as to
vest in CMP good and marketable title to the Lance Shares
free and clear of all liens and encumbrances whatsoever.
b. Except as to those two promissory notes dated March 23, 1994
in the aggregate principal amount of $125,000, releases
and/or Assignments, as appropriate, duly executed by Lance,
to Direct and/or 955404, as applicable, of the Lance
Instruments, so as to discharge and release Direct and/or
955404 from any and all liabilities or obligations arising
therefrom.
c. Escrow Agreement duly executed by Lance and Quebec Inc.
d. A discharge of the Lance Mortgage.
e. Releases of all other security interests in the assets of
955404 or Direct.
f. The counsel opinions required under Section 11(h).
-10-
<PAGE> 11
g. Agreement respecting Termination of Employment (the
"Termination Agreement") in the form of Exhibit B attached
hereto, duly executed by Lance.
h. Any and all other documents, instruments and certificates
necessary or appropriate in order to accomplish the
transactions contemplated hereby, including copies of
articles of incorporation, status certificate and
certificate of incumbency for Quebec Inc.
10. ITEMS TO BE DELIVERED BY DIRECT, 955404 AND/OR CMP AT CLOSING. At Closing,
Direct, 955404, and/or CMP, as appropriate, shall deliver the following to Lance
or Quebec Inc., as appropriate:
a. The payments pursuant to Section 2 hereof.
b. Escrow Agreement duly executed by CMP.
c. Releases by the institutional lenders to Direct and 955404
of all security pledged or provided by Lance or guarantees
made by him with respect to Direct or 955404 Ontario, or
such other assurances as are satisfactory to Lance in his
sole discretion that he has been relieved of financial and
other responsibility for such loans or obligations except
for pledges of the promissory notes in the aggregate
principal amount of $125,000 dated March 23, 1994 and to
obtain registered discharges of related financing
statements.
d. By CMP, $12,500 in full payment to Lance under the 1994
Share Purchase and Loan Agreement, dated March 23, 1994,
among CMP, Direct, 955404, Lance and Mara Dunlap.
e. Termination Agreement duly executed by Direct and 955404.
f. Any and all other documents, instruments or certificates
necessary or appropriate in order to accomplish the
transactions contemplated hereby.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DIRECT, 955404, AND CMP . The
obligations of Direct, 955404 and CMP under this Agreement are subject to the
following conditions precedent:
a. Delivery by Lance and Quebec Inc. of the items set forth in
Section 9 of this Agreement.
b. All representations and warranties of Lance and Quebec Inc.
shall be true, correct and complete on and as of the Closing
of this Agreement, and Lance shall have executed and
delivered to Direct, 955404 and CMP a certificate to this
effect.
-11-
<PAGE> 12
c. Lance and Quebec Inc. shall be in full and complete
compliance with all covenants and agreements required to be
observed by them under this Agreement, and shall execute and
deliver to Direct, 955404 and CMP a certificate to this
effect.
d. Direct Amalco shall have redeemed and/or purchased the
shares of Mara Dunlap in Direct Amalco or CMP, Direct
Amalco, Direct and 955404 shall have received the written
consent of Mara to the transactions contemplated by this
Agreement.
e. CMP shall have received from escrow all shares of stock in
Direct and 955404 held pursuant to that certain Escrow
Agreement dated March 23, 1994 among Lance, Mara Dunlap, CMP
and Ernst & Young (hereinafter, the "CMP Escrow Agreement").
f. This Agreement and the transactions contemplated by this
Agreement shall have been consented to in writing by the
following entities or their successors in interest:
(1) The Bank of New York Commercial Corporation, a
corporation organized under the laws of the State
of New York
(2) BNY Financial Corporation - Canada
g. CMP shall not have learned of any material adverse condition
or fact not known as of the date of this agreement about the
property, assets, liabilities or business of Direct or
955404.
h. CMP shall have received an opinion of counsel licensed to
practice in Montreal, Canada, in form and content
satisfactory to it, as to the following matters:
(1) the representation and warranties set forth in
Section 5(h);
(2) the enforceability of the provisions of Section
18(e) against Quebec Inc.; and
(3) the enforceability of a final judgment from an
Ontario Court against Quebec Inc.
i. CMP, Direct, 955404 or Direct Amalco shall have received an
agreement by Mara Dunlap that the Shareholders Agreement has
terminated and a release by her of the other parties thereto
from any obligations under that agreement.
j. Lance, Direct and 955404 shall have entered into the
Termination Agreement.
-12-
<PAGE> 13
12. CONDITION PRECEDENT TO OBLIGATIONS OF LANCE. The obligations of
Lance under this Agreement are subject to:
a. CMP and Direct shall be in full and complete compliance with
all covenants and agreements required to be observed by it
under this Agreement and shall deliver to Lance a
certificate to that effect.
b. All representations and warranties of CMP shall be true and
correct as of the Closing and CMP shall have delivered to
Lance a certificate to that effect.
c. Lance and Quebec Inc. shall have received an agreement by
Mara Dunlap that the Shareholders Agreement has terminated
and a release by her of the other parties thereto from any
obligations under that agreement
13. RETURN OF CMP SHARES. Lance shall execute and deliver to Ernst & Young a
written direction to provide for the release at Closing, from escrow and the
return to CMP of 50 shares of Class B stock of Direct and 50 common shares of
stock of 955404, held in escrow by Ernst & Young pursuant to the CMP Escrow
Agreement.
14. RELEASE OF CMP, DIRECT, 955404 AND DIRECT AMALCO. By his execution of this
Agreement, Lance and Quebec Inc. hereby agree, for themselves and for their
heirs, executors, administrators, successors and assigns, that the Closing of
this Agreement shall effect, without the necessity of any further action on the
part of Lance or Quebec Inc. whatsoever, immediately upon the Closing, a full,
final and irrevocable release and discharge of Direct, 955404, Direct Amalco,
CMP and CMP-US of any and all liabilities, debts, obligations, claims, demands,
suits, actions, causes of action, whether liquidated or unliquidated, contingent
or absolute, known or unknown, of any kind whatsoever, against Direct, 955404,
Direct Amalco, CMP or CMP-US, which Lance or Quebec Inc. or their successors and
assigns ever had, now has or will have in the future, including, without
limitation, any liabilities, obligations or monies with respect to Lance's
relationship (including as a director, officer, shareholder and employee) with
Direct and 955404 as well as his status as an officer, director and shareholder
thereof (or Direct Amalco), provided, however, that this Agreement shall not
release (i) Direct and CMP from its obligations to Lance, to the extent of the
$125,000 aggregate principal amount and interest accruing from and after the
Closing Date under those two promissory notes to Lance in the aggregate
principal amount of $125,000 dated March 23, 1994, or (ii) any of CMP, Direct,
955404 Ontario or Direct Amalco from any liabilities, debts, obligations,
claims, demands, suits, actions or causes of action arising from or relating to
this Agreement, the Termination Agreement or any of the transactions
contemplated by this Agreement, the Escrow Agreement or the Share Purchase and
Loan Agreement dated December 30, 1993 as amended March 23, 1994 or any of the
transactions contemplated by this Agreement.
15. RELEASE OF LANCE AND QUEBEC INC. By its execution of this Agreement, each
of CMP, Direct, 955404 and Direct Amalco hereby agrees, for itself and for its
successors and assigns, that the Closing of this Agreement shall effect, without
the necessity of any further action on the part
-13-
<PAGE> 14
of CMP, Direct, 955404 and Direct Amalco whatsoever, immediately upon the
Closing, a full, final and irrevocable release and discharge of Lance and
Quebec Inc. of any and all liabilities, debts, obligations, claims, demands,
suits, actions, causes of action, whether liquidated or unliquidated,
contingent or absolute, known or unknown, of any kind whatsoever, against Lance,
which any of CMP, Direct, 955404, or Direct Amalco, or its successors and
assigns, ever had, now has or will have in the future provided, however, that
nothing herein shall release or be deemed to release Lance from any liabilities,
debts, obligations, claims, demands, suits, actions, causes of action arising
from or relating to this Agreement, the Termination Agreement, the Escrow
Agreement, the Share Purchase and Loan Agreement dated December 30, 1993 as
amended March 23, 1994 in accordance with and subject to the provisions thereof
or any of the transactions contemplated by this Agreement.
16. ACTION BY DIRECT AND 955404. By approving this Agreement on behalf of
Direct and 955404, each of the directors of Direct and 955404, respectively,
hereby indicates his written consent to this Agreement and the transactions
contemplated hereby, and acknowledges that such consent is sufficient to
authorize this Agreement and the transactions contemplated hereby on behalf of
Direct and 955404 and further, for himself and on behalf of Direct and 955404,
each such director, and each party which is a shareholder of Direct or 955404,
consents to, and forever waives any objection or claim based on, any actual or
potential conflict of interest relating to the consent of the transactions
contemplated hereby.
17. POST CLOSING.
a. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION. The representations and warranties,
covenants and other agreements in this Agreement shall
survive the Closing of the transactions contemplated by this
Agreement for a period of three (3) years unless otherwise
expressly provided herein, provided, however, that the
representations and warranties set forth in Sections 5(e)
and (f) shall survive until the expiration of the
appropriate statutes of limitations and Sections 5(a), (d),
and (g), which shall survive indefinitely. Lance and Quebec
Inc., jointly and severally, shall indemnify, defend and
hold harmless Direct, 955404, Direct Amalco, CMP and CMP-US,
their directors, officers, affiliates, successors and
assigns, on account (i) of any and all claims, losses,
liabilities, damages and expenses on a net after tax basis
incurred by such indemnified parties resulting from or
relating to any breach by Lance and/or Quebec Inc. of any
representation, warranty, covenant or other agreement of
Lance and/or Quebec Inc. in this Agreement, and (ii)
notwithstanding anything else contained herein, any and all
claims, losses, liabilities, damages and expenses incurred
by such indemnified parties as a result of any criminal or
fraudulent activity of Lance and/or Quebec Inc., and any
knowledge of such indemnified parties related thereto shall
not be a defence to such indemnity claim. CMP and Direct
Amalco shall indemnify, defend and hold harmless, and hereby
agrees to indemnify, defend and hold harmless, Lance and
Quebec Inc. on account of any and all claims, losses,
liabilities, damages and expenses on a net after tax basis
incurred by such
-14-
<PAGE> 15
indemnified parties resulting from or relating to any
breach by CMP, Direct, 955404 or Direct Amalco of any
representation or warranty of CMP, Direct, 955404 or Direct
Amalco contained in this Agreement. The procedure for
submission and resolution of claims for indemnification
shall be as set out in the Escrow Agreement for resolution
of Indemnity Claims mutatis mutandis. Direct, 955404 and
Direct Amalco shall continue to indemnify Lance in respect
of matters related to Lance acting as a director of Direct,
955404 and Direct Amalco, to the extent permitted under
the Business Corporations Act (Ontario).
b. PAYMENT OF PROMISSORY NOTES AGGREGATING $125,000. Within
one (1) year of the Closing Date, Direct Amalco agrees to
pay and CMP undertakes to cause Direct Amalco to pay
promissory notes from Direct Steel Inc. to Lance in the
aggregate principal amount of $125,000 dated March 23, 1994,
together with interest thereon, but only to the extent
accrued since the Closing Date, at the rate stated in
Section 2(d) of this Agreement. Except for an amount equal
to $52,839 (plus interest from the date of Closing at the
rate of 1.5% over prime) which will be set off against such
notes as payment by Lance for personal expenses as provided
for in the Compromise Agreement, the payment of the $125,000
shall otherwise be without setoff or deduction.
c. TAXES. Lance and Quebec Inc. hereby agree that, in the
event that Direct, 955404, Direct Amalco or CMP is notified
by Revenue Canada or any other taxing authority of any
liability or responsibility for any deduction, or tax or
charge of any nature whatsoever on account of (except as
otherwise specifically dealt with herein) any payments
pursuant to this Agreement to Lance or Quebec Inc., in
addition to any other remedies otherwise available to
Direct, 955404, Direct Amalco and CMP, CMP shall be entitled
to withdraw such amount (and any associated interest and
penalties) from the Escrow Fund in accordance with the terms
of the Escrow Agreement.
d. LANCE PERSONAL EXPENSES. Upon written demand by either of
CMP or Direct Amalco provided in the same manner as notices
are furnished under Section 18(c) of this Agreement, Lance
shall reimburse Direct Amalco for any personal (as opposed
to corporate) expense he has caused any of Direct, 955404 or
Direct Amalco to pay or to become obligated on his behalf
(but excluding those referred to in Section 5(e) except as
provided for in the Compromise Agreement). Written demand
for reimbursement under this section shall itemize each
personal expense for which reimbursement is sought and
attach to it any invoice, bill or other document evidencing
such expense. Request for reimbursement shall not include
request for reimbursement for any tax deduction consequently
disallowed on account of such expense. In the event Lance
fails to make such reimbursement within 20 days of written
demand, CMP may make an Indemnity Claim for reimbursement of
an amount equal to the amount of any such personal expense
from the Escrow Fund in accordance with the terms of the
Escrow Agreement.
-15-
<PAGE> 16
e. INSURANCE POLICIES. CMP will as soon as reasonably
practicable following closing cause Direct Amalco and Direct
Amalco agrees to assign at the direction of Lance
the term key-man insurance policies owned by 955404 and/or
Direct, subject to any restrictions of the insurance
companies, but whether or not such policies have been
pledged or assigned.
18. MISCELLANEOUS.
a. CANADIAN FUNDS. All dollar figures in this Agreement are
expressed in Canadian funds.
b. REFERENCES TO DIRECT, 955404 AND DIRECT AMALCO. Except as
otherwise expressly provided herein, all references to
Direct and 955404 in this Agreement shall be deemed to refer
also to Direct Amalco (upon amalgamation), all
representations and warranties, covenants and agreements by
Lance and Quebec Inc. to Direct and 955404 shall also be to
Direct Amalco, and all resignations from and releases by
Lance and Quebec Inc. to Direct and 955404 shall also be
resignations from and releases to Direct Amalco and all
releases, representations and warranties, covenants and
agreements by Direct and 955404 to Lance and Quebec Inc.
shall also be by Direct Amalco.
c. NOTICES. Any notice hereunder or other communication
required or permitted to be given hereunder shall be in
writing and shall be delivered (i) by hand delivery, (ii)
transmitted by telecopy (only to the extent a facsimile
number is provided herein), (iii) regular mail, postage
prepaid, or (iv) sent by certified mail, return receipt
requested, with postage prepaid. Such notice shall be sent
to the relevant party at the address set forth below or to
such other address as shall be forwarded in writing by the
parties to whom such communication is being addressed.
(1) If to CMP: Cold Metal Products Company Ltd.
65 Imperial Street
P.O. Box 66, Station "B"
Hamilton, Ontario Canada L8L 7V2
Fax: (905) 544-2957
Attn: Jack W. Watson
Vice President and General Manager
and to its counsel:
<TABLE>
<S> <C>
Cohen Swados Wright Hanifin Bradford & Brett, LLP
70 Niagara Street
Buffalo, New York 14202
Fax: (716) 856-5228
</TABLE>
-16-
<PAGE> 17
<TABLE>
<S> <C>
Attention: Jane F. Clemens, Esq.
(2) If to Lance and Quebec Inc.
Lance Dunlap
1 Palace Pier Court, #2303
Etobicoke, Ontario, Canada
Fax: (416) 251-2676
Quebec Inc.
7160 Blvd. Des Mille I'Les
St. Francois, Laval, Quebec, Canada
Fax:
Attn: Lance Dunlap
(3) If to Direct, 955404 or Direct Amalco, as the case may be:
If to Direct or Direct Amalco:
Direct Steel Inc.
215 Doughton Road
Concord, Ontario
Canada L4K 1R1
Fax: (905) 738-6867
If to 955404:
955404 Ontario Inc.
215 Doughton Road
Concord, Ontario
Canada L4K 1R1
Fax: (905) 738-6867
and to their counsel:
Morris Rose Ledgett
Suite 2700
Canada Trust Tower
161 Bay Street
Toronto, Ontario, Canada M5J 2S1
Fax: (416) 863-9500
Attention: M. Sandra Appel, Esq.
and with a copy to:
</TABLE>
-17-
<PAGE> 18
Cold Metal Products Company Ltd.
65 Imperial Street
P.O. Box 66, Station "B"
Hamilton, Ontario, Canada L8L 7V2
Fax: (905) 544-2957
Attn: Jack W. Watson
Vice President and General Manager
Any notice or other communication required or permitted to
be given under this Agreement shall be deemed to be given
(i) if by hand delivery, on the date of such hand delivery,
(ii) if by telecopy or electronic transmission, on the date
of such telecopy or electronic transmission, (iii) if by
regular mailing, on the seventh day following such mailing
and (iv) if by certified mail, on the seventh day following
such mailing. Any notice or other communication required or
permitted to be given to any party under this Agreement
shall be deemed to have been delivered to such party if
delivered pursuant to this Section to such party's counsel
identified in this Section. Any party wishing to change such
party's address for notices or other communications
hereunder must provide written notification of such change
to all other parties hereto. In the absence of such written
notification of change to all parties, a notice or other
communication to a party the address set forth in this
Section shall be deemed proper.
d. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and
all such counterparts shall together constitute one and the
same document.
e. CHOICE OF LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the Province of
Ontario, Canada, and the federal laws of Canada applicable
therein. The parties agree that the courts of the Province
of Ontario will have exclusive jurisdiction to determine all
disputes and claims arising between the parties pursuant to
this Agreement and the transactions contemplated herein.
f. ENTIRE AGREEMENT. The Agreement constitutes the entire
agreement and understanding between the parties hereto with
respect to the subject matter of this Agreement, and
supersedes all prior or contemporaneous agreements or
understandings whether oral or written. This Agreement may
not be amended, modified or terminated except in accordance
with a written instrument signed by all parties hereto.
g. FURTHER ASSURANCES. Each of the parties to this Agreement
shall execute such documents and other papers and take such
further actions as may be reasonably required, and in a
timely manner both before and after the Closing hereof, to
carry out the provisions hereof and the transactions
contemplated hereby. Each of the
-18-
<PAGE> 19
parties shall use
reasonable efforts to or obtain the fulfilment of the
conditions to Closing.
h. SEVERABILITY. If any clause or provision of this Agreement
is finally determined to be void or unenforceable in whole
or in part by any court of competent jurisdiction, it shall
not be deemed to affect or impair any of the other clauses
or provisions of this Agreement which shall be deemed to be
separate and distinct clauses or provisions agreed to by the
parties.
i. SECTION AND OTHER HEADINGS. This Section and other headings
contained in this Agreement are for reference purposes only
and shall not in any way effect the meaning or
interpretation of this Agreement.
j. LANGUAGE. The parties have required that this Agreement and
all deeds, documents and notices relating to this Agreement
be drawn up in the English language. Les parties aux
presentes ont exige le present contrat et tous autres
contrats, documents ou avis afferents aux presentes soient
rediges en langue anglaise.
k. ENUREMENT. This Agreement shall enure to the benefit of and
be binding upon the parties, and their respective heirs,
executors, administrators, successors and assigns, but this
Agreement may not be assigned by any party without the
written consent of the others.
l. COSTS. Each party shall pay all costs and expenses of such
party and shall not seek reimbursement from Direct Amalco,
Direct or 955404.
IN WITNESS WHEREOF, the parties have executed this Share Purchase
Agreement on the day and year first above written.
/s/ Lance Dunlap
--------------------------
Lance Dunlap
DIRECT STEEL INC.
By /s/ Jack W. Watson
-------------------------
Jack W. Watson, Director
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<PAGE> 20
955404 ONTARIO INC.
By /s/ Jack W. Watson
--------------------------------------------
Jack W. Watson, Director
COLD METAL PRODUCTS COMPAMY, LTD.
By /s/ Jack W. Watson
--------------------------------------------
Jack W. Watson, Vice President and
General Manager
9034-3344 Quebec Inc.
By /s/ Lance Dunlap
--------------------------------------------
Lance Dunlap, President
-20-
<PAGE> 21
SCHEDULE 5b
-----------
1. Promissory Note in the amount of $401,137 from Direct Steel Inc. to
Lance Dunlap dated January 15, 1993, as amended by Promissory Note
Amendment Agreement dated May 23, 1994.
2. Demand Promissory Note Dated March 23, 1994 from Direct Steel Inc.
Lance Dunlap in the principal sum of $50,000.
3. Subordinated Promissory Note dated March 23, 1994 from Direct Steel
Inc. to Lance Dunlap in the principal sum of $75,000.
4. Charge/Mortgage of Land granted May 4, 1994 by 955404 Ontario Inc. to
Lance Dunlap in the principal sum of $200,000.
5. General Security Agreement from Direct Steel Inc. to Lance Dunlap dated
January 15, 1993 securing the payment of the $401,137 Promissory Note.
6. General Security Agreement from Direct Steel Inc. to Lance Dunlap dated
March 23, 1994 securing all monies due and owing to Lance Dunlap by
Direct Steel Inc.
<PAGE> 22
5(e)
- ----
Vehicle expenses as described in paragraph (2) of letter $23,443
from Revenue Canada to Anne Marie Bianchi dated May
21, 1996 (Hereinafter "Revenue Canada Letter")
Medical Fees as described in paragraph (5) of Revenue $9,761
Canada Letter
Travel and promotion expenses as described in paragraph $56,759
(1) of Revenue Canada Letter
Less club dues ($1,075)
Less Myrtle Beach Trips ($4,781)
--------
$50,903
-------
$84,107
Less Compensation for personal liability resulting from
Revenue Canada's assessment of professional fees as
described in a letter dated June 17, 1996 from Direct to
Lance, the same letter being refered to in paragraph
5(e)(v) of this agreement, at 50% of $62,535, the said
percentage being Lance's agreed upon marginal tax rate. ($31,268)
-------
$52,839
=======
<PAGE> 1
Exhibit 99(b)
SHARE PURCHASE AGREEMENT
This Agreement is made this 18th day of June, 1996,
A M O N G:
1176749 ONTARIO INC.
(hereinafter referred to as "1176749")
OF THE FIRST PART
- and -
MARA DUNLAP
(hereinafter referred to as "Mara")
OF THE SECOND PART
- and -
DIRECT STEEL INC.
(hereinafter referred to as "Direct")
OF THE THIRD PART
WHEREAS 1176749 is the holder of 25 Class C Shares in the
capital of Direct;
AND WHEREAS Direct is the result of an amalgamation between
Direct Steel Inc. and 955404 Ontario Inc.;
AND WHEREAS Mara is the sole shareholder of 1176749;
AND WHEREAS Mara, 1176749 and Direct have reached an agreement
whereby Direct will purchase the 25 Class C Shares in the capital of Direct held
by 1176749 for cancellation for an amount of $683,000;
NOW THEREFORE, in consideration of the payment of $633,000 by
Direct to 1176749 and of the payment of $1.00 to Mara and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties hereto agree as follows:
E-2
<PAGE> 2
1. Subject to the terms and conditions hereof, 1176749 hereby sells,
assigns, transfers and sets over unto Direct all of 1176749's right,
title and interest in and to 25 Class C Shares in the capital of
Direct together with the full benefit of all powers, covenants and
provisions related to the ownership of such Class C Shares including,
without limitation, 1176749's right and title and interest to the
Class C Shares.
2. 1176749 and Mara hereby represent and warrant to Direct and
acknowledge that Direct is relying on such representations and
warranties in purchasing the Class C Shares of Direct as follows:
a. No person has any written or oral agreement or option or any
right or privilege (whether by law, pre-emptive or
contractual) capable of becoming an agreement or option for
the purchase or acquisition from 1176749 or Mara of the
Class C Shares of Direct;
b. The sale of the Class C Shares of Direct as provided in this
Agreement will not violate, contravene, breach or result in
any default under any indenture, mortgage, lease, agreement,
instrument, statute, regulation, order, judgment or decree
to which 1176749 or Mara is a party or by which 1176749 and
Mara are bound or affected;
c. 1176749 is the beneficial owner and the holder of record of
the Class C Shares of Direct with good and marketable title
thereto free and clear of any claims, liens, or encumbrances
of any nature whatsoever and has the exclusive right and
full power to sell, assign, transfer and deliver the Class C
Shares of Direct to Direct; and
d. 1176749 is not a non-resident of Canada for purposes of
section 116 of the Income Tax Act (Canada).
3. DOCUMENTS - 1176749 and Mara shall provide all documents, instruments
or other evidence as Direct shall reasonably request in order to
establish the consummation of the transactions contemplated hereby.
4. GOVERNING LAW - This Agreement shall be a continuing agreement in
every respect and shall be governed by and construed in accordance
with the laws of the province of Ontario and the laws of Canada
applicable therein.
5. FURTHER ASSURANCES - Each of 1176749 and Mara agree that at the
reasonable request of Direct each shall do all further acts and things
and execute and deliver or cause to be executed and delivered such
further instruments, documents, matters, papers and assurances as are
reasonably necessary or desirable to effect the transactions
contemplated herein.
6. SUCCESSORS - This Agreement shall enure to the benefit and be binding
upon the parties hereto and their respective heirs, executors,
-2-
<PAGE> 3
administrators, successors and assigns.
7. COUNTERPARTS - This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
8. AMENDMENT AND WAIVERS - This Agreement may not be amended or modified
in any respect, except by written instrument executed by the parties
hereto. No waiver by any party of any condition, in whole or in part,
shall operate as a waiver of any other condition. All waivers must be
in writing.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement on the day, month and year first written above.
1176749 ONTARIO INC.
Per: /s/ Mara Dunlap
-------------------------------------
Mara Dunlap
/s/ Mara Dunlap
-----------------------------------------
MARA DUNLAP
DIRECT STEEL INC.
Per: /s/ John Butcher
-----------------------------------------
John Butcher
-3-
