EXHIBIT 2.6
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HAMILTION DIGITAL DESIGNS LTD.
as Corporation,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
as Vendors,
DTEK sIGNS ULC
as Purchaser
and
Display Technologies, Inc.
as Parent
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SHARE PURCHASE AGREEMENT
JUNE 30, 2000
SHARE PURCHASE AGREEMENT
Share Purchase Agreement dated June 30, 2000, between ▇▇▇▇▇▇▇▇ DIGITAL
DESIGNS LTD., a corporation incorporated under the laws of Ontario
("CORPORATION"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, DTEK SIGNS
ULC, an unlimited liability company incorporated under the laws of Nova Scotia
("PURCHASER"), and DISPLAY TECHNOLOGIES, INC., a corporation incorporated under
the laws of Nevada ("PARENT").
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS.
Where used herein or in any amendments hereto or in any communication
required or permitted to be given hereunder, the following terms shall have the
following meanings, respectively, unless the context otherwise requires:
(a) "AFFILIATE" has the meaning ascribed thereto in the ONTARIO
BUSINESS CORPORATIONS ACT.
(b) "AGREEMENT" means this Share Purchase Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof; "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar
expressions mean and refer to this Agreement and not to any
particular Article, Section or other subdivision; "ARTICLE",
"SECTION" or other subdivision of this Agreement means and refers
to the specified Article, Section or other subdivision of this
Agreement.
(c) "AUTHORIZATION" means, with respect to any Person, any order,
permit, approval, waiver, licence or similar authorization of any
Governmental Entity having jurisdiction over the Person.
(d) "ANCILLARY AGREEMENTS" means each and every other agreement
contemplated by this Agreement to be executed and delivered by
any of the Parties or any combination of the Parties.
(e) "BACKLOG" means firm orders (as evidenced by accepted purchase
orders or similar documents) for products of Corporation in hand
that have not been shipped or produced.
(f) "BOOKS AND RECORDS" means all books of account, tax records,
sales and purchase records, customer and supplier lists, computer
software, formulae, business reports, plans and projections and
all other documents, files, correspondence and other information
of Corporation whether in writing or electronic form.
(g) "BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which the principal commercial banks in Toronto,
Ontario are not open for business during normal business hours.
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(h) "CLOSING" means the completion of the transaction of purchase and
sale contemplated in this Agreement.
(i) "CLOSING DATE" means June 30, 2000, 12:01 a.m. Eastern Time.
(j) "CONSENT" means the consent of a contracting party to a direct or
indirect change in control of Corporation if required by the
terms of any Contract.
(k) "CONTRACTS" means all agreements to which Corporation is a party
including all contracts, leases of personal property and
commitments of any nature, written or oral.
(l) "CORPORATE RECORDS" means the corporate records of Corporation,
including (i) all constating documents and by-laws, (ii) all
minutes of meetings and resolutions of shareholders and directors
(and any committees), and (iii) the share certificate books,
securities register, register of transfers and register of
directors.
(m) "CORPORATION" has the meaning in the initial description of the
Parties hereto.
(n) "EMPLOYEE PLANS" means all the employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, profit
sharing, termination, change of control, pension, retirement,
stock option, stock purchase, stock appreciation, health,
welfare, medical, dental, disability, life insurance and similar
plans, programmes, arrangements or practices relating to the
current or former employees, officers or directors of Corporation
maintained, sponsored or funded by Corporation, whether written
or oral, funded or unfunded, insured or self-insured, registered
or unregistered.
(o) "ENVIRONMENTAL LAWS" means all applicable Laws and agreements
with Governmental Entities and all other statutory requirements
relating to public health or the protection of the environment
and all Authorizations issued pursuant to such Laws, agreements
or statutory requirements.
(p) "FINANCIAL STATEMENTS" shall mean the audited financial
statements for Corporation, as at April 30, 1998 and April 30,
1999, respectively, consisting in each case of a balance sheet
and the accompanying statements of income, retained earnings and
changes in financial position for the period then ended and notes
to the financial statements together with the report of the
auditors thereon, a copy of which financial statements is annexed
hereto as Schedule 3.2(w).
(q) "GAAP" means, at any time, accounting principles generally
accepted in Canada including those set out in the Handbook of the
Canadian Institute of Chartered Accountants, at the relevant time
applied on a consistent basis.
(r) "GOVERNMENTAL ENTITY" means any (i) multinational, federal,
provincial, state, municipal, local or other governmental or
public department, central bank, court, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) any
subdivision or authority of any of the foregoing, or (iii) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any
of the above.
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(s) "IOC" means Innovation Ontario Corporation.
(t) "INTELLECTUAL PROPERTY" means (i) any trade marks, trade names,
business names, brand names, service marks, logos, computer
software, computer programmes, copyrights, including any
performing, author or moral rights, designs, inventions, patents,
franchises, formulae, processes, know-how, technology and related
goodwill, (ii) any applications, registrations, issued patents,
continuations in part, divisional applications or analogous
rights or licence rights therefor, and (iii) other intellectual
or industrial property in each case, owned or used by the
Corporation.
(u) "INTERIM FINANCIAL STATEMENTS" means the unaudited balance sheet
of Corporation as at April 30, 2000 and the accompanying
unaudited statement of income of Corporation for the 12-month
period then ended and all notes in respect thereof, a copy of
which Interim Financial Statement is annexed hereto as Schedule
3.2(w).
(v) "INTERIM PERIOD" means the period between the close of business
on the date of this Agreement and the Closing.
(w) "LAWS" shall mean (i) all constitutions, treaties, laws,
statutes, codes, ordinances, orders, decrees, rules, regulations,
and municipal by-laws, whether domestic, foreign or
international; (ii) all judgments, orders, writs, injunctions,
decisions, rulings, decrees, and awards of any governmental
authority or body; and (iii) all policies, practices and
guidelines of any governmental authority or body which, although
not actually having the force of law, are considered by such
governmental authority or body as requiring compliance as if
having the force of law, in each case binding on or affecting the
Party or Person referred to in the context in which such word is
used; and "LAW" shall mean any one of them.
(x) "LEASED PROPERTIES" means the lands and premises listed and
described in Schedule 3.2(o).
(y) "LEASES" means the leases of the Leased Properties described in
Schedule 3.2(o).
(z) "LIEN" means any mortgage, charge, pledge, hypothecation,
security interest, assignment, lien (statutory or otherwise),
title retention agreement or arrangement, restrictive covenant or
other encumbrance of any nature or any other arrangement or
condition which, in substance, secures payment or performance of
an obligation.
(aa) "NET BOOK VALUE" means the excess of Corporation's total assets
over total liabilities, as determined in accordance with GAAP.
(bb) "ORDINARY COURSE" means, with respect to an action taken by a
Person, that such action is consistent with the past practices of
the Person and is taken in the ordinary course of the normal
day-to-day operations of the Person.
(cc) "PARENT" has the meaning in the initial description of the
parties hereto.
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(dd) "PARTIES" means Corporation, Vendors, Trustee, Purchaser and
Parent, and any other Person who may become a party to this
Agreement.
(ee) "PERMITTED LIENS" means (i) Liens for taxes, assessments or
governmental charges or levies on property not yet due and
delinquent, (ii) easements, encroachments and other minor
imperfections of title which do not, individually or in the
aggregate, materially detract from the value of or impair the use
or marketability of any real property, and (iii) Liens listed and
described in Schedule 1.1(cc) but only to the extent such Liens
conform to their description in Schedule 1.1(cc).
(ff) "PERSON" means a natural person, partnership, limited liability
partnership, corporation, joint stock company, trust,
unincorporated association, joint venture or other entity or
Governmental Entity, and pronouns have a similarly extended
meaning.
(gg) "PURCHASER" has the meaning in the initial description of the
Parties hereto.
(hh) "REQUIRED CONSENTS" means those Consents and Authorizations
listed and described in Schedule 3.2(b).
(ii) "SHAREHOLDERS AGREEMENTS" means each of the shareholders
agreement made as of October 14, 1994 among IOC, each of the
Vendors and the Corporation, and the shareholders agreement made
as of September 8, 1994 among the Vendors and Corporation.
(jj) "TRUSTEE" means Laurentian Bank of Canada, as Trustee of the
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Registered Retirement Savings Plan Trust.
(kk) "VENDORS" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, and "VENDOR" shall mean any one of them.
1.2 OTHER DEFINED TERMS
In addition to the defined terms in Section 1.1, each of the following
capitalized terms shall have the meaning ascribed thereto in the corresponding
Sections:
TERM SECTION
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Collective Covenants.......................... 8.4(1)
Collective Representations.................... 8.4(1)
Damages ...................................... 8.1
Indemnified Party............................. 8.5
Indemnifying Party............................ 8.5
Individual Representations and Covenants...... 8.4(1)
ITA .......................................... 3.1(d)
Material Contracts ........................... 3.2(p)
Public Statement ............................. 10.4
Purchase Price ............................... 2.2
Purchased Shares.............................. 2.1
R&D Credit or Refunds......................... 3.2(ff)(xi)
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TERM SECTION
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Tax .......................................... 3.2(ff)(i)
Tax Returns .................................. 3.2(ff)(ii)
Third Party Claim ............................ 8.7(1)
Trustee Shares ............................... 2.1
Vendor's Closing Certificate ................. 8.3(1)(a)
1.3 GENDER AND NUMBER.
Any reference in this Agreement to gender includes all genders and
words importing the singular number only shall include the plural and vice
versa.
1.4 HEADINGS, ETC.
The provision of a Table of Contents, the division of this Agreement
into Articles and Sections and the insertion of headings are for convenient
reference only and are not to affect its interpretation.
1.5 CURRENCY.
All references in this Agreement to dollars, unless otherwise
specifically indicated, are expressed in Canadian currency.
1.6 KNOWLEDGE.
Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge of Vendors, it shall be deemed
to refer to the actual or constructive separate knowledge of each of the
Vendors, and to the extent that such persons do not possess sufficient knowledge
of the facts or matters relating to any such representation or warranty, such
persons have obtained and/or confirmed to truth of the same through inquires of
other officers or employees of Corporation who, having regard to their
positions, job descriptions and responsibilities, should reasonably be expected
to have and disclose knowledge and information relevant to the representation
and warranty in question.
1.7 ACCOUNTING TERMS.
All accounting terms not specifically defined in this Agreement shall
be interpreted in accordance with GAAP.
1.8 INCORPORATION OF SCHEDULES.
The schedules attached to this Agreement shall, for all purposes of
this Agreement, form an integral part of it.
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ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
2.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, each Vendor
agrees to sell, assign and transfer to Purchaser and Purchaser agrees to
purchase from each Vendor on the Closing Date, all (but not less than all) of
their respective common shares in the capital of Corporation, which shares,
together with the 50 common shares of Corporation owned of record by Trustee
(the "TRUSTEE SHARES"), constitute all (but not less than all) of the issued and
outstanding common shares in the capital of Corporation (collectively, the
"PURCHASED SHARES"). Purchaser is separately purchasing the Trustee Shares from
Trustee for a total purchase price of $81,286.80, which amount constitutes part
of the Purchase Price as defined in Section 2.2 below and which is the estimated
full Purchase Price for such shares.
2.2 PURCHASE PRICE.
The purchase price ("PURCHASE PRICE") shall be an amount in cash equal
to the greater of: (a) 700% of Corporation's net income (determined pursuant to
GAAP) for the fiscal year ending June 30, 2000 plus 5% of Corporation's Backlog
at June 30, 2000 minus $120,000 (Purchaser's payment for the special preferred
shares of Corporation) or (b) 200% of the Net Book Value of Corporation at June
30, 2000 in excess of $120,000 (i.e., (Net Book Value - $120,000) x 200%).
Except as provided above, the special preferred shares of Corporation acquired
by Purchaser from Ontario Development Corporation, as the successor to IOC,
shall not be taken into account in the determination of the Purchase Price. The
Purchase Price shall be allocated among the Vendors ratably with their ownership
interests in Corporation. The initial determination of the actual amount of the
Purchase Price shall be made by Corporation's auditor. If Purchaser disagrees
with such initial determination, Purchaser shall notify Corporation of such
disagreement in writing within 20 days following Purchaser's receipt of such
determination. Within 10 days after such notice from Purchaser, Purchaser's
auditor and Corporation's auditor shall select ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or a
comparable auditing firm to make the final determination of the Purchase Price,
whose decision shall be binding on all of the Parties. All costs associated with
the determination of the Purchase Price shall be paid solely by Corporation and
not by any of Vendors or Trustee personally.
2.3 PAYMENT OF THE PURCHASE PRICE.
Parent shall cause Purchaser to pay a total of $887,536.80 of the
Purchase Price to the Vendors and Trustee at Closing. To the extent the total
Purchase Price exceeds $887,536.80, Parent shall cause such excess to be paid by
Purchaser to the Vendors and Trustee not later than September 30, 2000, which
date shall be delayed a reasonable period of time (not to exceed 45 days) if
necessary for the final determination of the Purchase Price. If the Purchase
Price as finally determined is less than $850,000, the difference shall promptly
be repaid by Vendors and Trustee to Purchaser.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF VENDORS
3.1 INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF VENDORS.
Each Vendor individually represents and warrants as to himself as
follows to Purchaser and Parent and acknowledges and confirms that Purchaser and
Parent are relying upon such representations and warranties in connection with
the purchase by Purchaser of the Purchased Shares:
(a) VALIDITY OF AGREEMENTS. The execution, delivery and performance
by him of this Agreement and any Ancillary Agreement to which he
is a party:
(i) will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition)
result in a breach or a violation of, or conflict with, or
allow any other Person to exercise any rights under, any of
the terms or provisions of any contracts or instruments to
which he is a party;
(ii) will not result in a breach of, or cause the termination or
revocation of, any Authorization held by him necessary to
the ownership or the operation of the business of
Corporation; and
(iii) will not result in the violation of any Law, except where
such violation would not have a material adverse effect on
the transactions contemplated by this Agreement or any
Ancillary Agreement or the business, operations and assets
of Corporation.
(b) EXECUTION AND BINDING OBLIGATION. This Agreement and each
Ancillary Agreement to which he is a party have been duly
executed and delivered by, and constitutes a legal, valid and
binding obligation of, enforceable against, him in accordance
with its terms subject only to any limitation under applicable
Laws relating to (i) bankruptcy, insolvency, and other similar
Laws of general application affecting the enforcement of
creditors' rights, and (ii) the discretion that a court may
exercise in the granting of equitable remedies such as specific
performance and injunction.
(c) TITLE TO PURCHASED SHARES. He is the registered and beneficial
owner of the number of common shares of Corporation set out
beside his name in Schedule 3.1(c), with good title thereto, free
and clear of all Liens. Such common shares, together with the
Trustee Shares, collectively constitute the Purchased Shares.
Upon Closing, Purchaser will have good and valid title to such
Purchased Shares, free and clear of all Liens.
(d) RESIDENCE OF VENDORS. He is not a non-resident of Canada within
the meaning of the INCOME TAX ACT (Canada) (the "ITA").
3.2 CORPORATE REPRESENTATIONS AND WARRANTIES OF VENDORS.
The Vendors, jointly and severally (except as provided in Section
8.4(1)), represent and warrant as follows to Purchaser and Parent and
acknowledge and confirm that Purchaser and Parent are relying
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upon such representations and warranties in connection with the purchase by
Purchaser of the Purchased Shares:
(a) INCORPORATION AND QUALIFICATION. Corporation is a corporation
incorporated, organized, in good standing and existing under the
Laws of its jurisdiction of incorporation and has the corporate
power to own and operate its property, carry on its business and
enter into and perform its obligations under this Agreement.
Corporation is duly qualified, licensed or registered to carry on
business in the jurisdictions listed in Schedule 3.2(a). The
jurisdictions listed in Schedule 3.2(a) include all jurisdictions
in which the nature of the assets or the business of Corporation,
makes such qualification necessary or where Corporation owns or
leases any material assets or conducts any material business.
(b) VALIDITY OF AGREEMENT. Except as disclosed in Schedule 3.2(b),
the execution, delivery and performance by Vendors and
Corporation of this Agreement and each Ancillary Agreement:
(i) will not (or would not with the giving of notice, the
lapse of time or the happening of any other event or
condition) result in a breach or a violation of, or
conflict with, or allow any other Person to exercise any
rights under, any of the terms or provisions of
Corporation's constituting documents or by-laws or any
contracts or instruments to which Corporation is a party
or pursuant to which any of its assets or property may be
affected; and
(ii) will not result in a breach of, or cause the termination
or revocation of, any Authorization necessary to the
ownership or the operation of the business of
Corporation.
(c) EXECUTION AND BINDING OBLIGATION. This Agreement has and any
Ancillary Agreement to which Corporation is a party have been
duly executed and delivered by, and constitutes a legal, valid
and binding obligation of, enforceable against, the Corporation
in accordance with its terms subject only to any limitation under
applicable Laws relating to (i) bankruptcy, winding-up,
insolvency, reorganization, arrangement and other similar Laws of
general application affecting the enforcement of creditors'
rights, and (ii) the discretion that a court may exercise in the
granting of equitable remedies such as specific performance and
injunction.
(d) REQUIRED AUTHORIZATIONS. There is no requirement to make any
filing with, give any notice to, or obtain any Authorization of,
any Governmental Entity or Person as a condition to the lawful
completion of the transactions contemplated by this Agreement,
except for the filings, notifications and Authorizations
described in Schedule 3.2(b) or that relate solely to the
identity of Purchaser or the nature of the business carried on by
Purchaser.
(e) AUTHORIZED AND ISSUED CAPITAL. The authorized capital of
Corporation consists of (i) an unlimited number of common shares,
of which 1,000 such common shares have been duly issued and are
outstanding as fully paid and non-
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assessable and which constitute all of the Purchased Shares; and
(ii) an unlimited number of special shares, of which 171 such
special shares have been duly issued and are outstanding as fully
paid and non-assessable. Such outstanding common shares and
special shares constitute all of the issued and outstanding
shares of capital stock of Corporation and all have been issued
in compliance with all applicable Laws including, without
limitation, applicable securities Laws.
There are no outstanding options, securities, loans or notes
convertible or exchangeable for any shares or other securities of
Corporation.
(f) SUBSIDIARIES. Corporation has no subsidiaries and holds no shares
or other ownership, equity or proprietary interests in any other
Person.
(g) NO OTHER AGREEMENTS TO PURCHASE. Except for Purchaser's right
under this Agreement and except as provided in the Shareholders
Agreement, no Person has any written or oral agreement, option or
warrant or any right or privilege (whether by Law, pre-emptive or
contractual) capable of becoming such for (i) the purchase or
acquisition from Vendors of any of the Purchased Shares, or (ii)
the purchase, subscription, allotment or issuance of any of the
unissued shares or other securities of Corporation.
(h) CORPORATE RECORDS. The Corporate Records are complete and
accurate, and contain copies of all of the articles, by-laws and
resolutions passed by the shareholders and directors of
Corporation since the date of incorporation. Other than the
Shareholders' Agreement, Corporation has never been subject to,
or affected by, any unanimous shareholders agreement.
(i) CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as disclosed in
Schedule 3.2(i), since April 30, 2000, Corporation has carried on
its business in the Ordinary Course and, without limiting the
generality of the foregoing, Corporation has not:
(i) made or assumed any commitment, obligation or liability
which is outside the Ordinary Course;
(ii) ceased to operate its properties and to carry on its
business as heretofore carried on;
(iii) sold or otherwise in any way alienated or disposed of any
of its assets other than in the Ordinary Course;
(iv) split, combined or reclassified any of its shares, or
issued redeemed, retired, repurchased or otherwise
acquired shares in its capital or any warrants, rights,
bonds, debentures, notes other corporate security, or
reserved, declared, made or paid any dividend, or made
any other distributions or appropriations of profits or
capital;
(v) discharged any secured or unsecured obligation or
liability (whether accrued, absolute, contingent or
otherwise), other than obligations and liabilities
discharged in the Ordinary Course;
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(vi) waived or cancelled any material claim, account
receivable, trade account, or right outside the Ordinary
Course or made any gift;
(vii) made any change in the rate or form of compensation or
remuneration payable or to become payable to any of its
shareholders, directors, officers, employees or agents
which is outside the Ordinary Course;
(viii) made any change in its accounting principles and
practices as utilized in the preparation of the Financial
Statements and the Interim Financial Statements, or
granted to any customer any special allowance or
discount, or changed its pricing, credit or payment
policies, other than in the Ordinary Course;
(ix) made any individual capital expenditure in excess of
$10,000.00;
(x) made any loan or advance, or assumed, guaranteed or
otherwise became liable with respect to the liabilities
or obligations of any Person;
(xi) modified its constating instruments, by-laws or capital
structure;
(xii) removed any auditor;
(xiii) purchased or otherwise acquired any corporate security or
proprietary, participatory or profit interest in any
Person;
(xiv) incurred any indebtedness other than to trade creditors
in the Ordinary Course; or
(xv) authorized, agreed or otherwise committed to any of the
foregoing.
(j) NO MATERIAL ADVERSE CHANGE. Except as may be otherwise set forth
in the Schedules to this Agreement, since April 30, 2000 there
has not occurred any material adverse change in the affairs,
operations, business, assets or condition of Corporation, its
assets or its business.
(k) COMPLIANCE WITH LAWS. Corporation is conducting its business in
compliance with all applicable Laws other than acts of
non-compliance which, in the aggregate, are not material.
(l) AUTHORIZATIONS. Corporation owns, holds, possesses or lawfully
uses in the operation of its business, all Authorizations which
are necessary for it to conduct its business, as presently or
previously conducted or for the ownership and use of their assets
in compliance with all applicable Laws. Each Authorization is
valid, subsisting and in good standing, and Corporation is not in
default or in breach of any Authorizations and, to the knowledge
of Vendors, no proceeding is pending or threatened to revoke or
limit any Authorizations. The change of control of Corporation
will not result in the loss of termination of any Authorizations.
(m) TITLE TO THE ASSETS. Corporation owns (with good title) all of
the properties and assets (whether real, personal or mixed and
whether tangible or intangible) that it purports to
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own including all the properties and assets reflected as being
owned by Corporation in the financial Books and Records.
Corporation has legal and beneficial ownership of such assets
free and clear of all Liens, except for Permitted Liens.
(n) CONDITION OF TANGIBLE ASSETS. The buildings, plants, structures,
vehicles, equipment and other tangible personal property of
Corporation are structurally sound, in good operating condition
and repair having regard to their use and age and are adequate
and suitable for the uses to which they are being put. None of
such buildings, plants, structures, vehicles, equipment or other
property is in need of maintenance or repairs except for normal
maintenance and repairs that are not material in nature or cost.
(o) LEASES. Corporation is not a party to, or under any agreement to
become a party to, any lease with respect to real property other
than the Leases, copies of which have been provided to Purchaser.
Each Lease is in good standing, creates a good and valid
leasehold estate in the Leased Properties thereby demised and is
in full force and effect without amendment, except as disclosed
in Schedule 3.2(o). With respect to each Lease (i) all rents and
additional rents have been paid, (ii) no waiver, indulgence or
postponement of the lessee's obligations has been granted by the
lessor and (iii) there exists no event of default under the
Lease. Corporation has adequate rights of ingress and egress into
each of the Leased Properties for the operation of their
respective business) in the Ordinary Course. Schedule 3.2(o)
contains a list of all of the Leases.
(p) MATERIAL CONTRACTS. Except for the Contracts described in
Schedule 3.2(p) (collectively, the "MATERIAL CONTRACTS"), the
Leases, the Employee Plans, the insurance policies set out in
Schedule 3.2(cc) and the Contracts listed in Schedule 3.2(aa),
Corporation is not a party to or bound by:
(i) any distributor, sales, advertising, agency or
manufacturer's representative Contract;
(ii) any continuing Contract for the purchase of materials,
supplies, equipment or services involving in the case of
any such Contract more than $25,000.00 over the life of
the Contract;
(iii) any Contract that expires or that may be renewed at the
option of any Person other than Corporation, as the case
may be, so as to expire more than one year after the date
of this Agreement;
(iv) any trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money,
any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type
required to be capitalized in accordance with GAAP;
(v) any Contract for capital expenditures;
(vi) any confidentiality, secrecy or non-disclosure Contract
or any Contract limiting the freedom of Corporation to
engage in any line of business, compete with any
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other Person, operate its assets at maximum production
capacity or otherwise conduct its business;
(vii) any Contract pursuant to which Corporation is a lessor of
any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property;
(viii) any Contract with any Person with whom Corporation, or
any of or Vendors does not deal at arm's length within
the meaning of the ITA;
(ix) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment
with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or
indebtedness of any other Person; or
(x) any Contract made out of the Ordinary Course.
(q) NO BREACH OF MATERIAL CONTRACTS. Corporation has performed all of
the obligations required to be performed by it and is entitled to
all benefits under, and is not alleged to be in default of any
Material Contract to which it is a party. Each of the Material
Contracts is in full force and effect, unamended, and there
exists no default or event of default or event, occurrence,
condition or act (including the purchase of the Purchased Shares)
which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default
or event of default under any Material Contract. True, correct
and complete copies of all Material Contracts have been delivered
to Purchaser.
(r) INTELLECTUAL PROPERTY.
(i) Attached as Schedule 3.2(r)(i) is a list of Intellectual
Property owned by or licensed to Corporation in carrying
on its businesses. Schedule 3.2(r)(i) also includes
complete and accurate particulars of all registrations or
applications for registration of the Intellectual
Property, as well as particulars of any interest in the
Intellectual Property enjoyed by third parties. Subject
only to any third party interests listed in Schedule
3.2(r)(i), Corporation is the beneficial and
unconditional owner of its Intellectual Property, free
and clear of all Liens, and is not a party to or bound by
any Contract or other obligation that limits or impairs
its ability to use, sell, transfer, assign or convey, or
that otherwise affects, its Intellectual Property, nor
has any Person been granted any interest in or right to
use all or any portion of the Intellectual Property. For
greater certainty, notwithstanding the provisions of any
contract, Vendors acknowledge that they have no rights in
or to any Intellectual Property developed by the
Corporation on its own initiative or on behalf of third
parties other than Vendors. Neither of Vendors has
knowledge of any infringement or violation of any of its
rights or the rights of Corporation in the Intellectual
Property. To the knowledge of each of the Vendors, the
conduct of the business of Corporation does not infringe
upon the patents, trade marks, licences, trade names,
business names, copyright or other industrial or
intellectual property rights, domestic or foreign, of any
other Person.
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(ii) Employee Confidentiality Agreements. Except as set forth
on Schedule 3.2(r) (ii), all current and former employees
and consultants of Corporation whose duties or
responsibilities relate to Corporation's business have
entered into confidentiality, invention assignment and
proprietary information agreements with Corporation in
the form provided to Purchaser.
(s) YEAR 2000. The Corporation has taken reasonable steps to ensure
that, and to the knowledge of the Vendors, except as set forth on
Schedule 3.2(r) the information technology systems used, in whole
or in part, in or required for, the carrying on of the business
of the Corporation in the manner heretofore carried on are
designed to be used during and after the calendar year 2000 A.D.
and will operate during each such time period without error
relating to date data.
(t) INVENTORIES. The inventories of Corporation do not include any
material items which are slow-moving, below standard quality or
of a quality or quantity not usable or saleable in the Ordinary
Course. The inventory levels of Corporation have been maintained
at levels sufficient for the continuation of the business of
Corporation in the Ordinary Course.
(u) PRODUCT AND SERVICE WARRANTIES. Schedule 3.2(u) sets forth
complete and accurate copies of the written warranties and
guaranties by Corporation currently in effect with respect to its
products and services. Except as set forth on Schedule 3.2(u),
there have not been any material deviations from such warranties
and guaranties and neither Corporation nor any of its salesmen,
employees, distributors or agents is authorized to undertake
obligations to any customer or to other third parties in excess
of such warranties or guaranties. Corporation has not made any
oral warranty or guaranty with respect to its products and
services which materially deviates from its standard form set
forth in Schedule 3.2(u).
(v) BOOKS AND RECORDS. All accounting and financial Books and Records
have been fully, properly and accurately kept and completed in
all material respects. The Books and Records and other data and
information are not recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process,
whether computerized or not) which are not available to
Corporation in the Ordinary Course.
(w) FINANCIAL STATEMENTS. The Financial Statements and the Interim
Financial Statements have been prepared in accordance with GAAP
(except that the Interim Financial Statements do not include
footnotes and are subject to normal, recurring year-end
adjustments) applied on a basis consistent with those of previous
fiscal years and each fairly, accurately and completely discloses
in all material respects (i) the assets, liabilities and
obligations (whether accrued, contingent, absolute or otherwise),
income, losses, retained earnings, reserves and financial
position of Corporation, (ii) the results of operations of
Corporation, and (ii) the changes in the financial position of
Corporation, all as at the dates and for the periods therein
specified.
True, correct and complete copies of the Financial Statements and
the Interim Financial Statements are attached as Schedule 3.2(w).
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(x) NO LIABILITIES. Except as disclosed in this Agreement and
Schedule 3.2(x) or reflected or reserved against in the balance
sheet forming part of the Interim Financial Statements,
Corporation has no liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise) except for
current liabilities incurred in the Ordinary Course since April
30, 2000.
(y) BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 3.2(y) is a
correct and complete list showing (i) the name of each bank in
which Corporation has an account or safety deposit box and the
names of all Persons authorized to draw on the account or to have
access to the safety deposit box, and (ii) the names of all
Persons holding powers of attorney from Corporation. Copies of
the powers of attorney have been provided to Purchaser.
(z) ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.2(z):
(i) none of the real properties (including, without
limitation, the Leased Properties) currently or, to the
knowledge of Vendors, formerly, owned, leased or used by
Corporation or over which Corporation has or had charge,
management or control (i) has ever been used by
Corporation or, to the knowledge of Vendors, any other
Person, as a waste disposal site or as a licensed
landfill, or (ii) has ever had asbestos,
asbestos-containing materials, PCBs, radioactive
substances or aboveground or underground storage systems,
active or abandoned, located on, at or under them by
Corporation or, to the knowledge of Vendors, by any other
Person;
(ii) to the knowledge of Vendors, no properties adjacent to
any of the Leased Properties are contaminated where such
contamination could, if it migrated to a Subject
Property, have a material adverse effect on the Subject
Property;
(iii) Corporation has not transported, removed or disposed of
any waste to a location outside of Ontario;
(iv) neither Corporation nor, to the knowledge of Vendors, any
other Person has located any contaminants in the ground
or in groundwater under any of the Leased Properties; and
(v) Corporation has not been required by any Governmental
Entity to (i) alter any of the Leased Properties in a
material way in order to be in compliance with
Environmental Laws, or (ii) perform any environmental
closure, decommissioning, rehabilitation, restoration or
post-remedial investigations, on, about, or in connection
with any real property.
Schedule 3.2(z) lists all reports and documents relating to the
environmental matters affecting Corporation or any of the Leased
Properties which are in the possession or under the control of
Vendors. Copies of all such reports and documents have been
provided to Purchaser. To the knowledge of Vendors, there are no
other reports or documents relating to environmental matters
affecting Corporation or any of the Leased
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Properties which have not been made available to Purchaser
whether by reason of confidentiality restrictions or otherwise.
(aa) EMPLOYEES. Except as set forth in Schedule 3.2(aa):
(i) there is no collective agreement in force with respect to
the employees of Corporation, no collective agreement is
currently being negotiated by Corporation, no union or
employee bargaining agent holds bargaining rights with
respect to any employees of Corporation , and there are
no current or, to the Vendors' knowledge, threatened
attempts to organize or establish any trade union or
employee association with respect to Corporation There is
no unfair labour practice complaint pending or to the
Vendors' knowledge, threatened against Corporation and
there is no labour strike, slow down, work stoppage or
lockout in effect or to the Vendors' knowledge,
threatened against Corporation nor has there been any
such event within the past three (3) years; and
(ii) all amounts due and owing or accrued due but not yet
owing for all salary, wages, bonuses, commissions,
vacation with pay, pension benefits or other employee
benefits have been paid or if accrued are reflected in
the Books and Records.
Schedule 3.2(aa) contains a correct and complete list of each
employee and consultant of Corporation whether actively at work
or not, their salaries, wage rates, commissions and consulting
fees, bonus arrangements, benefits, positions, ages, status as
full-time or part-time employees and length of service. Except as
set forth in Schedule 3.2(u), no employee of Corporation has any
agreement as to length of notice or severance payment required to
terminate his or her employment, other than such as results by
Law from the employment of an employee without an agreement as to
notice or severance.
(bb) EMPLOYEE PLANS.
(i) Schedule 3.2(bb) lists and describes all Employee Plans.
Corporation has furnished to the Purchaser true, correct
and complete copies of all the Employee Plans as amended
as of the date hereof, together with all related
documentation including, without limitation, funding and
investment management agreements, summary plan
descriptions, the most recent actuarial reports,
financial statements and asset statements, all material
opinions and memoranda (whether externally or internally
prepared) and all material correspondence with all
regulatory authorities or other relevant persons. No
changes have occurred or are expected to occur which
would materially affect the information contained in the
actuarial reports, financial statements or asset
statements required to be provided to the Purchaser
pursuant to this provision.
(ii) All of the Employee Plans are and have been established,
registered, qualified, invested and administered, in all
respects, in accordance with their terms and all Laws,
including all Tax Laws where same is required for
preferential tax treatment. To the knowledge of Vendors,
no fact or circumstance exists that
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could adversely affect the preferential tax treatment
ordinarily accorded to any such Employee Plan.
(iii) All obligations regarding the Employee Plans have been
satisfied, there are no outstanding defaults or
violations by any party to any Employee Plan and no
Taxes, penalties, or fees are owing or exigible under or
in respect of any of the Employee Plans.
(iv) No Employee Plan is subject to any pending investigation,
examination or other proceeding, action or claim
initiated by any regulatory authority, or by any other
party (other than routine claims for benefits).
(v) All contributions or premiums required to be paid by
Corporation under the terms of each Employee Plan or by
Laws have been made in a timely fashion in accordance
with Laws and the terms of the Employee Plans.
Corporation has no liability (other than liabilities
accruing after the Closing Date) with respect to any of
the Employee Plans. Contributions or premiums for the
period up to the Closing Date have been paid by
Corporation, as the case may be, even though not
otherwise required to be paid until a later date.
(vi) No commitments to improve or otherwise amend any Employee
Plan have been made except as required by applicable
Laws.
(vii) Each Employee Plan which is a funded plan is fully funded
as of the Closing Date on both a going concern and a
solvency basis pursuant to the actuarial assumptions and
methodology utilized in the most recent actuarial
valuation therefor.
(viii) None of the Employee Plans enjoy any special tax status
under any Laws, nor have any advance Tax ruling been
sought or received in respect of any Employee Plan.
(ix) No insurance policy or any other agreement affecting any
Employee Plan requires or permits a retroactive increase
in contributions, premiums or other payments due
thereunder. The level of insurance reserves under each
insured Employee Plan is reasonable and sufficient to
provide for all incurred but unreported claims.
(x) None of the Employee Plans (other than pension plans)
provide benefits to retired employees or to the
beneficiaries or dependants of retired employees.
(xi) No Employee Plan exists that could result in (i) the
payment to any person of any money, benefits or other
property, (ii) accelerated or increased funding
requirements for any Employee Plan or (iii) the
acceleration or provision of any other increased rights
or benefits to any person as a result of the transactions
contemplated by this Agreement.
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(cc) INSURANCE. The assets of Corporation are insured against loss or
damage by all insurable hazards or risks on a replacement cost
basis. Schedule 3.2(cc) contains a list of insurance policies
which are maintained by Corporation setting out, in respect of
each policy, a description of the type of policy, the name of
insurer, the coverage allowance, the expiration date, the annual
premium and any pending claims. Corporation is not in default
with respect to any of the provisions contained in the insurance
policies, the payment of any premiums under any insurance policy
nor has failed to give any notice or to present any claim under
any insurance policy in a due and timely fashion. Copies of all
insurance policies of Corporation and the most recent inspection
reports received from insurance underwriters have been delivered
to Purchaser.
(dd) LITIGATION. Except as described in Schedule 3.2(dd), there are no
(i) actions, suits or proceedings, at law or in equity, by any
Person (including, without limitation, Corporation), (ii)
arbitration or alternative dispute resolution process, or (iii)
any administrative or other proceeding by or before (or to the
knowledge of Vendors any investigation by) any Governmental
Entity, pending, or, to the knowledge of Vendors, threatened
against or affecting Corporation, the business or assets of
Corporation. Corporation is not subject to any judgment, order or
decree entered in any lawsuit or proceeding nor has Corporation
settled any claim prior to being prosecuted in respect of it.
Neither of Corporation is the plaintiff or complainant in any
action, suit or proceeding.
(ee) CUSTOMERS AND SUPPLIERS. Schedule 3.2(ee) is a true and correct
list setting forth all of the suppliers of Corporation by dollar
amount from June 30, 1998 to the date of this Agreement and all
customers that have purchased more than $100,000 in products or
services from Corporation in the last two years..
(ff) TAX MATTERS:
(i) DEFINITION OF TAXES - For the purposes of this Agreement,
the term "TAX" or, collectively, "TAXES" shall mean (A)
any and all federal, state, provincial, municipal, local
and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities including
Canada Pension Plan and Provincial Pension Plan
contributions and unemployment insurance contributions
and employment insurance contributions and ▇▇▇▇▇▇▇'▇
compensation and deductions at source, including taxes
based upon or measured by gross receipts, income,
profits, sales, capital use and occupation, good and
services, and value added, ad valorem, transfer,
franchise, withholding, customs duties, payroll,
recapture, employment, excise and property taxes,
together with all interest, penalties, fines and
additions imposed with respect to such amounts and (B)
any liability for the payment of any amounts of the type
described in clause (A) of this Section 3.2(ff)(i) as a
result of any express or implied obligation to indemnify
any other Person or as a result of any obligations under
any agreements or arrangements with any other Person with
respect to such amounts and including any liability for
taxes of a predecessor entity.
(ii) COMPUTATION, PREPARATION AND PAYMENT - Corporation has
correctly computed all Taxes, prepared and duly and
timely filed all federal, state, provincial,
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municipal, local and foreign returns, estimates,
information statements, elections, designations, reports
and any other related filings ("TAX RETURNS"), required
to be filed by it, has timely paid all Taxes due and
payable through April 30, 2000 and has made adequate
provision in the Financial Statements and the Interim
Financial Statements for the payment of all Taxes which
are or may become due and payable for any taxation year
ending on or prior to the Closing Date. Corporation has
made adequate and timely instalments of Taxes required to
be made.
(iii) ACCRUED TAXES - With respect to any periods for which Tax
Returns have not yet been required to be filed or for
which Taxes are not yet due and payable, Corporation has
only incurred liabilities for Taxes in the Ordinary
Course and in a manner and at a level consistent with
prior periods. Tax returns, reports, elections,
designations and any other filings required to be filed
for any period ending up to the Closing Date will
correctly be prepared and duly and timely filed by
Vendors.
(iv) STATUS OF ASSESSMENTS - All Tax returns of Corporation
for all periods ending prior to or on April 30, 1999 have
been assessed, and there are no outstanding waivers of
any limitation periods or agreements providing for an
extension of time for the filing of any Tax Return or the
payment of any Tax by Corporation or any outstanding
objections to any assessment or reassessment of Taxes.
Any deficiencies proposed as a result of such assessments
or reassessments of such Tax returns have been paid and
settled.
(v) WITHHOLDINGS -Corporation has withheld from each payment
made to any of its past and present shareholders,
directors, officers, employees and agents the amount of
all Taxes and other deductions required by Law to be
withheld and has paid such amounts when due, in the form
required under the appropriate legislation, or made
adequate provision for the payment of such amounts to the
proper receiving authorities. The amount of Tax withheld
but not remitted by Corporation will be retained in their
respective accounts and will be remitted by them to the
appropriate authorities when due.
(vi) COLLECTION AND REMITTANCE -Except as set forth in
Schedule 3.2(u), Corporation has collected from each
receipt from any of the past and present customers (or
other Persons paying amounts to Corporation) the amount
of all Taxes (including goods and services tax and
provincial sales taxes) required to be collected and has
paid and remitted such Taxes when due, in the form
required under the appropriate legislation or made
adequate provision for the payment of such amounts to the
proper receiving authorities. The amount of Tax collected
but not remitted by Corporation will be retained in their
respective accounts and remitted by them to the
appropriate authorities when due.
(vii) ASSESSMENTS - Corporation is not subject to any
assessments, reassessment, levies, penalties or interest
with respect to Taxes which will result in any liability
on its part in respect of any period ending on or prior
to the Closing Date.
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(viii) JURISDICTIONS OF TAXATION - Corporation has not been and
is not currently required to file any returns, reports,
elections, designations or other filings with any
taxation authority located in any jurisdiction outside
Canada or outside the province of Ontario.
(ix) RELATED PARTY TRANSACTIONS - Corporation has not, or has
not been deemed to have for purposes of the ITA, acquired
or had the use of property for proceeds greater than the
fair market value thereof from, or disposed of property
for proceeds less than the fair market value thereof to,
or received or performed services for other than the fair
market value from or to, or paid or received interest or
any other amount other than at a fair market value rate
to or from, any Person, firm or corporation with whom it
does not deal at arm's length within the meaning of the
ITA.
(x) FORGIVENESS OF DEBT - Corporation has not at any time
benefited from a forgiveness of debt or entered into any
transaction or arrangement (including conversion of debt
into shares of their share capital) which could have
resulted in the application of Section 80 and following
of the ITA.
(xi) RESEARCH AND DEVELOPMENT TAX CREDITS AND EXPENDITURES -
All refund of taxes or credits claimed with respect to
research and development ("R&D Credit or Refunds") were
claimed by Corporation in accordance with the provisions
of the ITA and the relevant provincial legislation and
Corporation satisfied at all relevant times the relevant
criteria and conditions entitling it to such R&D Credit
or Refunds.
(xii) DEDUCTIBILITY - As of the Closing, there will not be any
Contract, plan or arrangement, including but not limited
to the provisions of this Agreement, covering any
employee or former employee of Corporation that,
individually or collectively, could give rise to the
payment of any amount that would not be deductible by
Corporation as an expense under applicable Law other than
reimbursements of a reasonable amount of entertainment
expenses and other nondeductible expenses that are
commonly paid by similarly situated businesses in
reasonable amounts.
(xiii) TAX BASIS - Corporation's tax basis in its assets (and
the undepreciated capital cost of such assets) for
purposes of determining its future amortization,
depreciation and other Federal or Provincial income Tax
deductions is accurately reflected on Corporation's Tax
Returns and records.
(gg) PAID-UP CAPITAL - The paid-up capital for Tax purposes of each of
the Purchased Shares is no less than its stated capital for
corporate purposes.
3.3 SEPARATE REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ severally represents and warrants to Purchaser and
Parent, and acknowledges and confirms that Purchaser and Parent are relying upon
such representation and warranty in connection with the purchase by Purchaser of
the Purchased Shares owned by Trustee, that Trustee is
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the registered holder of 50 common shares of Corporation, which shares are held
by Trustee in a fiduciary capacity under the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Registered
Retirement Savings Plan Trust, free and clear of all Liens. Upon closing,
Purchaser will have good and valid title to such shares, free and clear of all
Liens.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
4.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
Purchaser and Parent jointly and severally represent and warrant as
follows to Vendors and Trustee and acknowledge and confirm that Vendors and
Trustee are relying on such representations and warranties in connection with
the sale by Vendors and Trustee of the Purchased Shares:
(a) INCORPORATION AND CORPORATE POWER. Each of Purchaser and Parent
is a corporation incorporated, in good standing and existing
under the Laws of its jurisdiction of incorporation and has the
corporate power and authority to enter into and perform its
obligations under this Agreement.
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
each of Purchaser and Parent of this Agreement:
(i) have been duly authorized by all necessary corporate
action on the part of Purchaser and Parent;
(ii) do not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition)
result in a breach or a violation of, or conflict with,
any of the terms or provisions of its constating
documents or by-laws or any contracts or instruments to
which it is a party or pursuant to which any of its
assets or property may be affected; and
(iii) will not result in the violation of any Law.
(c) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by each of Purchaser and Parent and
constitutes a legal, valid and binding obligation of each of
Purchaser and Parent, enforceable against it in accordance with
its respective terms subject only to any limitation under
applicable Laws relating to (i) bankruptcy, winding-up,
insolvency, reorganization, arrangement and other similar Laws of
general application affecting the enforcement of creditors'
rights, and (ii) the discretion that a court may exercise in the
granting of equitable remedies such as specific performance and
injunction.
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ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.
(1) Each of Vendors shall cause Corporation to, during the Interim Period,
conduct its business in the Ordinary Course and, without limiting the
generality of the foregoing, Corporation not to:
(a) make or assume any commitment, obligation or liability which is
outside the Ordinary Course;
(b) cease to operate its properties and to carry on its business as
heretofore carried on;
(c) sell or otherwise in any way alienate or dispose of any of its
assets, other than in the Ordinary Course;
(d) split, combine or reclassify any of its shares, or issue, redeem,
retire, repurchase or otherwise acquire shares in its capital or
any warrants, rights, bonds, debentures, notes or other corporate
security, or reserve, declare, make or pay any dividend, or make
any other distributions or appropriations of profits or capital;
(e) discharge any secured or unsecured obligation or liability
(whether accrued, absolute, contingent or otherwise), other than
obligations and liabilities discharged in the Ordinary Course;
(f) waive or cancel any material claim, account receivable, trade
account or right outside the Ordinary Course or make any gift;
(g) make any change in the rate or form of compensation or
remuneration payable to or to become payable to any of its
shareholders, directors, officers, employees or agents which is
outside the Ordinary Course;
(h) make any change in its accounting principles and practices as
utilized in the preparation of the Financial Statements and the
Interim Financial Statements, or grant to any customer any
special allowance or discount, or change its pricing, credit or
payment policies, other than in the Ordinary Course;
(i) make any capital expenditure in excess of $10,000;
(j) make any loan or advance, or assume, guarantee, endorse or
otherwise become liable with respect to the liabilities or
obligations of any Person;
(k) modify its constating instruments, by-laws or capital structure;
(l) remove any auditor;
(m) purchase or otherwise acquire any corporate security or
proprietary, participatory or profit interest in any Person;
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(n) incur any indebtedness other than to trade creditors in the
Ordinary Course; and
(o) authorize, agree or otherwise commit to any of the foregoing.
5.2 ACCESS FOR DUE DILIGENCE.
(1) Vendors and Corporation shall (i) permit Purchaser and its employees,
counsel, accountants or other representatives, during the Interim
Period, without undue interference to the ordinary conduct of the
business of Corporation, to have reasonable access during normal
business hours and upon reasonable notice to (w) the premises of
Corporation, (x) the assets and, in particular to any information,
including all Books and Records whether retained by Vendors,
Corporation or otherwise, (y) all Contracts and Leases, and (z) the
senior personnel of Corporation, and (ii) furnish to Purchaser or its
employees, counsel, accountants or other representatives such financial
and operating data and other information with respect to the assets and
business of Corporation as Purchaser shall from time to time reasonably
request.
(2) No investigations made by or on behalf of Purchaser, whether under this
Section 5.2 or any other provision of this Agreement, shall have the
effect of waiving, diminishing the scope of, or otherwise affecting any
representation or warranty made in this Agreement.
5.3 REQUEST FOR REQUIRED CONSENTS.
Vendors and Corporation shall use their best efforts to obtain, prior
to Closing, all of the Required Consents. Such Required Consents shall be upon
such terms as are acceptable to Purchaser, acting reasonably. Purchaser will
co-operate in obtaining such Required Consents.
5.4 FILINGS AND REQUIRED CONSENTS.
Each of Vendors, Corporation, and Purchaser, as promptly as practicable
after the execution of this Agreement, will (i) make, or cause to be made, all
such filings and submissions under all Laws applicable to it, as may be required
for it to consummate the purchase and sale of the Purchased Shares in accordance
with the terms of this Agreement, and (ii) obtain, or cause to be obtained, all
Required Consents necessary or advisable to be obtained by it in order to
consummate such transfer. Vendors, Corporation and Purchaser will coordinate and
cooperate with one another in exchanging such information and supplying such
assistance as may be reasonably requested by each in connection with the
foregoing including, without limitation, providing each other with all notices
and information supplied to or filed with any Governmental Entity (except for
notices and information which Vendors, Corporation or Purchaser, in each case
acting reasonably, considers highly confidential and sensitive which may be
filed on a confidential basis), and all notices and correspondence received from
any Governmental Entity.
5.5 NOTICE OF UNTRUE REPRESENTATION OR WARRANTY.
Each Vendor shall promptly notify Purchaser, and Purchaser shall
promptly notify Vendors, upon any representation or warranty made by either of
them contained in this Agreement becoming untrue or incorrect during the Interim
Period. Any such notification shall set out particulars of the untrue or
incorrect representation or warranty and details of any actions being taken by
Vendor or Purchaser, as the case may be, to rectify that state of affairs.
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5.6 EXCLUSIVE DEALING.
During the Interim Period, Vendors and Corporation shall not, directly
or indirectly, solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any inquiries or proposals from, any Person (other than Purchaser)
relating to any transaction involving the sale of any shares of Vendors or
Corporation or the sale of the business or assets of Corporation (other than as
permitted in this Agreement).
ARTICLE 6
CONDITIONS OF CLOSING
6.1 CONDITIONS FOR THE BENEFIT OF PURCHASER.
The purchase and sale of the Purchased Shares is subject to the
following conditions to be fulfilled or performed at or prior to the Closing
Date, which conditions are for the exclusive benefit of Purchaser and may be
waived, in whole or in part, by Purchaser in its sole discretion:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Vendors contained in this Agreement shall be true
and correct as of the Closing Date with the same force and effect
as if such representations and warranties had been made on and as
of such date and Vendors shall have executed and delivered a
certificate of a senior officer to that effect. The receipt of
such certificate and the Closing shall not constitute a waiver by
Purchaser of any of the representations and warranties of Vendors
which are contained in this Agreement. Upon the delivery of such
certificate, the representations and warranties of Vendors in
Article 3 shall be deemed to have been made on and as of the
Closing Date with the same force and effect as if made on and as
of such date.
(b) PERFORMANCE OF COVENANTS. Vendors and Corporation shall have
fulfilled or complied with all covenants contained in this
Agreement to be fulfilled or complied with by it at or prior to
the Closing, and Vendors shall have executed and delivered a
certificate of a senior officer to that effect. The receipt of
such certificate and the Closing shall not constitute a waiver by
Purchaser of any of the covenants of Vendors which are contained
in this Agreement.
(c) REQUIRED CONSENTS. All Required Consents shall have been obtained
on terms acceptable to Purchaser, acting reasonably. To the
extent that a notification is required under the COMPETITION ACT
(Canada), all applicable waiting periods shall have expired.
(d) DUE DILIGENCE. Purchaser shall have completed its investigation
into the Corporation, the Vendors' title to the Purchased Shares,
the Corporation's business (including without limitation the
Books and Records, the Corporate Records and the Corporation's
assets, operations, liabilities and financial condition) and all
other matters it deems relevant and such investigation shall not
have disclosed any matter which the Purchaser, acting reasonably,
considers to be materially adverse to its decision to acquire the
Purchased Shares;
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(e) DELIVERIES. Vendors shall deliver or cause to be delivered to
Purchaser the following in form and substance satisfactory to
Purchaser, acting reasonably:
(i) share certificates representing the Purchased Shares
owned by them, duly endorsed in blank for transfer, or
accompanied by irrevocable security transfer powers of
attorney duly executed in blank, in either case by the
holders of record;
(ii) certified copies of (i) the charter documents and by-laws
of Corporation, (ii) all resolutions of the shareholders
and the board of directors of Corporation approving the
entering into and completion of the transaction
contemplated by this Agreement; and
(iii) a certificate of status, compliance, good standing or
like certificate with respect to, Corporation issued by
appropriate government officials of its jurisdiction of
incorporation and, of each jurisdiction in which
Corporation carries on its business as listed in Schedule
3.2(a);
(iv) the certificates referred to in Section 6.1(a) and
Section 6.1(b);
(v) an opinion of counsel to Vendors and Corporation in form
and substance acceptable to Purchaser.
(vi) An estoppel certificate or landlord's acknowledgement
from each lessor under each of the Leases, confirming the
matters set forth in Section 3.2(o), copies of any
non-disturbance agreements with secured creditors; and
(vii) a duly executed resignation effective as at the Closing
of each director and officer of Corporation specified by
Purchaser in writing prior to the Closing.
(f) NO LEGAL ACTION. No action or proceeding shall be pending or
threatened by any Person (other than Purchaser) in any
jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right of
Corporation to conduct its business after Closing on
substantially the same basis as heretofore operated.
(g) NO MATERIAL CHANGE. During the Interim Period, there shall have
been no material adverse change in the business, operations,
properties, prospects or condition of Corporation.
(h) CONTINUANCE OF EMPLOYMENT. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and substantially
all other employees of Corporation on the date hereof shall have
remained employed in good standing with Corporation on the
Closing Date.
(i) SPECIAL PREFERRED SHARES. Purchaser shall have purchased all of
the outstanding special preferred shares of Corporation
originally issued to Innovation Ontario Corporation on terms and
conditions acceptable to Purchaser;
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(j) NONCOMPETITION AGREEMENTS. Each of the Vendors shall have entered
into, executed and delivered a noncompetition agreement in form
and substance acceptable to Purchaser.
6.2 TERMINATION BY PURCHASER.
If any of the conditions set forth in Section 6.1 have not been
fulfilled or waived at or prior to the Closing Date or any obligation or
covenant of Vendors or Corporation to be performed at or prior to Closing has
not been observed or performed by such time, Purchaser may terminate this
Agreement by notice in writing to Vendors and the Corporation, and in such event
Purchaser and Parent shall be released from all obligations save and except for
obligations under Sections 10.3 (Brokers), 10.4 (Announcements) and 10.6
(Expenses) which shall survive. Vendors and Corporation shall only be released
from their obligations if the condition or conditions for the non-performance of
which Purchaser has terminated this Agreement are not reasonably capable of
being performed or caused to be performed by Vendors or the Corporation. If
Purchaser waives compliance with any of the conditions, obligations or covenants
contained in this Agreement, the waiver will be without prejudice to any of its
rights of termination in the event of non-fulfilment, non-observance or
non-performance of any other condition, obligation or covenant in whole or in
part. Purchaser's right of termination under this Article 6 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. Except as
otherwise provided herein, nothing in Article 6 shall limit or affect any other
rights or causes of action Purchaser or Parent may have with respect to the
representations, warranties, covenants and indemnities in its favour contained
in this Agreement.
6.3 CONDITIONS FOR THE BENEFIT OF VENDORS AND TRUSTEE.
The purchase and sale of the Purchased Shares is subject to the
following conditions to be fulfilled or performed at or prior to the Closing,
which conditions are for the exclusive benefit of Vendors and Trustee and may be
waived, in whole or in part, by Vendors and Trustee in their sole discretion:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser and Parent contained in this Agreement
shall be true and correct as of the Closing Date with the same
force and effect as if such representations and warranties had
been made on and as of such date and Purchaser and Parent shall
have executed and delivered a certificate to that effect. The
receipt of such certificate and the Closing shall not constitute
a waiver of the representations and warranties of Purchaser and
Parent which are contained in this Agreement. Upon delivery of
such certificate, the representations and warranties of Purchaser
and Parent in Article 4 shall be deemed to have been made on and
as of the Closing Date with the same force and effect as if made
on and as of such date.
(b) PERFORMANCE OF COVENANTS. Purchaser and Parent shall have
fulfilled or complied with all covenants contained in this
Agreement to be fulfilled or complied with by them at or prior to
the Closing Date and Purchaser and Parent shall have executed and
delivered a certificate to that effect. The receipt of such
certificate and the Closing shall not
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constitute a waiver by Vendors of the covenants of Purchaser and
Parent which are contained in this Agreement.
(c) DELIVERIES. Purchaser shall deliver or cause to be delivered to
Vendors the following in form and substance satisfactory to
Vendors acting reasonably:
(i) a certificate of status, compliance, good standing or
like certificate with respect to each of Purchaser and
Parent issued by appropriate government official of the
jurisdiction of its incorporation; and
(ii) the certificates referred to in Section 6.3(a) and
Section 6.3(b).
(d) ▇▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT. Purchaser and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
shall have entered into an employment agreement, effective the
Closing Date, in form and substance acceptable to Purchaser.
(e) NO LEGAL ACTION. No action or proceeding shall be pending or
threatened by any Person (other than Vendors or Corporation) in
any jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right of
Corporation to conduct its business after Closing on
substantially the same basis as heretofore operated.
6.4 TERMINATION BY VENDORS.
If any of the conditions set forth in Section 6.3 have not been
fulfilled or waived at or prior to the Closing Date or any obligation or
covenant of Purchaser or Parent to be performed at or prior to the Closing Date
has not been observed or performed by such time, the Vendors may terminate this
Agreement by notice in writing to Purchaser, and in such event Vendors shall be
released from all obligations hereunder save and except for their obligations
under Sections 10.3 (Brokers), 10.4 (Announcements) and 10.6 (Expenses) which
shall survive. Purchaser and Parent shall only be released from their
obligations if the condition or conditions for the non-performance of which
Vendors have terminated this Agreement are not reasonably capable of being
performed or caused to be performed by Purchaser or Parent. If the Vendors waive
compliance with any of the conditions, obligations or covenants contained in
this Agreement, the waiver will be without prejudice to any of their rights of
termination in the event of non-fulfillment, non-observance or non-performance
of any other condition, obligation or covenant in whole or in part. The Vendors'
right of termination under this Article 6 is in addition to any other rights
they may have under this Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. Except as otherwise provided
herein, nothing in Article 6 shall limit or affect any other rights or causes of
action the Vendors may have with respect to the representations, warranties,
covenants and indemnities in their favor contained in this Agreement.
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ARTICLE 7
CLOSING
7.1 CLOSING; EFFECTIVE DATE.
The completion of the transaction of purchase and sale contemplated by
this Agreement shall take place at 10:00 a.m. (Eastern Daylight Time) on the
Closing Date or at such place, on such other date and at such other time as may
be agreed upon in writing between Vendors, Purchaser and Parent. However, for
accounting purposes the Closing shall be deemed effective as of 12:01 a.m.
Eastern Time, on July 1, 2000.
ARTICLE 8
INDEMNIFICATION
8.1 VENDORS' INDEMNIFICATION IN FAVOUR OF PURCHASER.
Subject to Sections 8.3 and 8.4, Vendors shall indemnify and save each
of Purchaser, Corporation and Parent harmless of and from any loss, liability,
claim, damage (including incidental and consequential damage) or expense
(whether or not involving a third-party claim) including legal expenses
(collectively, "DAMAGES") suffered by, imposed upon or asserted against
Purchaser or Corporation as a result of, in respect of, connected with, or
arising out of, under, or pursuant to:
(a) any failure of Vendors to perform or fulfil any covenant of
Vendors under this Agreement; or
(b) any breach or inaccuracy of any representation or warranty given
by Vendors contained in this Agreement.
8.2 PURCHASER AND PARENT INDEMNIFICATION IN FAVOUR OF VENDORS AND TRUSTEE.
Subject to Section 8.3, Purchaser and Parent shall indemnify and save
Vendors and Trustee harmless of and from any Damages suffered by, imposed upon
or asserted against Vendors or Trustee as a result of, in respect of, connected
with, or arising out of, under or pursuant to:
(a) any failure of Purchaser or Parent to perform or fulfil any
covenant of Purchaser or Parent under this Agreement; or
(b) any breach or inaccuracy of any representation or warranty given
by Purchaser or Parent contained in this Agreement.
8.3 TIME LIMITATIONS.
(1) The representations and warranties of Vendors and Trustee contained in
this Agreement shall survive the Closing and, notwithstanding the
Closing and any investigation made by or on behalf of Purchaser or
Parent, shall continue for a period of two (2) years after the Closing,
except that:
-28-
(a) the representations and warranties set out in Sections 3.1(b)
(Execution and Binding Obligation), 3.1(c) (Title to Purchased
Shares), 3.1(d) (Residence of Vendors), 3.2(a) (Incorporation and
Qualification), 3.2(e) (Authorized and Issued Capital), 3.2(g)
(No Other Agreement to Purchase), 3.2(z) (Environmental Matters)
3.2(bb) (Employee Plans) and Section 3.3 (Separate
Representations and Warranties of ▇▇▇▇▇▇) shall survive the
Closing and continue in full force and effect without limitation
of time;
(b) the representations and warranties set out in Sections 3.2(ff)
(Tax Matters) and 3.2(gg) (Paid-up Capital) (and the
corresponding representations and warranties set out with
Vendor's Closing Certificate) shall survive for a period of 30
days after the expiration of the statute of limitations
applicable to claims relating to such matters; and
(c) a claim for any breach of any of the representations and
warranties of Vendors contained in this Agreement involving fraud
or fraudulent misrepresentation shall survive and continue in
full force and effect without limitation of time.
(2) The representations and warranties of Purchaser and Parent contained in
this Agreement shall survive the Closing and, notwithstanding the
Closing and any investigation made by or on behalf of Vendors, shall
continue for a period of two (2) years after the Closing except that:
(a) the representation and warranty set out in Section 3.1(c)
(Execution and Binding Obligation) shall survive the Closing and
continue in full force and effect without limitation of time; and
(b) a claim for any breach of any representations and warranties of
Purchaser and Parent contained in this Agreement involving fraud
or fraudulent misrepresentation shall survive and continue in
full force and effect without limitation of time.
(3) The obligations of indemnification set out in Sections 8.1 and 8.2
shall survive the Closing, except for the obligation of indemnification
arising from any incorrectness in, or breach of, any representation or
warranty made by Vendors, Purchaser or Parent, as the case may be,
which in each case shall be subject to the limitations regarding
survival of representations and warranties set forth in Sections
8.3(1), or 8.3(2) as the case may be.
8.4 LIMITATION ON DAMAGES.
(1) The covenants of each of the Vendors in Section 2.1, the
representations and warranties of each Vendor in Section 3.1 and the
representations and warranties of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in Section 3.3 are
individual representations, warranties and covenants of each such
Vendor (collectively, the "INDIVIDUAL REPRESENTATIONS AND COVENANTS").
This means that the particular Vendor or Trustee making the Individual
Representations and Covenants will be solely liable for such Individual
Representations and Covenants as they pertain to himself or itself, but
not to the other Vendors. The representations and warranties contained
in Section 3.2 (collectively, the "COLLECTIVE REPRESENTATIONS") and
covenants (collectively, the "COLLECTIVE COVENANTS") in this Agreement
are made jointly and severally by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. This means that he
will be jointly and severally liable to Purchaser and Parent for any
Collective Representation and any Collective Covenant to the extent
provided in this Article 8. The Collective Representations and
Collective Covenants in this Agreement are made severally by each of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇. This means that each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ will be only severally liable to Purchaser and Parent for any
Collective Representation and any Collective Covenant to the extent
provided in this Article 8. By way of example, the liability of ▇▇.
▇▇▇▇▇ will be limited to 14.0% of the Damages incurred for any
Collective Representation or Collective Covenant, and the liability of
▇▇. ▇▇▇▇▇▇ will be limited to 26% of Damages incurred for any
Collective Representation or any Collective Covenant.
(2) Other than Damages suffered by Purchaser or Parent as a result of a
breach or inaccuracy of the representations and warranties contained in
Sections 3.1, 3.2(e), 3.2(g), 3.2(z), 3.2(bb) and 3.2(ff), all of which
shall not be subject to the limitations in this Section 8.4(2), Vendors
shall have no liability for indemnification pursuant to Section 8.1 as
a result of a breach by Vendors of the Collective Representations,
until the aggregate of the total of all Damages suffered by Purchaser
or Parent as a result of a breach by Vendors of its Collective
Representations exceeds $50,000, after which Vendors' liability for
indemnification shall commence from the first dollar of such Damages.
The liability of each Vendor and Trustee under this Article 8 shall not
exceed the amount of the Purchase Price received by such Vendor or
Trustee.
8.5 OBLIGATION TO REIMBURSE
The amount of any Damages suffered or incurred by a party being
indemnified hereunder (the "INDEMNIFIED PARTY") shall accrue interest at a rate
per annum of 8% from the date it is determined that the Indemnified Party incurs
any such Damages until payment in full by the Party providing for
indemnification hereunder (the "INDEMNIFYING PARTY").
8.6 NOTIFICATION.
Promptly upon obtaining knowledge thereof, the Indemnified Party shall
notify the Indemnifying Party of any cause which the Indemnified Party has
determined has given or could give riser to indemnification under this Article
8. The omission so to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any duty to indemnify and hold harmless which otherwise
might exist with respect to such cause unless (and only to that extent) the
omission to notify materially prejudices the ability of the Indemnifying Party
to exercise its right to defend provided in this Article 8.
8.7 DEFENSE OF THIRD PARTY CLAIM.
(1) If any legal proceeding shall be instituted or any claim or demand
shall be asserted by a third party against the Indemnified Party (each
a "THIRD PARTY CLAIM"), then the Indemnifying Party shall have the
right, after receipt of the Indemnified Party's notice under Section
8.6 and upon giving notice to the Indemnified Party within 10 calendar
days of such receipt, to defend the Third Party Claim at its own cost
and expense with counsel of its own selection, provided that:
(a) the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
(b) the Third Party Claim seeks only monetary damages and does not
seek any injunctive or other relief against the Indemnified
Party;
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(c) the Indemnifying Party unconditionally acknowledges in writing
its obligation to indemnify and hold the Indemnified Party
harmless with respect to the Third Party Claim; and
(d) legal counsel chosen by the Indemnifying Party is satisfactory to
the Indemnified Party, acting reasonably.
Amounts payable by the Indemnifying Party pursuant to a Third Party
Claim shall be paid in accordance with the terms of the settlement or,
the judgment, as applicable, but in any event prior to the expiry of
any delay for a judgment to become executory.
(2) The Indemnifying Party shall not be permitted to compromise and settle
or to cause a compromise and settlement of any Third Party Claim,
without the prior written consent of the Indemnified Party, unless:
(a) the terms of the compromise and settlement require only the
payment of money and do not require the Indemnified Party or the
Corporation to admit any wrongdoing or take or refrain from
taking any action; and
(b) the Indemnified Party receives, as part of the compromise and
settlement, a legally binding and enforceable unconditional
satisfaction or release, which his in form and substance
satisfactory to the Indemnified Party, acting reasonably, from
any and all obligations or liabilities it may have with respect
to the Third Party Claim.
(3) If the Indemnifying Party fails:
(a) within 10 calendar days from receipt of the notice of a Third
Party Claim to give notice of its intention to defend the Third
Party Claim in accordance with Section 8.7(1), or
(b) to comply at any time with Section 8.7,
then the Indemnifying Party shall be deemed to have waived its right to
defend the Third Party Claim and the Indemnified Party shall have the
right (but not the obligation) to undertake or to cause Corporation to
undertake the defense of the Third Party Claim and compromise and
settle the Third Party Claim on behalf, for the account and at the risk
and expense of the Indemnifying Party.
(4) Where the defence of a Third Party Claim is being undertaken and
controlled by the Indemnifying Party, the Indemnified Party will use
its reasonable efforts to make available to the Indemnifying Party
those employees whose assistance, testimony or presence is necessary to
assist the Indemnifying Party in evaluating and defending any such
claims. However, the Indemnifying Party shall be responsible for the
expense associated with any employees made available by the Indemnified
Party to the Indemnifying Party pursuant to this Section 8.7(4), which
expense shall be equal to an amount to be mutually agreed upon per
person per hour or per day for each day or portion thereof that the
employees are assisting the Indemnifying Party and which expenses shall
not exceed the actual cost to the Indemnified Party associated with the
employees.
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(5) With respect to any Third Party Claim at the request of the
Indemnifying Party, the Indemnified Party shall make available to the
Indemnifying Party or its representatives on a timely basis all
documents, records and other materials in the possession of the
Indemnified Party, at the expense of the Indemnifying Party, reasonably
required by the Indemnifying Party for its use in defending any such
claim and shall otherwise cooperate on a timely basis with the
Indemnifying Party in the defence of such claim.
(6) With respect to any Third Party Claim in respect of Tax or other
liability enforceable by Lien against the property of the Indemnified
Party, the Indemnifying Party's right to so defend the Proceeding shall
only apply after payment of the re-assessment.
ARTICLE 9
POST-CLOSING COVENANTS
9.1 POST-CLOSING COVENANTS OF PURCHASER AND PARENT.
Parent shall, or shall cause Purchaser or Hamilton to, do the
following:
(a) SHAREHOLDER LOAN - within 30 days following the Closing Date,
repay in full to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ the outstanding $336,000.00
shareholder loan from ▇▇. ▇▇▇▇▇▇▇▇ to Corporation.
(b) B.E. ▇▇▇▇▇▇▇ LOAN - within 30 days following the Closing Date,
repay to B.E. ▇▇▇▇▇▇▇ in full the $150,000.00 indebtedness of
Corporation to ▇▇. ▇▇▇▇▇▇▇.
(c) ▇▇▇▇▇▇▇▇ GUARANTEE - within 90 days following the Closing Date,
arrange for the full and complete release of ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ from his guarantee of Corporation's indebtedness to
Royal Bank.
9.2 POST-CLOSING DELIVERY OF PURCHASED SHARES BY TRUSTEE.
Within 10 days following the receipt by Trustee of the full purchase
price for the 50 Purchased Shares owned by Trustee, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cause
Trustee to, and Trustee shall, deliver or cause to be delivered to Purchaser all
share certificates representing such Purchased Shares, duly endorsed in blank
for transfer, or accompanied by irrevocable security transfer powers of attorney
duly executed in blank, by Trustee. Notwithstanding any provisions of this
Agreement to the contrary, upon full payment of the Purchase Price to Trustee
for such Purchased Shares, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have no equitable, beneficial
or other legal interest of any form whatsoever in such Purchased Shares.
9.3 CONFIDENTIALITY.
After the Closing, Vendors will keep confidential and will not use or
disclose any information in their possession or under their control relating to
Corporation or its business, unless such information is or becomes generally
available to the public other than as a result of a disclosure by Vendors in
violation of this Agreement.
-32-
9.4 FURTHER ASSURANCES.
From time to time after the Closing Date, each Party shall, at the
request of any other Party, execute and deliver such additional conveyances,
transfers and other assurances as may be reasonably required to effectively
transfer the Purchased Shares to Purchaser and carry out the intent of this
Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 NOTICES.
Any notice, direction or other communication given under this Agreement
shall be in writing and given by delivering it or sending it by facsimile or
other similar form of recorded communication addressed:
(a) To Purchaser at:
DISPLAY TECHNOLOGIES, INC..
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Stikeman, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) To Corporation at:
▇▇▇▇▇▇▇▇ DIGITAL DESIGNS LTD.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇, PhD., P. Eng., President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇, Martin, Evans, Husband
▇▇▇▇▇ ▇▇▇, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(c) To the Vendors at:
▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
O'▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Telephone: 905-842-8030
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ Ball
Suite 701, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Telephone: 905-276-9111
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any such communication shall be deemed to have been validly and effectively
given (i) if personally delivered, on the date of such delivery if such date is
a Business Day and such delivery was made prior to 4:00 p.m. Eastern Time and
otherwise on the next Business Day, or (ii) if transmitted by facsimile or
similar means of recorded communication on the Business Day following the date
of transmission. Any Party may change its address for service from time to time
by notice given in accordance with the foregoing and any subsequent notice shall
be sent to such Party at its changed address.
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10.2 TIME OF THE ESSENCE.
Time shall be of the essence of this Agreement.
10.3 BROKERS.
Vendors shall indemnify and save harmless Purchaser and Corporation
from and against any and all claims, losses and costs whatsoever for any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for Vendors or
Corporation. Purchaser shall indemnify and save harmless Vendors from and
against any and all claims, losses and costs whatsoever for any commission or
other remuneration payable or alleged to be payable to any broker, agent or
other intermediary who purports to act or have acted for Purchaser. These
indemnities shall not be subject to any of the limitations set out in Article 8
of this Agreement.
10.4 ANNOUNCEMENTS.
The Vendors and Corporation shall not make any announcement regarding
the transaction contemplated herein without the prior written consent of
Purchaser, and shall disclose the transaction only to such of their employees
and professional advisers who have a need to know. Purchaser shall consult with
the Corporation prior to any press release or public statement or announcement
(a "PUBLIC STATEMENT") with respect to the transaction contemplated in this
Agreement unless such Public Statement is required by Law or by any stock
exchange or organized securities market, in which case the Party required to
make the Public Statement shall be free to make such Public Statement.
10.5 THIRD PARTY BENEFICIARIES.
Vendors and Purchaser intend that this Agreement shall not benefit or
create any right or cause of action in, or on behalf of, any Person other than
the Parties to this Agreement and no Person, other than the Parties to this
Agreement shall be entitled to rely on the provisions of this Agreement in any
action, suit, proceeding, hearing or other forum.
10.6 EXPENSES.
Purchaser and Parent shall pay for their own fees and expenses and
Vendors shall pay for their own fees and expenses, incident to the negotiation,
preparation and execution of this Agreement and the agreements contemplated
hereby, including, without limitation, legal and accounting fees and expenses.
All such fees and expenses incurred by or on behalf of Corporation shall be paid
by Corporation. All such fees and expenses incurred by or on behalf of Trustee
shall be paid by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
10.7 SHAREHOLDERS AGREEMENTS.
The Vendors hereby consent to the transactions contemplated herein and
waive any right of first refusal or other rights they may have with respect to
the sale of the Purchased Shares, whether such rights arise from the
Shareholders Agreements or from any other agreement.
-35-
10.8 AMENDMENTS.
This Agreement may only be amended, supplemented or otherwise modified
by written agreement signed by Vendors, Corporation, Trustee, Purchaser and
Parent.
10.9 WAIVER.
(1) No waiver of any of the provisions of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar),
nor shall such waiver be binding unless executed in writing by the
Party to be bound by the waiver.
(2) No failure on the part of Vendors, Trustee, Purchaser or Parent to
exercise, and no delay in exercising any right under this Agreement
shall operate as a waiver of such right; nor shall any single or
partial exercise of any such right preclude any other or further
exercise of such right or the exercise of any other right.
10.10 NON-MERGER.
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties shall not merge on and shall survive
the Closing and, notwithstanding such Closing and any investigation made by or
on behalf of any Party, shall continue in full force and effect. Closing shall
not prejudice any right of one Party against any other Party in respect of
anything done or omitted under this Agreement or in respect of any right to
damages or other remedies.
10.11 ENTIRE AGREEMENT.
This Agreement together with the agreements referred to herein
constitutes the entire agreement between the Parties with respect to the
transactions contemplated in this Agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties. There are no representations, warranties, covenants, conditions or
other agreements, express or implied, collateral, statutory or otherwise,
between the Parties in connection with the subject matter of this Agreement
except as specifically set forth herein and therein and neither Vendors nor
Purchaser has relied or is relying on any other information, discussion or
understanding in entering into and completing the transactions contemplated in
this Agreement.
10.12 SUCCESSORS AND ASSIGNS.
This Agreement shall become effective when executed by Vendors and
Purchaser and after that time shall be binding upon and enure to the benefit of
Vendors, Purchaser and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights or obligations under this Agreement
shall be assignable or transferable by Vendors without the prior written consent
of the Purchaser. Purchaser may assign and transfer this Agreement and any of
its rights and obligations under this Agreement to an Affiliate without the
prior written consent of the Vendors, provided that Purchaser shall not by
reason of any such assignment and transfer be released from its obligations
hereunder.
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10.13 INCONSISTENCY.
This Agreement shall override the Schedules annexed hereto to the
extent of any inconsistency.
10.14 SEVERABILITY.
If any provision of this Agreement shall be determined by an arbitrator
or any court of competent jurisdiction to be illegal, invalid or unenforceable,
that provision shall be severed from this Agreement and the remaining provisions
shall continue in full force and effect.
10.15 GOVERNING LAW.
This Agreement shall be governed by and interpreted and enforced in
accordance with the Laws of the Province of Ontario and the federal Laws of
Canada applicable therein.
10.16 COUNTERPARTS.
This Agreement may be executed in any number of counterparts (including
counterparts by facsimile) and all such counterparts taken together shall be
deemed to constitute one and the same instrument.
-37-
IN WITNESS WHEREOF the parties have executed this Share Purchase
Agreement.
▇▇▇▇▇▇▇▇ DIGITAL DESIGNS LTD.
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
By:
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By:
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
DTEK SIGNS ULC
By:
--------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Title: Vice President, Secretary & General Counsel
--------------------------------------------
DISPLAY TECHNOLOGIES, INC.
--------------------------------------------
By:
--------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Title: Vice President, Secretary & General Counsel
--------------------------------------------
-38-
SCHEDULE 1.1(CC)
PERMITTED LIENS
SCHEDULE 3.1(C)
TITLE TO PURCHASED SHARES
SCHEDULE 3.2(A)
JURISDICTIONS IN WHICH CORPORATION CARRIES ON BUSINESS, ETC.
SCHEDULE 3.2(B)
REQUIRED CONSENTS OR AUTHORIZATIONS
SCHEDULE 3.2(I)
ORDINARY COURSE EXCEPTIONS
SCHEDULE 3.2(O)
LEASES AND LEASED PROPERTIES
SCHEDULE 3.2(P)
MATERIAL CONTRACTS
SCHEDULE 3.2(Q)
REQUIRED CONSENTS TO CHANGE OF CONTROL
SCHEDULE 3.2(R)(I)
INTELLECTUAL PROPERTY MATTERS
SCHEDULE 3.2(R)(II)
EMPLOYEE CONFIDENTIALITY AGREEMENTS
SCHEDULE 3.2(R)
YEAR 2000 COMPLIANCE
SCHEDULE 3.2(W)
PRODUCT AND SERVICE WARRANTIES
SCHEDULE 3.2(W)
AUDITED FINANCIAL STATEMENTS AND
INTERIM FINANCIAL STATEMENTS
SCHEDULE 3.2(X)
LIABILITIES
SCHEDULE 3.2(Y)
BANK ACCOUNTS AND POWERS OF ATTORNEY
SCHEDULE 3.2(Z)
ENVIRONMENTAL MATTERS
-39-
SCHEDULE 3.2(AA)
EMPLOYEE MATTERS
SCHEDULE 3.2(BB)(I)
EMPLOYEE PLANS
SCHEDULE 3.2(CC)
INSURANCE
SCHEDULE 3.2(DD)
LITIGATION
SCHEDULE 3.2(EE)
CUSTOMERS AND SUPPLIERS
SCHEDULE 3.2(FF)
TAX MATTERS
-i-
TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1
INTERPRETATION
1.1 Defined Terms...........................................................1
1.2 Other Defined Terms.....................................................4
1.3 Gender and Number.......................................................5
1.4 Headings, etc...........................................................5
1.5 Currency................................................................5
1.6 Knowledge...............................................................5
1.7 Accounting Terms........................................................5
1.8 Incorporation of Schedules..............................................5
ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
2.1 Purchase and Sale.......................................................6
2.2 Purchase Price..........................................................6
2.3 Payment of the Purchase Price...........................................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF VENDORS
3.1 Individual Representations and Warranties of Vendors....................7
3.2 Corporate Representations and Warranties of Vendors.....................7
3.3 Separate Representations and Warranties of ▇▇▇▇▇▇......................19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
4.1 Representations and Warranties of Purchaser and Parent.................20
-ii-
ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
5.1 Conduct of Business Prior to Closing...................................21
5.2 Access for Due Diligence...............................................22
5.3 Request for Required Consents..........................................22
5.4 Filings and Required Consents..........................................22
5.5 Notice of Untrue Representation or Warranty............................22
5.6 Exclusive Dealing......................................................23
ARTICLE 6
CONDITIONS OF CLOSING
6.1 Conditions for the Benefit of Purchaser................................23
6.2 Termination by Purchaser...............................................25
6.3 Conditions for the Benefit of Vendors and Trustee......................25
6.4 Termination by Vendors.................................................26
ARTICLE 7
CLOSING
7.1 Closing; Effective Date................................................27
ARTICLE 8
INDEMNIFICATION
8.1 Vendors' Indemnification in Favour of Purchaser........................27
8.2 Purchaser and Parent Indemnification in Favour of Vendors and Trustee..27
8.3 Time Limitations.......................................................27
8.4 Limitation on Damages..................................................28
8.5 Obligation to Reimburse................................................29
8.6 Notification...........................................................29
8.7 Defense of Third Party Claim...........................................29
-iii-
ARTICLE 9 POST-CLOSING COVENANTS
9.1 Post-Closing Covenants of Purchaser and Parent.........................31
9.2 Post-Closing Delivery of Purchased Shares by Trustee...................31
9.3 Confidentiality........................................................31
9.4 Further Assurances.....................................................32
ARTICLE 10
MISCELLANEOUS
10.1 Notices................................................................32
10.2 Time of the Essence....................................................34
10.3 Brokers................................................................34
10.4 Announcements..........................................................34
10.5 Third Party Beneficiaries..............................................34
10.6 Expenses...............................................................34
10.7 Shareholders Agreements................................................34
10.8 Amendments.............................................................35
10.9 Waiver.................................................................35
10.10 Non-Merger.............................................................35
10.11 Entire Agreement.......................................................35
10.12 Successors and Assigns.................................................35
10.13 Inconsistency..........................................................36
10.14 Severability...........................................................36
10.15 Governing Law..........................................................36
10.16 Counterparts...........................................................36
-iv-
SCHEDULES
SCHEDULE 1.1(cc) PERMITTED LIENS
SCHEDULE 3.1(c) TITLE TO PURCHASED SHARES
SCHEDULE 3.2(a) JURISDICTIONS IN WHICH CORPORATION CARRIES ON BUSINESS, ETC.
SCHEDULE 3.2(b) REQUIRED CONSENTS OR AUTHORIZATIONS
SCHEDULE 3.2(i) ORDINARY COURSE EXCEPTIONS
SCHEDULE 3.2(o) LEASES AND LEASED PROPERTIES
SCHEDULE 3.2(p) MATERIAL CONTRACTS
SCHEDULE 3.2(q) REQUIRED CONSENTS TO CHANGE OF CONTROL
SCHEDULE 3.2(r)(i) INTELLECTUAL PROPERTY MATTERS
SCHEDULE 3.2(r)(ii) EMPLOYEE CONFIDENTIALITY AGREEMENTS
SCHEDULE 3.2(s) YEAR 2000 COMPLIANCE
SCHEDULE 3.2(u) PRODUCT AND SERVICE WARRANTIES
SCHEDULE 3.2(w) AUDITED FINANCIAL STATEMENTS AND INTERIM FINANCIAL
STATEMENTS
SCHEDULE 3.2(x) LIABILITIES
SCHEDULE 3.2(y) BANK ACCOUNTS AND POWERS OF ATTORNEY
SCHEDULE 3.2(z) ENVIRONMENTAL MATTERS
SCHEDULE 3.2(aa) EMPLOYEE MATTERS
SCHEDULE 3.2(bb) EMPLOYEE PLANS
SCHEDULE 3.2(cc) INSURANCE
SCHEDULE 3.2(dd) LITIGATION
SCHEDULE 3.2(ee) CUSTOMERS AND SUPPLIERS
SCHEDULE 3.2(ff)(iv)TAX MATTERS