Exhibit 10.2
SHARE PURCHASE AGREEMENT
▇▇▇▇▇ ▇▇▇▇▇▇
(the "Vendor")
- and -
1523813 ONTARIO LIMITED d.b.a. FREEDOM PHONE LINES
(the "Corporation")
- and -
KEDA CONSULTING CORP.
(the "Purchaser")
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TELEPLUS ENTERPRISES INC.
("Teleplus Enterprises")
December 9th, 2004
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION....................................................4
1.01 Defined Terms..........................................................4
1.02 Gender and Number......................................................7
1.03 Headings, Etc..........................................................7
1.04 Currency...............................................................8
1.05 Severability...........................................................8
1.06 Entire Agreement.......................................................8
1.07 Amendments.............................................................8
1.08 Waiver.................................................................8
1.09 Governing Law..........................................................8
1.10 Inclusion..............................................................8
1.11 Accounting Terms.......................................................9
1.12 Incorporation of Schedules.............................................9
ARTICLE 2 - PURCHASED SHARES AND PURCHASE PRICE...............................9
2.01 Purchase and Sale......................................................9
2.02 Purchase Price.........................................................9
2.03 Payment of the Purchase Price.........................................10
2.04 Closing Adjustments...................................................10
2.05 Pre-Closing Reorganization............................................11
2.06 The Closing...........................................................12
2.07 Payment of Taxes and Registration Charges on Transfer.................12
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF VENDOR.........................12
3.01 Due Incorporation, Existence and Corporate Power of the Corporation...12
3.02 Extra-Provincial Qualification........................................12
3.03 Authorized Capital of the Corporation.................................12
3.04 Options, etc..........................................................12
3.05 Title to Purchased Shares.............................................13
3.06 Dividends and Distributions...........................................13
3.07 Corporate Records.....................................................13
3.08 Validity of Agreement.................................................13
3.09 Restrictive Documents.................................................14
3.10 Residence.............................................................14
3.11 Conduct of Business in Ordinary Course................................14
3.12 Title to Assets.......................................................14
3.13 Condition of Assets...................................................14
3.14 No Material Adverse Change............................................15
3.15 Compliance with Laws..................................................15
3.16 Environmental Compliance..............................................15
3.17 Authorizations........................................................15
3.18 No Options, Etc.......................................................16
3.19 Accounts Receivable...................................................16
3.20 Real Property.........................................................16
3.21 Lease.................................................................16
3.22 Material Contracts....................................................17
3.23 No Breach of Contracts................................................17
3.24 Intellectual Property Rights..........................................18
3.25 Subsidiaries and Investments..........................................18
3.26 Books and Records.....................................................18
3.27 Financial Statements..................................................18
3.28 Debt..................................................................19
3.29 Capital Expenditures..................................................19
3.30 Employees.............................................................19
3.31 Insurance.............................................................20
3.32 Litigation............................................................20
3.33 Taxes.................................................................20
3.34 Bank Accounts and Powers of Attorney..................................20
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ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................21
AND TELEPLUS ENTERPRISES......................................................21
4.01 Representations and Warranties of the Purchaser.......................21
(2) Validity of Agreement.................................................21
4.02 Representations and Warranties of Teleplus Enterprises................21
(2) Validity of Agreement.................................................22
(3) Valid Issue of Securities.............................................22
ARTICLE 5 - PRE-CLOSING COVENANTS OF THE PARTIES............................22
5.01 Conduct of Business Prior to Closing..................................22
5.02 Due Diligence Investigations..........................................23
5.03 Actions to Satisfy Closing Conditions.................................23
5.04 Transfer of the Purchased Shares......................................24
5.05 Request for Consents..................................................24
5.06 Audited Financial Statements..........................................24
5.07 Filings and Authorizations............................................24
5.08 Notice of Untrue Representation or Warranty...........................24
ARTICLE 6 - CONDITIONS OF CLOSING............................................24
6.01 Conditions for the Benefit of the Purchaser...........................24
6.02 Conditions for the Benefit of the Vendor..............................27
6.03 Conditions Precedent..................................................29
ARTICLE 7 - CLOSING..........................................................29
7.01 Date, Time and Place of Closing.......................................29
7.02 Closing Procedures....................................................29
7.03 Risk of Loss..........................................................29
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES.........30
8.01 Survival of Representations and Warranties............................30
8.02 Indemnification in Favour of the Purchaser............................30
8.03 Indemnification in Favour of the Vendor...............................30
8.04 Indemnification Proceedings...........................................31
8.05 Limitations...........................................................32
8.06 Right of Set-Off......................................................32
8.07 Exclusion of Other Remedies...........................................33
ARTICLE 9 - POST-CLOSING COVENANTS...........................................33
9.01 Access to Books and Records...........................................33
9.02 Further Assurances....................................................33
9.03 Assistance By Vendor..................................................33
9.04 Employment Duties of Vendor...........................................33
ARTICLE 10 - ARBITRATION.....................................................34
10.01 Best Endeavours to Settle Disputes....................................34
10.02 Arbitration...........................................................34
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ARTICLE 11 - MISCELLANEOUS...................................................34
11.01 Notices...............................................................35
11.02 Publicity.............................................................36
11.03 Time of the Essence...................................................36
11.04 Brokers...............................................................36
11.05 Third Party Beneficiaries.............................................36
11.06 Enurement.............................................................36
11.07 Counterparts..........................................................36
11.08 Joint and Several Liability...........................................37
11.09 Knowledge.............................................................37
11.10 Assignment............................................................37
11.11 Non-Merger............................................................37
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MEMORANDUM OF AGREEMENT made as of the 9th day of December, 2004, among ▇▇▇▇▇
▇▇▇▇▇▇, a resident of the Province of Ontario, (the "Vendor"), 1523813 ONTARIO
LIMITED d.b.a. FREEDOM PHONE LINES, a corporation incorporated under the laws of
the Province of Ontario (the "Corporation"), KEDA CONSULTING CORP., a
corporation incorporated under the laws of the Province of Ontario, (the
"Purchaser") and TELEPLUS ENTERPRISES INC., a corporation incorporated under the
laws of the State of Nevada ("Teleplus Enterprises") witnesses that:
WHEREAS the Corporation carries on the Business consisting of the sale of
prepaid residential telecommunication services;
AND WHEREAS the Vendor owns, and will own as of the Closing Date, all of the
issued and outstanding shares in the capital of the Corporation;
AND WHEREAS the Purchaser shall be a subsidiary of Teleplus Enterprises on
the date that is the Closing Date;
AND WHEREAS the Vendor, in reliance upon the representations and warranties of
the Purchaser and Teleplus Enterprises contained herein, has agreed to sell to
the Purchaser and that the Purchaser, in reliance upon the representations and
warranties of the Vendor and the Corporation contained herein, has agreed to
purchase from the Vendor all of the issued and outstanding shares in the capital
of the Corporation in accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by the parties), the
parties agree as follows:
ARTICLE 1 -
INTERPRETATION
1.01 Defined Terms.
As used in this Agreement, the following terms have the following
meanings:
"Accounts Receivable" means all accounts receivable, notes receivable and
other debts due or accruing due to the Corporation in connection with the
Business;
"Adjustment Amount" has the meaning ascribed thereto in Section 2.04;
"Agreement" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; "hereof", "hereto" and
"hereunder" and similar expressions mean and refer to this Agreement and
not to any particular Article, Section, Subsection or other subdivision;
"Article", "Section", "Subsection" or other subdivision of this Agreement
followed by a number means and refers to the specified Article, Section,
Subsection or other subdivision of this Agreement;
"Ancillary Agreements" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement; and "Ancillary
Agreement" means any one of such agreements, certificates or other
instruments;
"Audited Financial Statements" has the meaning ascribed thereto in Section
5.06;
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"Authorization" means, with respect to any Person, any authorization,
order, permit, approval, grant, license, consent, right, franchise,
privilege, certificate, judgment, writ, injunction, award, determination,
direction, decree, or by-law, rule or regulation of any Governmental
Entity, whether or not having the force of law, having jurisdiction over
such Person;
"Benefit Plans" means all employee benefit plans relating to the employees
of the Corporation, including profit sharing, deferred compensation,
phantom stock option, stock option, employee stock purchase, bonus,
retirement, health or insurance plans (oral or written) which are
disclosed as benefit plans on Schedule 3.31(10);
"Books and Records" means all technical, business and financial records,
financial books and records of account, books, data, reports, files,
lists, drawings, plans, logs, briefs, customer and supplier lists, deeds,
certificates, contracts, surveys, title opinions or any other
documentation and information in any form whatsoever (including written,
printed, electronic or computer printout form) relating to Corporation and
the Business;
"Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed
machinery and fixed equipment) situate on the Leased Property;
"Business" means the sale of prepaid residential telecommunication
services (local line, long distance, internet) presently and heretofore
carried on by the Corporation;
"Business Day" means any day of the year, other than a Saturday, Sunday or
any day on which Canadian chartered banks are required or authorized to
close in Toronto, Ontario;
"Claim" means any claim of any nature whatsoever, including any demand,
liability, obligation, debt, cause of action, suit, proceeding, judgment,
award, assessment, and reassessment;
"Closing" means the completion of the transaction of purchase and sale
contemplated in this Agreement;
"Closing Date" means March 7, 2005, subject to extension in accordance
with the provisions of Section 5.06, or such other date as the parties may
agree in writing, provided such date is no later than 15 days after the
delivery of the Audited Financial Statements;
"Consents" means the consents of contracting parties to any Contract or
Lease to the change in control of the Corporation contemplated in this
Agreement, and "Consent" means any one of such Consents;
"Contracts" means all contracts to which the Corporation is a party
including all contracts, leases of personal property, licenses,
undertakings, engagements or commitments of any nature, written or oral,
to which the Corporation is entitled in connection with the Business,
including those identified in Schedule 3.22;
"Corporate Records" means the corporate records of a corporation,
including (i) all articles, by-laws, any unanimous shareholders agreement
and any amendments thereto; (ii) all minutes of meetings and resolutions
of shareholders, directors and any committee thereof; (iii) the share
certificate books, register of shareholders, register of transfers and
register of directors; and (iv) all accounting records;
"Encumbrances" means any liability, debt, lien, charge, mortgage, pledge,
security interest, claim, defect of title, restriction, agreement of sale,
adverse claim, easement, reassessment, encroachment, burden or other
encumbrance of any kind or nature whatsoever or any items similar or
related to the foregoing;
"Environmental Laws" means all applicable Laws relating to the
environment, health and safety matters or conditions, Hazardous
Substances, pollution or protection of the environment;
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"Excluded Assets" has the meaning ascribed thereto in Section 2.05;
"Excluded Liabilities" has the meaning ascribed thereto in Section 2.05;
"Final Balance Sheet" has the meaning ascribed thereto in Section 2.04;
"Financial Statements" means the balance sheet of the Corporation for the
fiscal year ended July 31, 2004 and the accompanying statements of
shareholders' equity, income and changes in financial position for the
Corporation for the year then ended and all notes thereto as reported upon
by a firm of chartered accountants;
"Financial Thresholds" has the meaning ascribed thereto in Section 2.04.
"GAAP" means, at any time, accounting principles generally accepted in
Canada at such time;
"Governmental Entity" means (i) any multi-national, federal, provincial,
state, municipal, local or other governmental or public department, court,
commission, board, bureau, agency or instrumentality, domestic or foreign;
(ii) any subdivision, agent, commission, board, 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 foregoing;
"Hazardous Substance" includes any contaminant, pollutant, dangerous
substance, liquid or solid waste, industrial waste, hauled liquid or solid
waste, toxic substance, hazardous waste, hazardous material, or hazardous
substance (including anything with any of the foregoing as a component
thereof), whether or not such substance is "hazardous" as defined under
any Laws;
"Intellectual Properties" means all right, title, interest and benefit of
the Corporation in and to any registered or unregistered, trade or brand
names, service marks, copyrights, copyright applications, designs,
inventions, patents, patent applications, patent rights (including any
patents issuing on such applications or rights), licences, sub-licences,
franchises, formulas, processes, know-how, technology, computer rights and
other intellectual or industrial property of the Corporation or pertaining
to the Business, including the property listed in Schedule 3.24;
"ITA" means the Income Tax Act (Canada) and aall references in this
Agreement to the Income Tax Act (Canada) and to amounts to be withheld
pursuant thereto shall be deemed to be made to the Income Tax Act
(Canada), as now enacted or as it may from time to time be amended,
re-enacted or replaced, and in the case of any such amendment,
re-enactment or replacement, any references herein to the Income Tax Act
(Canada) and to amounts to be withheld pursuant thereto shall be read as
referring to such amended, re-enacted or replaced provisions;
"Landlord" means ▇▇▇▇▇▇ and Sons Limited;
"Laws" means all statutes, codes, ordinances, decrees, rules, regulations,
municipal by-laws, judicial or arbitral or administrative or ministerial
or departmental or regulatory judgments, orders, decisions, rulings or
awards, or any provisions of the foregoing, including general principles
of common and civil law and equity, binding on or affecting the Person
referred to in the context in which such word is used; and "Law" means any
one of them;
"Lease" means the lease between the Corporation and ▇▇▇▇▇▇ and Sons
Limited;
"Leased Property" means the premises located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇;
"Loss" means any loss whatsoever, including expenses, costs, damages,
penalties, fines, charges, claims, demands, liabilities, interest and any
and all legal fees and disbursements;
"OTCBB" means the over-the-counter bulletin board of the NASDAQ stock
exchange;
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"Parties" means the Corporation, the Vendor, the Purchaser and, Teleplus
Enterprises, and any other person who may become a party to this
Agreement; and "Party" means any one of them;
"Permitted Encumbrances" means: (i) Encumbrances 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 detract from the value of, or
impair the use or marketability of any real property; and (iii)
Encumbrances against assets of the Corporation the value of which assets
do not in the aggregate exceed $20,000, including those Encumbrances
disclosed in Schedule 3.12;
"Person" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or Governmental
Entity, and pronouns have a similarly extended meaning;
"Pre-Closing Reorganization" has the meaning ascribed thereto in
Section 2.05;
"Purchase Price" has the meaning ascribed thereto in Section 2.02;
"Purchased Shares" has the meaning ascribed thereto in Section 2.01;
"Security Right" means, with respect to any security, any option, warrant,
subscription right, pre-emptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment,
transfer, purchase, redemption, conversion, exchange, registration or
voting and includes rights conferred by statute by the issuer's
constituting documents or by agreement;
"Shareholders' Equity" means the total assets of the Corporation minus the
total liabilities of the Corporation;
"subsidiary" means any corporation, partnership, joint venture or other
entity in which the Corporation owns directly or indirectly, more than 20%
of the outstanding voting securities or equity interests;
"Teleplus Shares" means the common shares in the capital of Teleplus
Enterprises, which currently trade on the OTCBB;
"Time of Closing" means 2:00 p.m. (Toronto time) on the Closing Date or
such other time as the Closing may occur; and
1.02 Gender and Number.
Any reference in this Agreement to gender shall include all genders, and
words importing the singular number only shall include the plural and vice
versa.
1.03 Headings, Etc.
The division of this Agreement into Articles, Sections, Subsections and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
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1.04 Currency.
All references in this Agreement or any Ancillary Agreement to dollars,
unless otherwise specifically indicated, are expressed in Canadian currency.
1.05 Severability.
Any Article, Section, Subsection or other subdivision of this Agreement or
any Ancillary Agreement or any other provision of this Agreement or any
Ancillary Agreement which is, or becomes, illegal, invalid or unenforceable
shall be severed from this Agreement and any Ancillary Agreement and be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof or thereof.
1.06 Entire Agreement.
This Agreement together with the Ancillary Agreements constitutes the
entire agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. There are no representations,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connection with the subject matter of this
Agreement, except as specifically set forth herein and therein. If there is any
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.
1.07 Amendments.
This Agreement and any Ancillary Agreement may only be amended, modified
or supplemented by a written agreement signed by all of the parties to such
agreement.
1.08 Waiver.
No waiver of any of the provisions of this Agreement or any Ancillary
Agreement shall be deemed to constitute a waiver of any other provision (whether
or not similar), nor shall such waiver constitute a waiver or continuing waiver
unless otherwise expressly provided in writing duly executed by the party to be
bound thereby.
1.09 Governing Law.
This Agreement and all Ancillary Agreements shall be governed by and
interpreted and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein which apply to contracts made and to
be performed entirely in Ontario.
1.10 Inclusion.
Where the word "including" or "includes" is used in this Agreement, it
shall mean "including (or includes) without limitation".
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1.11 Accounting Terms.
All accounting terms not specifically defined in this Agreement shall be
construed in accordance with GAAP.
1.12 Incorporation of Schedules.
The following are the schedules that will be (a) delivered to the
Purchaser by the Vendor on the date that is 30 calendar days after the date
hereof, except for Schedule 2.04 which shall be delivered as complete on the
date hereof, and (b) attached to and incorporated in this Agreement:
Schedule 2.04 - Financial Thresholds
Schedule 3.12 - Permitted Encumbrances
Schedule 3.17 - Authorizations
Schedule 3.19 - Accounts Receivable
Schedule 3.22 - Material Contracts
Schedule 3.23 - Breach of Contracts
Schedule 3.24 - Intellectual Property
Schedule 3.27 - Financial Statements
Schedule 3.29 - Capital Expenditures
Schedule 3.30(7) - Employees
Schedule 3.30(10) - Benefit Plans
Schedule 3.30(11) - Payments made since date of Financial Statements
Schedule 3.31 - Insurance
Schedule 3.34 - Bank Accounts and Powers of Attorney
Schedule 6.02(5) - Form of Employment Agreement
Exhibits
Exhibit A - Form of Opinion of Counsel to the Vendor and
the Corporation
Exhibit B - Form of Opinion of Counsel to the Purchaser
Exhibit C - Form of Opinion of Counsel to Teleplus
Enterprises and Teleplus Consumer
Exhibit D - Form of Release to the Corporation
Exhibit E - Form of Release from the Corporation
ARTICLE 2 -
PURCHASED SHARES AND PURCHASE PRICE
2.01 Purchase and Sale.
Subject to the terms and conditions hereof, the Vendor agrees to sell,
assign and transfer to the Purchaser and the Purchaser agrees to purchase from
the Vendor at the Time of Closing on the Closing Date, the shares owned by the
Vendor representing all (but not less than all) of the issued and outstanding
shares (the "Purchased Shares") in the capital of the Corporation.
2.02 Purchase Price.
The aggregate purchase price (the "Purchase Price") payable by the
Purchaser to the Vendor for the Purchased Shares shall, subject to adjustment in
accordance with Section 2.05 and Section 2.06, be a maximum of $1,600,000 in
lawful money of Canada.
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2.03 Payment of the Purchase Price.
The Purchase Price shall be paid and satisfied as follows:
(b) $600,000 paid in cash to the Vendor at the Time of Closing;
(c) through the issuance to the Vendor at the Time of Closing of that
aggregate number of Teleplus Shares as is equal to $400,000 divided
by the average closing price of the Teleplus Shares on the OTCBB for
the five Business Days immediately preceding the Closing Date; and
(d) subject to the provisions of Section 2.04, $600,000 (the "Purchase
Price Balance") paid in cash to the Vendor in twelve (12) equal
installments of $50,000 paid quarterly commencing the last day of
the third full month following the Closing Date. Any installment of
the Purchase Price Balance payable to the Vendor shall be paid to
the Vendor in cash within 10 days of the end of the quarter for
which such installment is payable. In the event that the Vendor
ceases to comply with the covenant as to employment set out in
Section 9.04 as a result of (i) the Corporation terminating
employment of the Vendor for cause, or (ii) the Vendor voluntarily
terminating his employment with the Corporation, at any time before
the Purchase Price Balance has been satisfied in full, the Purchaser
shall be entitled, in its sole and absolute discretion, to terminate
the payment of any and all of the Purchase Price Balance then
payable. Any amount so terminated shall be accounted for as a
corresponding reduction in the Purchase Price.
2.04 Closing Adjustments.
(1) The Purchase Price will be adjusted to take into account changes in
the assets and liabilities of the Corporation from those stated in the Financial
Thresholds to those found in the Final Balance Sheet as hereinafter provided.
(2) The Vendor covenants to comply with certain financial restrictions for
the Corporation set forth in Schedule 2.04 hereto (the "Financial Thresholds"),
which restrictions shall be effective as at December 6, 2004 and shall remain in
effect until the consummation of the transactions contemplated hereby on the
Closing Date.
(3) Following the Closing, the Purchaser will cause to be prepared and
will deliver to the Vendor within 30 days following the Closing Date a draft
balance sheet for the Corporation as at the Closing Date. Such balance sheet
shall be prepared in accordance with GAAP and shall take into account any
liabilities (including tax liabilities) arising as a result of the Pre-Closing
Reorganization, and tax liabilities for the period ending at the Closing Date.
The Vendor will have 15 days after receipt of the draft balance sheet in which
to review the draft balance sheet and advise the Purchaser in writing as to any
disagreement regarding it, provided that there shall be deemed to be no
disagreement over the draft balance sheet unless the aggregate amount in dispute
exceeds $25,000. The Purchaser will provide access, upon every reasonable
request, to the Vendor and its accountants and advisors to all work papers of
the Corporation and its accountants to verify the accuracy, presentation and
other matters relating to the preparation of the draft balance sheet and the
Vendor and the Purchaser shall otherwise fully cooperate with each other in the
preparation of the draft balance sheet. The Vendor and the Purchaser shall each
bear their own costs and expenses in preparing and reviewing the draft balance
sheet. Any disagreement with respect to the draft balance sheet which cannot be
settled by the Parties shall be referred to a recognized national accounting
firm for final resolution. The costs of such firm will be shared equally by the
Purchaser and the Vendor. Immediately following the 15 day period referred to
above, or the resolution of any dispute in accordance with the foregoing, the
Purchaser shall cause to be prepared and delivered to the Vendor a final balance
sheet for the Corporation as at the Effective Time (the "Final Balance Sheet").
Such Final Balance Sheet shall be binding upon the Parties and not subject to
appeal.
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(4) Within two Business Days after receipt by the Vendor of the Final
Balance Sheet, the Vendor shall pay the Purchaser any Adjustment Amount. Such
payment, if any, shall be a decrease in the Purchase Price. The requirement of
the Vendor to make such payment to the Purchaser, if any, shall be satisfied by
way of set-off against the Purchase Price Balance and, in the event of any
required payment of an Adjustment Amount, both the aggregate Purchase Price
Balance and the amount of each instalment payment thereof shall be reduced
accordingly so that the then adjusted amount of the Purchase Price Balance, if
any, shall continue to be paid to the Vendor in twelve (12) equal quarterly
installments. For the purposes hereof, "Adjustment Amount" means the amount, if
any, by which each of EBITDA and Shareholders' Equity as determined from the
Final Balance Sheet is less than the each of EBITDA and Shareholders' Equity as
set forth in the Financial Thresholds.
2.05 Pre-Closing Reorganization
(1) Prior to completion of the transactions contemplated by this
Agreement, the Vendor will cause the Corporation to take certain actions in
order to transfer certain assets and liabilities out of the Corporation (the
"Pre-Closing Reorganization"). Pursuant to the Pre-Closing Reorganization, the
Vendor will cause (i) certain assets, being the laptop computer owned or leased
by the Corporation, being referred to herein as the "Excluded Assets", and (ii)
certain liabilities, being all liabilities related to or incurred in connection
with the Excluded Assets (such liabilities being referred to herein as the
"Excluded Liabilities"), to be transferred by the Corporation to a third party
and the Vendor will be responsible for the payment of any retained Excluded
Liabilities and will indemnify and save harmless the Purchaser and the
Corporation from any liability, obligation or loss arising out of or in respect
thereof.
(2) The Vendor agrees that they will indemnify and save the Purchaser and
the Corporation harmless with respect to any liability which the Corporation may
incur as a result of or in connection with the Pre-Closing Reorganization. For
greater certainty, it is intended by the Parties that in the event that the
Pre-Closing Reorganization results in a gain to the Corporation for purposes of
the ITA, this gain will be offset by any available loss carry forwards of the
Corporation. The Purchaser acknowledges that the Vendor will not be expected to
indemnify the Purchaser for any resulting reduction in the amount of the
Corporation's loss carry forwards.
(3) Any income tax liability of the Corporation: (a) which relates to
matters other than the carrying on of the Business, including, for greater
certainty but without limiting the generality of the foregoing, any income tax
liability arising as a result of the Pre-Closing Reorganization, or (b) which
relates to the carrying on of the Business for the portion of the then current
fiscal year which ends at the Closing Date, shall be for the account of the
Vendor and such liabilities shall be reflected on the Final Balance Sheet
referred to in Section 2.05. To the extent that such liabilities are not
reflected on the Final Balance Sheet, the Vendor will indemnify and save
harmless the Purchaser and the Corporation from any liability, obligation or
loss arising with respect to such liability. The income tax returns of the
Corporation for the period ended on the Closing Date will be prepared by the
Vendor within 120 days of the Closing Date and provided to the Purchaser. The
Purchaser will provide the Vendor with such access to the Books and Records as
are required for this purpose. The Purchaser will also provide the Vendor with
reasonable access to the books and records of the Corporation for the purpose of
dealing with any assessments or reassessments or other taxation matters relating
to the Corporation for which the Vendor is responsible hereunder. The Vendor
agrees that, prior to the Closing Date, it will provide the Purchaser with a
calculation of the income tax payable by the Corporation as a result of the
Pre-Closing Reorganization. The Purchaser will have a right to review and
approve such calculations.
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2.06 The Closing
The Closing shall take place at the Time of Closing at the offices of
▇▇▇▇▇▇▇▇▇ Dellelce LLP, Suite 810, 1 First Canadian Place, Toronto, Ontario, or
at such other time, date or place as the parties agree. Notwithstanding any
other provision of this Agreement, the within transactions shall be effective as
of the Closing Date.
2.07 Payment of Taxes and Registration Charges on Transfer.
Except as otherwise provided herein, the Vendor shall be liable for and
shall pay all taxes, duties, registration charges or other like charges properly
payable by a vendor in connection with the conveyance and transfer by it of the
Purchased Shares to the Purchaser hereunder.
ARTICLE 3 -
REPRESENTATIONS AND WARRANTIES OF VENDOR
Representations and Warranties of Vendor. The Vendor represents and warrants as
follows to the Purchaser and acknowledges and confirms that the Purchaser is
relying upon such representations and warranties in connection with the purchase
by the Purchaser of the Purchased Shares:
3.01 Due Incorporation, Existence and Corporate Power of the Corporation.
The Corporation is a corporation duly incorporated, validly existing and
in good standing under the laws of the Province of Ontario. The Corporation has
all necessary corporate power and authority to own or lease its properties, to
carry on its business as now being conducted by it, to enter into this Agreement
and the other agreements to which it is or is to become a party pursuant to the
terms hereof and to perform its obligations hereunder and thereunder.
3.02 Extra-Provincial Qualification.
The Corporation is duly qualified, licensed or registered to carry on its
business as now being conducted in all jurisdictions in which the nature of the
business conducted by it or the property owned or leased by it makes such
qualification, licensing or registration necessary.
3.03 Authorized Capital of the Corporation.
The authorized capital of the Corporation consists of an unlimited number
of common shares and an unlimited number of preferred shares, of which at the
date hereof and at the Time of Closing, one (1) common share is and will be duly
issued and outstanding as fully paid and non-assessable. The Purchased Shares
shall at Closing constitute all of the issued and outstanding shares of the
capital of the Corporation. All of the Purchased Shares shall at Closing be
owned legally by the Vendor.
-13-
3.04 Options, etc.
At Closing, there will be no Security Rights relating to any of the
unissued shares of the Corporation. Except for the Purchaser's right hereunder,
no Person has any option, warrant, right, call, commitment, conversion right,
right of exchange or other agreement or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement (i) for the
purchase from the Vendor of any of the Purchased Shares; or (iii) for the
purchase, subscription, allotment or issuance of any of the unissued shares in
the capital of the Corporation or of any securities of the Corporation.
3.05 Title to Purchased Shares.
The Purchased Shares are, or as of the Closing Date will be, owned by the
Vendor as the registered owner thereof with a good title thereto, free and clear
of all Encumbrances. The Vendor has the right, power and authority to enter into
this Agreement and to sell such Purchased Shares as contemplated herein. All
rights and powers to vote the Purchased Shares are held exclusively by the
Vendor. Such Purchased Shares are validly issued, fully paid and non-assessable,
were not issued in violation of the terms of any agreement or other
understanding, and were issued in compliance with all applicable laws and
regulations. The delivery of the Purchased Shares to the Purchaser pursuant to
the provisions hereof will transfer to the Purchaser valid title thereto, free
and clear of all Encumbrances.
3.06 Dividends and Distributions.
Since the date of the Financial Statements, the Corporation has not,
directly or indirectly, declared or paid any dividends or declared or made any
other distribution on any of its shares of any class and has not, directly or
indirectly, redeemed, purchased or otherwise acquired any of its shares of any
class or agreed to do so.
3.07 Corporate Records.
The Corporate Records of the Corporation are materially complete and
accurate and all corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable Laws and with the articles
and by-laws of the Corporation, and without limiting the generality of the
foregoing, (i) the minute books contain materially complete and accurate minutes
of all meetings of the directors and shareholders of the Corporation held since
the incorporation thereof, and all such meetings were duly called and held; (ii)
the minute books contain all written resolutions passed by the directors and
shareholders of the Corporation and all such resolutions were duly passed; (iii)
the share certificate books, register of shareholders and register of transfers
of the Corporation are materially complete and accurate, and all such transfers
have been duly completed and approved; and (iv) the registers of directors and
officers are materially complete and accurate and all former and present
directors and officers of the Corporation were duly elected or appointed as the
case may be.
3.08 Validity of Agreement.
(1) Each of the Corporation and the Vendor, as applicable, have all
necessary corporate power and authority to enter into and perform its
obligations under this Agreement and the Ancillary Agreements to which it is a
party.
(2) The execution, delivery and performance by the Vendor and the
Corporation, as the case may be, of this Agreement and the Ancillary Agreements
to which they are a party and the consummation of the transactions contemplated
thereby:
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(a) have been duly authorized by all necessary corporate action on the
part of the Corporation and the Vendor; and
(b) 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 violation
or a breach of, or a default under or give rise to a right of
termination, amendment or cancellation or the acceleration of any
obligation under (i) any charter, by-law or trust deed instruments
of the Corporation and the Vendor as applicable; (ii) any contracts
or instruments to which either of the Vendor or the Corporation is a
party or by which either of the Vendor or the Corporation is bound
other than those contracts previously disclosed to the Purchaser in
writing; or (iii) of any Laws applicable to them.
(3) This Agreement and any Ancillary Agreement to which the Vendor or
the Corporation is a party constitute legal, valid and binding
obligations of the Vendor and the Corporation, as the case may be,
enforceable against them in accordance with their respective terms.
3.09 Restrictive Documents.
None of the Corporation or the Vendor is subject to, or a party to, any
charter, by-law or trust deed restriction, any Law, any Claim, any contract or
instrument, any Encumbrance or any other restriction of any kind or character
which would prevent the consummation of the transactions contemplated by this
Agreement or compliance by the Corporation or the Vendor with the terms,
conditions and provisions hereof or the continued operation of the Business
after the date hereof or the Closing Date on substantially the same basis as
heretofore operated or which would restrict the ability of the Purchaser to
acquire any of the Purchased Shares, in each case except for the necessity of
obtaining the Consents.
3.10 Residence
The Vendor is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada).
3.11 Conduct of Business in Ordinary Course.
Since the date of the Financial Statements, the Business has been carried
on in the ordinary course. With the assets owned, licensed or leased by the
Corporation, the Corporation will be able to conduct its business following
Closing substantially in the manner presently carried on by it and such assets
include all proprietary rights, trade secrets and other property and assets,
real and personal, applicable to or used in connection with the Business.
3.12 Title to Assets.
The Corporation has good title to and has legal and beneficial ownership
of all of the assets and property (other than the Leased Property) used in
connection with the Business free and clear of all Encumbrances, except for
Permitted Encumbrances as disclosed in Schedule 3.12 hereto.
3.13 Condition of Assets.
All assets of the Corporation, including, without limitation, buildings,
fixtures, improvements, machinery, equipment, tools, furniture, improvements and
tangible personal property, whether owned or leased, used in connection with the
Business are in good operating condition and are in a state of good repair and
maintenance having regard to the age and use thereof, reasonable wear and tear
excepted, and are suitable for the purposes for which they are used in the
Business. All of the assets of the Corporation are reflected on the Financial
Statements or, under applicable GAAP, are not required to be reflected thereon
and include substantially all assets that are necessary for use in and operation
of the Business.
-15-
3.14 No Material Adverse Change.
Since the date of the Financial Statements there has been no change in the
affairs, assets, liabilities, business, prospects, operations or conditions of
the Corporation or the Business (as the case may be), financial or otherwise,
whether arising as a result of any legislative or regulatory change, revocation
of any licence or right to do business, fire, explosion, accident, casualty,
labour trouble, flood, drought, riot, storm, condemnation, act of God, public
force or otherwise, which has materially adversely affected or which will
materially adversely affect the Corporation or the Business except for general
economic conditions affecting Canada or the industry in which the Corporation
and the Business operates.
3.15 Compliance with Laws.
The Corporation is conducting the Business in compliance with all
applicable Laws of each jurisdiction in which the Business is carried on, except
for acts of non-compliance which in the aggregate are not material.
3.16 Environmental Compliance.
(1) The Corporation has at all times received, handled, generated, used,
stored, deposited, labelled, handled, treated, documented, transported and
disposed of any Hazardous Substances in compliance with all, and there is no
circumstance or condition which would subject the Corporation to any material
liability under any applicable Environmental Laws, health or safety Laws,
approvals or Authorizations.
(2) The Vendor has delivered to the Purchaser copies of all environmental
assessments, audits, studies and other environmental reports in the possession
or reasonably available to the Vendor and of which it has have knowledge
relating to the Leased Property or any aspect of the Business.
3.17 Authorizations.
The Corporation owns, holds, possesses or lawfully uses in the operation
of the Business, all Authorizations which are in any manner necessary to conduct
the Business as presently or previously conducted or for the ownership and use
of its assets and property, free and clear of all Encumbrances except for
Permitted Encumbrances and in compliance with all Laws applicable thereto. True,
correct and complete copies of all such Authorizations are attached as Schedule
3.17 and the Corporation is not in default, nor has it received any notice of
any Claim in default, with respect to any such Authorizations. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need for the Corporation to comply with any special
qualification or procedures or to pay any amounts other than routine filing
fees. None of such Authorizations will be adversely affected by the consummation
of the transactions contemplated hereby. Neither the Vendor nor any affiliate of
the Vendor owns or has any proprietary, financial or other interests (direct or
indirect) in any Authorization which the Corporation owns, possesses or uses in
the operation of the Business as now or previously conducted.
-16-
3.18 No Options, Etc.
No Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming such for the purchase
from the Corporation of any of its assets or property.
3.19 Accounts Receivable.
Attached hereto as Schedule 3.19 is a comprehensive age analyzed statement
of all accounts receivable, notes and other amounts due or recorded in the
respective records and books of account of the Corporation as being due to the
Corporation as at November 30, 2004, subject to an allowance for doubtful
accounts taken in accordance with GAAP; and none of such accounts receivable or
other amounts is or will at the Closing Date be subject to any counterclaim or
set-off except to the extent of any such provision or reserve.
3.20 Real Property.
(1) The Corporation has not previously owned, nor is it currently the
owner of, or under any agreement or option to own, any real property or any
interest therein, other than the Lease.
(2) All of the Buildings and Fixtures and the Leased Property (i) were, to
the best knowledge of the Vendor, constructed in accordance with all applicable
laws and with all Authorizations validly issued pursuant thereto; (ii) are in
good operating condition and in a state of good maintenance and repair; and
(iii) are adequate and suitable for the purposes for which they are presently
being used; and with respect to the Leased Property, the lessee has adequate
rights of ingress and egress for the operation of the Business in the ordinary
course. To the best knowledge of the Vendor, none of the Leased Property or the
Buildings and Fixtures thereon, nor the use, operation or maintenance thereof
for the purpose of carrying on the Business violates any restrictive covenant or
any provision of any Law or encroaches on any property owned by any other
Person. No condemnation or expropriation proceeding is pending or, to the best
knowledge of the Vendor, threatened which would preclude or impair the use of
any such property or any part thereof for the purposes for which it is currently
used. There are no outstanding work orders with respect to any of the property
and assets of the Corporation from or required by any Government Entity or from
any other Person and there are no matters under discussion with or by the
Corporation relating to work orders.
3.21 Lease.
The Corporation is not a party to, or under any agreement or option to
become a party to, any lease with respect to real property used or to be used in
the Business other than the Lease. The Lease is in good standing, creates a good
and valid leasehold estate in the Leased Property thereby demised and is in full
force and effect without amendment thereto. With respect to the Lease (i) all
rents and additional rents due to the date hereof have been paid; (ii) neither
the lessor, to the best of the knowledge of the Vendor, nor the Corporation is
in default thereunder; (iii) no waiver, indulgence or postponement of the
Corporation's obligations thereunder has been granted by the lessor; (iv) there
exists no event of default or event, occurrence, condition or act (including the
purchase of the Purchased Shares hereunder) which, with the giving of notice,
the lapse of time or the happening of any other event or condition, would become
a default under such Lease; (v) the Corporation has not violated any of the
terms or conditions under the Lease in any material respect; and (vi) to the
best knowledge of the Vendor, all of the covenants to be performed by any other
party under the Lease have been fully performed. The Leased Property is in a
state of good maintenance and repair, normal wear and tear excepted, and is
adequate and suitable for the purposes for which it is presently being used.
-17-
3.22 Material Contracts.
The Contracts listed in Schedule 3.22 constitute all the material
Contracts of the Corporation having an aggregate value, whether payable in one
payment or in successive payments, in excess of $10,000. Except as set forth in
the Schedules hereto, the Corporation is not a party to or bound by:
(a) any employment agreement, bonus, deferred compensation, pension,
profit sharing, stock option, phantom stock plan, employee stock
purchase, health, insurance, retirement or other employee benefit
plan, any collective agreements or any agreement (oral or written)
providing for compensation to be paid to any employee consequent
upon the sale of any substantial portion of outstanding shares in
the capital the of the Corporation;
(b) any agreement or commitment relating to the borrowing of money;
(c) any agreement or commitment relating to capital expenditures;
(d) any loan or advance to, or investment in, any other Person or any
agreement or commitment relating to the making of any such loan,
advance or investment;
(e) any bonds, debentures, mortgages, notes or other similar
indebtedness or liabilities whatsoever or any agreement to create or
issue any bonds, debentures, mortgages, notes or other similar
indebtedness;
(f) any performance bond, indemnity, guarantee or other contingent
liability in respect of any indebtedness or obligation of any
Person;
(g) any management, consulting or any other similar agreement or
commitment;
(h) any agreement or commitment limiting the freedom of the Corporation
or any successor owner of the Corporation, the Business or the
property and assets of the Corporation to engage in any line of
business or to compete with any other Person;
(i) any licensing or other agreement or commitment relating to
intellectual property used by the Corporation in the conduct of the
Business;
(j) any agreement or commitment entered into in the ordinary course of
the Business involving an amount of more than $25,000 which is not
cancellable without penalty within thirty (30) days;
(k) any agreement or commitment not entered into in the ordinary course
of the Business; and
(l) any agreement or arrangement with any Person with whom either of the
Corporation or the Vendor (or their directors, officers and
employees) does not deal at arm's length within the meaning of the
Income Tax Act (Canada).
3.23 No Breach of Contracts.
Each of the Contracts is in full force and effect, unamended, and there
exists no default, warranty claim or other obligation or liability or event,
occurrence, condition or act (including the purchase of the Purchased Shares
hereunder) which, with the giving of notice, the lapse of time or the happening
of any other event or condition, would become a default, or give rise to a
warranty claim or other obligation or liability thereunder. Except as disclosed
in Schedule 3.23, the Corporation has not violated or breached, in any material
respect, any of the terms or conditions of any Contract and all the covenants to
be performed by any other party thereto have been fully and properly performed.
True, correct and complete copies of all Contracts in writing having an
aggregate value, whether payable in one payment or in successive payments, in
excess of $25,000 have been delivered or made available to the Purchaser.
-18-
3.24 Intellectual Property Rights.
The Intellectual Properties used in whole or in part in or required for
the carrying on of the Business in the manner heretofore carried on are set out
in Schedule 3.24 and are owned by, validly licensed, or properly registered to
the Corporation as indicated in Schedule 3.24. Except as otherwise expressly
stated in Schedule 3.24, the Corporation: (i) has the exclusive right to use
such Intellectual Properties; (ii) is the owner of record of such Intellectual
Properties; and (iii) has not conveyed, assigned or encumbered any of them. All
registrations and filings necessary to preserve the rights of the Corporation in
the Intellectual Properties have been made and are in good standing. To the best
of the knowledge of the Vendor, the conduct of the Business does not infringe
upon the intellectual properties of any other Person.
3.25 Subsidiaries and Investments.
The Corporation has no subsidiaries or agreements of any nature to acquire
any subsidiary or to acquire or lease any other business operations.
3.26 Books and Records.
All Books and Records of the Corporation have been fully, properly and
accurately kept and, where required, completed in accordance with GAAP and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein. The records, systems, controls, data or information of the Corporation
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 (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Corporation.
3.27 Financial Statements.
The Financial Statements have been prepared in accordance with GAAP
applied on a basis consistent with those of previous fiscal years and present
fairly:
(a) the assets, liabilities (whether accrued, absolute, contingent or
otherwise), and the financial condition of the Corporation (as the
case may be) as at the respective dates of the relevant statements;
(b) the financial position of the Corporation (as the case may be) as at
the respective dates of the relevant statements; and
(c) the sales and earnings of the Corporation during the periods covered
thereby.
True, correct and complete copies of the Financial Statements are attached
hereto as Schedule 3.27.
-19-
3.28 Debt.
At the Time of Closing, the Corporation does not and shall not have any
long-term debt except for debt incurred in connection with leases and loans
associated with operating assets as disclosed on the Schedules hereto.
3.29 Capital Expenditures.
Except as otherwise expressly stated in Schedule 3.29, no capital
expenditures exceeding in the aggregate $10,000 have been made or authorized by
the Corporation except in the ordinary course of business since the date of the
Financial Statements.
3.30 Employees.
(1) The Corporation is in compliance with all Laws respecting employment
and employment practices, terms and conditions of employment, pay equity and
wages and hours and has not and is not engaged in any unfair labour practice.
(2) No unfair labour practice, complaint or grievance against the
Corporation is pending or, to the best of the knowledge of the Vendor,
threatened before any labour relations board or similar Governmental Entity with
respect to the Business.
(3) There is no labour strike, dispute, slowdown or stoppage actually
pending or involving or, to the best of the knowledge of the Vendor, threatened
against the Corporation with respect to the Business.
(4) No grievance which might have an adverse effect upon the Corporation
or the conduct of the Business exists, no arbitration proceeding arising out of
or under any Collective Agreement is pending, and no claim therefor has been
asserted.
(5) No collective bargaining agreement is currently in effect or being
negotiated by the Corporation with respect to any employees of the Corporation.
(6) No pension plan is currently in effect or being negotiated by either
of the Corporation with respect to any employees of the Corporation.
(7) Schedule 3.30(7) contains a complete list of all permanent and full
time employees of the Corporation, their salaries and wage rates, bonus
arrangements, benefits, positions and length of service. Schedule 3.30(7)
contains a correct and complete list showing all amounts due or accrued due for
all salary, wages, bonuses, commissions, vacation with pay, pension benefits or
other employee benefits relating to all employees.
(8) No employee of the Corporation has any agreement as to length of
notice required to terminate his or her employment, other than such as results
by law from the employment of an employee without agreement as to such notice or
as to length of employment.
(9) All vacation pay (including all banked vacation pay), bonuses,
commissions and other employee benefit payments are reflected and have been
accrued in the Books and Records of the Corporation.
-20-
(10) The only benefit plans existing in respect of the employees of the
Corporation are the Benefit Plans. True, correct and complete copies of all
written Benefit Plans and related documentation have been provided to the
Purchaser and any oral or written Benefit Plans are accurately described on
Schedule 3.30(10). The Benefit Plans are duly registered where required by, and
are in good standing under, all applicable Laws. All required employer and
employee contributions and premiums under the Benefit Plans to the date hereof
have been made, the respective fund or funds established under the Benefit Plans
are funded in accordance with applicable Laws, and no past service funding
liabilities exist thereunder.
(11) No payments have been made or authorized since the date of the
Financial Statements by the Corporation to its officers, directors, former
directors, shareholders or employees or to any Person not dealing at arm's
length (as such term is construed under the Income Tax Act (Canada)) with any of
the foregoing, except in the ordinary course of the Business and at the regular
rates payable to them as salary, pension, bonuses, rents or other remuneration
of any nature, and except as otherwise disclosed in Schedule 3.30(11).
3.31 Insurance.
[Intentionally deleted]
3.32 Litigation.
There is no action, suit or proceeding, at law or in equity, by any
Person, nor any arbitration, administrative or other proceeding by or before (or
to the best knowledge of the Vendor or the Corporation any investigation by) any
Governmental Entity pending, or, to the best of the knowledge of the Vendor or
the Corporation, threatened against or affecting the Corporation or any of its
properties, rights or assets and none of the Vendor or the Corporation knows of
any valid basis for any such action, suit, proceeding, arbitration or
investigation. The Corporation is not subject to any judgment, order or decree
entered in any lawsuit or proceeding.
3.33 Taxes.
The Corporation has filed or caused to be filed, within the times and
within the manner prescribed by Law, all federal, provincial, local and foreign
tax returns and tax reports which are required to be filed by or with respect to
the Corporation. The information contained in such returns and reports is
materially correct and complete and such returns and reports reflect accurately
all liability for taxes of the Corporation for the periods covered thereby. All
federal, provincial, local and foreign income, profits, franchise, sales, use,
occupancy, excise and other taxes and assessments (including interest and
penalties) that are or may become payable by or due from the Corporation have
been fully paid or fully disclosed and fully provided for in the Books and
Records and the Financial Statements. No examination of any tax return of the
Corporation is currently in progress, there are no outstanding agreements or
waivers extending the statutory period providing for an extension of time with
respect to the assessment or re-assessment of tax or the filing of any tax
return by, or any payment of any tax by the Corporation, and to the knowledge of
the Corporation there are no Claims now threatened or pending against the
Corporation in respect of taxes or any matters under discussion with any
Governmental Entity relating to taxes. The Corporation has withheld from each
payment made by it the amount of all taxes and other deductions required to be
withheld therefrom and has paid the same to the proper taxing or other authority
within the time prescribed under any applicable law.
3.34 Bank Accounts and Powers of Attorney.
Schedule 3.34 is a correct and complete list showing (i) the name of each
bank with which the Corporation has an account or safe deposit box and the names
of all persons authorized to draw thereon or to have access thereto; and (ii)
the names of any persons holding powers of attorney from the Corporation and a
summary statement of the terms thereof.
-21-
ARTICLE 4 -
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND TELEPLUS ENTERPRISES
4.01 Representations and Warranties of the Purchaser. The Purchaser represents
and warrants as follows to the Vendor and acknowledges and confirms that the
Vendor is relying on such representations and warranties in connection with the
sale by the Vendor of the Purchased Shares:
(1) Due Incorporation and Existence. The Purchaser is a corporation
incorporated, validly existing and in good standing under the laws of the
Province of Ontario. The Purchaser has all necessary corporate power and
authority to own or lease its properties and to carry on its business as now
being conducted by it.
(2) Validity of Agreement.
(a) The Purchaser has all necessary corporate power and authority to
enter into and perform its obligations under this Agreement and the
Ancillary Agreements to which it is a party.
(b) The execution, delivery and performance by the Purchaser of this
Agreement and the Ancillary Agreements to which they are a party or
to which either is a party and the consummation of the transactions
contemplated thereby:
(i) have been duly authorized by all necessary corporate action on
the part of the Purchaser; and
(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 violation or a breach of, or a default under or give rise
to a right of termination, amendment or cancellation or the
acceleration of any obligation under (i) any charter, by-law
or trust deed instruments of the Purchaser as applicable; (ii)
any contracts or instruments to which the Purchaser is a party
or by which the Purchaser is bound; or (iii) of any Laws
applicable to them.
(c) This Agreement and any Ancillary Agreement to which the Purchaser is
a party constitute legal, valid and binding obligations of the
Purchaser, enforceable against it in accordance with their
respective terms.
(3) Restrictive Documents. The Purchaser is not subject to, or a party to,
any charter, by-law or trust deed restriction, any Law, any Claim, any contract
or instrument, any Encumbrance or any other restriction of any kind or character
which would prevent the consummation of the transactions contemplated by this
Agreement or compliance by the Purchaser with the terms, conditions and
provisions hereof.
4.02 Representations and Warranties of Teleplus Enterprises. Teleplus
Enterprises represents and warrants as follows to the Vendor and acknowledges
and confirms that the Vendor is relying on such representations and warranties
in connection with the sale by the Vendor of the Purchased Shares:
(1) Due Incorporation and Existence. Teleplus Enterprises is a
corporation incorporated, validly existing and in good standing
under the laws of the State of Nevada. Teleplus Enterprises has all
necessary corporate power and authority to own or lease its
properties and to carry on its business as now being conducted by
it.
-22-
(2) Validity of Agreement.
(a) Teleplus Enterprises has all necessary corporate power and authority
to enter into and perform its obligations under this Agreement and
the Ancillary Agreements to which it is a party.
(b) The execution, delivery and performance by Teleplus Enterprises of
this Agreement and the Ancillary Agreements to which they are a
party or to which either is a party and the consummation of the
transactions contemplated thereby:
(i) have been duly authorized by all necessary corporate action on
the part of Teleplus Enterprises; and
(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 violation or a breach of, or a default under or give rise
to a right of termination, amendment or cancellation or the
acceleration of any obligation under (i) any charter, by-law
or trust deed instruments of Teleplus Enterprises as
applicable; (ii) any contracts or instruments to which
Teleplus Enterprises is a party or by which Teleplus
Enterprises is bound; or (iii) of any Laws applicable to them.
(c) This Agreement and any Ancillary Agreement to which Teleplus
Enterprises is a party constitute legal, valid and binding
obligations of Teleplus Enterprises, enforceable against it in
accordance with their respective terms.
(3) Valid Issue of Securities.
(a) All necessary corporate action has been taken or will be taken by
Teleplus Enterprises prior to the Closing Date to duly authorize all issuances
to the Vendor of the Teleplus Shares.
(b) All necessary corporate action has been taken or will have been taken
by Teleplus Enterprises prior to the Closing Date to conditionally allot for
issuance to the Vendor the Teleplus Shares to be issued on the Closing Date in
accordance with the provisions hereof, and such shares when issued in accordance
with the terms hereof will be validly issued as fully paid and non-assessable
shares of the Purchaser.
(4) Restrictive Documents. Teleplus Enterprises is not subject to, or a
party to, any charter, by-law or trust deed restriction, any Law, any Claim, any
contract or instrument, any Encumbrance or any other restriction of any kind or
character which would prevent the consummation of the transactions contemplated
by this Agreement or compliance by Teleplus Enterprises with the terms,
conditions and provisions hereof.
ARTICLE 5 -
PRE-CLOSING COVENANTS OF THE PARTIES
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5.01 Conduct of Business Prior to Closing.
During the period from the date hereof until the Closing Date, the Vendor
and the Corporation will conduct the Business in the ordinary course thereof,
subject to completion of the Pre-Closing Reorganization, unless the Corporation
has obtained the prior written consent of the Purchaser to do otherwise. Without
limiting the generality of the foregoing, and subject to completion of the
Pre-Closing Reorganization:
(1) the Corporation will continue to maintain and service the assets used
in the conduct of the Business in the same manner as has been its consistent
past practice;
(2) each of the Vendor and the Corporation shall use its reasonable
commercial efforts to keep available the service of the present employees and
agents of the Business and to maintain the relations and goodwill with the
suppliers, customers, distributors and any others having business relations with
the Business; and
(3) the Vendor shall use its reasonable commercial efforts to conduct the
Business in such a manner that on the Closing Date the representation and
warranties of the Vendor contained herein shall be true, correct and complete as
if such representations and warranties were made on and as of such date.
5.02 Due Diligence Investigations.
(1) The Vendor and the Corporation (i) shall permit the Purchaser and its
employees, agents, counsel, accountants or other representatives, between the
date hereof and the Time of Closing, without undue interference to the ordinary
conduct of the Business, to have reasonable access during normal business hours
and upon reasonable notice (a) to the premises of the Corporation, including the
Leased Property, (b) to the Corporation, all of its assets and property, the
Business and any other information, including accounting records, corporate
records and tax records and returns whether retained by the Vendor, the
Corporation or otherwise, and (c) to the senior personnel of the Corporation and
the Business; and (ii) shall furnish to the Purchaser or its employees, agents
counsel, accountants, or other representatives such financial and operating data
and other information with respect to the assets and property of the Corporation
and the Business as the Purchaser shall from time to time reasonably request.
(2) No investigations made by or on behalf of a party hereto, whether
under Section 5.02 or any other provision of this Agreement or any Ancillary
Agreement, shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made in this Agreement or any
Ancillary Agreement.
(3) Until the Time of Closing and in the event of termination of this
Agreement without Closing, the Purchaser will keep confidential any information
obtained from the Vendor, the Corporation or their respective agents and
representatives, unless such information (i) is or becomes generally available
to the public other than as a result of a disclosure in violation of this
Agreement; (ii) becomes available to the Purchaser on a non-confidential basis
from a source other than the Vendor, the Corporation or their representatives;
or (iii) was known to the Purchaser on a non-confidential basis before its
disclosure to the Purchaser by the Vendor, the Corporation or their
representatives. If this Agreement is so terminated, promptly after such
termination the Purchaser will return or cause to be returned or destroyed all
documents, work papers and other material, whether in written, electronic or
other form (including all copies thereof), obtained from the Vendor, the
Corporation or their respective agents and representatives in connection with
this Agreement and not theretofore made public.
5.03 Actions to Satisfy Closing Conditions.
Each of the Parties hereby agrees to take all such actions as are within
its power to control and to use its best efforts to cause other actions to be
taken which are not within its power to control, so as to ensure compliance with
all of the conditions set forth in Article 6.
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5.04 Transfer of the Purchased Shares.
The Vendor shall take all necessary and reasonable steps and proceedings
to permit good title to the Purchased Shares to be duly and validly transferred
and assigned to the Purchaser at the Time of Closing, free of all Encumbrances.
5.05 Request for Consents.
The Vendor will use its reasonable commercial efforts to obtain, prior to
Closing, all Consents which are required under the Contracts set forth in
Schedules 3.22 and 3.23. Such Consents shall be upon such terms as are
acceptable to the Purchaser, acting reasonably. The Purchaser will co-operate in
obtaining such Consents.
5.06 Audited Financial Statements.
The Vendor shall, prior to Closing and by no later than February 14, 2005,
cause to be prepared and delivered to the Purchaser, at the cost and expense of
the Vendor: (i) unqualified audited annual financial statements of the
Corporation for the two years ended July 31, 2004; and (ii) unqualified audited
financial statements for the period August 1, 2004 to November 30, 2004
(collectively, the "Audited Financial Statements"), provided that if the Vendor
has not delivered the Audited Financial Statements to the Purchaser by February
14, 2005, the parties may extend the date for delivery of the of the Audited
Financial Statements and the Closing Date for an additional 30 days.
5.07 Filings and Authorizations.
Each of the Vendor and the Purchaser, as promptly as practicable after the
execution hereof, (i) will 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; (ii) will use all reasonable efforts to obtain, or
cause to be obtained, all Authorizations, approvals, consents and waivers from
all Persons and Governmental Entities necessary or advisable to be obtained by
it in order to consummate such transfer; and (iii) will use all reasonable
commercial efforts to take, or cause to be taken, all other actions necessary,
proper or advisable in order for it to fulfill its obligations hereunder. The
Vendor and the 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.
5.08 Notice of Untrue Representation or Warranty.
The Vendor or the Corporation, as the case may be, shall promptly notify
the Purchaser upon any representation or warranty of the Vendor or the
Corporation contained in this Agreement or any Ancillary Agreement becoming
untrue or incorrect prior to the Time of Closing.
ARTICLE 6 -
CONDITIONS OF CLOSING
6.01 Conditions for the Benefit of the 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 Time of Closing,
which conditions are for the exclusive benefit of the Purchaser and may be
waived in whole or in part by the Purchaser in its sole discretion:
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(1) Truth of Representations and Warranties of the Vendor. The
representations and warranties of the Vendor contained in this Agreement or in
any Ancillary 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 the Vendor shall also have executed and
delivered a certificate to that effect. The receipt of such evidence and the
Closing shall not be a waiver of the representations and warranties of the
Vendor which are contained in this Agreement. Upon the delivery of such
certificates, the representations and warranties of the Vendor 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.
(2) Performance of Covenants by the Vendor. Each of the Vendor and the
Corporation shall have fulfilled or complied with all covenants herein contained
to be performed or caused to be performed by them at or prior to the Time of
Closing, and the Vendor and the Corporation shall each have delivered a
certificate to that effect. The receipt of such certificates and the Closing
shall not be a waiver of the covenants of the Vendor and the Corporation which
are contained in this Agreement.
(3) Consents and Authorizations. All Consents and Authorizations and all
other required consents and authorizations shall have been obtained on terms
acceptable to the Purchaser, acting reasonably, in order to permit the Closing
of the sale of the Purchased Shares on the terms and conditions set out in this
Agreement without adversely affecting, or resulting in the violation or a breach
of or a default under or any termination, cancellation, amendment or
acceleration of any obligation under any licence, permit, Lease or Contract in
connection with the Business.
(4) Due Diligence. The Purchaser shall have completed its due diligence
investigations in accordance with Section 5.02 to its satisfaction, in its sole
and absolute discretion, on or before February 1, 2005; provided, however, that,
satisfactory completion of such due diligence investigations by the Purchaser is
conditional upon (a) the Vendor submitting to the Purchaser the Audited
Financial Statements, and (b) the Purchaser being satisfied with the contents of
such Audited Financial Statements in its sole and absolute discretion.
(5) Non-Competition Agreements. Each of the Vendor and ▇▇ ▇▇▇▇▇ shall have
entered into non-competition agreements with the Corporation whereby he
covenants and agrees with the Purchaser and the Corporation that he will not,
directly or indirectly, for a period of 24 months from and after the Closing
Date, either individually or in partnership or jointly or in conjunction with
any person or persons, firm, association, syndicate, company or corporation
(except the Purchaser or the Corporation), as principal, shareholder or
employee, carry on, be engaged in, be interested in, be concerned with or be
connected in any manner with the ownership, management or control of, any
business enterprise which is competitive with the Business of the Corporation as
now carried on or as now proposed to be carried on.
(6) Deliveries. The Vendor shall have delivered or caused to be delivered
to the Purchaser the following in form and substance satisfactory to the
Purchaser, acting reasonably:
(a) share certificates representing the Purchased Shares 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 thereof;
(b) certified copies of (i) the charter documents and extracts from
the by-laws of the Corporation relating to the execution of
documents; (ii) all resolutions of the board of directors of the
Corporation approving the entering into of this Agreement and the
completion of all transactions contemplated hereunder; (iii) all
other instruments evidencing necessary corporate action of the
Corporation with respect to such matters; and (iv) specimen
signatures of the officers of the Corporation;
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(c) a certificate of status, compliance, good standing or like
certificate with respect to each of the Corporation issued by
appropriate government officials of the jurisdiction of its
incorporation;
(d) the certificates referred to in Subsections 6.01(1) and (2);
(e) the non-competition agreements referred to in Subsection 6.01(5);
(f) a favourable opinion of counsel to the Vendor and the Corporation in
substantially the form set forth in Exhibit A;
(g) all originals of the Corporate Records of the Corporation and access
to the said Corporate Records;
(h) evidence that all necessary steps and proceedings as approved by
counsel for the Purchaser to permit all of the Purchased Shares to
be fully and validly transferred to the Purchaser or its nominee(s)
have been taken;
(i) duly executed resignations effective as of the Time of Closing of
each director and officer of the Corporation as the Purchaser may
specify;
(j) a release in favour of the Corporation of each of the Vendor and
such officers and directors of the Corporation as the Purchaser may
specify in the form of the release attached hereto as Exhibit D; and
(k) all necessary assurances, transfers, assignments and consents,
including all necessary Consents, and any other instruments
necessary or reasonably required to effectively carry out the intent
of this Agreement and any Ancillary Agreement and to transfer the
Purchased Shares to the Purchaser, free and clear of all
Encumbrances.
(7) Board Approval. The Board of Directors of the Purchaser shall have
approved the purchase of the Purchased Shares as of February 1, 2004, and the
transactions contemplated hereby on the terms and conditions set forth in this
Agreement.
(8) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Purchaser and the Purchaser
shall have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(9) Change in Law. Since the date hereof, no Law, proposed Law, any change
in any Law, or the interpretation or enforcement of any Law shall have been
introduced, enacted or announced (including the introduction, enactment or
announcement of any Law respecting taxes or environmental matters or any change
therein or in the interpretation or enforcement thereof), the effect of which
will be to prevent the closing of the transactions contemplated herein or to
increase materially (i) the cost to the Purchaser of the completion of the
transactions contemplated in this Agreement; or (ii) the cost of the Corporation
of operating the Business after Closing on substantially the same basis as
heretofore operated.
If any condition, obligation or covenant of the Vendor or the Corporation to be
performed hereunder or under any Ancillary Agreement at or prior to the Time of
Closing shall not have been fulfilled or performed by such time, the Purchaser
may terminate this Agreement by notice in writing to the Vendor, and in such
event the Purchaser shall be released from all obligations hereunder. The Vendor
shall only be released from its obligations hereunder if the condition or
conditions for the non-performance of which the Purchaser has terminated this
Agreement are not reasonably capable of being performed or caused to be
performed by the Vendor. Notwithstanding the foregoing, the Purchaser shall be
entitled to waive compliance with any of such conditions, obligations or
covenants in whole or in part if it sees fit to do so without prejudice to any
of its rights of termination in the event of non-performance of any other
condition, obligation, or covenant in whole or in part.
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6.02 Conditions for the Benefit of the Vendor.
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed at or prior to the Time of Closing,
which conditions are for the exclusive benefit of the Vendor and may be waived
by the Vendor in its sole discretion:
(1) Truth of Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser contained in this Agreement or
in any Ancillary 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 the Purchaser shall also have executed and
delivered a certificate of a senior officer to that effect. The receipt of such
evidence and the Closing shall not be a waiver of the representations and
warranties of the Purchaser which are contained in this Agreement. Upon the
delivery of such certificates, the representations and warranties of the
Purchaser 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.
(2) Performance of Covenants by the Purchaser. The Purchaser shall have
fulfilled or complied with all covenants herein contained to be performed or
caused to be performed by it at or prior to the Time of Closing, and the
Purchaser shall have delivered a certificate of a senior officer to that effect.
The receipt of such certificate and the Closing shall not be a waiver of the
covenants of the Purchaser which are contained in this Agreement.
(3) Truth of Representations and Warranties of Teleplus Enterprises. The
representations and warranties of Teleplus Enterprises contained in this
Agreement or in any Ancillary 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 Teleplus Enterprises shall
also have executed and delivered a certificate of a senior officer to that
effect. The receipt of such evidence and the Closing shall not be a waiver of
the representations and warranties of Teleplus Enterprises which are contained
in this Agreement. Upon the delivery of such certificates, the representations
and warranties of Teleplus Enterprises 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.
(4) Performance of Covenants by Teleplus Enterprises. Teleplus Enterprises
shall have fulfilled or complied with all covenants herein contained to be
performed or caused to be performed by it at or prior to the Time of Closing,
and Teleplus Enterprises shall have delivered a certificate of a senior officer
to that effect. The receipt of such certificate and the Closing shall not be a
waiver of the covenants of Teleplus Enterprises which are contained in this
Agreement.
(5) Employment Agreements. The Corporation shall have entered into
employment agreements with the Vendor and ▇▇ ▇▇▇▇▇ pursuant to which they will
each be entitled to an aggregate of $100,000 in remuneration payable in equal
installments over a period of three years from the Closing Date, subject to the
satisfaction of certain performance targets by the Corporation, and payable in
cash or, at the election of the Purchaser, Teleplus Shares, substantially in the
form attached hereto as Schedule 6.02(5).
(6) Deliveries. The Purchaser shall have delivered or caused to be
delivered to the Vendor the following in form and substance satisfactory to the
Vendor, acting reasonably:
(a) certificates representing the Teleplus Shares duly registered in the
name of the Vendor or as the Vendor shall direct at Closing;
(b) certified copies of (i) the charter documents and extracts from
the by-laws of the Purchaser relating to the execution of
documents; (ii) all resolutions of the board of directors of the
Purchaser approving the entering into of this Agreement and the
completion of all transactions contemplated hereunder; (iii) all
other instruments evidencing necessary corporate action of the
Purchaser with respect to such matters; and (iv) specimen
signatures of certain of the officers of the Purchaser;
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(c) a certificate of status, compliance, good standing or like
certificate with respect to each of the Purchaser and Teleplus
Enterprises issued by appropriate government officials of the
jurisdiction of its incorporation;
(e) the certificates referred to in Subsections 6.02(l), (2), (3) and
(4);
(f) the employment agreements referred to in Subsection 6.02(5);
(g) a favourable opinion of counsel to the Purchaser in substantially
the form set forth in Exhibit C;
(h) a favourable opinion of counsel to Teleplus Enterprises and Teleplus
Consumer in substantially the form set forth in Exhibit C1;
(i) a release in favour of the Vendor and officers and directors of the
Corporation from the Corporation in the form of the release attached
hereto as Exhibit E where such persons provided the release required
pursuant to paragraph 6.01(5)(l);
(j) evidence that all necessary steps and proceedings as approved by
counsel for the Vendor to permit the Teleplus Shares to be issued,
in accordance with the terms hereof, to the Vendor or their
nominee(s) under this Agreement and the Ancillary Agreements have
been taken; and
(k) all necessary assurances, transfers, assignments and consents,
including all necessary consents, and any other instruments
necessary or reasonably required to effectively carry out the intent
of this Agreement and any Ancillary Agreement and to transfer the
agreed upon consideration to the Vendor, free and clear of all
Encumbrances.
(7) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Vendor and the Vendor shall
have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(8) Change in Law. Since the date hereof, no Law, proposed Law, any change
in any Law, or the interpretation or enforcement of any Law shall have been
introduced, enacted or announced (including the introduction, enactment or
announcement of any Law respecting taxes or environmental matters or any change
therein or in the interpretation or enforcement thereof), the effect of which
will be to prevent the closing of the transactions contemplated herein.
If any condition, obligation or covenant of the Purchaser to be performed
hereunder or under any Ancillary Agreement at or prior to the Time of Closing
shall not have been fulfilled or performed by such time, the Vendor may
terminate this Agreement by notice in writing to the Purchaser, and in such
event the Vendor shall be released from all obligations hereunder. The Purchaser
shall only be released from its obligations hereunder if the condition or
conditions for the non-performance of which the Vendor has terminated this
Agreement are not reasonably capable of being performed or caused to be
performed by the Purchaser. Notwithstanding the foregoing, the Vendor shall be
entitled to waive compliance with any of such conditions, obligations or
covenants in whole or in part if it sees fit to do so without prejudice to any
of its rights of termination in the event of non-performance of any other
condition, obligation, or covenant in whole or in part.
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6.03 Conditions Precedent.
The purchase and sale of the Purchased Shares is subject to the following
terms and conditions to be fulfilled at or prior to the Time of Closing, which
conditions are true conditions precedent:
(1) No Legal Action. No action or proceeding shall be pending or
threatened by any Person in any jurisdiction, to enjoin, restrict or prohibit
any of the transactions contemplated hereby or the right of the Corporation to
conduct the Business after Closing on substantially the same basis as heretofore
operated.
(2) Insurance. Prior to the Closing Date, the Corporation will obtain
insurance with respect to its business, properties and employees, which
insurance shall include but not necessarily be limited to (a) comprehensive
liability coverage of no less than $500,000, and (b) fire and theft coverage of
no less than $50,000.
If any conditions precedent in this Section 6.03 shall not have been fulfilled
at or prior to the Time of Closing, this Agreement shall be terminated and the
Parties shall be released from all obligations hereunder.
ARTICLE 7 -
CLOSING
7.01 Date, Time and Place of Closing.
The completion of the transactions contemplated by this Agreement shall
take place at the offices of ▇▇▇▇▇▇▇▇▇ Dellelce LLP, Toronto, Ontario, on the
Closing Date at the Time of Closing, or at such other place, on such other date,
and at such other time as may be agreed upon in writing between the Vendor and
the Purchaser.
7.02 Closing Procedures.
Subject to satisfaction or waiver by the relevant Party of the conditions
of Closing set forth herein, at the Time of Closing the Vendor shall deliver
actual possession of the Purchased Shares and the requisite instruments of
conveyance and upon such delivery the Purchaser shall pay or satisfy the
Purchase Price in accordance with Section 2.03. The transfer of possession of
the Purchased Shares shall be deemed to take effect as at the Time of Closing.
7.03 Risk of Loss.
If, prior to the Time of Closing, all or any part of the property or
assets of the Corporation are destroyed or damaged by fire or any other casualty
or shall be appropriated, expropriated or seized by any Governmental Entity or
other lawful authority, the Purchaser shall have the option, exercisable by
notice in writing given within five Business Days of the Purchaser receiving
notice in writing from the Vendor of such destruction, damage, expropriation or
seizure:
(a) to reduce the Purchase Price by an amount equal to the cost of
repair, or, if destroyed or damaged beyond repair, by an amount
equal to the replacement cost of the assets forming part of the
property or assets so damaged or destroyed and to complete the
purchase; or
(b) to complete the purchase without reduction of the Purchase Price, in
which event all proceeds of an insurance or compensation for
expropriation or seizure shall be payable to the Corporation and any
right and claim of the Vendor to any such amounts not paid by the
Closing Date shall be assigned to the Corporation; or
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(c) if all or a substantial portion of the property or assets are so
destroyed or damaged, of terminating this Agreement and not
completing the purchase, in which case all obligations of the
Purchaser shall terminate forthwith upon the Purchaser giving notice
as required herein.
7.04 Expenses.
Unless otherwise expressly provided herein, each of the Parties shall be
responsible for the expenses (including but not limited to fees and expenses of
legal counsel and other professional advisers) incurred by them, respectively,
in connection with the negotiation and settlement of this Agreement and the
completion of the transactions contemplated hereby.
ARTICLE 8 -
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES
8.01 Survival of Representations and Warranties.
(1) The representations and warranties of the Vendor contained in this
Agreement or any Ancillary Agreement shall survive the Closing and,
notwithstanding such or any investigation made by or on behalf of the Purchaser,
shall continue in full force and effect for the benefit of the Purchaser for a
period of 36 months from the Closing Date and any claim in respect thereof
(except a claim based on tax matters under Section 3.35 which shall continue
until the expiry of the relevant reassessment periods, or a claim based on fraud
which shall have no restriction) shall be made in writing within such time
period.
(2) The representations and warranties of the Purchaser and Teleplus
contained in this Agreement or in any Ancillary Agreement shall survive the
Closing and, notwithstanding such Closing or any investigation made by or on
behalf of any of the Vendor, shall continue in full force and effect for the
benefit of the Vendor for a period of 36 months from the Closing Date and any
claim in respect thereof (except a claim based on fraud which shall have no
restriction) shall be made in writing within such time period.
8.02 Indemnification in Favour of the Purchaser.
Subject to Section 8.05, the Vendor agrees to indemnify and save each of
the Purchaser, and its shareholders, directors, officers, employees, agents and
representatives, (in respect of whom the Purchaser hereby acts as agent and
trustee with respect thereto) harmless of and from any Claim or Loss suffered
by, imposed upon or asserted against the Purchaser or the Corporation as a
result of, in respect of, connected with or arising out of, under or pursuant
to:
(a) any failure of the Vendor to perform or fulfill any covenant of the
Vendor under this Agreement; and
(b) any breach or inaccuracy of any representation or warranty contained
in this Agreement given by the Vendor.
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8.03 Indemnification in Favour of the Vendor.
(1) Subject to Section 8.04, the Purchaser shall indemnify and save the
Vendor harmless of and from any Claim or Loss suffered by, imposed upon or
asserted against the Vendor as a result of, in respect of, connected with or
arising out of, under or pursuant to:
(a) any failure by the Purchaser to perform and fulfill any
covenant of the Purchaser under this Agreement or any
Ancillary Agreement;
(b) subject to the limitation period set forth in Section 8.01
hereof, any breach or inaccuracy of any representation or
warranty given by the Purchaser contained in this Agreement or
in any Ancillary Agreement; or
(c) the guarantee given by the Vendor in connection with the
Lease, if and only if such indemnification sought by the
Vendor arises out of a Claim made by the Landlord against the
Vendor resulting from failure by the Purchaser to comply with
the terms of the Lease after the Closing Date.
(2) Subject to Section 8.04, Teleplus Enterprises shall indemnify and save
the Vendor harmless of and from any Claim or Loss suffered by, imposed upon or
asserted against the Vendor as a result of, in respect of, connected with or
arising out of, under or pursuant to:
(a) any failure by Teleplus Enterprises to perform and fulfill any
covenant of Teleplus Enterprises under this Agreement or any
Ancillary Agreement; or
(b) subject to the limitation period set forth in Section 8.01
hereof, any breach or inaccuracy of any representation or
warranty given by Teleplus Enterprises contained in this
Agreement or in any Ancillary Agreement.
8.04 Indemnification Proceedings.
(1) Any Party seeking indemnification under this Article (save and except
for indemnification claims under the provisions of Section 8.05, the procedure
for which shall be governed by the provisions thereof) (the "indemnified party")
shall forthwith notify the Party against whom a claim for indemnification is
sought hereunder (the "indemnifying party") in writing, which notice shall
specify, in reasonable detail, the nature and estimated amount of the claim. If
a claim by a third party is made against an indemnified party, and if the
indemnified party intends to seek indemnity with respect thereto under this
Article, the indemnified party shall promptly (and in any case within 30 days of
such claim being made) notify the indemnifying party of such with reasonable
particulars. The indemnifying party shall have 30 days after receipt of such
notice to undertake, conduct and control, through counsel of its own choosing
and at its expense, the settlement or defence thereof, and the indemnified party
shall cooperate with it in connection therewith; except that with respect to
settlements entered into by the indemnifying party (i) the consent of the
indemnified party shall be required if the settlement provides for equitable
relief against the indemnified party, which consent shall not be unreasonably
withheld or delayed; and (ii) the indemnifying party shall obtain the release of
the indemnified party. If the indemnifying party undertakes, conducts and
controls the settlement or defence of such claim (i) the indemnifying party
shall permit the indemnified party to participate in such settlement or defence
through counsel chosen by the indemnified party, provided that the fees and
expenses of such counsel shall be borne by the indemnified party; and (ii) the
indemnifying party shall promptly reimburse the indemnified party for the full
amount of any loss resulting from any claim and all related expenses (other than
the fees and expenses of counsel as aforesaid) incurred by the indemnified
party. The indemnified party shall not pay or settle any claim so long as the
indemnifying party is reasonably contesting any such claim in good faith on a
timely basis. Notwithstanding the two immediately preceding sentences, the
indemnified party shall have the right to pay or settle any such claim, provided
that in such event it shall waive any right to indemnity therefor by the
indemnifying party.
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(2) With respect to third party claims, if the indemnifying party does not
notify the indemnified party within 30 days after the receipt of the indemnified
party's notice of a claim of indemnity hereunder that it elects to undertake the
defence thereof, the indemnified party shall have the right, but not the
obligation, to contest, settle or compromise the claim in the exercise of its
reasonable judgment at the expense of the indemnifying party, provided that any
such settlement or compromise shall be subject to the prior written consent of
the indemnifying party, such consent not to be unreasonably withheld.
(3) In the event of any claim by a third party against an indemnified
party, the defence of which is being undertaken and controlled by the
indemnifying party, the indemnified party will use all 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 in defending any such claims; provided that the indemnifying
party shall be responsible for the expense associated with any employees made
available by the indemnified party to the indemnifying party hereunder, 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 such employees are
assisting the indemnifying party and which expenses shall not exceed the actual
cost to the indemnified party associated with such employees.
(4) With respect to third party claims, 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 claim and shall otherwise
cooperate on a timely basis with the indemnifying party in the defence of such
claim.
(5) With respect to any re-assessment for income, corporate, sales,
excise, or other tax or other liability enforceable by Encumbrance against the
property of the indemnified party, the indemnifying party's right to so contest
shall only apply after such payment of such re-assessment or the provision of
such security as is necessary to avoid an Encumbrance being placed on the
property of the indemnified party.
8.05 Limitations.
The obligation of indemnification set out in (i) Sections 8.02 and 8.03,
except for Section 8.03(1)(c) to which this Section does not apply, shall be
applicable only to the extent that any claims made thereunder, in the aggregate,
exceed $50,000; and (ii) Sections 8.02 and 8.03 (except any claim based on tax
matters under Section 3.35 which shall apply until the expiry of the relevant
reassessment period, any claim based on fraud which shall have no restriction),
shall be applicable only to the extent that a claim for indemnification is made
within 36 months of the Closing Date.
8.06 Right of Set-Off
To fund, in part or in whole, any claims made by the Purchaser under this
Article 8 against the Vendor, the Vendor agrees that the Purchaser shall be
entitled to set-off against amounts owing by it to the Vendor under Section
2.03, provided that any such set-off shall be made in accordance with this
Section 8.06. The Purchaser shall provide 5 days prior written notice of its
intention to claim set-off under this section, and such written notice shall
include all available particulars of the claim and a detailed calculation of the
Purchaser's estimate of amounts owing to it under this Article 8. The amount of
the proposed set-off shall represent a bona fide estimate of the quantum of
damages to which the Purchaser claims entitlement under this Article 8. Pending
final resolution of any disputed claim made by the Purchaser under this Section
8.06, the Purchaser shall be entitled to withhold the amount of such claim from
any payment of due under Section 2.03. If the Purchaser and the Vendor are
unable to agree as to the appropriate quantum to be set off by the Purchaser,
the matter shall be settled in accordance with the provisions of Article 10.
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8.07 Exclusion of Other Remedies.
No Party shall have the right to bring any proceeding against any other
Party for a breach of any representation, warranty, covenant or agreement
contained in this Agreement, except for a proceeding brought in accordance with
the provisions of this Article and Article 10 hereof. This provision is not
intended to preclude any proceeding by any Party against any other Party based
on a cause of action or right, including any statutory right, other than a cause
of action in contract or tort for breach of a representation, warranty or
agreement contained in this Agreement.
ARTICLE 9 -
POST-CLOSING COVENANTS
9.01 Access to Books and Records.
For a period of six (6) years from the Closing Date or for such longer
period as may be required by applicable Law, the Purchaser covenants and agrees
to retain all original accounting books and records relating to the Corporation
for the period prior to the Closing Date. So long as any such books and records
are retained by the Purchaser pursuant to this Agreement, the Vendor shall have
the reasonable right to inspect and to make copies (at their own expense) of the
same at any time upon reasonable request during normal business hours and upon
reasonable notice for any proper purpose and without undue interference to the
business operations of the Purchaser. The Purchaser shall have the right to have
its representatives present during any such investigations.
9.02 Further Assurances.
From time to time subsequent to 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 effectively to
carry out the intent of this Agreement and any Ancillary Agreement and to
transfer the Purchased Shares to the Purchaser.
9.03 Assistance By Vendor.
In order that the Corporation may, following the Closing, realize the full
benefit of the Contracts and the Lease, the Vendor will, at the request and
expense and under the direction of the Purchaser, as the Purchaser shall
specify,
(a) take all such action and do or cause to be done all such things
as shall, in the opinion of the Purchaser acting reasonably, be
necessary or proper in order that the obligations of the
Corporation thereunder may be performed in such manner that the
value of such Contracts and the Lease shall be preserved and
shall enure to the benefit of the Corporation, and that the
collection of moneys due and payable to the Corporation in and
under the Contracts and the Lease shall be received by the
Corporation, and
(b) promptly pay over to the Corporation any moneys collected after the
Closing Date by or paid to the Vendor in respect of every such
Contract and the Lease.
9.04 Employment Duties of Vendor.
The Vendor agrees to devote his full time and attention to the business of
the Corporation following Closing in accordance with the provisions of the
employment agreement referred to in Subsection 6.02(5).
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ARTICLE 10 -
ARBITRATION
10.01 Best Endeavours to Settle Disputes.
In the event of any dispute, claim, question or difference arising out of
or relating to this Agreement or any agreement executed pursuant to this
Agreement or any breach hereof, the parties hereto shall use their best
endeavours to settle such dispute, claim, question or difference. To this
effect, they shall consult and negotiate with each other, in good faith and
understanding of their mutual interests, to reach a just and equitable solution
satisfactory to all parties.
10.02 Arbitration.
Except as is expressly provided in this Agreement, if the parties do not
reach a solution pursuant to Section 10.01 within a period of 15 Business Days
following the first notification in writing by any party to another party of any
dispute, claim, question or difference, then upon written notice by any party to
the others, the dispute, claim, question or difference shall be finally settled
by arbitration in accordance with the provisions of the Arbitrations Act
(Ontario) and any amendments thereto, based upon the following:
(a) the arbitration tribunal shall consist of one arbitrator appointed
by mutual agreement of the parties, or in the event of failure to
agree within 10 Business Days, any party may apply to a judge of the
Superior Court of Justice to appoint an arbitrator. The arbitrator
shall be qualified by education and training to pass upon the
particular matter to be decided;
(b) the arbitrator shall be instructed that time is of the essence in
proceeding with his determination of any dispute, claim, question or
difference and, in any event, the arbitration award must be rendered
within 30 days of the submission of such dispute to arbitration;
(c) the arbitration shall take place in Toronto, Ontario;
(d) the arbitration award shall be given in writing and shall be final
and binding on the parties, subject only to one appeal to another
arbitration tribunal appointed pursuant to subsection 10.02(a), and
shall deal with the question of costs of arbitration and all matters
related thereto;
(e) an appeal to a further arbitration tribunal of an arbitration award
shall also be given in writing and shall be final and binding on the
parties, not subject to any appeal and shall deal with the question
of costs of arbitration and all matters related thereto; and
(f) judgment upon the award rendered may be entered in any Court having
jurisdiction, or, application may be made to such Court for a
judicial recognition of the award or an order of enforcement
thereof, as the case may be.
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ARTICLE 11 -
MISCELLANEOUS
11.01 Notices.
Any notice, direction or other instrument required or permitted to be
given hereunder shall be in writing and given by delivering or sending it by
telecopy or other similar form of communication addressed:
(1) to the Purchaser at:
Keda Consulting Corp.
c/o Wildeboer Dellelce LLP
1 First Canadian Place
Suite 810
Toronto, Ontario M5X 1A9
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ Dellelce LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(2) to the Vendor at:
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fine and Deo
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ (ext. 27)
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(3) to the Corporation at:
1523813 ONTARIO LIMITED
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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Any such notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given, if sent by telecopier or other similar
form of telecommunications on the next Business Day following such transmission
or, if delivered, to have been received on the date of such delivery. 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 the
party at its changed address.
11.02 Publicity.
Save as required by Law or by any stock exchange, none of the Parties
shall issue any press release or make any other public statement or announcement
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior written approval of the other
Parties to the contents and the manner of presentation and publication thereof.
If disclosure is required by Law or by any stock exchange, the disclosing Party
shall consult in advance with the other Parties and attempt in good faith to
reflect such other Parties' concerns in the required disclosure.
11.03 Time of the Essence.
Time shall be of the essence of this Agreement.
11.04 Brokers.
The Vendor shall indemnify and save harmless the Purchaser from and
against any Claims 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 the Vendor.
11.05 Third Party Beneficiaries.
Each Party hereto intends 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 hereto, and no Person, other than the Parties hereto, shall be entitled
to rely on the provisions hereof in any action, suit, proceeding, hearing or
other forum.
11.06 Enurement.
This Agreement shall enure to the benefit of and be binding upon each of
the Parties, their successors and any permitted assigns.
11.07 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
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11.08 Joint and Several Liability.
In the event that there is no Closing, for any reason whatsoever, and
notwithstanding any other provision hereof, the Corporation shall be jointly and
severally liable with each of the Vendor, as a principal and not as a surety,
with respect to all of the representations, warranties, covenants, indemnities
and agreements of the Vendor.
11.09 Knowledge.
Where any representation or warranty contained in this Agreement or any
Ancillary Agreement is expressly qualified by reference to the knowledge of the
Vendor, or where any other reference is made herein or in any Ancillary
Agreement to the knowledge of the Vendor, it shall be deemed to refer to the
knowledge of each of the Vendor and the Corporation. Each of the Vendor hereby
confirms that it has made due and diligent inquiry of such Persons (including
appropriate officers of the Vendor and the Corporation) as it considers
necessary as to the matters that are the subject of such representations,
warranties or references.
11.10 Assignment.
This Agreement may not be assigned by the Vendor without the prior written
consent of the Purchaser. This Agreement may be assigned by the Purchaser
without the consent of the Vendor, provided that any assignee enters into a
written agreement with the Vendor to be bound by the provisions of this
Agreement in all respects and to the same extent as the Purchaser is bound.
11.11 Non-Merger.
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties of the Parties contained in this Agreement and
the Ancillary Agreements shall not merge on and shall survive the Closing and,
notwithstanding such Closing, or 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 hereunder or under any of the Ancillary Agreements or in respect of any
right to damages or other remedies.
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first above written.
KEDA CONSULTING CORP.
Per: /s/ Marius Silvasan
___________________________________ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Witness: ▇▇▇▇▇ ▇▇▇▇▇▇
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TELEPLUS ENTERPRISES INC.
Per: /s/ Marius Silvasan
1523813 ONTARIO LIMITED
Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, President