<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
For the transition period from ___________________to____________________
Commission file number 1-12870
COLD METAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of 16-1144965
incorporation or organization) (I.R.S. Employer Identification
No.)
8526 SOUTH AVENUE, YOUNGSTOWN, OHIO 44514
(Address of principal executive offices) (Zip Code)
(330) 758-1194
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]
Number of shares of Common Stock outstanding as of October 31, 1996: 7,162,250
1
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COLD METAL PRODUCTS, INC.
SEC FORM 10-Q
Quarter Ended September 30, 1996
Index
<TABLE>
Page No.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Statements of Operations ................................................................................3
Consolidated Balance Sheets...........................................................................................4
Consolidated Statements of Cash Flows.................................................................................5
Notes to Consolidated Financial Statements............................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................8
PART II. - OTHER INFORMATION
Item 1 Legal Proceedings ............................................................................................11
Item 2 Changes in Securities.........................................................................................11
Item 3 Defaults Upon Senior Securities...............................................................................11
Item 4 Submission of Matters to a Vote of Securities Holders.........................................................11
Item 5 Other Information.............................................................................................11
Item 6 Exhibits and Reports on Form 8-K..............................................................................11
Signatures ........................................................................................................12
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
September 30, September 30,
------------- -------------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 71,646 $ 55,039 $ 134,051 $ 116,288
Cost of sales 65,338 50,641 121,305 105,765
----------- ----------- ----------- -----------
Gross profit 6,308 4,398 12,746 10,523
Selling, general, and administrative expenses 4,078 3,125 7,889 6,479
Income (loss) from equity investment - (34) 28 (25)
Interest expense 650 884 1,155 1,710
----------- ----------- ----------- -----------
Income before income taxes 1,580 355 3,730 2,309
Income taxes 569 144 1,314 831
----------- ----------- ----------- -----------
Net income $ 1,011 $ 211 $ 2,416 $ 1,478
=========== =========== =========== ===========
Per common share data:
Net income $ 0.14 $ 0.03 $ 0.34 $ 0.21
=========== =========== =========== ===========
Weighted average common shares outstanding 7,162,250 7,175,511 7,162,250 7,178,862
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
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COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
------------- --------
1996 1996
---- ----
<S> <C> <C>
ASSETS:
Cash $ 4,128 $ 2,318
Receivables 39,769 37,301
Inventories 48,697 48,320
Prepaid and other current assets 1,507 1,469
--------- ---------
Total current assets 94,101 89,408
Property, plant and equipment - at cost 68,626 56,148
Less accumulated depreciation (28,106) (26,811)
--------- ---------
Property, plant and equipment - net 40,520 29,337
Other assets 9,043 7,945
--------- ---------
Total assets $ 143,664 $ 126,690
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving line of credit-current portion $ 17,446 $ 499
Accounts payable 26,540 29,835
Other current liabilities 8,718 7,624
--------- ---------
Total current liabilities 52,704 37,958
Long-term debt 39,000 39,000
Postretirement benefits 17,113 17,364
Shareholders' equity:
Common stock, $.01 par value; 15,000,000 shares
authorized, 7,532,250 shares issued 75 75
Additional paid-in capital 25,330 25,300
Retained earnings 14,963 12,547
Cumulative translation adjustment (2,047) (2,080)
Less treasury stock, 370,000 shares, at cost (3,474) (3,474)
--------- ---------
Total shareholders' equity 34,847 32,368
--------- ---------
Total liabilities and shareholders' equity $ 143,664 $ 126,690
========= =========
</TABLE>
See notes to consolidated financial statements
4
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COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended September 30,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,416 $ 1,478
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Equity investment (28) 25
Depreciation and amortization 1,437 1,284
Deferred income taxes -- (103)
Deferred directors' fees 30 20
Changes in operating assets and liabilities:
Accounts receivable 602 3,356
Inventory 6,824 242
Accounts payable (6,103) (13,409)
Accrued expense and other 456 (6,004)
--------- ---------
Net cash provided by (used in) operating activities 5,634 (13,111)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (9,887) (4,687)
Acquisition (2,609)
--------- ---------
Net cash used in investing activities (12,496) (4,687)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit 104,915 104,670
Payments of revolving line of credit (96,220) (82,569)
Defeasance of industrial revenue bond -- (4,250)
Treasury stock acquisition -- (61)
--------- ---------
Net cash provided by financing activities 8,695 17,790
Net increase (decrease) in cash 1,833 (8)
Effect of translation adjustment (23) 110
--------- ---------
Cash at beginning of period 2,318 2,946
Cash at end of period $ 4,128 $ 3,048
========= =========
</TABLE>
See notes to consolidated financial statements.
5
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COLD METAL PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. OPINION OF MANAGEMENT
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position of Cold Metal Products, Inc.
and subsidiary (the Company) as of September 30, 1996 and March 31, 1996, the
results of operations for the three month and six month periods ended September
30, 1996 and 1995, and changes in cash flows for the six months ended September
30, 1996 and 1995. The results of operations for the periods ended September 30,
1996 and 1995 are not necessarily indicative of the results to be expected for
the full year.
The condensed consolidated financial statements do not include footnotes and
certain financial information normally presented annually under generally
accepted accounting principles and, therefore, should be read in conjunction
with the audited consolidated financial statements contained in the Company's
annual report on Form 10-K for the year ended March 31, 1996.
NOTE 2. RESULTS OF FOREIGN OPERATIONS
Net sales, pretax income, and net income, respectively, of the Company's
Canadian subsidiary were $40.2 million, $1.2 million, and $736,000 for the
quarter ended September 30, 1996, and $24.1 million, $333,000, and $197,000 for
the quarter ended September 30, 1995. Comparable net sales, pretax income, and
net income, respectively, for the six months ended September 30, 1996 were $69.3
million, $2.3 million, and $1.4 million and for the six months ended September
30, 1995, $50.2 million, $625,000, and $385,000.
NOTE 3. PER SHARE CALCULATIONS
Primary earnings per common share have been computed based upon the average
weighted outstanding shares of 7,162,250 for the three month and six month
periods ended September 30, 1996. Primary earnings per common share have been
computed based upon the average weighted outstanding shares of 7,175,511 for the
three months ended September 30,1995 and 7,178,862 for the six months ended
September 30, 1995.
NOTE 4. INVENTORIES
Inventories are classified as follows:
<TABLE>
<CAPTION>
September 30, March 31,
------------ --------
1996 1996
---- ----
(In thousands)
<S> <C> <C>
Raw Materials $ 26,663 $ 24,576
Work-in-process 14,338 14,784
Finished goods 7,696 8,960
------ --------
Total inventories $ 48,697 $ 48,320
======== ========
</TABLE>
6
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NOTE 5. ACQUISITIONS:
Effective June 18, 1996, the Company acquired the remaining outstanding shares
of its 50% equity affiliate, Direct Steel, Inc., ("Direct Steel"), for
approximately $2.6 million. Direct Steel operates a steel service center located
in Concord, Ontario, Canada. The acquisition has been accounted for as a
purchase and, accordingly, assets and liabilities are reflected at estimated
fair values. The preliminary allocation of purchase price resulted in goodwill
of approximately $1.9 million, which is being amortized over 40 years.
The following unaudited pro forma information has been derived from the
Company's income statement for the three month and six month periods ended
September 30, 1996 and adjusts such information to give effect to the
acquisition of the remaining outstanding shares of Direct Steel as if the
acquisition had occurred on April 1, 1995. The pro forma information 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
acquisition had been consummated on April 1, 1995, or which may result from
future operations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30, September 30, September 30,
----------- ------------- ------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $71,646 $65,776 $ 146,122 $ 137,990
Net income 1,011 172 2,430 1,419
Earnings per share 0.14 0.02 0.34 0.20
</TABLE>
On November 1, 1996, the Company acquired certain assets of a Hamilton, Ontario
flat rolled steel processing center from Russel Metals, Inc. for approximately
$5.8 million. The purchase was completed utilizing the Company's existing
banking facilities and short-term seller financing. The transaction will be
accounted for as a purchase.
NOTE 6. SHORT-TERM AND LONG-TERM DEBT
As of September 30, 1996, short term revolving line of credit included $10.1
million of borrowings under a line of credit agreement between Direct Steel and
its major lender. The line of credit is collateralized by accounts receivable
and inventory of Direct Steel under a general security agreement which contains
customary restrictions concerning various ratios. At period end, Direct was in
default with respect to covenants regarding the minimum gross margins, debt to
tangible net worth and current ratio. Accordingly, the lender has the right to
demand payment of the amount due. The lender has, in writing, waived its rights
in respect to the breach as of September 30, 1996.
Additionally, the prohibition in another lending facility against the incurrence
of fiscal year capital expenditures in excess of $5,000,000 is waived for the
six month period ending December 30, 1996.
NOTE 7. DIRECTORS' INCENTIVE PLAN
In accordance with the Non-Employee Directors' Incentive Plan, three directors
have elected to receive shares of stock on a deferred basis in lieu of cash
payments of their fiscal 1997 annual retainer fee. As of September 30, 1996, a
total of 8,364 shares of the 60,000 shares reserved under the Plan for such
deferral elections, was committed to be issued at the end of the deferment
period, which is a specified period after the Director's resignation or certain
other events, such as a sale or merger of the Company.
7
<PAGE> 8
ITEM 2.
COLD METAL PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of financial
condition and results of operations during the periods included in the
accompanying consolidated financial statements and should be read in conjunction
with the annual financial statements.
Results of Operations
- ---------------------
The following table presents the Company's results of operations as a
percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 91.2 92.0 90.5 91.0
----- ----- ----- -----
Gross profit 8.8 8.0 9.5 9.0
Selling, general, and administrative
expenses 5.7 5.7 5.9 5.6
Income (loss) from equity investment 0.0 (0.1) 0.0 0.0
Interest expense 0.9 1.6 0.8 1.4
----- ----- ----- -----
Income before income taxes 2.2 0.6 2.8 2.0
Income taxes 0.8 0.2 1.0 0.7
----- ----- ----- -----
Net income 1.4% 0.4% 1.8% 1.3%
===== ===== ===== =====
</TABLE>
Net sales for the three months ended September 30, 1996 were $71.6
million, representing a $16.6 million or 30.2% increase from the three months
ended September 30, 1995. The increase in sales reported is attributable mainly
to the addition to the Company's consolidated financial statements of sales of
$13.4 million at Direct Steel, Inc., which became a wholly owned subsidiary of
the Company in June 1996. The second quarter of fiscal 1997 was the first full
quarter to include the consolidation of Direct Steel's results. Excluding Direct
Steel, Cold Metal's sales increased 5.8% or $3.2 million. Volume of tons shipped
was up 14.0%, accounting for a $7.2 million sales increase, offset by an
aggregate decrease in sales dollars per ton of $4.0 million due to a decline in
average selling price, resulting from both a mix shift and lower market prices.
Lower market selling prices were generally matched by reduced raw material costs
on the procurement side.
For the six months ended September 30, 1996, net sales at $134.1
million were up $17.8 million from the $116.3 million of the prior year period
on a 37.5% increase in tonnage shipped. Excluding Direct Steel, sales were up
2.3%, or $2.7 million on a 9.6% increase in volume, also offset by lower average
selling prices resulting from both a mix shift and lower market prices.
Gross profit for the three months ended September 30, 1996 was $6.3
million or 8.8% of net sales, which was an increase of $1.9 million, or 43.4%,
over the same period of the prior year. Gross
8
<PAGE> 9
profit for the three months ended September 30, 1995 was $4.4 million, or 8.0%
of net sales. The increase in gross margin as a percentage of sales is the
result of prior year sales of higher cost inventory in a softening price market,
which caused a deterioration in margins in the fiscal 1996 period. This
improvement was somewhat offset by the effect of lower margins on the
incremental Direct Steel service center business.
Gross profit for the six months ended September 30, 1996 was $12.7
million or 9.5% of net sales compared to $10.5 million or 9.0% of net sales for
the six months ended September 30, 1995, reflecting the effects described above.
Selling and administrative costs of $4.1 million in the second quarter
of fiscal year 1997 represented 5.7% of sales; selling and administrative costs
in the second quarter of fiscal year 1996 were $3.1 million, also 5.7% of net
sales. The $953,000 increase in selling and administrative costs during the
second quarter of fiscal 1997 reflected the consolidation of Direct Steel
activity and higher personnel and professional fees associated with the
Company's growth plan. For the six month period ended September 30, 1996,
selling and administrative costs were $7.9 million, or 5.9% of net sales,
compared to $6.5 million, or 5.6% of net sales for the six months ended
September 30, 1995, again reflecting the consolidation of Direct Steel as of
June 1996 and higher expenses associated with the Company's growth plan.
Income from equity investment at Direct Steel was a loss of $25,000 for
the three month period ended September 30, 1995. Subsequent to June 18, 1996,
the operations were consolidated with the Company's and no longer reported as
income from equity investment.
Interest expense was $650,000 or .9% of net sales for the three months
ended September 30, 1996 as compared to $884,000 or 1.6% of net sales for the
three months ended September 30, 1995. For the six months ended September 30,
1996, interest expense was $1.2 million, or .8% of net sales, compared to $1.7
million, or 1.4% of net sales for the six month period ended September 30, 1995.
The current year quarter and year to date figures reflect lower borrowing levels
associated with decreased inventory resulting from improved inventory management
and slightly lower interest rates. Interest cost associated with the Ottawa
expansion project have been capitalized.
Income before taxes was $1.6 million, or 2.2% of net sales for the
three months ended September 30, 1996. For the three months ended September 30,
1995, income before taxes was $355,000 or .6% of net sales. For the six months
ended September 30, 1996, income before taxes was $3.7 million, or 2.8% of net
sales, compared with $2.3 million, or 2.0% of net sales for the six months ended
September 30, 1995.
Income taxes for the three months ended September 30, 1996 were
$569,000, or .8% of net sales compared to $144,000, or .2% of net sales for the
same period ended September 30, 1995. Taxes for the six months ended September
30, 1996 were $1.3 million, or 1.0% of net sales, compared to $831,000, or .7%
of net sales for the six months ended September 30, 1995. The current year
reflects higher income levels as effective tax rates remained relatively
unchanged.
Net income for the three months ended September 30, 1996 was $1.0
million, or $.14 per share based on 7,162,250 shares as compared to a net income
of $211,000, or $.03 per share based on 7,175,511 shares for the three months
ended September 30, 1995. Net income for the six months ended September 30, 1996
was $2.4 million or $.34 per share based on 7,162,250 shares compared to net
income of $1.5 million or $.21 per share based on 7,178,862 shares for the six
months ended September 30, 1995.
9
<PAGE> 10
Liquidity and Capital Resources
- --------------------------------
During the six months ended September 30, 1996, operating activities
provided $5.6 million in cash, compared to cash consumed of $13.1 million for
the six months ended September 30, 1995. Contributing to cash inflows in the
current year were net income, non-cash depreciation, and a reduction in
inventories. A decrease in accounts payable somewhat offset the effect of lower
inventories which resulted from improved inventory management.
Cash used in investing activities was $12.5 million for the six months
ended September 30, 1996. Approximately $2.6 million was expended to acquire the
remaining outstanding shares of Direct Steel not previously owned by the
Company. Capital expenditures were $9.9 million, the majority of which, $9.0
million, reflected spending for the Company's Ottawa expansion project. Current
projections are that the Company will spend approximately $17 million in total
for fiscal 1997 in connection with this expansion project and other planned
capital projects. The Company believes that funds supplied through its current
financing agreement, by operations, and through additional financing in
connection with the completion of the Ottawa expansion project will provide
sufficient funds to satisfy fiscal year projections for cash needs.
Cash flows from financing activities provided $8.7 million for the six
months ended September 30, 1996. The Company's revolving credit facilities
provided a maximum availability of $84 million of which $56.4 was outstanding at
September 30, 1996. Direct Steel was in violation of certain covenants relating
to its maintenance of certain ratios in loan agreements to which Direct Steel is
a party. The balance of the Company' indebtedness through the other credit
facility is not affected. The lender has waived its rights with respect to
Direct Steel's breach as of September 30, 1996. The Company is currently
negotiating a restructure of Direct Steel's financing agreement with the lender.
On November 1, 1996, the Company acquired certain assets of a Hamilton,
Ontario flat rolled steel processing center from Russel Metals, Inc. for
approximately $5.8 million. The purchase was completed utilizing the Company's
existing banking facilities and short-term seller financing.
The Company believes that cash generated from operations, borrowings
under the revolving credit facilities, and project financing associated with the
Ottawa expansion project will provide adequate cash for the Company's currently
anticipated requirements over the next twelve months. As the Company pursues its
growth strategy of expanding through core business acquisitions, capital
requirements may change and the Company may from time to time seek additional
financing.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings to be reported. For certain proceedings
previously reported, see Form 10K for the fiscal year ended March 31, 1996.
ITEM 2. CHANGE IN SECURITIES
There have been no changes in securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no defaults upon senior securities (see Liquidity and
Capital Resources above in Management's Discussion and Analysis of Operations
with respect to technical defaults relating to Direct Steel, Inc.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Company's Annual Meeting of Shareholders for 1995 was held on
July 20, 1996.
(b) See Item (c) below
(c) At the Annual Meeting of Shareholders the following matters were
voted:
1. Nine directors were elected to serve for a term of one year by
the following vote:
<TABLE>
<CAPTION>
Share Voted Shares Voted
----------- ------------
"For" "Withheld"
----- ----------
<S> <C> <C>
R. Quintus Anderson 6,798,495 7,050
Wilbur J. Berner 6,798,495 7,050
Edwin H. Gott, Jr. 6,797,995 7,550
James R. Harpster 6,798,495 7,050
Claude F. Kronk 6,798,495 7,050
Heidi A. Nauleau 6,795,695 9,850
Robert D. Neary 6,797,695 7,850
Peter B. Sullivan 6,797,995 7,550
Gordon A. Wilber 6,798,195 7,350
</TABLE>
2. The selection of Deloitte & Touche LLP as independent auditors
for the Company was confirmed, ratified, and approved by a vote of
6,800,795 shares for, 3,100 shares against, and 1,650 shares
abstaining.
ITEM 5. OTHER INFORMATION
There is no other information to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Number and Description
(10)(p) Russel Metal, Inc. and Cold Metal Products
Company, Ltd Asset Purchase Agreement dated
10/21/96 (exhibit is filed without schedules
and exhibits which will be furnished
supplementally to the Commission upon
request)
(27) Financial Data Schedule
11
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(b) Reports on Form 8-K
The Company filed a Current Report of Form 8-K on July 3, 1996, and
Form 8K-A amendment 1 dated August 27, 1996, and amendment 2 dated September 27,
1996 to report its purchase of the remaining outstanding shares of stock of
Direct Steel, Inc.
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 thereunto duly authorized.
Cold Metal Products, Inc.
(Registrant)
/s/ James R. Harpster
-----------------------------------------------
James R. Harpster
President, Chief Executive Officer
/s/ John E. Sloe
-----------------------------------------------
John E. Sloe
Vice-President, Chief Financial Officer
(Principal Financial and Accounting Officer)
November 11, 1996
12
<PAGE> 1
EXHIBIT 10(P)
RUSSEL METALS INC.
- AND -
COLD METAL PRODUCTS COMPANY, LTD.
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
DATED OCTOBER 21, 1996
<PAGE> 2
TABLE OF CONTENTS
-----------------
ARTICLE 1
INTERPRETATION
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 Definitions............................................................ 1
1.2 Headings and Table of Contents......................................... 9
1.3 Number and Gender...................................................... 9
1.4 Business Days.......................................................... 9
1.5 Currency and Payment Obligations....................................... 9
1.6 Calculation of Interest................................................ 10
1.7 Statute References..................................................... 10
1.8 Section and Schedule References........................................ 10
ARTICLE 2
PURCHASE OF ASSETS
2.1 Agreement to Purchase and Sell......................................... 12
2.2 Amount of Purchase Price............................................... 12
2.3 Payment of Purchase Price.............................................. 12
2.4 Allocation of Purchase Price........................................... 12
2.5 GST Election........................................................... 12
2.6 Waiver of Bulk Sales Act............................................... 13
ARTICLE 3
CLOSING ARRANGEMENTS
3.1 Closing................................................................ 14
3.2 Vendor's Closing Deliveries............................................ 14
3.3 Purchaser's Closing Deliveries......................................... 15
3.4 Possession............................................................. 16
3.5 Notices................................................................ 16
3.6 Non-Transferable and Non-Assignable Assets............................. 16
3.7 Planning Act........................................................... 17
ARTICLE 4
CONDITIONS OF CLOSING
4.1 Purchaser's Conditions................................................. 18
4.2 Condition not Fulfilled................................................ 19
4.3 Vendor's Conditions.................................................... 20
4.4 Condition not Fulfilled................................................ 20
</TABLE>
<PAGE> 3
-ii-
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
<TABLE>
<CAPTION>
<S> <C> <C>
5.1 Representations and Warranties of the Vendor.......................... 21
5.2 Representations and Warranties of the Purchaser....................... 32
5.3 Survival of Representations and Warranties............................ 33
ARTICLE 6
INDEMNIFICATION
6.1 Indemnity by the Vendor............................................... 34
6.2 Indemnity by the Purchaser............................................ 35
6.3 Limitations........................................................... 35
6.4 Notice of Claim....................................................... 35
6.5 Direct Claims......................................................... 36
6.6 Third Party Claims.................................................... 36
6.7 Settlement of Third Party Claims...................................... 37
6.8 GST Gross-up.......................................................... 37
6.9 Arbitration........................................................... 37
ARTICLE 7
INTERIM PERIOD
7.1 Investigation......................................................... 38
7.2 Authorizations........................................................ 38
7.3 Confidentiality....................................................... 38
7.4 Risk of Loss.......................................................... 40
7.5 Action During Interim Period.......................................... 40
7.6 Exclusive Dealings.................................................... 41
7.7 Consents and Approvals................................................ 41
7.8 Updates to Information................................................ 41
7.9 Phase II Environmental Report......................................... 41
ARTICLE 8
EMPLOYEES
8.1 Offer of Employment................................................... 43
8.2 Accrual by Vendor; Purchase Price Adjustment.......................... 43
8.3 Notice of Change of Employment........................................ 44
8.4 Closing Statement..................................................... 44
8.5 Pension Benefits...................................................... 44
8.6 Employee Benefits..................................................... 46
</TABLE>
<PAGE> 4
- iii -
<TABLE>
<CAPTION>
<S> <C> <C>
8.7 Disabled Employees....................................................... 47
8.8 Computer Purchase Plan................................................... 47
ARTICLE 9
POST-CLOSING MATTERS
9.1 Excluded Assets.......................................................... 48
9.2 Completion of Existing Orders............................................ 48
9.3 Co-operation in Filing of Returns........................................ 48
9.4 Non-Merger............................................................... 48
9.5 Further Assurances....................................................... 48
9.6 Accounts Payable List.................................................... 49
9.7 Inventory Count.......................................................... 49
9.8 Severance Application.................................................... 49
9.9 Temporary Easements...................................................... 50
ARTICLE 10
GENERAL
10.1 Expenses................................................................. 51
10.2 Payment of Taxes......................................................... 51
10.3 Public Announcements..................................................... 51
10.4 Notices.................................................................. 51
10.5 Time of Essence.......................................................... 53
10.6 Entire Agreement......................................................... 53
10.7 Waiver................................................................... 53
10.8 Severability............................................................. 53
10.9 Governing Law............................................................ 53
10.10 Successors and Assigns; No Third Party Beneficiaries..................... 53
10.11 Counterparts............................................................. 55
</TABLE>
<PAGE> 5
ASSET PURCHASE AGREEMENT
------------------------
This Agreement dated as of October 21, 1996 is made
B E T W E E N
RUSSEL METALS INC. (the "VENDOR")
------------------
- and -
COLD METAL PRODUCTS COMPANY, LTD. (the "PURCHASER")
---------------------------------
RECITALS
A. The Vendor carries on the Business and is willing to sell the Assets to
the Purchaser; and
B. The Purchaser is willing to purchase the Assets and to assume certain
specified liabilities of the Business;
For good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the
meanings set out below unless the context requires otherwise:
(1) "AGREEMENT" means this Agreement, including the Exhibits and the Schedules
to this Agreement, as it or they may be amended or supplemented from time
to time, and the expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER",
"HEREBY" and similar expressions refer to this Agreement and not to any
particular Section or other portion of this Agreement.
(2) "APPLICABLE EMPLOYEE BENEFIT LAWS" has the meaning given in Section
5.1(23).
<PAGE> 6
2
(3) "APPLICABLE LAW" means, with respect to any Person, property, transaction,
event or other matter, any Law relating or applicable to such Person,
property, transaction, event or other matter as at the date hereof.
Applicable Law also includes, where appropriate, any interpretation of the
Law (or any part) as it exists as at the date hereof by any Person having
jurisdiction over it, or charged with its administration or
interpretation.
(4) "ASSETS" means all the properties, assets, interests and rights of the
Vendor which are Related to the Business (other than the Excluded Assets)
including the following:
(a) the Real Property;
(b) the Personal Property;
(c) all rights and interests under or pursuant to all warranties,
representations and guarantees, express, implied or otherwise, of or
made by suppliers or others in connection with the Assets or the
Assumed Liabilities or otherwise Related to the Business;
(d) the Contracts;
(e) the Licences and Permits;
(f) the Prepaid Amounts;
(g) the Books and Records;
(h) all goodwill Related to the Business including the present telephone
numbers and other communications numbers and addresses of the
Business; and
(i) all proceeds of any or all of the foregoing received or receivable
after the Closing Date.
(5) "ASSUMED LIABILITIES" means only the following Liabilities of the Vendor
that are Related to the Business:
(a) Liabilities incurred under (i) the Permitted Liens; (ii) the Personal
Property Leases; (iii) the Contracts; (iv) the Licences and Permits;
and (v) the Environmental Permits, in each case solely in respect of
the period commencing on the Closing Date; and
(b) Liabilities incurred in the ordinary course of business solely in
respect of the period commencing on the Closing Date in respect of
Employees' expenses,
<PAGE> 7
3
commissions, wages and salaries and vacation pay,
worker's compensation levies, Canada Pension Plan
contributions and unemployment insurance premiums in
respect of such amounts.
(6) "BOOKS AND RECORDS" means all books, records, files and papers
Related to the Business or the Assets including drawings,
engineering information, computer programs (including source
code) with respect to that portion of the data processing
system for the Business which forms part of the Assets,
software programs, manuals and data, sales and advertising
materials, sales and purchases correspondence, trade
association files, research and development records, lists of
present and former customers and suppliers, personnel,
employment and other records, and all copies and recordings of
the foregoing.
(7) "BUSINESS" means the ownership and operation of a flat rolled
steel operation located at 475 Kenora Avenue, Hamilton,
Ontario, but not including the operations of the Kombi Line.
(8) "BUSINESS DAY" means any day except Saturday, Sunday or any
day on which banks are generally not open for business in the
City of Hamilton, Ontario.
(9) "CANADIAN DOLLARS" means the lawful currency of Canada.
(10) "CLAIM" has the meaning given in Section 6.1.
(11) "CLOSING DATE" means November 1, 1996 or such earlier or later
date as may be agreed upon in writing by the Parties; provided
that the Purchaser shall have the right to extend the Closing
Date to a Business Day not later than November 15, 1996 upon
two Business Days' written notice to the Vendor.
(12) "COLLECTIVE AGREEMENT" means the collective agreement
commencing July 18, 1994 and expiring July 17, 1996, as
amended by the Memorandum of Agreement dated July 15, 1996,
between the Vendor and the United Steelworkers of America,
Local 5958.
(13) "CONSENTS AND APPROVALS" means all consents and approvals
required to be obtained in connection with the execution and
delivery of this Agreement and the completion of the
transactions contemplated by this Agreement.
(14) "CONTRACTS" means the contracts, agreements, leases and
arrangements Related to the Business, but specifically
excluding the Excluded Contracts.
<PAGE> 8
4
(15) "DATA PROCESSING SYSTEM" means the computer equipment and
associated peripheral devices and the related operating and
application systems and other software owned, leased or
licensed by the Vendor and used by it in connection with the
Business.
(16) "DIRECT CLAIM" has the meaning given in Section 6.4.
(17) "DISABLED EMPLOYEE" means an Employee who was not available
for work at the Business on the Closing Date due to illness,
injury, accident or any other disabling condition.
(18) "EMPLOYEE" means an individual who is employed by the Vendor
in the operation of a flat rolled steel operation located at
475 Kenora Avenue, Hamilton, Ontario, and "EMPLOYEES" means
every Employee; "Employee" also includes Mr. Ed Christie, who
is not employed by the Vendor in the Business, but will be a
Transferred Employee.
(19) "EMPLOYEE PLANS" has the meaning given in Section 5.1(23).
(20) "ENVIRONMENTAL LAWS" means Applicable Law in respect of the
natural environment, and in respect of the manufacture,
importation, handling, transportation, storage, disposal and
treatment of Hazardous Substances.
(21) "ENVIRONMENTAL PERMITS" means all permits, certificates,
approvals, consents, registrations and licences issued or
required by any Environmental Laws or any court or
governmental authority and relating to or required for the
ownership and/or operation of the Business and/or the Assets.
(22) "EXCLUDED ASSETS" means the following property and assets of
the Vendor:
(a) all assets, properties, interests and rights not
Related to the Business;
(b) subject to the transfers of assets contemplated by
Section 8.5, all rights and interests in and to all
Employee Plans of the Vendor and any related assets
or insurance policies;
(c) the rights of the Vendor relating to this Agreement
or any agreements or documents made pursuant to this
Agreement;
(d) all Excluded Contracts;
(e) all inventories and accounts receivable Related to
the Business, other than any inventories maintained
by the wood shop forming part of the Business;
(f) all cash on hand or in banks or other depositories;
<PAGE> 9
5
(g) the Kombi Line; and
(h) that portion of the Data Processing System which is
not located at 475 Kenora Avenue, Hamilton, Ontario.
(23) "EXCLUDED CONTRACTS" means the contracts and agreements listed
in Schedule 5.1(9) under the heading "Excluded Contracts".
(24) "EXCLUDED LIABILITIES" means all Liabilities of the Vendor
other than the Assumed Liabilities.
(25) "FINANCIAL STATEMENTS" has the meaning given in Section
5.1(29).
(26) "GST" means goods and services tax imposed under Part IV of
the Excise Tax Act (Canada).
(27) "HAZARDOUS SUBSTANCE" means any solid, liquid, gas, odour,
heat, sound, vibration, radiation or combination of them that
may impair the natural environment, injure or damage property
or plant or animal life or harm or impair the health of any
individual.
(28) "IMPROVEMENTS" means all buildings, fixtures, parking lots,
roadways, structures, erections, fixed machinery, fixed
equipment and appurtenances situate on, in, under, over or
forming part of the Real Property.
(29) "INCLUDING" means "including without limitation", and
"INCLUDES" means "includes without limitation".
(30) "INDEMNIFIED PARTY" means a Person whom the Vendor or the
Purchaser, as the case may be, has agreed to indemnify under
Article 6.
(31) "INDEMNIFYING PARTY" means, in relation to an Indemnified
Party, the Party to this Agreement that has agreed to
indemnify that Indemnified Party under Article 6.
(32) "KIM-TAM" means Kim-Tam Truck Leasing Limited, an affiliate of
Samuel, Son & Co., Limited.
(33) "KIM-TAM AGREEMENT" means the agreement of purchase and sale
dated as of August 30, 1996 made between Kim-Tam and the
Vendor with respect to the sale of the property municipally
known as 410 Nash Road, Hamilton, Ontario, a copy of which has
been delivered to the Purchaser, together with any amendment
thereto which has been approved in writing by the Purchaser.
(34) "KOMBI LINE" means the Kombi "cut to length" line located at
the Real Property.
<PAGE> 10
6
(35) "LAW" means any law, rule, statute, regulation, order,
judgment, decree, treaty or other requirement having the force
of law.
(36) "LIABILITIES" means all costs, expenses, charges, debts,
liabilities, claims, demands and obligations, whether primary
or secondary, direct or indirect, fixed, contingent, absolute
or otherwise, under or in respect of any contract, agreement,
arrangement, lease, commitment or undertaking, Applicable Law
and Taxes.
(37) "LICENCES AND PERMITS" means all licences, permits, filings,
authorizations, approvals or indicia of authority Related to
the Business or necessary for the conduct of the Business and
includes the Environmental Permits.
(38) "LIEN" means any lien, mortgage, charge, hypothec, pledge,
security interest, prior assignment, option, lease, sublease,
right to possession, encumbrance, claim, right or restriction
which affects, by way of a conflicting ownership interest or
otherwise, the right, title or interest in or to any
particular property.
(39) "MATERIAL ADVERSE CHANGE" means a change in the condition of
the Business which has had or could reasonably be expected to
have a significant adverse effect on the value of the Business
or the Assets.
(40) "NOTICES" means the notices required to be given to any Person
under Applicable Law or pursuant to any contract or other
obligation to which the Vendor is a party or by which the
Vendor is bound or which is applicable to any of the Assets,
in connection with the execution and delivery of this
Agreement or the completion of the transactions contemplated
by this Agreement.
(41) "PARTY" means a party to this Agreement and any reference to a
Party includes its successors and permitted assigns; and
"PARTIES" means every Party.
(42) "PERMITTED LIENS" means:
(a) Liens for Taxes and Realty Taxes if same are not due
and payable;
(b) mechanics', construction, carriers', workers',
repairers', storers' or other similar liens (inchoate
or otherwise) which individually or in the aggregate
are not material, arising or incurred in the ordinary
course of business which have not been filed,
recorded or registered in accordance with Applicable
Law or of which notice has not been given to the
Vendor;
(c) minor title defects or irregularities consisting of
minor survey exceptions, minor unregistered easements
or rights of way, restrictions in the original grant
from the Crown, restrictions implied by Applicable
Law and other minor
<PAGE> 11
7
unregistered restrictions as to the use of Real
Property which title defects, irregularities or
restrictions do not, in the aggregate, materially
impair the marketability of the Real Property or the
operation of the Business or the continued use of the
Real Property to which they relate after the Closing
Date on substantially the same basis as such Real
Property is currently being used and the Business is
currently being operated and which have, in each
instance, been complied with in all material
respects;
(d) easements, covenants, rights of way and other
restrictions which are registered against title to
the Real Property as at October 1, 1996 and which
have, in each instance, been complied with;
(e) agreements with municipalities which are registered
against title to the Real Property as at October 1,
1996 provided that they have been complied with or
adequate security has been furnished to secure
compliance;
(f) the obligations of the Vendor pursuant to Section 19
of the Kim-Tam Agreement; and
(g) the Personal Property Leases listed on Schedule
5.1(8).
(43) "PERSON" is to be broadly interpreted and includes an
individual, a corporation, a partnership, a trust, an
unincorporated organization, the government of a country or
any political subdivision thereof, or any agency or department
of any such government, and the executors, administrators or
other legal representatives of an individual in such capacity.
(44) "PERSONAL PROPERTY" means all machinery, equipment, furniture,
motor vehicles and other chattels Related to the Business
(including those in possession of third parties), including
the personal property listed in Schedule 5.1(6).
(45) "PERSONAL PROPERTY LEASES" means all chattel leases, equipment
leases, rental agreements, conditional sales contracts and
other similar agreements Related to the Business.
(46) "PREPAID AMOUNTS" means all prepayments, prepaid charges,
deposits, sums and fees Related to the Business or in respect
of the Assets.
(47) "PRIME RATE" means the prime rate of interest per annum quoted
by Royal Bank of Canada from time to time as its reference
rate of interest for Canadian dollar loans made to its
commercial customers in Canada and which Royal Bank of Canada
refers to as its "prime rate", as such rate may be changed
from time to time; the Prime Rate
<PAGE> 12
8
is not necessarily the lowest rate of interest charged by
Royal Bank of Canada to its customers.
(48) "PURCHASE PRICE" has the meaning given in Section 2.2.
(49) "PURCHASER'S BENEFIT PLANS" has the meaning given in Section
8.6.
(50) "PURCHASER'S UNION PENSION PLAN" has the meaning given in
Section 8.5(3).
(51) "PURCHASER'S SOLICITORS" means Blake, Cassels and Graydon of
Toronto, Ontario.
(52) "REAL PROPERTY" means the real property that is beneficially
owned by the Vendor and municipally described as 475 Kenora
Avenue, Hamilton, Ontario, which real property is more
particularly described in Schedule 5.1(5), including the
Improvements.
(53) "REALTY TAXES" means all provincial and municipal real
property taxes, fees, levies, imposts and other assessments.
(54) "RELATED TO THE BUSINESS" means, directly or indirectly, used
in, arising from, or relating in any manner to the Business.
(55) "RELEASE" means a discharge, deposit, spill, leak, pumping,
pouring, emission, emptying, injection, escape, leaching,
seepage or disposal of a Hazardous Substance which is in
breach of any Environmental Laws.
(56) "RIGHTS" has the meaning given in Section 3.6.
(57) "TAXES" means all taxes, charges, fees, levies, imposts and
other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, alternative,
net worth, transfer, profits, withholding, payroll, employer
health, excise, franchise and personal property taxes, and any
other taxes, customs duties, fees or assessments, together
with any instalments with respect thereto, and any interest,
fines and penalties, imposed by any governmental authority
(including federal, state, provincial, municipal and foreign
governmental authorities), and whether disputed or not.
(58) "THIRD PARTY" has the meaning given in Section 6.6.
(59) "THIRD PARTY CLAIM" has the meaning given in Section 6.4.
(60) "TRANSFER AMOUNT" has the meaning given in Section 8.5.
(61) "TRANSFER DATE" has the meaning given in Section 8.5.
<PAGE> 13
9
(62) "TRANSFERRED EMPLOYEES" means Employees who fall within the
bargaining unit described in the Collective Agreement and all
other Employees who have accepted an offer of employment from
the Purchaser as of the Closing Date, but not including any
non-unionized Disabled Employees until such non-unionized
Disabled Employee has accepted an offer of employment from the
Purchaser on the terms offered by the Purchaser on the first
Business Day following the Closing Date and has reported to
work.
(63) "VENDOR'S BENEFIT PLANS" has the meaning given in Section 8.6.
(64) "VENDOR'S NON-UNION PENSION PLANS" has the meaning given in
Section 8.5(1).
(65) "VENDOR'S UNION PENSION PLAN" has the meaning given in Section
8.5(2).
(66) "VENDOR'S SOLICITORS" means Fraser & Beatty of Toronto,
Ontario.
1.2 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into Articles
and Sections, the insertion of headings, and the provision of any table of
contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
1.4 BUSINESS DAYS. If any payment is required to be made or other action is
required to be taken pursuant to this Agreement on a day which is not a Business
Day, then such payment or action shall be made or taken on the next Business
Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. Except as otherwise expressly provided in
this Agreement:
(1) all dollar amounts referred to in this Agreement are stated in
Canadian Dollars;
(2) except for the payments contemplated by Section 2.3(2), any
payment contemplated by this Agreement shall be made by cash,
certified cheque or any other method that provides immediately
available funds; any payment contemplated by Section 2.3(2)
may be made by ordinary cheque; and
(3) except in the case of any payment due on the Closing Date, any
payment due on a particular day must be received and available
not later than 4:30 p.m. (Eastern
<PAGE> 14
10
Standard time) on the due date and any payment made after that
time shall be deemed to have been made and received on the
next Business Day.
1.6 CALCULATION OF INTEREST. In calculating interest payable under this
Agreement for any period of time, the first day of such period shall be included
and the last day of such period shall be excluded.
1.7 STATUTE REFERENCES. Any reference in this Agreement to any statute or any
section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.8 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections, Exhibits or Schedules are to Sections,
Exhibits or Schedules of this Agreement. The Exhibits and Schedules to this
Agreement are as follows:
EXHIBITS
- --------
A Promissory Note
B Allocation of Purchase Price
C General Conveyance
D Vendor's Bring-Down Certificate
E Vendor's Corporate Certificate
F Arbitration Rules
G Kombi Term Sheet
H Vendor's Solicitors' Opinion
I Data Processing Services Term Sheet
J Purchaser's Bring-Down Certificate
K Purchaser's Corporate Certificate
L Purchaser's Solicitors' Opinion
M Actuarial Assumptions
N Parent Guarantee
O Kim-Tam Agreement Assignment Agreement
SCHEDULES
- ---------
1.1(42) Permitted Liens
4.1(9) Draft Reference Plan
5.1(4) Assets
5.1(5) Real Property
<PAGE> 15
11
5.1(6) Personal Property
5.1(8) Personal Property Leases
5.1(11) Non-Compliance with Applicable Laws
5.1(13) Data Processing
5.1(14) Licences and Permits
5.1(15) Consents and Approvals
5.1(16) Notices
5.1(19) Insurance
5.1(20) Environmental Matters; Remediation Measures
5.1(21) Employees and Employment Contracts
5.1(22) Collective Agreements; Complaints; Grievances, etc.
5.1(23) Employee Plans
5.1(25) Customers and Suppliers
5.1(29) Financial Statements
----------
<PAGE> 16
12
ARTICLE 2
PURCHASE OF ASSETS
2.1 AGREEMENT TO PURCHASE AND SELL. On the Closing Date, subject to the terms
and conditions of this Agreement:
(1) the Vendor shall sell and the Purchaser shall purchase the
Assets as they exist at the Closing Date (including causing M.
Lewis Management Co. Ltd. to sell the Real Property to the
Purchaser on the Closing Date); and,
(2) the Purchaser shall assume the Assumed Liabilities.
2.2 AMOUNT OF PURCHASE PRICE. The purchase price payable by the Purchaser to the
Vendor for the Assets (the "PURCHASE PRICE") shall be the amount of $7,800,000:
2.3 PAYMENT OF PURCHASE PRICE. On the Closing Date, the Purchaser shall pay to
the Vendor an amount equal to $6,300,000, less the amount of any adjustment for
salaries, commissions, bonuses, Canada Pension plan premiums, Workers'
Compensation premiums, accumulated vacation pay credits as contemplated by
Section 8.2, Realty Taxes and plus or minus other adjustments which are
customary in connection with the purchase and sale of real property in Ontario.
The balance of the Purchase Price ($1,500,000) shall be evidenced by and payable
in accordance with a promissory note substantially in the form attached as
Exhibit "A". The Purchaser's obligations under such promissory note will be
supported by a guarantee of Cold Metal Products, Inc. substantially in the form
attached as Exhibit "N".
2.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among
the Assets in the manner specified in Exhibit B. The Purchaser and the Vendor
shall follow the allocations set out in Exhibit B in determining and reporting
their liabilities for any Taxes and, without limitation, shall file their
respective income tax returns prepared in accordance with such allocations.
2.5 GST ELECTION. On the Closing Date, the Vendor and the Purchaser shall
execute jointly an election under Section 167 of the Excise Tax Act (Canada),
following the prescribed form and including the prescribed information, to have
the sale of the Assets take place on a GST-free basis
<PAGE> 17
13
under Part IX of the Excise Tax Act (Canada) and the Purchaser shall file such
election with its GST return for the reporting period in which the sale of the
Assets takes place.
2.6 WAIVER OF BULK SALES ACT. On the Closing Date, subject to the
indemnification arrangements contemplated by Sections 6.1 and 6.3, the Purchaser
shall waive compliance with the Bulk Sales Act (Ontario) in connection with the
transactions contemplated by this Agreement.
----------
<PAGE> 18
14
ARTICLE 3
CLOSING ARRANGEMENTS
3.1 CLOSING. The closing of this transaction shall take place at 10:00 a.m. on
the Closing Date (with effect as of 11:00 p.m. on the Closing Date) at the
offices of the Purchaser's Solicitors, or at such other time or place as may be
agreed orally or in writing by the Vendor and the Purchaser.
3.2 VENDOR'S CLOSING DELIVERIES. On the Closing Date, the Vendor shall deliver
or cause to be delivered to the Purchaser the following documents:
(1) a general conveyance agreement substantially in the form of
Exhibit C duly executed by the Vendor, together with such
other bills of sale or instruments of conveyance, assignment
or transfer as may be reasonably required by the Purchaser;
(2) a registerable transfer by M. Lewis Management Company Ltd. to
the Purchaser of legal title to the Real Property, together
with an authorization and direction by the Vendor directing M.
Lewis Management Company Ltd. to transfer the Real Property to
the Purchaser and confirmation by the Vendor to the Purchaser
that beneficial title of the Real Property has been
transferred to the Purchaser;
(3) an agreement including the terms set forth in Exhibit G duly
executed by the Vendor setting forth the rights and
obligations of the Vendor and the Purchaser relating to the
operation and removal of the Kombi Line after the Closing
Date;
(4) a certificate of the President or other senior officer of the
Vendor dated as of the Closing Date in the form of Exhibit D;
(5) an agreement substantially in the form of Exhibit O assigning
the rights of the Vendor and M. Lewis Management Company Ltd.
under the Kim-Tam Agreement;
(6) a certificate of the Secretary or other officer of the Vendor
in the form of Exhibit E;
(7) any Consents and Approvals listed on Schedule 5.1(15) which
are designated as "Material Consents and Approvals" and any
Licenses and Permits listed on Schedule 5.1(14) which are
designated as "Material Consents and Approvals";
(8) certificates evidencing the payment of all taxes collectable
or payable by the Vendor in respect of the Business under
provincial retail sales tax legislation of Ontario or under
federal Goods and Services tax legislation;
<PAGE> 19
15
(9) the election referred to in Section 2.5;
(10) the closing statement in respect of Employees referred to in
Section 8.4;
(11) if available by the Closing Date, the easements and the lease
referred to in Section 9.9;
(12) an opinion of the Vendor's Solicitors addressed to the
Purchaser and the Purchaser's Solicitors substantially in the
form of Exhibit H;
(13) an agreement including the terms set forth in Exhibit I
relating to the provision by the Vendor to the Purchaser of
data processing services after the Closing Date;
(14) an "as built" survey with respect to the Real Property dated
not earlier than July 31, 1996; and
(15) all deeds of conveyance, bills of sale, assurances, transfers,
assignments, consents, and such other agreements, documents
and instruments as may be reasonably required by the Purchaser
to complete the transactions provided for in this Agreement.
3.3 PURCHASER'S CLOSING DELIVERIES. At the Closing Date, the Purchaser shall
deliver or cause to be delivered to the Vendor the following documents and
payments:
(1) an agreement including the terms set forth in Exhibit G duly
executed by the Purchaser setting forth the rights and
obligations of the Vendor and the Purchaser relating to the
operation and removal of the Kombi Line after the Closing
Date;
(2) a certificate of the President or other senior officer of the
Purchaser dated as of the Closing Date in the form of Exhibit
J;
(3) a certificate of the Secretary or other officer of the
Purchaser in the form of Exhibit K;
(4) an agreement substantially in the form of Exhibit O under
which the Purchaser assumes the obligations of the Vendor
under Section 19 of the Kim-Tam Agreement;
(5) the payment referred to in Section 2.3(1);
(6) the promissory note referred to in Section 2.3;
(7) the guarantee of Cold Metal Products, Inc. referred to in
Section 2.3;
(8) an opinion of the Purchaser's Solicitors to the usual matters
regarding the promissory note and the guarantee referred to
above, including the due authorization, execution,
<PAGE> 20
16
delivery and enforceability of such promissory note and
guarantee, subject to the usual assumptions and
qualifications, in a form satisfactory to the Vendor, acting
reasonably;
(9) an opinion of Purchaser's Solicitors addressed to the Vendor
and Vendor's Solicitors substantially in the form of Exhibit
L;
(10) the elections referred to in Section 2.5;
(11) an agreement including the terms of Exhibit I relating to the
provision by the Vendor to the Purchaser of data processing
services after the Closing Date; and
(12) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Vendor to
complete the transactions provided for in this Agreement.
3.4 POSSESSION. On the Closing Date, the Vendor shall deliver or cause to be
delivered to the Purchaser vacant possession of the Assets free of Liens except
Permitted Liens or except as otherwise provided herein.
3.5 NOTICES. On the Closing Date, the Vendor shall deliver the Notices to the
Persons to whom they are addressed.
3.6 NON-TRANSFERABLE AND NON-ASSIGNABLE ASSETS. To the extent that any of the
Assets to be transferred to the Purchaser on the Closing Date, or any claim,
right or benefit arising under or resulting from such Assets (collectively, the
"RIGHTS") is not capable of being transferred without the approval, consent or
waiver of any third Person, or if the transfer of a Right would constitute a
breach of any obligation under, or a violation of, any Applicable Law unless the
approval, consent or waiver of such third Person is obtained, then, except as
expressly otherwise provided in this Agreement and without limiting the rights
and remedies of the Purchaser contained elsewhere in this Agreement, this
Agreement shall not constitute an agreement to transfer such Rights unless and
until such approval, consent or waiver has been obtained. After the Closing Date
and until all such Rights are transferred to the Purchaser, the Vendor shall:
(a) maintain its existence and hold the Rights in trust for the
Purchaser;
(b) comply with the terms and provisions of the Rights as agent
for the Purchaser at the Purchaser's cost and for the
Purchaser's benefit;
<PAGE> 21
17
(c) cooperate with the Purchaser in any reasonable and lawful
arrangements designed to provide the benefits of such Rights
to the Purchaser; and
(d) enforce, at the request of the Purchaser and at the expense
and for the account of the Purchaser, any rights of the Vendor
arising from such Rights against any third Person, including
the right to elect to terminate any such rights in accordance
with the terms of such rights upon the written direction of
the Purchaser.
In order that the full value of the Rights may be realized for the benefit of
the Purchaser, the Vendor shall, at the request and expense and under the
direction of the Purchaser, in the name of the Vendor or otherwise as the
Purchaser may specify, take all such action and do or cause to be done all such
things as are, in the opinion of the Purchaser, necessary or proper in order
that the obligations of the Vendor under such Rights may be performed in such
manner that the value of such Rights is preserved and enures to the benefit of
the Purchaser, and that any moneys due and payable and to become due and payable
to the Purchaser in and under the Rights are received by the Purchaser. The
Vendor shall promptly pay to the Purchaser all moneys collected by or paid to
the Vendor in respect of every such Right. The Purchaser shall indemnify and
hold the Vendor harmless from and against any claim or liability under or in
respect of such Rights arising because of any action of the Vendor taken
pursuant to this Section.
3.7 PLANNING ACT. This Agreement does not and is not intended to create an
interest in land unless the subdivision control provisions of the Planning Act
have been complied with.
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<PAGE> 22
18
ARTICLE 4
CONDITIONS OF CLOSING
4.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to complete the
purchase and sale of the Assets pursuant to this Agreement unless, on or before
the Closing Date, each of the following conditions has been satisfied, it being
understood that the following conditions are included for the exclusive benefit
of the Purchaser and may be waived, in whole or in part, in writing by the
Purchaser at any time; and the Vendor agrees with the Purchaser to take all such
actions, steps and proceedings as are reasonably within its control as may be
necessary to ensure that the following conditions are fulfilled on or before the
Closing Date:
(1) Representations and Warranties. The representations and warranties
of the Vendor in Section 5.1 shall be true and correct on the Closing Date.
(2) Vendor's Compliance. The Vendor shall have performed and complied
with all of the terms and conditions in this Agreement on its part to be
performed or complied with on or before the Closing Date and shall have executed
and delivered or caused to have been executed and delivered to the Purchaser on
the Closing Date all the documents contemplated in Section 3.2 or elsewhere in
this Agreement.
(3) Due Diligence Investigation. The Purchaser shall have conducted and
completed its investigation of the Vendor, the Business and the Assets, and the
Purchaser, in its sole discretion, shall have been satisfied in all respects
with the results of such investigation and, in its sole discretion, shall have
determined to proceed with the transactions contemplated by this Agreement.
(4) Material Adverse Change. There shall have been no Material Adverse
Change to the Business or the Real Property since June 30, 1996.
(5) No Litigation. There shall be no litigation or proceedings:
(a) pending or threatened against any of the Parties hereto or
against any of their respective directors or officers, or
involving the assets or properties of any of them, for the
purpose of enjoining, preventing or restraining the completion
of the transactions contemplated hereby or otherwise claiming
that such completion is improper; or
(b) pending or threatened against any of the Parties or against
any of their respective directors or officers which:
<PAGE> 23
19
(i) in the result, could adversely affect the right of
the Purchaser to acquire or retain the Assets or to
continue the operations of the Business after Closing
Date; or
(ii) in the judgment of the Purchaser, would make the
completion of the transactions contemplated by this
Agreement inadvisable.
(6) Collective Agreement. The Collective Agreement shall have been duly
executed and delivered by the parties thereto and remain in full force and
effect.
(7) Liens. The Purchaser shall be satisfied that the Assets shall be
free and clear of all Liens except for Permitted Liens and shall have received
an opinion of the Purchaser's Solicitors to that effect with respect to the Real
Property.
(8) Consents and Approvals. All the Consents and Approvals which are
listed on Schedule 5.1(15) under the heading "Material Consents and Approvals"
shall have been obtained.
(9) Real Estate Matters. Applications for severance, as contemplated by
Section 9.8, approved by the Purchaser and Kim-Tam shall have been submitted to
the relevant Land Division Committee. If the relevant Land Division Committee
shall have dealt with such application, the severance shall have been granted
and all terms of such severance imposed by the Land Division Committee shall be
acceptable to the Purchaser.
(10) Financing. The Purchaser shall have obtained financing for up to
$2,500,000 of the Purchase Price on terms and conditions satisfactory to the
Purchaser in its sole discretion.
4.2 CONDITION NOT FULFILLED. If any condition in Section 4.1 has not been
fulfilled on or before the Closing Date, then the Purchaser in its sole
discretion may, without limiting any rights or remedies available to the
Purchaser at law or in equity, either:
(1) terminate this Agreement by notice to the Vendor, in which event
the Purchaser shall be released from its obligations under this Agreement to
complete the purchase of the Assets and, unless the Purchaser can show that the
condition or conditions for the non-performance of which the Purchaser has
terminated this Agreement are reasonably capable of being performed or caused to
be performed by the Vendor, then the Vendor shall also be released from all
obligations hereunder; or
(2) waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other condition.
4.3 VENDOR'S CONDITIONS. The Vendor shall not be obliged to complete the
transactions contemplated by this Agreement unless, on or before the Closing
Date, each of the following
<PAGE> 24
20
conditions has been satisfied, it being understood that the following conditions
are included for the exclusive benefit of the Vendor, and may be waived, in
whole or in part, in writing by the Vendor at any time; and the Purchaser agrees
with the Vendor to take all such actions, steps and proceedings within the
Purchaser's reasonable control as may be necessary to ensure that the following
conditions are fulfilled on or before the Closing Date:
(1) Representations and Warranties. The representations and warranties
of the Purchaser in Section 5.2 shall be true and correct at the Closing Date.
(2) Purchaser's Compliance. The Purchaser shall have performed and
complied with all of the terms and conditions in this Agreement on its part to
be performed by or complied with on or before the Closing Date and shall have
executed and delivered or caused to have been executed and delivered to the
Vendor on the Closing Date all the documents contemplated in Section 3.3 or
elsewhere in this Agreement.
(3) No Litigation. There shall be no litigation or proceedings pending
or threatened against any of the Vendor or against its directors or officers, or
involving the assets or properties of the Vendor, (i) for the purpose of
enjoining, preventing or restraining the completion of the transactions
contemplated hereby or otherwise claiming that such completion is improper, or
(ii) which in the judgment of the Vendor, acting reasonably, would make the
completion of the transactions contemplated by this Agreement inadvisable.
4.4 CONDITION NOT FULFILLED. If any condition in Section 4.3 shall not have been
fulfilled on or before the Closing Date, then the Vendor in its sole discretion
may, without limiting any rights or remedies available to the Vendor at law or
in equity (except to the extent so limited by Section 2.3), either:
(1) terminate this Agreement by notice to the Purchaser in which event
the Vendor shall be released from all obligations under this Agreement and,
unless the Vendor can show that the condition or conditions for the
non-performance of which the Vendor has terminated this Agreement are reasonably
capable of being performed or caused to be performed by the Purchaser, then the
Purchaser shall also be released from all obligations hereunder; or
(2) waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other condition.
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<PAGE> 25
21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE VENDOR. As a material inducement to
the Purchaser's entering into this Agreement and completing the transactions
contemplated by this Agreement and acknowledging that the Purchaser is entering
into this Agreement in reliance upon the representations and warranties of the
Vendor set out in this Section 5.1, the Vendor represents and warrants to the
Purchaser as follows:
(1) Incorporation and Power. The Vendor is a corporation incorporated
and validly subsisting under the Canada Business Corporations Act. The Vendor
has the corporate power and authority and is qualified to own and dispose of the
Assets. No act or proceeding has been taken by or against the Vendor in
connection with the dissolution, liquidation, winding up, bankruptcy or
reorganization of the Vendor.
(2) Due Authorization. The Vendor has the corporate power, authority
and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to carry
out its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Vendor. The
execution and delivery of this Agreement and such other agreements and
instruments and the completion of the transactions contemplated by this
Agreement and such other agreements and instruments do not require any
authorization by the shareholders of the Vendor.
(3) Enforceability of Obligations. This Agreement constitutes a valid
and binding obligation of the Vendor enforceable against the Vendor in
accordance with its terms subject, however, to limitations on enforcement
imposed by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of the rights of creditors or others and to the extent that
equitable remedies such as specific performance and injunctions are only
available in the discretion of the court from which they are sought. The Vendor
is not an insolvent person within the meaning of the Bankruptcy and Insolvency
Act (Canada) and will not become an insolvent person as a result of the
transactions contemplated by this Agreement.
(4) Title to Assets. The Vendor has good and marketable title to all
the Assets (except that M. Lewis Management Company Ltd. holds legal title to
the Real Property for the benefit of the Vendor), free and clear of any and all
Liens, except for Permitted Liens and any Liens to be released or for which
Consents and Approvals are to be obtained on or prior to the Closing Date.
Schedule 5.1(4) sets out a complete and accurate list of all locations where the
Assets are situate, including a brief description of the Assets situate at each
location. Other than this Agreement, there
<PAGE> 26
22
is no agreement, option or other right or privilege outstanding in favour of any
Person for the purchase from the Vendor of the Business or of any of the Assets
out of the ordinary course of business.
(5) Real Property.
(a) Schedule 5.1(5) lists the municipal address for and a proper
legal description of the Real Property. The Vendor has good
and marketable beneficial title to the Real Property free and
clear of all Liens except Permitted Liens. Legal title to the
Real Property is held by M. Lewis Management Company Ltd., as
bare nominee for the Vendor.
(b) The Real Property and the current use thereof comply with
Applicable Law. No notice of violation of any Applicable Law
or of any covenant, restriction or easement affecting the Real
Property or with respect to the use or occupancy of the Real
Property, has been received by the Vendor from any
governmental authority having jurisdiction over the Real
Property or from any other Person entitled to enforce the
same.
(c) There are no existing or, to the best of the Vendor's
knowledge, proposed or contemplated expropriation proceedings
that would result in the taking of all or any part of the Real
Property or that would adversely affect the current use of the
Real Property.
(d) The Improvements have been constructed in material compliance
with Applicable Law. All amounts for labour and materials
relating to the construction and repair of the Improvements
have been paid in full and, except for Permitted Liens, no one
has a right to file a construction, builders, mechanics or
similar lien in respect of the payment of such amounts.
(e) All Realty Taxes with respect to the Real Property which are
due have been paid in full and, except as disclosed on
Schedule 5.1(15), there are no local improvement charges,
special levies or development charges outstanding in respect
of the Real Property. The Vendor has not received any notice
of proposed local improvement charges, special levies or
development charges.
(f) To the best of the Vendor's knowledge, all utilities required
for the normal operation of the Business from the Real
Property connect into the Real Property through adjoining
public highways or, if they pass through adjoining private
land, do so in accordance with valid registered easements and
are sufficient for the operation of the Real Property for
purposes of the Business.
<PAGE> 27
23
(g) To the best of the Vendor's knowledge, none of the
Improvements has been designated as an historical site or
building pursuant to Applicable Law and the Real Property is
not designated for regulation by any conservation authority
pursuant to Applicable Law. The Real Property is not and, to
the best of the Vendor's knowledge, never has been used as a
cemetery.
(h) To the best of the Vendor's knowledge, the Improvements do not
contravene any of the height requirements of any of the
regulations under the Aeronautics Act (Canada).
(i) The Real Property and the rights of the Vendor arising under
the Kim-Tam Agreement to use certain adjacent real property is
the only real property used in the operation of the Business.
No Person (other than the Vendor and Kim-Tam, which has the
benefit of certain easements under the Kim-Tam Agreement) has
a right to occupy any part of the Real Property.
(6) Personal Property. Schedule 5.1(6) lists each item of Personal
Property which had a book value in the accounting records of the Vendor at the
date of the Vendor's most recently completed financial year, of more than $1,000
or is otherwise material to the Business. All Personal Property is in good
operating condition and repair, ordinary wear and tear excepted.
(7) No Leased Premises. None of the real property used by the Vendor in
connection with the Business is leased from, or otherwise owned by, any Person
other than the Vendor and Kim-Tam.
(8) Personal Property Leases. Schedule 5.1(8) lists all the Personal
Property Leases and identifies the ones which cannot be terminated by the Vendor
without liability at any time upon less than 30 days' notice or which involve
payment by it in the future of more than $5,000. Each Personal Property Lease is
in full force and effect and has not been amended, and the Vendor is entitled to
the full benefit and advantage of each Personal Property Lease in accordance
with its terms. Each Personal Property Lease is in good standing and there has
not been any material default by the Vendor under any Personal Property Lease
nor any material dispute that has not been resolved between the Vendor and any
other party under any Personal Property Lease.
(9) Contracts. The Vendor is not a party to any contract which is
material to the Business. The Vendor has not received notice of any default, and
the Vendor is not in default, under any Contract which default would have a
material adverse effect upon the condition of the Business and there has not
occurred any event which, with a lapse of time or giving of notice, or both,
would constitute such a default.
(10) Nash Road Pickle Line Authorization. The Vendor has provided to
the Purchaser all materials in the possession of or under the control of the
Vendor relating to the Vendor's application for authorization to construct a
pickle line at 400 Nash Road, Hamilton, Ontario.
<PAGE> 28
24
(11) Compliance with Applicable Laws. Except as disclosed in Schedule
5.1(11) or pursuant to Section 5.1(20), the Business has been and is being
operated in material compliance with Applicable Laws.
(12) Intellectual Property. There are no patents, industrial designs or
other similar intellectual property rights which are necessary in connection
with the operation of the Business. The use of the Assets and the conduct of the
Business does not infringe upon the industrial or intellectual property rights
of any other Person.
(13) Data Processing. Schedule 5.1(13) sets out (a) a brief description
of the Data Processing System; and (b) a list of all agreements, including
warranties, leases and licences, relating to the Data Processing System; (c) a
list of the Assets which form part of the Data Processing System; and (d) a
description of the Excluded Assets which form part of the Data Processing
System. The Vendor has taken appropriate action by instruction, agreement or
otherwise with its Employees or other persons permitted access to system
application programs and data files used in the Data Processing System to
protect against unauthorized access, use, copying, modification, theft and
destruction of such programs and files.
(14) Licences and Permits. The Vendor holds all licenses, permits,
authorizations and approvals necessary to own the Assets and to operate the
Business. Schedule 5.1(14) lists and describes all the Licences and Permits,
identifies the ones that by their terms are not transferable and identifies
those Licenses and Permits which are material to the Business. The Vendor holds,
free and clear of any and all Liens except Permitted Liens, all material
Licences and Permits. All material Licences and Permits are in full force and
effect, the Vendor is not in violation of any term or provision or requirement
of any such material Licences and Permits and, to the best of the Vendor's
knowledge, 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 material Licence or Permit.
(15) Consents and Approvals. Schedule 5.1(15) lists and describes all
the Consents and Approvals and identifies those Consents and Approvals which are
material to the Business. Except for the Consents and Approvals which are
identified on Schedule 5.1(15) as being material to the Business, no material
consent or approval of any Person is required in connection with the execution
and delivery of this Agreement and the completion of the transactions
contemplated by this Agreement or to permit the Purchaser to carry on the
Business after the Closing Date as the Business is currently carried on by the
Vendor.
(16) Notices. Schedule 5.1(16) lists and describes all the Notices and
identifies those Notices which are material to the Business. Except for the
Notices which are identified on Schedule 5.1(16) as being material to the
Business, no material notice is required to be delivered to any Person in
connection with the execution and delivery of this Agreement and the completion
of the transactions contemplated by this Agreement or to permit the Purchaser to
carry on the Business after the Closing Date as the Business is currently
carried on by the Vendor.
<PAGE> 29
25
(17) Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Vendor and the completion (with any
required Consents and Approvals and Notices) of the transactions contemplated by
this Agreement or entered into contemporaneously with this Agreement do not and
will not result in or constitute any of the following:
(a) a default, breach or violation or an event that, with notice
or lapse of time or both, would be a default, breach or
violation of any of the terms, conditions or provisions of the
articles or by-laws of the Vendor, or any of its subsidiaries,
of any contract (including contracts other than the Contracts)
to which the Vendor, or any of its subsidiaries, is a party or
of any Licence or Permit identified on Schedule 5.1(14) as
being material to the Business;
(b) an event which, pursuant to the terms of any Licence or Permit
identified on Schedule 5.1(14) as being material to the
Business, causes any right or interest of the Vendor to come
to an end or be amended in any way that is detrimental to the
Business or entitles any other Person to terminate or amend
any such right or interest;
(c) the creation or imposition of any Lien (other than a Permitted
Lien) on any Asset; or
(d) the violation of any Applicable Law applicable to or affecting
the Vendor, or any of its subsidiaries, which is Related to
the Business.
(18) Litigation. There is no action, suit, proceeding, claim,
application, complaint or investigation in any court or before any arbitrator or
before or by any regulatory body or governmental or non-governmental body
pending or, to the best of the Vendor's knowledge, threatened by or against the
Vendor Related to the Business or affecting the condition of the Business or the
transactions contemplated by this Agreement; and to the best of the Vendor's
knowledge, there is no factual or legal basis which could give rise to any such
action, suit, proceeding, claim, application, complaint or investigation.
(19) Insurance. Particulars of the policies of insurance Related to the
Business and related to the Assets are set out in Schedule 5.1(19). All such
policies are in full force and effect and the Vendor is not in default, whether
as to the payment of premium or otherwise, under the terms of such policies.
(20) Environmental Matters. The Vendor has delivered to the Purchaser a
Phase I environmental report dated October, 1996 prepared by Beak Consultants
Limited with respect to the Real Property. Except as disclosed on Schedule
5.1(20) or as disclosed in such Phase I environmental report or the Phase II
environmental assessment to be performed by the Purchaser's environmental
consultant, Temco Associates Corporation:
(a) The Business and the Assets as carried on or used by the
Vendor and its predecessors (including the condition of the
Real Property and the waters on or under the Real
<PAGE> 30
26
Property) have been and are currently carried on and used in
material compliance with all Environmental Laws.
(b) The Vendor has not used any machinery, equipment or facility
included in the Assets or in the Real Property, or permitted
them to be used, to generate, manufacture, refine, treat,
transport, store, handle, dispose of, transfer, produce or
process any Hazardous Substance except in material compliance
with all Environmental Laws.
(c) The Vendor is not, and has not been, subject to any
proceedings alleging the violation of any Environmental Law in
relation to the Business or the Assets and no part of the
Business or the Assets is the subject of any proceedings to
evaluate whether any remedial action is needed to respond to
the Release or presence of a Hazardous Substance on the Real
Property.
(d) To the best of the Vendor's knowledge, there are no
circumstances that could reasonably be expected to give rise
to any civil or criminal proceedings or Liability regarding
(i) the Release or presence of a Hazardous Substance on lands
used in or related to the Business and the Assets or on land
where the Vendor has disposed or arranged for the disposal of
materials arising from the conduct of the Business or (ii) the
violation of any Environmental Law by the Vendor, its
employees, agents or others for whom it is responsible in
relation to the Business.
(e) The Environmental Permits listed in Schedule 5.1(20)
constitute all Environmental Permits which are required for
the operation of the Business, including any machinery,
equipment or facility constituting the Assets of the Business,
as it is presently being conducted. The Environmental Permits
presently held are valid and in full force and effect, and no
material violations thereof have been experienced, noted, or
recorded, and no proceedings are pending or, to the best of
the Vendor's knowledge, threatened to revoke or limit any of
them.
(f) All Hazardous Substances disposed of, treated or stored by the
Vendor on the Real Property or generated in the operation of
the Business, have been disposed of, treated and stored in
material compliance with all Environmental Laws.
(g) There are no proceedings nor any circumstances or material
facts relating to the Real Property or Related to the Business
which could, if true, give rise to any proceedings, in which
it is alleged that the Vendor or its predecessors are
potentially responsible for a domestic or foreign federal,
provincial, state, municipal or local clean-up or remediation
of lands contaminated with Hazardous Substances or for any
other remedial or corrective action under an Environmental
Law, and for which the Purchaser may become financially
responsible after the Closing Date.
<PAGE> 31
27
(h) The Vendor or its predecessors have maintained all
environmental and operating documents and records relating to
the Business and the Assets in the manner and for the time
periods required by any Environmental Law, and the Vendor has
allowed the Purchaser to review all environmental documents
and records relating to the Business and the Assets prior to
the Closing Date.
(i) There is no underground storage tank located on the Real
Property.
(j) The Vendor has provided to the Purchaser true copies of (i)
all reports relating to the Assets or the Business filed by
the Vendor pursuant to any Environmental Law, and (ii) all
environmental reports, audits, assessments or studies
performed at the request or on behalf of the Vendor.
(k) To the best of the Vendor's knowledge, there are no pending or
proposed changes to Environmental Laws which would render
illegal or materially restrict the operation of the Business.
(l) The Improvements have not been insulated with any Hazardous
Substance.
(21) Employment Contracts. Schedule 5.1(21) lists all the Employees as
of the date of this Agreement and the age, position, status, length of service,
compensation and benefits of each of them, respectively. Schedule 5.1(21)
specifically identifies all Employees who have employment contracts with the
Vendor Related to the Business. Except as set out in Schedule 5.1(21) and
5.1(22), the Vendor is not a party to or bound by any contracts or requirements
of Applicable Law in respect of any Employee, including:
(a) any contracts or arrangements for the employment or statutory
re-employment of any Employee; or
(b) any bonus, deferred compensation, profit sharing, pension,
retirement, hospitalization insurance, or other plans or
arrangements providing employee benefits, except for the plans
providing employee benefits described in Schedules 5.1(23A)
and 5.1(23B).
(22) Collective Agreements. With respect to the Business and the Kombi
Line, except as set out in Schedule 5.1(22):
(a) the Vendor is not a party to any collective bargaining
agreement, contract or legally binding commitment to any trade
union or employee organization or group in respect of or
affecting Employees;
(b) the Vendor is not currently engaged in any labour negotiation;
<PAGE> 32
28
(c) the Vendor is not a party to any application, complaint or
other proceeding under any statute;
(d) to the best of the Vendor's knowledge, the Vendor is not
engaged in any unfair labour practice and the Vendor is not
aware of any pending or threatened complaint regarding any
alleged unfair labour practices;
(e) there is no strike, labour dispute, work slow down or stoppage
pending or, to the best of the Vendor's knowledge, threatened
against the Vendor;
(f) there is no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement which is pending
or, to the best of the Vendor's knowledge, threatened against
the Vendor;
(g) the Vendor has not experienced any material work stoppage
since January 1, 1985; and
(h) to the best of the Vendor's knowledge, the Vendor is not the
subject of any new union organization effort.
(23) Employee Plans.
(a) Schedule 5.1(23) lists all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation,
stock purchase, retirement, hospitalization insurance,
medical, dental, legal, disability and similar plans or
arrangements or practices relating to the Employees which are
currently maintained, or to which the Vendor is contributing
(the "EMPLOYEE PLANS").
(b) All of the Employee Plans applicable to unionized Employees
and, to the best of the Vendor's knowledge, all of the
Employee Plans applicable to non-unionized Employees, are and
have been established, registered, qualified, invested and
administered, in all material respects, in accordance with all
laws, regulations, orders or other legislative, administrative
or judicial promulgations applicable to the Employee Plans
("APPLICABLE EMPLOYEE BENEFIT LAWS"). To the best of the
Vendor's knowledge, no fact or circumstance exists that could
adversely affect the tax-exempt status of any Employee Plans.
(c) Except as set forth in Schedule 5.1(23), all obligations
regarding the Employee Plans applicable to unionized Employees
and, to the best of the Vendor's knowledge, all obligations
regarding the Employee Plans applicable to non-unionized
Employees, have been satisfied, there are no outstanding
material defaults or violations by the Vendor and, to the best
of the Vendor's knowledge, by its agents or appointees, under
<PAGE> 33
29
any Employee Plan and no Taxes, penalties or fees are owing or
exigible by the Vendor under any of the Employee Plans
applicable to unionized Employees and, to the best of the
Vendor's knowledge, under any Employee Plans applicable to
non-unionized Employees.
(d) Subject to the Collective Agreement, the current terms of the
Vendor's Union Pension Plan permit the Vendor to unilaterally
amend, modify, vary, revoke or terminate, in whole or in part,
the Vendor's Union Pension Plan and take contribution holidays
under or withdraw surplus from the Vendor's Union Pension
Plan, subject only to approvals required by Applicable
Employee Benefit Laws in respect of the unionized Employees
and the Vendor is not aware of any facts or circumstances that
would adversely affect the foregoing.
(e) To the best of the Vendor's knowledge, no Employee Plan, nor
any related trust or other funding medium thereunder, is
subject to any pending investigation, examination or other
proceeding, action or claim initiated by any governmental
agency or instrumentality, or by any other party (other than
routine claims for benefits), and there exists no state of
facts which after notice or lapse of time or both could
reasonably be expected to give rise to any such investigation,
examination or other proceeding, action or claim or to affect
the registration of any Employee Plan required to be
registered.
(f) Subject to the Collective Agreement, all contributions or
premiums required to be made by the Vendor under the terms of
each Employee Plan or by Applicable Employee Benefit Laws have
been made in accordance with Applicable Employee Benefit Laws
and the terms of the Employee Plans, and except as set forth
in Schedule 5.1(23) the Vendor does not have, and as of the
Closing Date will not have, any liability (other than
liabilities accruing after the Closing Date) with respect to
any of the Employee Plans.
(g) Except as disclosed pursuant to Section 5.1(23)(j), and
subject to the Collective Agreement, no amendments have been
made to any Employee Plan and no representations or promises
concerning improvements to any Employee Plan have been made
and no representations or promises concerning amendments or
improvements to an Employee Plan will be made before the
Closing Date.
(h) There have been no improper withdrawals, applications or
transfers of assets from any Employee Plan or the trusts or
other funding media relating thereto, and neither the Vendor
nor, to the best of its knowledge, any of its agents has been
in breach of any fiduciary obligation with respect to the
administration of the Employee Plans or the trusts or other
funding media relating thereto.
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(i) Subject to the Collective Agreement and approvals under
Applicable Employee Benefit Laws in respect of the unionized
Employees, the Vendor is not aware of any reason why the
Purchaser may not merge the assets transferred from the
Vendor's Union Pension Plan with any other registered pension
plan or fund.
(j) The Vendor has furnished or will make available to the
Purchaser within a reasonable time prior to the Closing Date,
true, correct and complete copies of all the Employee Plans as
amended as of the date hereof together with all current
funding agreements, actuarial reports, cost analyses, claims
experience reports, funding and financial information returns
and statements for the non-pension benefits and for the
Vendor's Union Pension Plan (excluding the master trust
funding agreement and master trust asset statement for the
Vendor's Union Pension Plan), copies of material
correspondence with all regulatory authorities with respect to
matters outstanding as at the Closing Date with respect to the
Vendor's Union Pension Plan and plan summaries, booklets and
personnel manuals. The Purchaser shall be entitled to make
copies of the foregoing material (excluding the document known
as "Section 500 Guidelines for Positive Growth Employee
Relations" which applies only to the non-union Employees). No
material changes have occurred to the Employee Plans or are
expected to occur which would affect the actuarial reports or
financial statements required to be provided or made available
to the Purchaser pursuant to this Section 5.1(23).
(k) Except as set forth in Schedule 5.1(23), the Vendor's Union
Pension Plan is fully funded or fully insured on both an
ongoing and solvency basis pursuant to the actuarial
assumptions and methodology set out in Schedule 5.1(23).
(l) None of the Employee Plans enjoys any special tax status under
Applicable Employee Benefit Laws, nor have any advance tax
rulings been sought or received in respect of the Employee
Plans.
(m) All employee data necessary to administer each Employee Plan
as it applies to Transferred Employees has been provided by
the Vendor to the Purchaser and is true and correct.
(n) Except as disclosed in Schedule 5.1(23), none of the Employee
Plans provides benefits to retired employees or to the
beneficiaries or dependents of retired employees.
(o) The Vendor has no obligation or liability (fixed, contingent
or otherwise) with respect to any employee benefit plans of
the type referred to in Section 5.1(23)(a), other than the
Employee Plans.
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(24) Bonuses. There are no bonuses, fees or other remuneration or
compensation (other than normal salaries) which are accrued but will be unpaid
as at the Closing Date, and there are no bonuses, fees or other remuneration or
compensation relating to the period prior to the Closing Date which are not
accrued but for which the Purchaser may be liable. The Vendor has not paid any
bonus, fee, distribution, remuneration or other compensation to any Employee
(other than salaries, wages or bonuses paid or payable to Employees in the
ordinary course of business in accordance with current compensation levels and
practices as set out in Schedules 5.1(21) and 5.1(23)).
(25) Customers and Suppliers. Schedule 5.1(25) lists the 5 largest
customers and the 5 largest suppliers of the Business for the 12 month period
ending immediately before the date of this Agreement, and the aggregate amount
which each customer was invoiced and each supplier was paid during such period.
Schedule 5.1(25) also lists any volume rebate or other similar policy or
practice relevant to the Business. The Vendor is not aware of, nor has it
received notice of, any intention on the part of any such customer or supplier
to cease doing business with the Vendor or to modify or change in any material
manner any existing arrangement with the Vendor Related to the Business for the
purchase or supply of any products or services.
(26) Residence of Vendor. The Vendor is not a non-resident of Canada
within the meaning of section 116 of the Income Tax Act (Canada).
(27) Deductions at Source. The Vendor has fulfilled all requirements
under the Income Tax Act (Canada) and the Regulations thereto, the Canada
Pension Plan, the Unemployment Insurance Act (Canada) and any applicable
provincial legislation, for withholding of amounts from Employees and has
remitted all amounts withheld to the appropriate authorities within the
prescribed times.
(28) GST. The Assets constitute all or substantially all of the
property used in a "commercial activity" for the purposes of Part IX of the
Excise Tax Act (Canada) that forms all or part of a business carried on by the
Vendor and the Vendor is a "registrant" under Part IX of the Excise Tax Act
(Canada). The Vendor's GST registration number is R121687776RT.
(29) Financial Statements; Taxes. The Vendor has furnished the
Purchaser with an unaudited income statement for the Business for the six month
period ended June 30, 1996 and an unaudited income statement for the Business
for the nine month period ended September 30, 1996 (the "FINANCIAL STATEMENTS"),
true and complete copies of which are annexed as Schedule 5.1(29). The Financial
Statements present fairly the revenue and expenses of the Business for the
relevant periods. Prior to the Closing Date, the Vendor will have allowed the
Purchaser to review (a) all internal and external audit reports and notes
prepared with respect to the Assets and the Business, and (b) all municipal,
business and other similar tax returns relating to the Business or the Assets.
Prior to the Closing Date, the Vendor will have furnished to the Purchaser a
true and correct aged list of all accounts payable, including the name and
address of each account payee and the amount owed as of September 30, 1996.
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(30) Brokerage Fees. The Vendor has not entered into any agreement
which would entitle any Person to any valid claim against the Purchaser for a
broker's commission, finder's fee or any like payment in respect of the purchase
and sale of the Assets or any other matters contemplated by this Agreement.
5.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents
and warrants to the Vendor as follows:
(1) Incorporation and Power. The Purchaser is a corporation duly
incorporated and validly subsisting under the laws of Ontario.
(2) Due Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to carry
out its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Purchaser.
(3) Enforceability of Obligations. This Agreement constitutes a valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms subject, however, to limitations on enforcement
imposed by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of the rights of creditors or others and to the extent that
equitable remedies such as specific performance and injunctions are only
available in the discretion of the court from which they are sought.
(4) GST. The Purchaser is a "registrant" under Part IX of the Excise
Tax Act (Canada) and its registration number is R101047199.
(5) Consents and Approvals. Except for the consents required by the
Purchaser from The Bank of New York and CIT Equipment Group Inc. (which have
been received), the Purchaser does not require any consents or approvals in
order to allow the Purchaser to execute and deliver this Agreement and to
perform its obligations hereunder.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(1) The representations and warranties of the Vendor contained in
Section 5.1 or any other agreement, certificate or instrument delivered pursuant
to this Agreement shall survive the Closing Date for a period of 18 months from
the Closing Date, and notwithstanding the Closing Date and any inspection or
inquiries made by or on behalf of the Purchaser, shall continue in full force
and effect for the benefit of the Purchaser, after which time the Vendor shall
be released from all
<PAGE> 37
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obligations in respect of such representations and warranties except with
respect to any Claims asserted by the Purchaser in writing (setting out in
reasonable detail the nature of the Claim and the approximate amount of such
Claim) before the expiration of such period, but (a) there shall be no time
limit on the representations and warranties of the Vendor set out in Section 5.1
which relate to the incorporation of the Vendor, the due authorization of this
Agreement by the Vendor, the enforceability of the Vendor's obligations under
this Agreement or the title of the Vendor to any personal property forming part
of the Assets, and (b) the representations and warranties of the Vendor with
respect to tax matters and the Employee Plans shall expire contemporaneously
with the expiry of the relevant statutory limitation periods.
(2) The representations and warranties of the Purchaser contained in
Section 5.2 or any other agreement, certificate or instrument delivered pursuant
to this Agreement shall survive the Closing Date for a period of 18 months from
the Closing Date, and notwithstanding the Closing Date, shall continue in full
force and effect for the benefit of the Vendor, after which time the Purchaser
shall be released from all obligations in respect of such representations and
warranties except with respect to any Claims asserted by the Vendor in writing
(setting out in reasonable detail the nature of the Claim and the appropriate
amount thereof) before the expiration of such period, but there shall be no time
limit on the representations and warranties of the Purchaser set out in Section
5.2 which relate to the incorporation of the Purchaser, the due authorization of
this Agreement by the Purchaser and the enforceability of the Purchaser's
obligations under this Agreement.
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ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY BY THE VENDOR. The Vendor shall indemnify and hold the Purchaser,
its directors, officers, employees, agents, representatives and the Purchaser's
affiliates and their respective directors, officers and employees harmless in
respect of any claim, demand, action, cause of action, damage, loss, cost,
liability or expense (hereinafter referred to as "CLAIM") which may be made or
brought against an Indemnified Party or which it may suffer or incur directly or
indirectly as a result of, in respect of or arising out of:
(1) subject to Section 5.3(1), any breach of any representation or
warranty of the Vendor contained in this Agreement or in any
other agreement, certificate or instrument executed and
delivered pursuant to this Agreement;
(2) any breach of or any non-fulfillment of any covenant or
agreement on the part of the Vendor under this Agreement or
under any other agreement, certificate or instrument executed
and delivered pursuant to this Agreement;
(3) the waiver by the Purchaser of compliance with the Bulk Sales
Act (Ontario) in connection with the transactions contemplated
by this Agreement; or
(4) the termination or lay-off by the Purchaser of any Employee
employed as of the Closing Date if such Employee is terminated
or laid off as a result of the removal from the Business of
the Kombi Line after the Closing Date (including any
termination or lay-off resulting from the exercise of any
"bumping rights" under the Collective Agreement);
(5) any Excluded Liability;
(6) any products sold by the Business prior to the Closing Date,
including any Claim alleging product liability, breach of the
Sale of Goods Act (Ontario) or any other type of Claim
relating to the products sold by the Business prior to the
Closing Date;
(7) any termination or severance liability incurred by the
Purchaser as a result of the return to work by any Disabled
Employee after the Closing Date, including any termination or
severance liability incurred by the Purchaser in favour of any
other Employee as a result of the exercise by a returning
Disabled Employee of any "bumping rights" under the Collective
Agreement; or
<PAGE> 39
35
(8) any fines, penalties, damages, costs or expenses which may be
imposed upon or incurred by the Purchaser in respect of any of
the environmental remediation items referred to in Section
7.9;
6.2 INDEMNITY BY THE PURCHASER. The Purchaser shall indemnify and hold the
Vendor, its directors, officers, employees, agents and representatives harmless
in respect of any Claim which may be made or brought against an Indemnified
Party or which it may suffer or incur directly or indirectly as a result of in
respect of or arising out of:
(1) subject to Section 5.3(2), any breach of any representation or
warranty of the Purchaser contained in this Agreement or in
any other agreement, certificate or instrument executed and
delivered pursuant to this Agreement; or
(2) any breach of or any non-fulfillment of any covenant or
agreement on the part of the Purchaser under this Agreement or
under any other agreement, certificate or instrument executed
and delivered pursuant to this Agreement.
6.3 LIMITATIONS. Subject to the proviso below, no Party shall have any Liability
for indemnification pursuant to Sections 6.1 or 6.2 unless and until the
accumulated aggregate amount of Claims of the Indemnified Party exceeds $25,000,
following which all such accumulated Claims and all further Claims of the
Indemnified Party shall be recoverable as provided in this Agreement; provided,
however, that the foregoing limitation shall not apply to any Claim by the
Purchaser for misrepresentation under Section 5.1(4) (as to the title of the
Vendor to the Assets, free and clear of all Liens except for Permitted Liens) or
for indemnity under any of Sections 6.1(3), 6.1(4), 6.1(5), 6.1(6), 6.1(7) or
6.1(8).
6.4 NOTICE OF CLAIM. If an Indemnified Party becomes aware of a Claim in respect
of which indemnification is provided for pursuant to either of Section 6.1 or
6.2, as the case may be, the Indemnified Party shall promptly give written
notice of the Claim to the Indemnifying Party. Such notice shall specify whether
the Claim arises as a result of a claim by a Person against the Indemnified
Party (a "THIRD PARTY CLAIM") or whether the Claim does not so arise (a "DIRECT
CLAIM"), and shall also specify with reasonable particularity (to the extent
that the information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does not
receive notice of any Claim in time effectively to contest the determination of
any liability susceptible of being contested, then the Liability of the
Indemnifying Party to the Indemnified Party under this Article shall be
<PAGE> 40
36
reduced by the amount of any losses incurred by the Indemnifying Party resulting
from the Indemnified Party's failure to give such notice on a timely basis.
6.5 DIRECT CLAIMS. In the case of a Direct Claim, the Indemnifying Party shall
have 60 days from receipt of notice of the Claim within which to make such
investigation of the Claim as the Indemnifying Party considers necessary or
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or before the expiration of such 60 day period (or any mutually agreed
upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim, failing which the matter shall be referred to
and finally settled by binding arbitration conducted in accordance with the
Arbitration Rules set forth in Exhibit F.
6.6 THIRD PARTY CLAIMS. In the case of a Third Party Claim, the Indemnifying
Party shall have the right, at its expense, to participate in or assume control
of the negotiation, settlement or defence of the Claim. If the Indemnifying
Party elects to assume such control, the Indemnifying Party shall reimburse the
Indemnified Party for all of the Indemnified Party's out-of-pocket expenses
incurred as a result of such participation or assumption. The Indemnified Party
shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that
the fees and disbursements of such counsel shall be paid by the Indemnified
Party unless the Indemnifying Party consents to the retention of such counsel at
its expense. The Indemnified Party shall cooperate with the Indemnifying Party
so as to permit the Indemnifying Party to conduct such negotiation, settlement
and defence and for this purpose shall preserve all relevant documents in
relation to the Third Party Claim, allow the Indemnifying Party access on
reasonable notice to inspect and take copies of all such documents and require
its personnel to provide such statements as the Indemnifying Party may
reasonably require and to attend and give evidence at any trial or hearing in
respect of the Third Party Claim. If, having elected to assume control of the
negotiation, settlement or defence of the Third Party Claim, the Indemnifying
Party thereafter fails to conduct such negotiation, settlement or defence with
reasonable diligence, then the Indemnified Party shall be entitled to assume
such control and the Indemnifying Party shall be bound by the results obtained
by the Indemnified Party with respect to such Third Party Claim. If any Third
Party Claim is of a nature such that the Indemnified Party is required by
Applicable Law or the order of any court, tribunal or regulatory body having
jurisdiction to make a payment to any person (a "THIRD PARTY") with respect to
the Third Party Claim before the completion of settlement negotiations or
related legal proceedings, as the case may be, then the Indemnified Party may
with the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed make such payment and the Indemnifying
Party shall, promptly after demand by the Indemnified Party, reimburse the
Indemnified Party for such payment. If the amount of any liability of the
Indemnified Party under the Third Party Claim in respect of which such a payment
was made, as finally determined, is less than the amount which was paid by the
Indemnifying Party to the
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Indemnified Party, the Indemnified Party shall, promptly after receipt of the
difference from the Third Party, pay the amount of such difference to the
Indemnifying Party.
6.7 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to assume
control of the defence of any Third Party Claim, the Indemnified Party shall
have the exclusive right to contest, settle or pay the amount claimed. Whether
or not the Indemnifying Party assumes control of the negotiation, settlement or
defence of any Third Party Claim, the Indemnifying Party shall not settle any
Third Party Claim without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed; provided, however, that
the liability of the Indemnifying Party shall be limited to the proposed
settlement amount if any such consent is not obtained for any reason within a
reasonable time after the request therefor.
6.8 GST GROSS-UP. The amount of any Claim submitted under Section 6.1 or 6.2 as
damages or by way of indemnification as determined without regard to this
Section 6.8 shall be increased by an amount equal to the rate of Goods and
Services Tax applied to such amount.
6.9 ARBITRATION. Any and all disputes, claims or controversies arising out of or
in any way connected with or arising from this Agreement, its negotiation,
performance, breach, enforcement, existence or validity, any failure of the
Parties to reach agreement with respect to matters provided for in this
Agreement and all matters of dispute relating to the rights and obligations of
the Parties, which cannot be amicably resolved, even if only one of the Parties
declares that there is a difference, shall be referred to and finally settled by
private and confidential, binding, English language arbitration held in Ontario,
governed by Ontario law and conducted in accordance with the rules set forth in
Exhibit F.
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ARTICLE 7
INTERIM PERIOD
7.1 INVESTIGATION. Until the Closing Date, the Purchaser and its representatives
and advisers shall be permitted to make such investigations, inspections,
surveys or tests of the Business as the Purchaser deems necessary or desirable
to familiarize itself with such properties, assets and other matters, provided
same shall be carried out without undue interference with the operations of the
Business. Without limiting the generality of the foregoing, the Purchaser shall,
during normal business hours, be permitted complete access to all documents
relating to information scheduled or required to be disclosed under this
Agreement, the Employees, premises, books, minute books, contracts, documents,
data, soil test reports, environmental reports, surveys, inspection reports,
records regarding suppliers, customers and regulators, any other reports
prepared by advisers and other records of the Business (and the Vendor shall
provide photocopies to the Purchaser of all such written information and
documents as may be reasonably requested by the Purchaser), including the items
listed in Section 5.1(29). Except as provided in Section 5.1(20), any such
investigations, inspections, surveys or tests shall not limit the
representations and warranties of the Vendor under this Agreement, which shall
continue in full force and effect, subject to the time limitations in Section
5.3.
7.2 AUTHORIZATIONS. The Vendor shall execute and deliver any authorizations
required to permit the investigations, inspections, surveys or tests described
in Section 7.1 and 7.9.
7.3 CONFIDENTIALITY.
(1) Each Party shall (and shall cause each of its Representatives (as
defined below) to) hold in strictest confidence and not use in any manner, other
than as expressly contemplated by this Agreement (including Section 10.3), any
Confidential Information (as defined below) of the other Party.
(2) Section 7.3(1) shall not apply to the disclosure of any
Confidential Information where such disclosure is required by Applicable Law. In
that case, the Party required to disclose (or whose Representative is required
to disclose) shall, as soon as possible in the circumstances, notify the other
Party of the requirement. Upon receiving such notification, the other Party may
take any reasonable action to challenge the requirement, and the affected Party
shall (or shall cause the applicable Representative to), at the expense of the
other Party, assist the other Party in taking such reasonable action.
(3) Following the termination of this Agreement in accordance with the
provisions of either of Sections 4.1 or 4.2, each Party shall (and shall cause
each of its Representatives to)
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promptly, upon a request from the other Party, return to the requesting Party
all copies of any tangible items (other than this Agreement), if any, which are
or which contain Confidential Information of the requesting Party; provided that
if the Party so obligated to return Confidential Information or its
Representatives have prepared summaries or analyses containing or concerning any
Confidential Information, then such Party may, instead of returning the
summaries or analyses, destroy them and provide a certificate to that effect to
the requesting Party.
(4) For the purposes of this Section 7.3:
(a) "CONFIDENTIAL INFORMATION" of a Party at any time means all
information relating to such Party's business (including
business plans, way of doing business, business results and
prospects and customer lists) which,
(i) at the time is of a confidential nature (whether or
not specifically identified as confidential) and is
known or should be known by the other Party or its
Representatives as being confidential, and
(ii) has been or is from time to time made known to or is
otherwise learned by the other Party or any of its
Representatives as a result of the matters provided
for in this Agreement,
including the following information:
(iii) the terms of this Agreement;
(iv) a Party's proprietary software; and
(v) a Party's business records,
but not including any information that at such time:
(vi) has become generally available to the public other
than as a result of a disclosure by the other Party
or any of its Representatives;
(vii) was available to the other Party or its
Representatives on a non-confidential basis before
the date of this Agreement; or
(viii) becomes available to the other Party or its
Representatives on a non-confidential basis from a
Person other than the first-mentioned Party or any of
its Representatives who is not, to the knowledge of
such other Party or its Representatives, otherwise
bound by confidentiality obligations to such
first-mentioned Party in respect of such information
or otherwise prohibited
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from transmitting the information to the other Party
or its Representatives; and
(b) "REPRESENTATIVES" with respect to any party means its
respective directors, officers, employees, agents and other
representatives and advisers.
7.4 RISK OF LOSS. The Assets shall be at the risk of the Vendor until the
Closing Date. Until the Closing Date, the Vendor shall maintain in force all the
policies of property damage insurance under which any of the Assets is insured.
If, before the Closing Date, any of the Assets is lost, damaged or destroyed and
the loss, damage or destruction constitutes a Material Adverse Change, then:
(a) the Purchaser may terminate this Agreement in accordance with
the provisions of Section 4.1, in which case all obligations
of the Purchaser and the Vendor under this Agreement shall
terminate forthwith upon the Purchaser giving notice of such
termination; or
(b) the Purchaser may complete the purchase without reduction of
the Purchase Price and require the Vendor to assign to the
Purchaser the proceeds of any insurance payable as a result of
the occurrence of such loss, damage or destruction.
7.5 ACTION DURING INTERIM PERIOD. During the period between the date of
execution of this Agreement and the Closing Date, the Vendor shall:
(a) carry on the Business in the normal course;
(b) maintain and keep the Assets in good repair (normal wear and
tear excepted);
(c) notify the Purchaser immediately of any Material Adverse
Change and of any breach of any representation, warranty or
covenant in this Agreement;
(d) not amend in any way or terminate any Employee Plan;
(e) not do any act or omit to do any act that would cause a breach
of any representation, warranty, covenant or agreement
contained in this Agreement; and
(f) not hire any new employee or terminate any existing employee
without prior consultation with the Purchaser.
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7.6 EXCLUSIVE DEALINGS. During the period between the date of execution of this
Agreement and the Closing Date, the Vendor shall not, and shall cause its
shareholders not to, take any action, directly or indirectly, to encourage,
initiate or engage in discussions or negotiations with, or provide any
information to any Person, other than the Purchaser and its designated and
authorized representatives, concerning any sale, transfer, assignment, licence,
merger or similar transaction involving the Business or the Assets. The Vendor
shall notify the Purchaser promptly if any such discussions or negotiations are
sought or if any proposal for a sale, transfer, assignment, licence, merger or
similar transaction is received or being considered.
7.7 CONSENTS AND APPROVALS. The Vendor shall use all reasonable commercial
efforts to obtain all Consents and Approvals before the Closing Date at the
Vendor's own expense.
7.8 UPDATES TO INFORMATION. The Vendor shall update on or before the Closing
Date, by amendment or supplement, any of the informational disclosure schedules
referred to in this Agreement and any other disclosure in writing from the
Vendor to the Purchaser as soon as reasonably possible after new or conflicting
information comes to the attention of the Vendor. The Purchaser shall not be
obligated to accept any such amendment or supplement and receipt of any such
amendment or supplement shall not be deemed to be a waiver or release by the
Purchaser of any provision of this Agreement.
7.9 PHASE II ENVIRONMENTAL REPORT. Prior to the Closing Date, the Purchaser may
cause an environmental consultant retained by the Purchaser to perform such
environmental assessments relating to the Real Property as the Purchase may
consider necessary or desirable. The costs of such assessments shall be paid by
the Vendor, to a maximum of $15,000. All such environmental assessments shall be
performed at times reasonably acceptable to the Vendor without undue
interference with the operations of the Business, and the Purchaser shall repair
(and be responsible for the costs thereof) any material damage to the Real
Property or adjacent lands resulting therefrom. The Vendor shall take the
remediation measures identified in Schedule 5.1(20). In addition, if the
environmental assessments referred to above disclose any non-compliance by the
Real Property or the Business with any Environmental Laws, the Vendor shall take
all measures as are, in the opinion of the Purchaser (acting reasonably),
necessary to correct same. In addition, if additional environmental issues
requiring remediation to comply with Environmental Laws are revealed during the
course of any such remediation measures, the Vendor will remediate same. The
Vendor shall cause all such remediation measures to be undertaken at the
Vendor's expense as quickly as is reasonably practicable following the delivery
by the Purchaser to the Vendor of a copy of the environmental report prepared by
the Purchaser's environmental consultant; provided, however, that if, prior to
the Closing Date, the Vendor determines (acting reasonably) that the estimated
costs of remediation (including the measures identified in Schedule 5.1(20))
exceed $500,000 in the aggregate and the Vendor determines that it is not
prepared to incur such costs to perform the remediation measures required by the
Purchaser, or the Purchaser determines (acting reasonably) that it is not
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likely to be satisfied with the resulting environmental condition of the Real
Property (despite the Vendor's remediation measures), then either the Vendor or
the Purchaser may terminate this Agreement by notice to the other Party, in
which event both Parties shall be released from their respective obligations
under this Agreement.
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ARTICLE 8
EMPLOYEES
8.1 OFFER OF EMPLOYMENT; NON-SOLICITATION. The Purchaser shall provide
employment, as of the Closing Date, to each of the unionized Employees employed
as of the Closing Date in accordance with the Collective Agreement, and the
Purchaser shall assume the Collective Agreement as of the Closing Date. The
Purchaser shall offer employment, as of the Closing Date, to each of the
non-unionized Employees (other than any non-unionized Disabled Employees and Don
Glassco) employed as of the Closing Date on terms and conditions of employment
that are substantially similar in the aggregate as presently exist for such
employment. The Purchaser shall offer employment to the non-unionized Disabled
Employees who are Employees of the Vendor on the date the Purchaser is satisfied
that such Disabled Employees are able to return to full time work on the terms
and conditions applicable at that time. The Vendor shall continue to maintain
the non-unionized Disabled Employees as its employees until such Disabled
Employees accept employment with the Purchaser or their employment is terminated
by the Vendor. The Parties acknowledge that the terms of employment of any
non-unionized Employee are subject to any specific changes to pension and
benefit arrangements as are contemplated by Sections 8.5, 8.6 and 8.7. The
Purchaser shall not be obligated to any Employee who refuses to accept
employment with the Purchaser. The Vendor shall not encourage any Employee
employed with the Business as of the Closing Date except Don Glassco to seek
employment with any employer other than the Purchaser and the Vendor shall not
employ any Transferred Employee for at least one year following the Closing
Date.
8.2 ACCRUAL BY VENDOR; PURCHASE PRICE ADJUSTMENT. On or before the Closing Date,
the Vendor shall accrue for each of the Transferred Employees all salaries,
commissions, bonuses, Canada Pension Plan premiums, Workers' Compensation
premiums and other amounts that may become payable to or receivable by such
accepting Employees for all periods before the payroll date immediately
preceding the Closing Date, including a pro-rated amount on account of
accumulated vacation with pay credits (per employee) in respect of their
employment with the Business or any predecessor of the Business. The Vendor
shall deliver to the Purchaser on the Business Day before the Closing Date a
certificate as to the aggregate amount of such accrual, and the portion of the
Purchase Price payable on the Closing Date shall be reduced by an amount equal
to the amount of such accrual. In addition, a similar accrual and certification
shall be delivered by the Vendor to the Purchaser for the period from the
payroll date immediately preceding the Closing Date to the Closing Date, and the
Vendor shall pay to the Purchaser the amount of such accrual within 15 Business
Days following the Closing Date. In addition, the Vendor shall settle, pay or
accrue, for all other Employees, all amounts that may become payable to or in
respect of or receivable by such employees before the Closing Date, including
termination allowances, severance pay and accumulated vacation with pay credits.
The Purchaser shall have the right to verify the amount of all such accruals and
to require an adjustment payment from the Vendor in the event of an error.
<PAGE> 48
44
8.3 NOTICE OF CHANGE OF EMPLOYMENT. The Purchaser may give such notice to the
Employees concerning the change of their employer with respect to the Business
as the Purchaser, in light of Applicable Law, considers reasonable, provided any
such notice shall be pre-approved by the Vendor, which approval shall not be
unreasonably withheld or delayed.
8.4 CLOSING STATEMENT. At least 10 days before the Closing Date, the Vendor
shall deliver to the Purchaser an up-to-date list of all Employees as at such
date certified by a senior officer of the Vendor. On the Closing Date, the
Vendor shall also deliver to the Purchaser an up-to-date list of Employees as at
the Closing Date.
8.5 PENSION BENEFITS.
(1) Effective as of the Closing Date, the Transferred Employees who
participate in the Russelsteel Metals Pension Plan E, Russel Metals Pension Plan
F and the Russel Metals Group Retirement Savings Plan, (collectively the
"VENDOR'S NON-UNION PENSION PLANS") shall cease to participate in and accrue
benefits under such plans. The Vendor shall retain responsibility for, and
satisfy all obligations with respect to, all pension and ancillary benefits
accrued to each Transferred Employee under the Vendor's Non-Union Pension Plans.
On or after the Closing Date, the Purchaser may establish for the non-unionized
Transferred Employees such retirement and pension arrangements, if any, as it
deems appropriate.
(2) Effective as of the Closing Date, the unionized Transferred
Employees who participate in the Russel Metals Inc. Pension Plan G pertaining to
United Steel Workers of America Local 5958 - Hamilton (the "Vendor's Union
Pension Plan") shall cease to participate in and accrue benefits under the
Vendor's Union Pension Plan.
(3) Effective as of the Closing Date, the Purchaser shall provide at
its own expense, a pension plan registered with the appropriate federal and
provincial regulatory authorities for the unionized Transferred Employees (the
"PURCHASER'S UNION PENSION PLAN"). The Purchaser's Union Pension Plan shall
provide benefits, other than benefits relating to surplus for unionized
Transferred Employees in respect of their service prior to Closing and after the
Closing Date to the expiry of the Collective Agreement on the same basis as
provided under the Vendor's Union Pension Plan as constituted at the Closing
Date, and as modified by amendments, if any, required by Applicable Law.
(4) Within 45 Business Days after the Closing Date, the Vendor shall
cause its actuary to perform actuarial valuations as at the Closing Date in
accordance with the solvency assumptions described in Exhibit M hereto in order
to determine the solvency liabilities under the Vendor's Union Pension Plan and
the solvency liabilities for the unionized Transferred Employees and the
unionized Disabled Employees under the Vendor's Union Pension Plan, and shall
cause the amounts thereof and the funded ratio of assets held under the Vendor's
Union Pension Plan as at the Closing Date to be reported to the Purchaser and to
the Purchaser's actuary and notwithstanding the provisions of
<PAGE> 49
45
Section 5.1(23)(j) shall furnish to each of them such other information and data
as may be reasonably requested to permit a review and verification of such
determinations by the Purchaser and its actuary and such information as may be
required to be reported to the Pension Commission of Ontario to effect a
transfer hereunder. If the Purchaser does not agree in writing to the
determinations within 30 Business Days of receiving such information, the
determinations shall be referred to and settled with full and final effect by a
qualified actuary in the Metropolitan Toronto office of Eckler Partners (or
their successor) within 30 Business Days thereafter and the reasonable costs and
expenses of such actuary shall be borne equally by the Vendor and the Purchaser.
(5) Within 10 Business Days following the determination of the solvency
liabilities and assets referred to in paragraph (4), the Vendor shall apply for
such regulatory approvals as may be required to transfer from the Vendor's Union
Pension Plan to the Purchaser's Union Pension Plan such maximum amount
determined as at the Closing Date as may be permitted by the applicable
regulatory authorities to be transferred from the Vendor's Union Pension Plan to
the Purchaser's Pension Plan in respect of the unionized Transferred Employees
and unionized Disabled Employees (the "TRANSFER AMOUNT"). The Vendor shall
deliver a true and complete copy of the Vendor's application to the Purchaser at
the time the Vendor makes such application and shall promptly provide to the
Purchaser copies of all correspondence with the regulators relating thereto.
(6) Promptly after the determination of the Transfer Amount and subject
to receipt by the Vendor of such regulatory approvals as may be required and
subject to the adjustments referred to in Section 8.5(8), the Vendor shall cause
the funding agent of the Vendor's Union Pension Plan to transfer the Transfer
Amount together with interest thereon at the rate prescribed therefor in Exhibit
M, to the funding agent of the Purchaser's Union Pension Plan. The date on which
such amount is transferred from the Vendor's Union Pension Plan to the
Purchaser's Union Pension Plan pursuant to this Section 8.5(7) shall be referred
to as the "TRANSFER DATE". Written confirmation and copies of any and all such
regulatory approvals shall be forwarded by each party to the other promptly upon
receipt.
(7) As soon as practicable after the Closing Date, but in any event no
later than the Transfer Date, the Vendor shall make a payment to the Purchaser
(considered to be an adjustment to the Purchase Price) of an amount equal to the
amount by which,
(a) the solvency liability determined as at the
Closing Date for unionized Transferred Employees and
unionized Disabled Employees determined in accordance
with paragraph 8.5(4)
exceeds
(b) the Transfer Amount as at the Closing Date,
together with interest adjustments thereon from the Closing Date to the date of
payment at the rate prescribed therefor in Exhibit M.
<PAGE> 50
46
(8) From the Closing Date to the Transfer Date, the Vendor, shall cause
the funding agent of the Vendor's Union Pension Plan to pay from the Vendor's
Union Pension Plan and record as required, all pension and ancillary benefit
payments relating to the unionized Transferred Employees and unionized Disabled
Employees as directed by the Purchaser and the Purchaser's direction in respect
thereof shall be in accordance with the Purchaser's Union Pension Plan and
Applicable Laws. The amount of the aforesaid payment together with interest
thereon from the date of payment to the Transfer Date, as adjusted in accordance
with Exhibit M therefor, shall be deducted from, the Transfer Amount. The Vendor
shall indemnify and hold the Purchaser harmless against and from any and all
damages, claims, demands, actions, losses, liabilities, expenses or costs that
the Purchaser may suffer or incur as a result of the Vendor's failure to carry
out the directions of the Purchaser under this Section 8.5(8).
8.6 EMPLOYEE BENEFITS.
Promptly after the Closing Date, the Purchaser shall establish
or cause to be established, at its own expense, with effect as of the Closing
Date, benefit plans ("PURCHASER'S BENEFIT PLANS") to provide non-pension
benefits for the Transferred Employees in connection with any and all claims of
Transferred Employees incurred after the Closing Date. The non-pension benefits
to be provided under the Purchaser's Benefit Plans are to be similar, in the
aggregate, to the Vendor's Benefit Plans, but the Purchaser does not guarantee
identical benefits. Such Transferred Employees who participate in the Vendor's
non-pension benefit arrangements (the "VENDOR'S BENEFIT PLANS") according to the
terms of the Vendor's Benefit Plans shall, with effect as of the Closing Date,
cease to participate in and accrue benefits under the Vendor's Benefit Plans and
shall commence participation in and accrue benefits under the Purchaser's
Benefit Plans in accordance with, and subject to, the membership, eligibility
and coverage requirements of the Purchaser's Benefit Plans, except that with
respect to such Transferred Employees, the Purchaser's Benefit Plans shall waive
any pre-existing condition limitations, shall accept any pre-approvals and shall
honour any deductibles and out-of-pocket expenses incurred by such Transferred
Employees and their dependants during 1996. Transferred Employees who are not
participants in the Vendor's Benefit Plans as at the Closing Date shall become
participants in and accrue benefits under the Purchaser's Benefit Plans as and
from the Closing Date in accordance with, and subject to, the membership,
eligibility and coverage requirements thereof. The Vendor shall retain
responsibility under the Vendor's Benefit Plans for all amounts payable by
reason of or in connection with any and all claims incurred by the Employees
before the Closing Date. For the purposes of this Section 8.6, a claim shall be
deemed to have been incurred on the date of occurrence of an injury, the later
of diagnosis of an illness and absence from work because of that illness, or any
other event giving rise to such claim or series of related claims.
<PAGE> 51
47
8.7 DISABLED EMPLOYEES.
(1) Non-Pension Benefits and Non-Unionized Employees' Pension Benefits.
Notwithstanding the provisions of sections 8.5 and 8.6, the Vendor shall, at its
own cost, retain all responsibility for non-pension benefit entitlements of
unionized Disabled Employees (including reimbursement of any costs incurred by
the Purchaser if the Purchaser is required to provide such coverage by
maintaining such unionized Disabled Employees on the Purchaser's Benefits Plans,
other than the cost of any improvements to the non-pension benefits which come
into effect after the Closing Date) and the pension benefits of non-unionized
Disabled Employees, until the earlier of such Disabled Employee's normal
retirement date or the date that the Vendor's insurance carrier deems that such
Disabled Employee no longer qualifies for non-pension benefits, except that if
any Disabled Employee returns to work with the Purchaser following the Closing
Date, the provisions of Section 8.6 shall apply mutatis mutandis as though the
word "Closing Date" in Section 8.6 meant the date upon which such Disabled
Employee returns to work with the Purchaser.
(2) Unionized Pension Benefits. The pension benefits of unionized
Disabled Employees shall be transferred to the Purchaser's Union Pension Plan in
accordance with Section 8.5 and the provisions of Exhibit M relating thereto.
8.8 COMPUTER PURCHASE PLAN. The Purchaser shall continue to collect payments
under the Vendor's computer purchase plan on a bi-weekly basis from Transferred
Employees who are identified in Schedule 5.1(21) as participants in the plan.
Such payments shall be remitted by the Purchaser to GE Capital on behalf of the
Vendor until the earlier of the date on which all payments required under the
plan have been made and, in respect of individual Plan participants, the date
that the employment of such Transferred Employee is terminated. In the event
that there is a shortfall in payments made to GE Capital by the Purchaser as a
consequence of the termination of employment of a participating Transferred
Employee, the Vendor shall be responsible to GE Capital for any shortfall.
-----------
<PAGE> 52
48
ARTICLE 9
POST-CLOSING MATTERS
9.1 EXCLUDED ASSETS. The Vendor shall at its own expense remove all tangible
Excluded Assets (except the Kombi Line), if any, from the premises of the
Business within 30 days following the Closing Date. Prior to March 4, 1997, the
Vendor shall, at its own expense, remove the Kombi Line. Prior to such removal,
the rights and obligations of the Vendor and the Purchaser with respect to the
Kombi Line shall be governed by the principles attached hereto as Exhibit G. The
Vendor shall take all reasonable steps to ensure that all assets to be removed
from the premises of the Business are removed in a manner which minimizes any
damage to the premises of the Business.
9.2 COMPLETION OF EXISTING ORDERS. After the Closing Date, the Purchaser shall
complete, for its own account, any orders made by customers the work in respect
of which was commenced but not completed by the Closing Date.
9.3 CO-OPERATION IN FILING OF RETURNS. The Purchaser agrees to allow the Vendor
to inspect the Books and Records delivered to the Purchaser pursuant to this
Agreement and to make copies thereof, at the Vendor's expense, to the extent
necessary to allow the Vendor to prepare and file its tax returns.
9.4 NON-MERGER. Each party hereby agrees that all provisions of this Agreement,
other than (a) the conditions in Article 4 and (b) the representations and
warranties contained in Article 5 and the related indemnities in Sections 6.1
and 6.2 hereof (which shall be subject to the special arrangements provided in
such Articles or Sections) shall forever survive the execution, delivery and
performance of this Agreement, Closing Date and the execution, delivery and
performance of any and all documents delivered in connection with this
Agreement.
9.5 FURTHER ASSURANCES. Each Party shall promptly do, execute, deliver or cause
to be done, executed and delivered all further acts, documents and things in
connection with this Agreement that the other Party may reasonably require, for
the purposes of giving effect to this Agreement. Without limiting the foregoing,
at the request of the Purchaser and the expense of the Vendor, the Vendor will
use all reasonable commercial efforts to obtain all assurances as may be
required by the Purchaser or any of its creditors as to the title of any
personal property forming part of the Assets, free of all Liens except Permitted
Liens.
<PAGE> 53
49
9.6 ACCOUNTS PAYABLE LIST. Within 15 days following the Closing Date, the Vendor
shall deliver to the Purchaser a list of the accounts payable of the Vendor
Related to the Business as at the Closing Date.
9.7 INVENTORY COUNT. Within 2 days following the Closing Date, the Vendor and
the Purchaser shall conduct a joint inventory of steel coils owned by the
customers of the Business, to ensure that the Parties understand the extent of
the customer-owned steel coil inventory as at the Closing Date.
9.8 SEVERANCE APPLICATION. The Vendor shall apply for and pursue the obtaining
of consents from the relevant Land Division Committee pursuant to the provisions
of the Planning Act Ontario, for:
(1) the creation of easements by Kim-Tam in favour of the
Purchaser over Parts 5, 6, 12, 13 and 14 on the Draft
Reference Plan attached as Schedule 4.1(9) (the "Draft
Reference Plan");
(2) for the severance of Part 7 on the Draft Reference Plan with a
view to its transfer to the Purchaser; and
(3) the creation of easements by the Purchaser in favour of
Kim-Tam over Parts 8, 10 and 11 on the Draft Reference Plan,
in each case, solely at the Vendor's expense. This obligation shall survive
closing and shall be a continuing obligation of the Vendor after closing. The
Vendor shall deliver to the Purchaser copies of all applications for severance,
correspondence and notices of meetings to the Purchaser on an on-going basis.
The Purchaser shall have the right, acting reasonably, to approve all
applications prior to their being submitted and any conditions imposed by the
Committee, although the Vendor will be responsible for complying with any such
conditions at its expense. If the Vendor does not pursue the obtaining of the
aforesaid severances with due diligence, the Purchaser shall have the right to
require the Vendor to cease doing so and to itself take over such application
but the Vendor shall continue to be responsible for the reasonable costs of
applying for, pursuing and obtaining the aforesaid severances, including
satisfying any conditions imposed by the relevant Land Division Committee.
<PAGE> 54
50
9.9 TEMPORARY EASEMENTS. The Vendor shall use all reasonable commercial efforts
to obtain from Kim-Tam valid, registered easements benefitting the Real Property
for a term of 21 years less 1 day over Parts 5, 6, 12, 13 and 14 on the Draft
Reference Plan attached as Schedule 4.1(9) and a registered lease for a term of
21 years less 1 day over Part 7 on the Draft Reference Plan, in each case until
consents under the Planning Act for the transfer of Part 7 and the creation of
permanent easements over Parts 6, 12, 13 and 14 have been obtained. The other
terms of such easements and the lease shall be satisfactory to the Purchaser,
acting reasonably. In addition, the Vendor shall use all reasonable commercial
efforts to obtain from Kim-Tam its agreement that the owner of the Real Property
shall have access to the CN spur line which runs to the south of the Real
Property.
--------------
<PAGE> 55
51
ARTICLE 10
GENERAL
10.1 EXPENSES. Each Party shall be responsible for its own legal and other
expenses (including any Taxes imposed on such expenses) incurred in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement and for the
payment of any broker's commission, finder's fee or like payment payable by it
in respect of the purchase and sale of the Assets pursuant to this Agreement.
10.2 PAYMENT OF TAXES. The Purchaser shall pay all land transfer taxes and any
filing or recording fees payable in connection with the instruments of transfer
provided for in this Agreement. The Vendor shall pay all other Taxes payable as
a result of the transactions contemplated by this Agreement.
10.3 PUBLIC ANNOUNCEMENTS. Except to the extent otherwise required by law or
with the prior consent of the other Party, neither Party shall make any public
announcement regarding this Agreement or the transactions contemplated by this
Agreement. The Parties confirm their intention to coordinate the issuance of any
press releases to be issued as a result of the transactions contemplated by this
Agreement. Upon the execution of this Agreement, each of the Parties intends to
make a public announcement regarding this transaction, the terms of which have
been agreed upon.
10.4 NOTICES.
(1) Any notice, certificate, consent, determination or other communication
required or permitted to be given or made under this Agreement shall be in
writing and shall be effectively given and made if (i) delivered personally,
(ii) sent by prepaid courier service or mail, or (iii) sent prepaid by fax or
other similar means of electronic communication, in each case to the applicable
address set out below:
<PAGE> 56
52
(i) if to the Vendor, to:
Russel Metals Inc.
1900 Minnesota Court
Suite 210
Mississauga, ON L5N 3C9
CANADA
Attention: Mr. Carl Quenneville
(ii) if to the Purchaser, to:
Cold Metal Products Company, Ltd.
Head Office
Box 66, Station B
Hamilton, ON L8L 7V2
CANADA
Attention: Mr. Jack Watson
with a copy to:
Cold Metal Products, Inc.
8628 South Avenue
P.O. Box 6078
Youngstown, OH 44601
U.S.A.
Attention: Mr. James R. Harpster
(2) Any such communication so given or made shall be deemed to have been given
or made and to have been received on the day of delivery if delivered, or on the
day of faxing or sending by other means of recorded electronic communication,
provided that such day in either event is a Business Day and the communication
is so delivered, faxed or sent before 4:30 p.m. on such day. Otherwise, such
communication shall be deemed to have been given and made and to have been
received on the next following Business Day. Any such communication sent by mail
shall be deemed to have been given and made and to have been received on the
fifth Business Day following the mailing thereof; provided however that no such
communication shall be mailed during any actual or apprehended disruption of
postal services. Any such communication given or made in any other manner shall
be deemed to have been given or made and to have been received only upon actual
receipt.
<PAGE> 57
53
(3) Any Party may from time to time change its address under this Section 10.4
by notice to the other Party given in the manner provided by this Section.
10.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
10.6 ENTIRE AGREEMENT. This Agreement and the other documentation executed and
delivered by the Parties in connection with this Agreement constitutes the
entire agreement between the Parties pertaining to the subject matter of this
Agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written. There are no conditions, warranties,
representations or other agreements between the Parties in connection with the
subject matter of this Agreement (whether oral or written, express or implied,
statutory or otherwise) except as specifically set out in this Agreement and the
other documentation executed and delivered by the Parties in connection with the
Agreement.
10.7 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the party to be bound
by the waiver. No waiver shall be inferred from or implied by any failure to act
or delay in acting by a party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other party. The
waiver by a party of any default, breach or non-compliance under this Agreement
shall not operate as a waiver of that party's rights under this Agreement in
respect of any continuing or subsequent default, breach or non-observance
(whether of the same or any other nature).
10.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable in that Province and shall be treated, in all respects, as an Ontario
contract.
10.10 SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. This Agreement shall
enure to the benefit of, and be binding on, the Parties and their respective
successors and permitted assigns. Neither party may assign or transfer, whether
absolutely, by way of security or otherwise, all or any part of its respective
rights or obligations under this Agreement without the prior written consent of
<PAGE> 58
54
the other party. No Person who is not a party to this Agreement may enforce any
provision of this Agreement or otherwise derive any benefit or advantage
hereunder.
------------
<PAGE> 59
10.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original or faxed form and the parties
adopt any signatures received by a receiving fax machine as original signatures
of the parties; provided, however, that any party providing its signature in
such manner shall promptly forward to the other party an original of the signed
copy of this Agreement which was so faxed.
IN WITNESS WHEREOF the parties have executed this Agreement.
RUSSEL METALS INC.
By: /s/ Brian R. Hedges
--------------------
Name: Brian Hedges
Title: Vice-President and Chief Financial
Officer
COLD METAL PRODUCTS COMPANY, LTD.
By: /s/ Jack W. Watson
-------------------
Name: Jack W. Watson
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,128
<SECURITIES> 0
<RECEIVABLES> 39,769
<ALLOWANCES> 0
<INVENTORY> 48,697
<CURRENT-ASSETS> 94,101
<PP&E> 68,626
<DEPRECIATION> 28,106
<TOTAL-ASSETS> 143,664
<CURRENT-LIABILITIES> 52,704
<BONDS> 0
<COMMON> 75
0
0
<OTHER-SE> 19,809
<TOTAL-LIABILITY-AND-EQUITY> 143,644
<SALES> 71,646
<TOTAL-REVENUES> 71,646
<CGS> 65,338
<TOTAL-COSTS> 65,338
<OTHER-EXPENSES> 4,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 650
<INCOME-PRETAX> 1,580
<INCOME-TAX> 569
<INCOME-CONTINUING> 1,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> .14
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</TABLE>
