EXHIBIT 10.1
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT is entered into as of the 20th day
of October, 2003 by and among FIRST AID DIRECT, INC., a Florida corporation
("FADI"), and those persons signatory hereto (individually an Exchanging
Shareholder and collectively the "EXCHANGING SHAREHOLDERS"), who are the holders
of all of the issued and outstanding shares of 3323455 Canada Inc., a Canadian
corporation ("3323")
The parties wish to effect FADI's acquisition of 3323, through the
purchase of all the issued and outstanding capital stock of 3323 from the
Exchanging Shareholders on the terms and conditions set forth below.
Accordingly, in consideration of the covenants, representations and warranties
set forth herein, the parties, intending to be legally bound, agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following
terms have the respective meanings set forth below:
"3323" means 3323455 Canada Inc., a Canadian corporation, and
its successors and permitted assigns.
"3323 Contracts" has the meaning set forth in Section 3.16.
"3323 Designees" means the three individuals designated in
Annex A for appointment as directors of FADI pursuant to the Board Augmentation.
"3323 Financial Statements" means the pro forma financial
statements attached as Exhibit C.
"3323 Plans" means the employee benefit plans identified on
Schedule 3.22.
"3323 Property Rights" has the meaning set forth in Section
3.14.
"3323 Representatives" has the meaning set forth in Section
5.2.
"3323 Shares" means all of the Outstanding Capital Shares of
3323.
"Adjudication" has the meaning set forth in Section 11.5.
"Affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
"Agreement" means this Securities Exchange Agreement,
including the Schedules and Exhibits, as amended from time to time.
"Applicable Law" means, with respect to a referenced Person,
any legislation, regulation, rule or procedure passed, adopted, implemented or
amended by any Governmental Entity, or any notice of a decision, finding or
action by any Governmental Entity, in each case to the extent it has become
effective, binding on the Person, its assets or operations or applicable to the
subject matter or its performance of this Agreement, from and after the date
compliance therewith is mandated by the terms thereof.
"Board" means the board of directors of a referenced Person.
"Board Augmentation" has the meaning set forth in Section 9.7.
"Business Day" means a day other than Saturday, Sunday, or any
other day on which banks located in the State of Florida or the Province of
Quebec are authorized or obligated to close.
"Bylaws" means the bylaws or comparable organizational
instrument of a referenced Person, as amended and in effect on the date hereof.
"Capital Shares" means the authorized shares of capital stock
of a referenced Person having the right to participate in the distribution of
earnings and assets of that Person.
"Charter" means certificate or articles of incorporation or
comparable organizational instrument of a referenced Person, as amended and in
effect on the date hereof.
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"Closing," "Closing Date" and "Closing Notice" have the
respective meanings set forth in Section 2.1.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Control Person" means any Person who controls or is
controlled (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) by a Person.
"Derivative Securities" means any securities that are
convertible into or exchangeable for Capital Shares or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
"$" or dollars means United States denominated dollars.
"EDGAR" means the SEC's electronic data gathering and
retrieval system.
"Encumbrances" has the meaning set forth in Section 3.19.
"ERISA" means the United States Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, and the regulations promulgated thereunder.
"FADI" means First Aid Direct, Inc., a Florida corporation,
and its successors and permitted assigns.
"FADI Common Stock" means FADI's common stock, par value $.01
per share, now or hereafter Outstanding, or any Capital Shares or other
securities of FADI issuable in exchange, conversion or substitution therefor.
"FADI Financial Statements" means (a) the audited balance
sheets of FADI as of December 31, 2002 and related audited statements of
operations, comprehensive income, shareholders' equity and cash flows for each
of the fiscal years ended December 31, 2002 and 2001 (the "Audited FADI
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Financial Statements"), accompanied by a report of independent auditors to the
effect that the Audited FADI Financial Statements present fairly, in all
material respects, the consolidated financial position of FADI at December 31,
2002, and the consolidated results of its operations and its cash flows for each
of the fiscal years ended December 31, 2002 and 2001 in conformity with GAAP and
(b) an unaudited consolidated balance sheet of FADI as of September 30, 2003
(the "FADI Balance Sheet") and related statements of operations, comprehensive
income and cash flows for the nine months ended September 30, 2003 and 2002.
"FADI Representatives" has the meaning set forth in Section
5.1.
"FADI Shares" has the meaning set forth in Section 2.3.
"GAAP" means accounting principles generally accepted in the
United States of America, consistently applied (except as reflected in the
applicable notes to the financial statements involved).
"Governmental Entity" means any federal, state, local or
foreign governmental board, body, commission, authority, agency, court or other
administrative, judicial or legislative body.
"Intellectual Property Rights" means all legal, equitable or
moral intellectual property or proprietary rights or benefits, including
copyrights and materials in any media for which copyrights are held or asserted,
moral rights, trademarks, patent rights (including patent applications and
disclosures), rights of priority, mask and derivative work rights, know how and
trade secret rights.
"Indemnified Person" means a Person claiming indemnification
under Section 11.
"Indemnifying Person" means a Person against which a claim for
indemnification is asserted under Section 11.
"Knowledge," "Known to" or any similar phrase means, with
respect to any mater in question, that, with respect to an Exchanging
Shareholder, a 3323 Executive Officer, or, with respect to FADI, a FADI
Executive Officer: (a) has actual knowledge of such fact or other matter, or (b)
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could be expected to discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
"Liabilities" means judgments, penalties (including excise and
similar taxes), fines and amounts paid in settlement, including in each case any
interest assessments or other charges payable in connection therewith.
"Litigation Expenses" means reasonable expenses incurred in
connection with a Proceeding, including attorneys' fees, retainers and
disbursements, court costs, experts' fees, travel expenses and printing costs.
"Management Realignment" has the meaning set forth in Section
9.8.
"Material Adverse Effect" means any material and adverse
effect on the business, operations, properties, prospects or financial condition
of a Person, including without limitation (a) initiation or public announcement
of a tender or exchange offer for 50% or more of the Outstanding Capital Shares
of FADI, (b) initiation or public announcement of a transaction that will result
in a change of control of any Control Person of FADI, (c) commencement of
proceedings for delisting FADI Common Stock on its Principal Market, (d)
institution of a Proceeding against a Person before any Governmental Entity
seeking damages in excess of $100,000 or remedies that could materially
adversely affect its operations and (e) initiation of a Material Action by a
Person without the consent of the other Person. Notwithstanding the foregoing,
the following shall not be a Material Adverse Effect: (i) this Agreement or the
transactions contemplated hereby or the public announcement of this Agreement
and the transactions contemplated hereby; (ii) the economy or securities markets
in general; or (iii) FADI's or 3323's industry in general and not in whole or in
any part significantly related specifically to FADI or 3323, as applicable.
"Material 3323 Actions" and "Material FADI Actions" (collectively,
"Material Actions") have the meaning set forth in Section 3.13 and Section 4.12,
respectively.
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"NASD" means the National Association of Securities Dealers,
Inc.
"Outside Closing Date" means October 31, 2003 or such later
date as the Parties may mutually determine.
"Outstanding" means, at any date as of which the number of
issued and outstanding Capital Shares of any class is to be determined, all
issued and outstanding Capital Shares of that class then directly or indirectly
owned or held by or for the account of any Person other than the issuer thereof.
References in this Agreement to Outstanding Capital Shares shall not include
treasury shares.
"Party" means each of FADI, the Exchanging Shareholders and
3323.
"Person" means an individual, corporation, partnership,
association, limited liability company, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative or any appeal therein.
"Registration Rights Agreement" means the Registration Rights
Agreement between FADI and the Exchanging Shareholders in the form of Exhibit B,
providing for the registration of FADI Shares for resale under the Securities
Act.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the United States Securities Act of
1933, as amended, and the regulations promulgated thereunder.
"Termination Notice" has the meaning set forth in Section
12.4.
"Third Person Proceeding" means any Proceeding first
threatened or initiated by a Person other than a Party or derivatively on behalf
of a Party after the Closing Date.
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"Transfer Agent" means Florida Atlantic Stock Transfer, or any
successor transfer agent for FADI Common Stock.
1.2 Construction. Unless otherwise expressly provided herein,
all references to Sections, Schedules, Annexes or Exhibits refer to the
corresponding sections, schedules, annex or exhibits to this Agreement. The
Schedules and Exhibits are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. All capitalized terms used in the
Schedules and Exhibits and not otherwise defined shall have the respective
meanings ascribed to them in this Agreement.
2. TERMS OF THE TRANSACTION.
2.1 Closing Notice. On the date within two (2) Business Days
after delivery to 3323 of notice from FADI certifying its satisfaction of the
conditions set forth in Section 9, 3323 shall deliver a notice to FADI (the
"Closing Notice") certifying its satisfaction of the conditions set forth in
Section 8 and setting forth a date within two (2) Business Days after the date
of the Closing Notice (the "Closing Date") on which the closing of the exchange
of the 3323 Shares hereunder (the "Closing") shall be held.
2.2 Exchange of the 3323 Shares. On the terms and subject to
the conditions of this Agreement, at the Closing FADI shall exchange with the
Exchanging Shareholders, and the each of Exchanging Shareholders shall transfer,
assign, convey and deliver to FADI all of the 3323 Shares, free and clear of all
liens, claims, charges, restrictions, equities or encumbrances of any kind.
2.3 Consideration for the 3323 Shares. In consideration for
the 3323 Shares, FADI shall issue and deliver to the Exchanging Shareholders at
the Closing an aggregate of 30,692,285FADI Shares in proportion to their
respective ownership of 3323.
2.4 Closing Mechanics. At the Closing, (a) the Exchanging
Shareholders shall deliver to FADI, certificates representing the 3323 Shares,
duly endorsed for transfer to FADI or accompanied by duly executed stock powers
therefor, free and clear of all liens, claims, charges, restrictions, equities
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or encumbrances of any kind, together with any necessary stock transfer stamps,
and (b) FADI shall deliver to the Exchanging Shareholders certificates
registered in the name of the Exchanging Shareholders, representing the FADI
Shares, bearing a legend reflecting their restricted status under the Securities
Act.
2.5 Other Closing Transactions. At the Closing, the following
transactions shall be consummated and deemed to occur simultaneously with the
issuance and sale of the FADI Shares in consideration for the 3323 Shares.
(a) Board Augmentation. The Board Augmentation shall be
implemented in accordance with Section 9.7.
(b) Management Realignment. The Management Realignment shall
be implemented in accordance with Section 9.8.
(c) Registration Rights. FADI and the Exchanging Shareholders
shall enter into the Registration Rights Agreement in accordance with
Section 9.10.
(d) Management Contracts. FADI shall enter into management
contracts with Scott Siegel, Jeffrey Tabin, Michel Marengere and Jacques Delorme
in the forms attached as Exhibit____.
(e) Option Grants. FADI shall grant the stock options
identified on Schedule 2.5(e).
(f) Private Placement Closing. FADI shall close a private
placement of shares of common stock and warrants providing gross proceeds of up
to $750,000.
(g) Closing Payments. FADI shall make the payments provided on
Schedule 2.5(g).
3. REPRESENTATIONS AND WARRANTIES OF THE EXCHANGING SHAREHOLDERS.
The Exchanging Shareholders, severally and not jointly, represent and warrant to
FADI as set forth below, subject to the exceptions set forth in the Schedules.
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3.1 Organization of 3323. 3323 is a corporation duly organized
and existing in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate authority to own its properties
and to carry on its business as now being conducted. 3323 is duly licensed to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes licensure necessary, except
where failure to so qualify would have no Material Adverse Effect on 3323. 3323
does not own all or any part of or control, directly or indirectly, any other
business, corporation, joint venture, partnership or proprietorship.
3.2 Authority. The Exchanging Shareholder has the requisite
corporate power and authority to enter into this Agreement and to perform their
respective obligations hereunder. The execution, issuance and delivery of this
Agreement, the transfer of the 3323 Shares to FADI and the consummation by the
Exchanging Shareholders of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization is required by the Board of 3323. This Agreement has been duly
executed and delivered by the Exchanging Shareholder and constitutes a valid and
binding obligation, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights and to other equitable principles of general application.
3.3 Capitalization. As of the Closing Date, 3323's authorized
Capital Shares consist solely of 30,692,285 common shares are Outstanding.
Except as set forth herein or in Schedule 3.3, (a) no Derivative Securities of
3323 are Outstanding, (b) no Person has any agreement, right or commitment
entitling it to acquire Derivative Securities from 3323 and (c) there are no
agreements or other instruments of any kind to which 3323 or, to the Knowledge
of 3323, any Person is a party relating to the voting of the 3323 Shares, other
than its Charter and Bylaws, or to the registration of its Capital Shares under
the Securities Act. All of the 3323 Shares have been duly and validly authorized
and issued and are fully paid and nonassessable.
3.4 3323 Share Ownership. The Exchanging Shareholders has good
and marketable title to the 3323 Shares, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any kind.
Upon delivery to FADI of certificates representing the 3323 Shares, FADI will
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acquire good and valid title thereto, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any kind.
Other than this Agreement, the 3323 Shares are not subject to any agreement,
arrangement, commitment or understanding that could impair FADI's rights
thereto, including any restriction relating to the voting, dividend rights or
disposition of the 3323 Shares.
3.5 Investment Intent. Each of the Exchanging Shareholders is
entering into this Agreement for its own account and not with a view to any
distribution of the FADI Shares acquired by it, and it has no present
arrangement to sell any of its FADI Shares to or through any Person, provided
that this representation shall not be construed as an undertaking to hold any
FADI Shares for any minimum or other specific term, and each of the Exchanging
Shareholders reserves the right to dispose of its FADI Shares at any time in
accordance with Applicable Law.
3.6 Sophistication. Each of the Exchanging Shareholders who is
a U.S. Person, as defined under Regulation S under the Securities Act, is a
sophisticated investor, as described in Rule 506(b)(2)(ii) under the Securities
Act, and an accredited investor, as defined in Rule 501 of the Securities Act.
3.7 Experience. The Exchanging Shareholder has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the FADI Common Stock. The Exchanging Shareholder
acknowledges that an investment in the FADI Common Stock is speculative and
involves a high degree of risk.
3.8 Quebec Residents. If the Exchanging Shareholder is
resident of the Province of Quebec, (i) he is acquiring the FADI Shares as a
principal for its own account, and not for the benefit of any other person, (ii)
he is acquiring a sufficient number of FADI Shares such that the aggregate
acquisition cost to the Exchanging Shareholder of such FADI Shares is not less
than CDN$150,000; and (iii) the Exchanging Shareholder is not an entity formed,
created, established or incorporated for the primary purpose of permitting the
purchase of the FADI Shares without a prospectus by groups of individuals whose
individual share of the aggregate acquisition cost is less than CDN$150,000;
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3.9 Ontario Residents. If the Exchanging Shareholder is
resident of the Province of Ontario, he is acquiring the FADI Shares as
principal for its own account and is an "accredited investor" within the meaning
of Rule 45-501 and its Companion Policy 45-501CP and has executed the
certification to this effect attached hereto as Schedule 3.7;
3.10 Other Canadian Residents. If the Exchanging Shareholder
is resident of British Columbia, Alberta, Manitoba, Newfoundland and Labrador,
the Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island or
Saskatchewan, it is an "accredited investor" as defined in Multilateral
Instrument 45-103 - Capital Raising Exemptions as evidenced by the Accredited
Investor Certificate Form, a copy of which is attached as Schedule 3.8 and meets
the applicable requirements set forth on Schedule 3.8.
3.11 Access to Information. Each of the Exchanging
Shareholders has received or had access, through the 3323 Representatives, to
all documents, records and other information pertaining to its investment in the
FADI Common Stock that it has requested, including documents filed by FADI under
the Exchange Act, and has been given the opportunity, directly or through the
3323 Representatives, to meet or have telephonic discussions with
representatives of FADI, to ask questions of them, to receive answers concerning
the terms and conditions of this investment and to obtain information that FADI
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information provided to the Exchanging
Shareholders or the 3323 Representatives.
3.12 Manner of Sale. At no time was the Exchanging Shareholder
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising relating to FADI or any investment in the FADI Common Stock.
3.13 No Conflicts. The execution, delivery and performance of
this Agreement by the Exchanging Shareholder and the consummation by the
Exchanging Shareholder of the transactions contemplated hereby, including the
sale and assignment of the 3323 Shares, do not and will not (a) result in a
violation of the Charter or Bylaws of the Exchanging Shareholder, (b) conflict
with or constitute a default (or an event that with notice or lapse of time or
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both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
instrument or "lock-up" arrangement or similar provision of any underwriting or
similar agreement to which an Exchanging Shareholder is a party, or (c) to the
Knowledge of 3323, result in a violation of any Applicable Law, nor is 3323 or
the conduct of its business otherwise in violation of, conflict with or default
under any of the foregoing, except for any violations, conflicts, defaults or
rights of termination, amendment, acceleration or cancellation that would,
individually or in the aggregate, have no Material Adverse Effect on 3323.
3.14 Consents. Except as set forth on Schedule 3.10, neither
the execution, delivery or performance of this Agreement nor the consummation of
the transactions provided for herein (a) requires the Exchanging Shareholder or
3323 to obtain or make any consent, authorization, approval, registration or
filing under a 3323 Contract or any Applicable Law, judgment or decree, (b) will
cause any acceleration of maturity of any note, instrument or other obligation
to which the Exchanging Shareholder or 3323 is a party or by which any of them
is bound or with respect to which any of them is an obligor or guarantor or (c)
will result in the creation or imposition of any lien, claim, charge,
restriction, equity or encumbrance of any kind whatever upon or give to any
other Person any interest or right (including any right of termination or
cancellation) in or with respect to 3323 Contract or the properties, assets or
operations of 3323. Schedule 3.10 indicates, with respect to each consent listed
thereon, whether it has been obtained as of the date hereof and, if not, when
the Exchanging Shareholder reasonably expect it to be obtained.
3.15 Financial Statements. The 3323 Financial Statements have
been provided to FADI. Subject to the assumptions and qualifications provided
therein, the 3323 Financial Statements do not contain a misstatement of a
material fact or omit a fact necessary to make them not materially misleading.
3.16 No Undisclosed Liabilities. To the Knowledge of 3323,
3323 has no material liabilities or obligations not reflected in the 3323
Financial Statements, other than those incurred in the ordinary course of its
business since the date of the most recent balance sheet included in the 3323
Financial Statements and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on 3323.
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3.17 No Material Adverse Change. Since the date of the most
recent balance sheet included in the 3323 Financial Statements, no event or
condition has occurred that could have a Material Adverse Effect on 3323. Except
as set forth in Schedule 3.13, since the date of the most recent balance sheet
included in the 3323 Financial Statements, 3323 has not (a) issued or
repurchased any Capital Shares, issued any Derivative Securities or declared,
set aside or paid any dividend or distribution on its Outstanding Capital
Shares, (b) incurred any obligation (absolute or contingent) except current
liabilities incurred in the ordinary course of business and obligations under
the contracts in effect as of that date, (c) mortgaged, pledged or knowingly
subjected to lien, charge or any other encumbrance, any of its assets, tangible
or intangible, (d) sold or transferred any of its tangible or intangible assets,
except to fund accounts payable and otherwise in the ordinary course of
business, (e) canceled any material debts or claims or waived any material
right, (f) paid or discharged any liabilities of any other Person, (g) sold,
assigned or transferred any trademarks, trade names, copyrights, licenses,
royalty agreements, proprietary registrations, know-how, trade secrets or other
intangible assets, or granted any licenses with respect to any of the foregoing,
(h) suffered or incurred any extraordinary expenses or losses, (i) paid or
discharged any material obligation or liability, absolute or contingent, other
than current liabilities incurred since June 30, 2003 in the ordinary course of
business, (j) made any material change in the individual or aggregate
compensation in any form payable to any of its employees, directors or
consultants, (k) entered into any material transaction of any kind except in the
ordinary course of business, or entered into any transaction or agreement
whatsoever with a Control Person of 3323, (l) made any material changes in their
accounting principles or methods, or (m) agreed in writing or, to the Knowledge
of 3323, orally to take any of the actions covered by this Section 3.13
(collectively, "Material 3323 Actions").
3.18 Intellectual Property Rights. Schedule 3.14 sets forth a
list and description of all Intellectual Property Rights owned or licensed by
3323, used by 3323 prior to the date hereof or necessary for the conduct of
3323's business as presently conducted ("3323 Property Rights"). All of the 3323
Property Rights are valid and enforceable against third parties. After the
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Closing Date, 3323 will continue to have the right to use all the 3323 Property
Rights for the conduct of 3323's business in the same manner, media, fields of
use and territories as presently utilized. Except as set forth on Schedule 3.14,
3323 owns, is licensed to use or otherwise will have the right to use all of the
3323 Property Rights in the ordinary course after the Closing Date. Except as
indicated on Schedule 3.14, 3323 owns the 3323 Property Rights outright or is
licensed to use them on an exclusive basis, in each case free and clear of all
liens and encumbrances, and no other Intellectual Property Rights are necessary
for the conduct of 3323's business as currently conducted. To the Knowledge of
3323, the conduct of 3323's business as presently conducted and the use of the
3323 Property Rights and other assets following the Closing Date does not and
will not infringe on the Intellectual Property Rights of any other Person. There
is no pending or, to the Knowledge of 3323, threatened infringement claims
against 3323.
3.19 Contracts. Except as set forth on Schedule 3.15, 3323 is
not a Party to or is bound by any:
(a) employment or consulting agreement or
arrangement that has an aggregate future liability in excess of $100,000 and is
not terminable by 3323 by notice of not more than six months for a cost of less
than $100,000;
(b) employee collective bargaining contract with any
labor union; (c) covenant not to compete or other covenant restricting the
operations of 3323;
(d) agreement or arrangement with any current or
former officer, director or employee of 3323 or any Affiliate of 3323, other
than employment agreements covered by Section 3.15(a);
(e) agreement or arrangement designed to shift risk
relating to currency, interest rate or other price fluctuations involving
notional amounts in excess of $50,000;
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(f) lease or similar agreement with any Person under
which (i) 3323 is lessee of, or holds or uses, any machinery, equipment, vehicle
or other tangible personal property owned by any Person or (ii) 3323 is a lessor
or sublessor of, or makes available for use by any Person, any tangible personal
property owned or leased by 3323, in each case which has an aggregate future
liability or receivable, as the case may be, in excess of $100,000 and is not
terminable at 3323's election on less than six months' notice for a cost of less
than $100,000;
(g) agreement or arrangement for the future purchase
or receipt of materials, supplies, equipment or services, which has an aggregate
future liability to 3323 in excess of $100,000 and is not terminable at 3323's
election on less than six months' notice for a cost of less than $100,000;
(h) material license, option or other agreement or
arrangement relating in whole or in part to the 3323 Property Rights listed on
Schedule 3.14;
(i) agreement, instrument or arrangement under which
3323 has borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to, any Person, which individually is in excess of
$100,000;
(j) agreement, instrument or arrangement under which
(i) any Person has directly or indirectly guaranteed indebtedness, liabilities
or obligations of 3323 or (ii) 3323 has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any Person (in each case other than
endorsements for the purpose of collection in the ordinary course of business),
which individually is in excess of $100,000;
(k) agreement, instrument or arrangement under which
3323 has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any Person, which individually
is in excess of $100,000;
(l) agreement, instrument or arrangement providing
for indemnification of any Person against claims or liabilities relating to any
current or former business of 3323 or any predecessor of 3323; or
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(m) other agreement, instrument or arrangement to
which 3323 is a party or by or to which it or any of its assets or business is
bound or subject, having an aggregate future liability to any Person in excess
of $100,000 and is not terminable at 3323's election upon less than six months'
notice for a cost of less than $100,000.
3.20 Enforceability of 3323 Contracts. Except as set forth on
Schedule 3.16, to the Knowledge of 3323, (a) all agreements, instruments and
arrangements listed or required to be listed in Schedule 3.16 or any other
Schedule contemplated by Section 3 (collectively, the "3323 Contracts") are
valid, binding and in full force and effect and are enforceable by 3323 in
accordance with its terms, (b) 3323 has performed all its material obligations
to date under all 3323 Contracts to which it is a party or is otherwise bound or
subject, (c) 3323 is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect under the 3323
Contracts, (d) no other Person to any of the 3323 Contracts has notified 3323 of
the counterparty's belief that 3323 is or is likely to become in breach or
default in any material respect thereunder or of the counterparty's intention to
accelerate or modify in a manner adverse to 3323 any obligations or rights
thereunder and (e) no other Person to any of the 3323 Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder.
3.21 Litigation and Other Proceedings. Except as set forth in
Schedule 3.17, there are no Proceedings pending or, to the Knowledge of 3323,
threatened against 3323 that might have a Material Adverse Effect on 3323, and
there are no judgments, orders, writs, injunctions, decrees or awards issued by
or, to the Knowledge of 3323, requested by any Governmental Entity that might
have a Material Adverse Effect on 3323.
3.22 Tax and Other Returns and Reports. Except as disclosed on
Schedule 3.18, (a) all national, state, provincial and local tax returns,
reports and statements required to be filed by 3323 have been filed with the
appropriate Governmental Entities in all jurisdictions in which the returns,
reports and statements are required to be filed, and all such returns, reports
and statements properly reflect the tax liabilities of 3323 for the periods,
properties or events covered thereby, (b) all national, state, provincial and
local taxes, assessments, interest, penalties, deficiencies, fees and other
16
governmental charges or impositions have been properly accrued or paid, (c) 3323
has not received any notice of assessment or proposed assessment by any taxing
authority in connection with any of its tax returns, and there are no pending
tax examinations of or tax claims asserted against 3323 or any of its assets or
properties, (d) there are no tax liens on any of 3323's assets, and (e) 3323 has
no Knowledge of any basis for any additional assessment of any taxes on 3323.
3.23 Title to Assets; Absence of Liens and Encumbrances. 3323
owns or has a valid leasehold interest in all its material assets and property
reflected in the 3323 pro forma balance sheet included in the 3323 Financial
Statements, except assets and property disposed of after June 30, 2003 in the
ordinary course of business and consistent with past practice. Except as set
forth on Schedule 3.19, none of such assets or properties is subject to any
material defects of title, mortgage, pledge, lien, security interest, lease,
charge, encumbrance, objection or joint ownership (collectively,
"Encumbrances"). Except as set forth on Schedule 3.19, the facilities,
machinery, furniture, office and other equipment of 3323 that are used in its
business are sufficient for the operations of 3323 as currently conducted are in
good operating condition and repair, subject only to the ordinary wear and tear.
3323 is not in material default under the 3323 Contracts governing any
Encumbrances to which it or its properties and assets are subject.
3.24 Compliance with Applicable Laws. To the Knowledge of
3323, 3323 is in compliance in all material respects with all Applicable Laws
affecting its business or operations, including those relating to occupational
health and safety, and to the Knowledge of 3323, 3323 has received no
communication during the past two years from a Governmental Entity alleging that
3323 has failed to comply in any material respect with any Applicable Laws.
3.25 Employee and Labor Matters. To the Knowledge of 3323,
3323 has made all payments and performed all material acts, if any, required to
be complied with and has complied in all material respects with the applicable
provisions, if any, of all Applicable Laws affecting employee and labor matters.
Each terminated plan, if any, was terminated in accordance with Applicable Laws,
and any agreements relating thereto have been terminated without liability to
3323.
17
3.26 Benefit Plans. 3323 currently maintains the employee
benefit plans described on Schedule 3.22. Each listed plan (a) to the Knowledge
of 3323 has been administered and operated in accordance with Applicable Laws
and (b) has received all contributions required to be made thereunder by 3323
and any predecessors. For each listed plan, 3323 has delivered to FADI copies of
(i) the plan document setting forth the terms and conditions of the plan, (ii)
any the trust agreement established under the plan, (iii) any investment or
insurance contracts under the trust, (iv) the latest determination letter or an
opinion from the applicable Governmental Entity about the qualified status of
the plan under Applicable Law, and (v) any annual reports required by Applicable
Law for the last three completed plan years. Any contributions to health plans
required to be made by employees of 3323 has been paid in accordance the
policies therefor.
3.27 Insurance. 3323 maintain policies of fire and casualty,
liability and other forms of insurance in amounts, with deductibles and against
risks and losses that are, in the 3323's judgment, reasonable for the business
and assets of 3323. The insurance policies maintained by 3323 are listed on
Schedule 3.23. All listed policies are in full force and effect, all premiums
due and payable thereon have been paid, and no notice of cancellation or
termination has been received thereunder. To the Knowledge of 3323, the
activities and operations of 3323 have been conducted in a manner conforming in
all material respects to all applicable provisions of the listed insurance
policies.
3.28 Transactions with Affiliates. Except as set forth on
Schedule 3.24, there is no transaction, and no transaction is now proposed, to
which 3323 was or is to be a party and in which any of its officers, directors
or shareholders or any of their Affiliates had or has a direct or indirect
material interest.
3.29 Bank Accounts; Powers of Attorney; etc. Except as set
forth on Schedule 3.25, there are no (a) safe deposit boxes, bank accounts,
brokerage accounts or similar arrangements maintained by or for the account of
3323 with any bank, financial institution or other Person or (b) any outstanding
powers of attorney or other authorizations issued by 3323 to 3323, any bank or
financial institution or any other Person.
18
3.30 Fees. Except as set forth on Schedule 3.26, no Person
acting on behalf of 3323 or any of its Affiliates is entitled to any brokerage
fees or commissions of any nature directly or indirectly from 3323 in connection
with any of the transactions contemplated hereby.
3.31 Disclosure. No representation or warranty of the
Exchanging Shareholders contained in this Agreement, and no statement contained
in any document, certificate or Schedule to this Agreement delivered to FADI in
connection herewith by 3323, its Affiliates or any Person acting on its or their
behalf contains any untrue statement of a material fact or omits to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make those statements not misleading.
4. REPRESENTATIONS AND WARRANTIES OF FADI. FADI represents and
warrants to the Exchanging Shareholders as set forth below, subject to the
exceptions set forth in the Schedules.
4.1 Organization of FADI. FADI is a corporation duly organized
and existing in good standing under the laws of the State of Delaware and has
all requisite corporate authority to own its properties and to carry on its
business as now being conducted. FADI is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of the business conducted or property owned by it makes qualification
necessary, except where failure to so qualify would have no Material Adverse
Effect on FADI. FADI does not own all or any part of or control, directly or
indirectly, any other business, corporation, joint venture, partnership or
proprietorship.
4.2 Authority. FADI has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
issue the FADI Shares. The execution, issuance and delivery of this Agreement,
the issuance of the FADI Shares and the consummation by FADI of the transactions
contemplated hereby have been duly authorized by all necessary corporate action,
and no further consent or authorization is required by its Boards or its
shareholders. This Agreement and the other agreements delivered or to be
delivered by FADI have been or will be at Closing duly executed and delivered by
FADI and constitute valid and binding obligations of FADI, enforceable against
it in accordance with their terms, subject to applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights and to other
equitable principles of general application.
19
4.3 Capitalization. On the date hereof, FADI's authorized
Capital Shares consist solely of 50,000,000 shares of FADI Common Stock, of
which 3,985,000 shares are Outstanding. Except as set forth herein or in
Schedule 4.3, (i) no Derivative Securities of FADI are Outstanding, (ii) no
Person has any agreement, right or commitment entitling it to acquire Derivative
Securities from FADI and (iii) there are no agreements or other instruments of
any kind to which FADI or, to its Knowledge, any Person is a party relating to
the voting of its Capital Shares, other than its Charter and Bylaws, or to the
registration of its Capital Shares under the Securities Act. All of the shares
of FADI Common Stock that are Outstanding on the date of this Agreement have
been duly and validly authorized and issued and are fully paid and
nonassessable.
4.4 Exchange Act Registration. As of the date hereof, (a) the
FADI Common Stock is registered under Section 12(g) of the Exchange Act, and (b)
FADI is in full compliance with all reporting requirements of the Exchange Act.
4.5 Valid Issuance. Assuming the accuracy of the
representations and warranties of the Exchanging Shareholders in Section 3, both
at the date hereof and at the time of issuance, the issuance and sale of the
FADI Shares will be exempt from registration under the Securities Act in
reliance upon Section 4(2) thereof or Regulation D thereunder and, when
delivered in accordance with the terms hereof, the FADI Shares shall be duly and
validly issued, fully paid and nonassessable. Neither the issuance and sale of
the FADI Shares pursuant to this Agreement nor FADI's performance of its other
obligations hereunder will (i) result in the creation or imposition of any
liens, charges, claims or other encumbrances upon the FADI Shares or any of the
assets of FADI or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe to or acquire additional Capital Shares
or other securities of FADI. The Exchanging Shareholders will not be subject to
personal liability solely by reason of their ownership or possession of the FADI
Shares.
20
4.6 No General Solicitation or Advertising. Neither FADI nor
any of its Affiliates nor any distributor or any person acting on its or their
behalf (a) has conducted or will conduct any general solicitation, as that term
is used in Rule 502(c) under the Securities Act, or any general advertising with
respect to any of the FADI Shares or the FADI Notes or (b) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require FADI to register the issuance of the FADI
Shares or the FADI Notes under the Securities Act.
4.7 No Integrated Offering. Neither FADI or its Affiliates nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
other than pursuant to this Agreement, under circumstances that would require
the issuance of the FADI Shares and the FADI Notes to be registered under the
Securities Act.
4.8 No Conflicts. The execution, delivery and performance of
this Agreement by FADI and the consummation by FADI of the transactions
contemplated hereby, including the issuance of the FADI Shares, do not and will
not (a) result in a violation of its Charter or Bylaws, (b) conflict with or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
instrument or "lock-up" arrangement or similar provision of any underwriting or
similar agreement to which FADI is a party, or (c) result in a violation of any
Applicable Law, nor is FADI or the conduct of its business otherwise in
violation of, conflict with or default under any of the foregoing, except for
any violations, conflicts, defaults or rights of termination, amendment,
acceleration or cancellation that would, individually or in the aggregate, have
no Material Adverse Effect on FADI.
4.9 Consents. Assuming the accuracy of the representations and
warranties of the Exchanging Shareholders in Section 3 both at the date hereof
and on the Closing Date, FADI is not required by Applicable Law to obtain any
consent, authorization or order of any Governmental Entity or to make any filing
or registration with any Governmental Entity in connection with its execution,
delivery or performance of its obligations under this Agreement, other than the
filing of (a) any notices that may be required under state or provincial
21
securities laws subsequent to the Closing, (b) the receipt of an exempting order
from the Quebec Securities Commission in respect of the issuance of FADI Shares
in favor of certain Exchanging Shareholders who are resident of the Province of
Quebec and (c) an Information Statement with the SEC under Rule 14f-1 under the
Exchange Act, in connection with the notice of the Board Augmentation.
4.10 SEC Documents and Financial Statements. Except as
indicated on Schedule 4.10, FADI has filed on a timely basis all documents
required to be filed by it with the SEC since January 1, 1997 (all such
documents filed since January 1, 1997 and prior to the date hereof are referred
to as the "FADI SEC Documents"). Complete and correct copies of FADI SEC
Documents have been made available to the Exchanging Shareholders. As of their
respective dates, or if amended as of the date of the last such amendment, FADI
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be (including all applicable
rules and regulations promulgated by the SEC relating to FADI's audit
committee), and none of FADI SEC Documents as of the date thereof contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Complete
and accurate copies of the unaudited consolidated balance sheet, consolidated
statements of operations, consolidated statements of stockholders' equity and
consolidated statements of cash flows (together with any supplementary
information thereto) of FADI, all as of and for the nine-month period ended
September 30, 2003 (the "FADI Interim Financial Information") have been provided
to the Exchanging Shareholders. The FADI Financial Statements fairly present, in
all material respects, the consolidated financial position of FADI, as of and
for the respective dates thereof, and the consolidated results of its operations
and its consolidated cash flows for the respective periods then ended (subject,
in the case of the FADI Interim Financial Information, to normal year-end audit
adjustments and to any other adjustments described therein) in conformity with
GAAP during the periods involved (except as may be indicated therein or in the
notes thereto and the FADI Interim Financial Information do not contain the
footnotes required by GAAP). Since September 30, 2003, FADI has not made any
change in the accounting practices or policies applied in the preparation of its
financial statements, except as may be required by GAAP.
22
4.11 No Undisclosed Liabilities. FADI has no material
liabilities or obligations not reflected in the FADI Financial Statements, other
than those incurred in the ordinary course of FADI's business since the date of
the FADI Interim Financial Information and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on FADI.
4.12 No Material Adverse Change. Since the date of the FADI
Interim Financial Information, no event or condition has occurred that could
have a Material Adverse Effect on FADI. Except as set forth in Schedule4.12, or
as set forth in FADI`s periodic reports filed with the SEC, since the date of
the FADI Interim Financial Information, FADI has not (a) issued or repurchased
any Capital Shares, issued any Derivative Securities or declared, set aside or
paid any dividend or distribution on Outstanding Capital Shares, (b) incurred
any obligation (absolute or contingent) except current liabilities incurred in
the ordinary course of business and obligations under the contracts in effect as
of that date, (c) mortgaged, pledged or knowingly subjected to lien, charge or
any other encumbrance, any of its assets, tangible or intangible, (d) sold or
transferred any of its tangible or intangible assets, except to fund accounts
payable and otherwise in the ordinary course of business, (e) canceled any
material debts or claims or waived any material right, (f) paid or discharged
any liabilities of any other Person, (g) sold, assigned or transferred any
trademarks, trade names, copyrights, licenses, royalty agreements, proprietary
registrations, know-how, trade secrets or other intangible assets, or granted
any licenses with respect to any of the foregoing, (h) suffered or incurred any
extraordinary expenses or losses, (i) paid or discharged any material obligation
or liability, absolute or contingent, other than current liabilities incurred
since September 30, 2003 in the ordinary course of business, (j) made any
material change in the individual or aggregate compensation in any form payable
to any of its employees, directors or consultants, (k) entered into any material
transaction of any kind except in the ordinary course of business, or entered
into any transaction or agreement whatsoever with a Control Person of FADI, (l)
made any material changes in its accounting principles or methods or (m) agreed
in writing or, to the best knowledge of FADI, orally to take any of the actions
covered by this Section 4.12 (collectively, "Material FADI Actions").
23
4.13 Trademarks, Trade Names and Licenses. FADI owns the
trademarks, trade names and registrations therefor listed in Schedule 4.13.
Except as set forth in Schedule 4.13, (a) FADI has not granted licenses or other
rights to use its trademarks, trade names or registrations, (b) no other
trademarks, trade names or registrations are either owned or licensed by FADI
and (c) to the best knowledge of FADI, the operations of FADI do not infringe on
the trademarks and trade names of any Person, and no pending or threatened claim
has been made to the contrary.
4.14 Litigation and Other Proceedings. Except as set forth in
Schedule 4.14, there are no Proceedings pending or, to FADI's knowledge,
threatened against FADI that might have a Material Adverse Effect on FADI, and
there are no judgments, orders, writs, injunctions, decrees or awards issued by
or, to FADI's knowledge, requested by any Governmental Entity that might have a
Material Adverse Effect on FADI.
4.15 Contracts. Except as set forth on Schedule 4.15, or as set forth in FADI`s
periodic filings with the SEC, FADI is not a party to or is bound by any:
(a) employment or consulting agreement or arrangement
that has an aggregate future liability in excess of $100,000 and is not
terminable by FADI by notice of not more than 6 months for a cost of less than
$100,000;
(b) employee collective bargaining contract with any
labor union;
(c) covenant not to compete or other covenant
restricting the operations of FADI;
(d) agreement or arrangement with any current or
former officer, director or employee of FADI or any Affiliate of FADI, other
than employment agreements covered by Section 4.15(a);
(e) agreement or arrangement designed to shift risk
relating to currency, interest rate or other price fluctuations involving
notional amounts in excess of $50,000;
24
(f) lease or similar agreement with any Person under
which (i) FADI is lessee of, or holds or uses, any machinery, equipment, vehicle
or other tangible personal property owned by any Person or (ii) FADI is a lessor
or sublessor of, or makes available for use by any Person, any tangible personal
property owned or leased by FADI, which has an aggregate future liability or
receivable, as the case may be, in excess of $100,000 and is not terminable at
FADI's election on less than 6 months notice for a cost of less than $100,000;
(g) agreement or arrangement for the future purchase
or receipt of materials, supplies, equipment or services, which has an aggregate
future liability to FADI in excess of $100,000 and is not terminable at FADI's
election on less than 6 months notice for a cost of less than $100,000;
(h) agreement, instrument or arrangement under which
FADI has borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to, any Person, which individually is in excess of
$100,000;
(i) agreement, instrument or arrangement under which
(i) any Person has directly or indirectly guaranteed indebtedness, liabilities
or obligations of FADI or (ii) FADI has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any Person (in each case other than
endorsements for the purpose of collection in the ordinary course of business),
which individually is in excess of $100,000;
(j) agreement, instrument or arrangement under which
FADI has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any Person, which individually
is in excess of $100,000;
(k) agreement, instrument or arrangement providing
for indemnification of any Person against claims or liabilities relating to any
current or former business of FADI or any predecessor of FADI; or
(l) other agreement, instrument or arrangement to
which FADI is a party or by or to which it or any of its assets or business is
bound or subject, having an aggregate future liability to any Person in excess
of $100,000 and is not terminable at FADI's election upon less than 6 months
notice for a cost of less than $100,000.
25
4.16 Enforceability of FADI Contracts. Except as set forth on
Schedule 4.16, (a) all agreements, instruments and arrangements listed or
required to be listed in Schedule 4.15 or any other Schedule contemplated by
Section 4 (collectively, the "FADI Contracts") are valid, binding and in full
force and effect and are enforceable by FADI in accordance with its terms, (b)
FADI has performed all its material obligations to date under all FADI Contracts
to which it is a party or is otherwise bound or subject, (c) FADI is not (with
or without the lapse of time or the giving of notice, or both) in breach or
default in any material respect under any FADI Contracts, (d) no other Person to
any of FADI Contracts has notified FADI of the counterparty's belief that FADI
is or is likely to become in breach or default in any material respect
thereunder or of the counterparty's intention to accelerate or modify in a
manner adverse to FADI any obligations or rights thereunder and (e) no other
party to any of FADI Contacts is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder.
4.17 Tax and Other Returns and Reports. Except as disclosed on
Schedule 4.17, (a) all national, state and local tax returns, reports and
statements required to be filed by FADI has been filed with the appropriate
Governmental Entities in all jurisdictions in which the returns, reports and
statements are required to be filed, and all such returns, reports and
statements properly reflect the tax liabilities of FADI for the periods,
properties or events covered thereby, (b) all national, state and local taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions have been properly accrued or paid, (c) FADI has not
received any notice of assessment or proposed assessment by any taxing authority
in connection with any of its tax returns, and there are no pending tax
examinations of or tax claims asserted against FADI or any of its assets or
properties, (d) there are no tax liens on any of FADI's assets, and (e) FADI has
no knowledge of any basis for any additional assessment of any taxes on FADI.
4.18 Title to Assets; Absence of Liens and Encumbrances. FADI
owns or has a valid leasehold interest in all its material assets and property
reflected in the FADI Interim Financial Information, except assets and property
disposed of after June 30, 2003 in the ordinary course of business and
consistent with past practice. Except as set forth on Schedule 4.18, none of
26
such assets or properties is subject to any material Encumbrances. Except as set
forth on Schedule 4.18, the facilities, machinery, furniture, office and other
equipment of FADI that are used in its business are sufficient for the
operations of FADI as currently conducted are in good operating condition and
repair, subject only to the ordinary wear and tear. FADI is in no material
default under FADI Contracts governing any Encumbrances to which it or its
properties and assets are subject.
4.19 Compliance with Applicable Laws. Except as set forth on
Schedule 4.19, FADI is in compliance in all material respects with all
Applicable Laws affecting its business or operations, including those relating
to occupational health and safety, and FADI has received no communication during
the past two years from a Governmental Entity alleging that it has failed to
comply in any material respect with any Applicable Laws.
4.20 Employee and Labor Matters. FADI has made all payments
and performed all material acts, if any, required to be complied with and have
complied in all material respects with the applicable provisions, if any, of
ERISA, the Code and any related or similar Applicable Laws affecting employee
and labor matters. FADI has neither unfunded liability nor accumulated funding
deficiency (within the meaning of ERISA) with respect to any employee plan. All
benefits payable under any terminated employee pension benefit plan (as that
term is defined in Section 3(2)(A) of ERISA) previously maintained by FADI or
any predecessor or to which it or any predecessor has previously contributed
have been paid in full, and FADI has no unfunded liability in respect thereof to
the Pension Benefit Guaranty Corporation, similar Governmental Entity or to the
participants in the plan or to the beneficiaries of those participants. Each
terminated plan, if any, was terminated in accordance with Applicable Laws, and
any agreements relating thereto have been terminated without liability to FADI.
4.21 Benefit Plans. FADI currently maintains the employee
benefit plans described on Schedule 4.21. Each listed plan (a) is qualified
under the applicable provisions of the Code, (b) has been administered and
operated in accordance with the applicable provisions of ERISA and the Code and
(c) has received all contributions required to be made thereunder by FADI and
27
any predecessors. For each listed plan, FADI has delivered to the 3323 copies of
(i) the plan document setting forth the terms and conditions of the plan, (ii)
any the trust agreement established under the plan, (iii) any investment or
insurance contracts under the trust, (iv) the latest determination letter or an
opinion from the applicable Governmental Entity about the qualified status of
the plan under the Code or other Applicable Law and (v) any annual reports
required by Applicable Law for the last three completed plan years. Any
contributions to health plans required to be made by employees of FADI has been
paid in accordance the policies therefor.
4.22 Insurance. FADI maintains policies of fire and casualty,
liability and other forms of insurance in amounts, with deductibles and against
risks and losses that are, in FADI's judgment, reasonable for the business and
assets of FADI. The insurance policies maintained by FADI are listed on Schedule
4.22. All listed policies are in full force and effect, all premiums due and
payable thereon have been paid, and no notice of cancellation or termination has
been received thereunder. The activities and operations of FADI have been
conducted in a manner conforming in all material respects to all applicable
provisions of the listed insurance policies.
4.23 Transactions with Affiliates. Except as set forth on
Schedule 4.23, or as set forth in FADI`s periodic filings with the SEC, there is
no transaction, and no transaction is now proposed, to which FADI was or is to
be a party and in which any of its officers, directors or shareholders or any of
their Affiliates had or has a direct or indirect material interest.
4.24 Fees. No Person acting on behalf of FADI or any of its
Affiliates is entitled to any brokerage fees or commissions of any nature
directly or indirectly from FADI or its Affiliates in connection with any of the
transactions contemplated hereby.
4.25 Disclosure. No representation or warranty of FADI
contained in this Agreement, and no statement contained in any document,
certificate or Schedule to this Agreement delivered to the Exchanging
Shareholders in connection herewith by FADI, its Affiliates or any Person acting
on its or their behalf contains any untrue statement of a material fact or omits
to state any material fact necessary, in light of the circumstances under which
it was made, in order to make those statements not misleading.
28
5. DILIGENCE AND DISCLOSURE MATTERS.
5.1 FADI's Due Diligence Review. The Exchanging Shareholders
shall cause 3323 to make available for inspection and review by FADI and its
advisors and representatives (collectively, "FADI Representatives") copies of
all records of 3323 reasonably requested by them for conducting their due
diligence review in connection with the transactions contemplated by this
Agreement.
5.2 3323's Due Diligence Review. FADI shall make available for
inspection and review by 3323 and its advisors and representatives
(collectively, "3323 Representatives") copies of all records of FADI reasonably
requested by them for conducting their due diligence review in connection with
the transactions contemplated by this Agreement.
5.3 Supplemental Disclosure. Each Party shall have the
continuing obligation until the Closing to promptly supplement or amend its
Schedules to reflect any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules, provided that no supplement or
amendment to the Schedules delivered more than five (5) business days after the
date of this Agreement shall have any effect for the purpose of determining the
satisfaction of the conditions set forth in Section 8 or Section 9.
5.4 Non-Disclosure. All confidential information received by a
Party with respect to the business of the other Party shall be treated in
accordance with the restrictions set forth in the confidentiality agreement
dated as of October 15, 2003 between FADI and 3323.
5.5 Information Statement. FADI covenants that on the date
filed with the SEC and on the date first sent or given to shareholders, the
Information Statement shall not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
29
they were made, not misleading. 3323 shall provide for use in the Information
Statement all information about 3323 and its Affiliates reasonably necessary for
the Information Statement to comply as to form in all material respects with the
relevant provisions of the Exchange Act. 3323 covenants that on the date the
Information Statement is filed with the SEC and on the date it is first sent to
FADI's shareholders, the information provided in writing by 3323 or its
Affiliates for use therein shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements related thereto contained in the Information
Statement, in light of the circumstances in which they were made, not
misleading. 3323 and its counsel shall be given a reasonable opportunity to
review and comment upon the Information Statement and all amendments and
supplements thereto prior to their filing with the SEC or dissemination to
FADI's shareholders. FADI shall provide 3323 and its counsel with any comments
FADI or its counsel may receive from the SEC or its staff with respect to the
Information Statement promptly after the receipt thereof.
5.6 Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each Party shall use all reasonable efforts to cause the Closing
to occur by the Outside Closing Date.
5.7 Further Assurances. From time to time, as and when
requested by a Party, the other Parties shall execute and deliver, or cause to
be executed and delivered, all documents and instruments and shall take all
actions (subject to the other provisions of this Agreement) as the other Parties
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
6. CONDUCT OF 3323 BUSINESS PENDING CLOSING. From the date of
this Agreement to the Closing, unless otherwise approved in writing by FADI,
3323 shall cause 3323 to conduct its business in accordance with the provisions
of this Section 6.
6.1 Corporate Existence. 3323 shall cause 3323 to take all
steps necessary to preserve and continue its corporate existence and franchises.
6.2 Conduct of Operations. 3323 shall cause 3323 to conduct
its operations in the ordinary and usual courses of business, as currently
conducted, and shall not take or agree to take any Material 3323 Actions except
(i) in connection with the acquisition of Kischi Konsulting Inc. and (ii) as
provided in this Agreement.
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6.3 Preservation of Representations. The Exchanging
Shareholders shall not take any action that (a) if taken on or before the date
hereof, would make any of their representations and warranties in Section 3
untrue or (b) would interfere with their ability to perform its obligations
under this Agreement.
6.4 Procuring Approvals. 3323 shall use its best efforts to
cause 3323 to obtain all licenses, consents or other approvals required to be
obtained from any Person in connection with the transactions contemplated by
this Agreement.
6.5 Exclusivity. Between the date of this Agreement and the
earlier to occur of the Closing or the termination of this Agreement in
accordance with Section 12, no Exchanging Shareholder nor any Person acting on
their behalf shall initiate, encourage, solicit or agree to any offer from any
Person other than FADI regarding any merger, sale of securities, sale of assets
or similar transaction involving 3323 or any transaction that could be expected
to impede, delay, interfere with, prevent or dilute the benefits to FADI of the
transactions contemplated hereby, unless (a) the 3323 Board determines in good
faith based on written advice of its outside legal counsel that the action is
necessary for the Board to comply with its fiduciary duties to shareholders
under Applicable Law, (b) prior to entering into negotiations, the 3323 Board
receives from that Person an executed confidentiality agreement with terms no
less favorable to FADI than those contained in the confidentiality agreement
with 3323 and (c) prior to entering into those negotiations, 3323 provides
written notice to FADI that includes the terms of the proposal, the identity of
the Person making the proposal and the fact that clauses (a) and (b) of this
Section 6.5 have been satisfied.
7. CONDUCT OF FADI BUSINESS PENDING CLOSING. From the date of
this Agreement to the Closing, unless otherwise approved in writing by 3323,
FADI shall conduct its business in accordance with the provisions of this
Section 7.
7.1 Preservation of Representations. FADI shall not take any
action that (a) if taken on or before the date hereof, would make any of its
representations and warranties in Section 4 untrue or (b) would interfere with
its ability to perform its obligations under this Agreement.
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7.2 Procuring Approvals. FADI shall use its best efforts to
obtain all licenses, consents or other approvals required to be obtained by it
from any Person in connection with the transactions contemplated by this
Agreement. As soon as practicable after the date hereof, FADI shall mail copies
of the definitive Information Statement to its shareholders.
7.3 Delivery of Periodic Reports. FADI shall promptly deliver
to 3323, upon release to wire services or filing under EDGAR, copies of all its
press releases and Exchange Act filings.
8. CONDITIONS PRECEDENT TO FADI'S OBLIGATIONS. The obligations
of FADI hereunder to issue the FADI Shares to the Exchanging Shareholders at the
Closing in exchange for the 3323 Shares and to consummate the other transactions
contemplated by Section 2 are subject to the satisfaction or waiver on or before
the Closing Date, of each of the conditions set forth in this Section 8. FADI
may not rely on the Exchanging Shareholders' failure to satisfy any condition
set forth in this Section 8 if the failure was caused by its own failure to act
in good faith or to use all reasonable efforts to satisfy the conditions set
forth in Section 9.
8.1 Accuracy of the Exchanging Shareholders' Representation
and Warranties. The representations and warranties of the Exchanging
Shareholders herein shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made as of the
Closing Date.
8.2 Performance by the Exchanging Shareholders. The Exchanging
Shareholders shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required hereunder to be
performed, satisfied or complied with by them at or prior to the Closing Date.
In addition, 3323's acquisition of Kischi Konsulting Inc. shall have occurred on
the terms and conditions disclosed to FADI, and that FADI shall have acquired at
least 80% of the outstanding shares of 3323.
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8.3 No Injunction. No Applicable Law shall prohibit the
Exchanging Shareholders from consummating the transactions contemplated by this
Agreement, and no proceeding for that purpose shall have been commenced.
8.4 No Adverse Changes. Since the filing date of most recent
balance sheet of 3323 included in the 3323 Financial Statements, no event or
condition shall have occurred that had or would likely have a Material Adverse
Effect on 3323.
8.5 Consents Obtained. The Exchanging Shareholders shall have
obtained any written consents of any Person whose consent is required to
consummate the transactions contemplated by this Agreement.
8.6 Section 338 Election. If requested by FADI, the Exchanging
Shareholders shall have delivered to FADI any documents or instruments required
for FADI to file a timely election under Section 338 of the Code with respect to
its tax treatment of its acquisition of 3323.
8.7 Officer's Certificate. FADI shall have received a
Compliance Certificate in substantially the form of Exhibit E, executed by the
chief executive officer of 3323 as at the Closing Date.
9. CONDITIONS PRECEDENT TO THE EXCHANGING SHAREHOLDERS'
OBLIGATIONS. The obligations of the Exchanging Shareholders to assign and
transfer the 3323 Shares to FADI at the Closing in exchange for the FADI Shares
and to consummate the other transactions contemplated by Section 2 are subject
to the satisfaction or waiver on or before the Closing Date, of each of the
conditions set forth in this Section 9. The Exchanging Shareholders may not rely
on FADI's failure to satisfy any condition set forth in this Section 9 if the
failure was caused by their own failure to act in good faith or to use all
reasonable efforts to satisfy the conditions set forth in Section 8.
9.1 Accuracy of FADI's Representation and Warranties. The
representations and warranties of FADI herein shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made as of the Closing Date.
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9.2 Performance by FADI. FADI shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required hereunder to be performed, satisfied or complied with by
FADI at or prior to the Closing Date.
9.3 No Injunction. No Applicable Law shall prohibit FADI from
consummating the transactions contemplated by this Agreement, and no proceeding
for that purpose shall have been commenced.
9.4 No Adverse Changes. Since the date of the FADI Interim
Financial Information was filed, no event or condition shall have occurred that
had or would likely have a Material Adverse Effect on FADI.
9.5 No Trading Suspension or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by the SEC, nor shall
FADI has received any letter or notice of any suspension or delisting.
9.6 Consents Obtained. FADI shall have obtained any required
written consents of any other Person whose consent is required to the
transactions contemplated by this Agreement, except that the Exchanging
Shareholder acknowledges and agrees that FADI is requried to obtain receipt of
an exempting order from the Quebec Securities Commission in respect of the
issuance of FADI Shares in favor of certain Exchanging Shareholders who are
resident of the Province of Quebec, and that such exempting order shall not be
received by the Closing Date.
9.7 Board Augmentation. 3323 shall have received a unanimous
written consent of all incumbent directors of FADI, executed and effective as of
the Closing Date, subject to Closing hereunder, increasing the size of FADI
Board to five members and appointing 3323 Designees as directors of FADI to fill
the vacancies created by the increase in the size of FADI Board.
9.8 Management Realignment. 3323 shall have received (a) the
written resignation of each incumbent officer of FADI (which shall release FADI
from all obligations to them, other than indemnification without payment by
FADI), executed and effective as of the Closing Date, subject to Closing
34
hereunder, and (b) a unanimous written consent of all incumbent directors of
FADI, executed and effective as of the Closing Date electing the incumbent
officers of 3323 listed in Schedule 9.8 to the respective positions with FADI
set forth therein.
9.9 Registration Rights Agreement. FADI shall have executed
and delivered the Registration Rights Agreement.
9.10 Officer's Certificate. The Exchanging Shareholders shall
have received a Compliance Certificate in substantially the form of Exhibit F,
executed by the chief executive officer of FADI as at the Closing Date.
10. POST-CLOSING COVENANTS.
10.1 Conduct of Business. For a period of at least three years
after the Closing Date, provided that is available on commercially reasonable
terms, FADI shall maintain the directors and officers liability insurance policy
in place on the Closing Date or a replacement policy with equivalent coverage
for former officers and shall pay all premiums thereon as they become due. 3323
shall not, directly or indirectly through any Affiliates, vote FADI Shares or
take any action as officers or directors of FADI to approve, effect or
facilitate any act or omission that would result in a violation of FADI's
covenants in this Section 10.1.
11. INDEMNIFICATION.
11.1 Indemnification by FADI. FADI shall indemnify and hold
harmless 3323 and its Affiliates, duly authorized agents and Control Persons
from and against any Liabilities and Litigation Expenses incurred by the
Indemnified Person in connection with any Proceeding to which the Indemnified
Person is, was or at any time becomes a party, arising from FADI's breach of its
representations and warranties under this Agreement or its failure to perform
any of its covenants contained in this Agreement.
35
11.2 Indemnification by the Exchanging Shareholders. Each of
the Exchanging Shareholders shall indemnify and hold harmless FADI and its
Affiliates, duly authorized agents and Control Persons from and against any
Liabilities and Litigation Expenses incurred by the Indemnified Person in
connection with any Proceeding to which the Indemnified Person is, was or at any
time becomes a party, arising from the Exchanging Shareholder's breach of its
representations and warranties under this Agreement or its failure to perform
any of its covenants contained in this Agreement.
11.3 Notice and Defense of Claim. The Indemnified Person shall
promptly notify the Indemnifying Person in writing of the commencement of any
Third Person Proceeding for which indemnification may be claimed hereunder,
provided that any failure to so notify the Indemnifying Person shall not relieve
it from its obligations under this Section 11. If it receives notice of a Third
Person Proceeding from the Indemnified Person, the Indemnifying Person may
participate in the Proceeding at its own expense and will be entitled to assume
the defense thereof with counsel of its choice unless counsel for the
Indemnifying Person reasonably concludes that there would be a conflict of
interest between the Indemnifying Person and the Indemnified Person that
precludes their joint representation under Applicable Law or ethical canons. If
the Indemnifying Person assumes the defense of the Third Person Proceeding, it
shall not be liable to the Indemnified Person for any Litigation Expenses
subsequently incurred by it in connection with the defense thereof, except to
the extent that the Indemnifying Person authorizes the Indemnified Person to
engage separate counsel or the Indemnifying Person or its counsel fails to act
with reasonable diligence in assuming the defense of the Proceeding, in each of
which events all Litigation Expenses thereafter incurred by the Indemnified
Person for employing separate counsel shall be subject to indemnification
hereunder. In no event shall the Indemnifying Person be obligated for the
Litigation Expenses of more than one separate counsel to represent all
Indemnified Parties in a particular Third Person Proceeding.
11.4 Advancement of Expenses. Upon written request by the
Indemnified Person in connection with a Third Person Proceeding, the
Indemnifying Person shall promptly advance all Litigation Expenses incurred by
or on behalf of the Indemnified Person to the extent authorized under Section
11.3. The request shall contain a reasonably detailed description of the
Litigation Expenses or, if available to the Indemnified Person, documentation
evidencing the amount of the Litigation Expenses. The Indemnified Person's right
to advancement of Litigation Expenses shall be conditioned upon its agreement to
repay amounts advanced if it is ultimately determined that the Indemnified
Person is not entitled to be indemnified for those Litigation Expenses under
this Section 11.
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11.5 Remedies of the Indemnified Person. In the event that (a)
advances of Litigation Expenses pursuant to Section 11.4 are not timely made,
(b) payment of Liabilities or Litigation Expenses are not timely made after a
determination of entitlement to indemnification hereunder or (c) the Indemnified
Person otherwise seeks to enforce its rights under this Section 11, the
Indemnified Person shall be entitled to a final adjudication of its rights
hereunder in any court of competent jurisdiction in the venue specified in
Section 13.1 (an "Adjudication"). All Litigation Expenses reasonably incurred by
the Indemnified Person in connection with an Adjudication shall be borne by the
Indemnifying Person if the Indemnified Person is successful in the Adjudication.
11.6 Settlement, Compromise and Consent. Without the prior
written consent of the Indemnified Person, the Indemnifying Person shall not
settle any Third Person Proceeding, permit a default judgment to be entered
therein or consent to the entry of any adverse judgment therein unless the
settlement, compromise or consent includes an unconditional release in favor of
the Indemnified Person by all claimants from any liability therein. The
Indemnifying Person shall not be liable to indemnify the Indemnified Person
under this Section 11 for any amounts paid in settlement of a Third Person
Proceeding effected without its written consent, which the Indemnifying Person
shall not unreasonably withhold or delay.
11.7 Nonexclusivity. The rights of the Indemnified Person
under this Section 11 shall not be deemed exclusive or in limitation of any
other rights to which the Indemnified Person may be entitled under Applicable
Law.
11.8 Other Payments. The Indemnifying Person shall not be
liable to make any payment under this Section 11 to the extent that the
Indemnified Person has received payment from a third party of the amounts
otherwise payable by the Indemnifying Person hereunder.
11.9 Subrogation. The Indemnifying Person shall be subrogated,
to the extent of any indemnification payment under this Agreement, to all
related rights of recovery of the Indemnified Person, and the Indemnified Person
shall take all actions necessary to secure the Indemnifying Person's recovery
rights and perfect its ability to enforce those rights.
37
12. TERMINATION.
12.1 3323 Termination Event. Provided that the Exchanging
Shareholders have not materially breached any of their representations,
warranties, covenants or agreements contained herein, the Exchanging
Shareholders may terminate this Agreement and abandon the transactions
contemplated hereby at any time prior to the Closing if FADI shall have failed
to satisfy in any material respect any of the conditions set forth in Section 9
or any of those conditions shall have become incapable of fulfillment and shall
not have been waived by a majority of the Exchanging Shareholders and the
failure or nonfulfillment materially reduces the benefits of the transactions
contemplated hereby to the Exchanging Shareholders.
12.2 FADI Termination Event. Provided that FADI has not
materially breached any of its representations, warranties, covenants or
agreements contained herein, it may terminate this Agreement and abandon the
transactions contemplated hereby at any time prior to the Closing if the
Exchanging Shareholders shall have failed to satisfy in any material respect any
of the conditions set forth in Section 8 or any of those conditions shall have
become incapable of fulfillment and shall not have been waived by FADI and the
failure or nonfulfillment materially reduces the benefits of the transactions
contemplated hereby to FADI.
12.3 Other Termination Events. This Agreement may be
terminated and the transactions contemplated hereby abandoned by the Parties (i)
by mutual agreement, or (ii) if the Closing does not occur on or prior to the
Outside Closing Date, provided that the Party seeking termination pursuant to
this Section 12.3 is not in breach of its or their material representations,
warranties, covenants or agreements contained in this Agreement.
12.4 Notice of Termination. In the event FADI or an Exchanging
Shareholder seeks to terminate this Agreement pursuant to this Section 12, it
shall provide written notice (a "Termination Notice") thereof to the other
Party, setting forth in reasonable detail the grounds for termination, whereupon
the transactions contemplated by this Agreement shall be terminated, without
further action by any Party, subject to the provisions of Section 12.5.
38
12.5 Effects of Termination. If this Agreement is terminated
and the transactions contemplated hereby are abandoned as provided in this
Section 12, this Agreement shall become void and of no further force or effect,
except that each Party shall return all documents and other material received
from or on behalf of the counter Party in connection with the transactions
contemplated hereby, together with all copies thereof, whether so obtained
before or after the execution hereof. The restrictions set forth in the LOI
regarding disclosure of confidential information shall remain in full force and
effect notwithstanding any termination of this Agreement.
13. MISCELLANEOUS.
13.1 Choice of Law; Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida without regard
to principles of conflicts of laws. Any action brought by a Party against the
counter Party concerning the transactions contemplated by this Agreement may be
brought in the state courts of New York or in the federal courts located in
Miami, Florida. All Parties agree to submit to the jurisdiction of those courts
and waive trial by jury. The prevailing Party in any Proceeding between the
Parties shall be entitled to recover from the counter Party its reasonable
attorneys' fees and disbursements incurred in connection with the Proceeding.
13.2 Assignment. Neither this Agreement nor any rights or
obligations of a Party hereunder may be assigned by any Party without the prior
written consent of the counter Party.
13.3 Binding Effect. The terms, conditions and provisions of
this Agreement and all rights and obligations of each Party hereunder shall
inure to the benefit of and be binding upon that Person and its successors and
permitted assigns. Nothing herein expressed or implied shall give or be
construed to give to any other Person any legal or equitable rights hereunder.
13.4 Amendment. Except as expressly provided in this
Agreement, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by all the
Parties.
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13.5 Notices. Any notice given under this Agreement shall be
made in writing and shall be deemed to have been duly given or made if delivered
personally, mailed with postage prepaid by registered or certified mail or sent
by courier or facsimile to a Party at its address set forth or provided below.
Any notice so sent shall be deemed to have been given or delivered (a) at the
time that it is personally delivered, (b) within two business days after the
date deposited in the United States mail or one business day after deposit with
an overnight courier if sent by mail or courier or (c) when receipt is
acknowledged, if sent by facsimile. A Party may change its address by giving
notice in writing, stating its new address, to the other Party.
If to the Exchanging Shareholders:
[Provide]
With a copy to:
Hodgson Russ LLP
One M&T Plaza
Suite 2000
Buffalo NY
14203
Attention: Joseph P. Galda
If to FADI:
5607 Hiatus Road, Suite 500
Tamarac Florida, 33321-6408
Att: Scott Siegel
13.6 Fees and Expenses. All reasonable fees and expenses of
the Exchanging Shareholders (including legal and accounting expenses) shall be
paid at Closing by FADI from the proceeds of the private placement. As to FADI
and 3323, each Party shall pay its own expenses in connection with the
transactions contemplated by this Agreement.
13.7 Publicity. Except as required by Applicable Law, neither
FADI nor any Exchanging Shareholder shall issue any press release or otherwise
make any public statement or announcement with respect to this Agreement or the
transactions contemplated hereby without the prior consent of 3323, in the case
of a statement or announcement by FADI, or FADI, in the case of a statement or
announcement by any Exchanging Shareholder, which shall not be unreasonably
withheld, conditioned or delayed in either case.
40
13.8 Entire Agreement. This Agreement, including the Schedules
and Exhibits, together with the confidentiality provisions of the
confidentiality agreement, set forth the entire agreement and understanding of
the Parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between or among the
Parties, both oral and written, relating to the subject matter hereof.
13.9 Severability. In the event any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without that provision, severance of which shall not affect the validity
or enforceability of any other provision of this Agreement.
13.10 Waiver of Provisions. The waiver of compliance at any
time with any of the provisions, terms or conditions contained in this Agreement
shall not be considered a waiver of the provision, term or condition itself or
of any other provision, term or condition hereof.
13.11 Covenants. The parties agree and covenant to cooperate
fully and provide any certificates, documentation, financial statements and data
for purposes of making any filings or submissions to the regulatory authorities
having jurisdiction in the United States and Canada.
13.12 Captions. The headings and captions in this Agreement
and in the Schedules and Exhibits are for convenience and identification only
and are in no way intended to define, limit or expand the scope and intent of
this Agreement or any provision hereof.
13.13 Counterparts. This Agreement may be executed in separate
counterparts that together will constitute one and the same instrument.
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13.14 IN WITNESS WHEREOF, the Parties have caused this
Agreement to be duly executed by the undersigned as of the date first set forth
above.
FIRST AID DIRECT, INC.
By: /s/ Scott Siegel
--------------------------------------------
Scott Siegel,
President and Chief Executive Officer
THE EXCHANGING SHAREHOLDERS
/s/ Michel L. Marengere
-----------------------------------------------
Name: Michel L. Marengere
/s/ Jacques Delorme
-----------------------------------------------
Name: Jacques Delorme
42