Exhibit 10.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 25/th/ day of January, 2000.
B E T W E E N :
1348485 ONTARIO INC.
a corporation incorporated under
the laws of the Province of Ontario
(the "Purchaser"),
OF THE FIRST PART;
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▇▇▇▇▇▇ ▇▇▇ INVESTMENTS INC.
O/A CABLE TEC COMMUNICATIONS
a corporation incorporated
under the laws of the Province of Ontario
(the "Company"),
OF THE SECOND PART;
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▇▇▇▇▇▇▇ TANUNAGARA
of the Town of Whitchurch-Stoufville in
the Regional Municipality of York
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▇▇▇▇▇▇▇ TANUNAGARA
of the Town of Whitchurch-Stoufville in
the Regional Municipality of York
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▇▇▇▇▇▇ TANUNAGARA
of the Town of Pickering, in
the Regional Municipality of Durham
(collectively, the "Vendors"),
OF THE THIRD PART;
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WHEREAS:
1. The Vendors are the registered and beneficial owners of all of the issued
and outstanding shares in the capital of the Company; and
2. The Purchaser wishes to purchase, and the Vendors wish to sell all of the
issued and outstanding shares in the capital of the Company on the terms
and conditions herein contained;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged), it
is agreed between the parties hereto as follows:
ARTICLE 1 - INTERPRETATION
1.1 Defined Terms.
In this Agreement and in the schedules hereto, unless there is something in the
subject matter or context inconsistent therewith, the following terms and
expressions will have the following meanings:
(a) "Affiliate" of any person means any corporation which, directly or
indirectly, is controlled by, controls or is under direct or
indirect common control with such person;
(b) "arm's length" will have the meaning ascribed to such term under the
Income Tax Act, S.C. 1970-71-72, c. 63 (Canada);
(c) "Business" means the business carried on by the Company which
primarily involves the installation of fibre optic cabling, but does
not include the business of operating a Cantel retail outlet;
(d) "Business Day" means any day other than a day which is a Saturday, a
Sunday or a statutory holiday in Ontario;
(e) "Closing Date" means February 21, 2000, or such other date as the
Vendors and Purchaser may agree upon;
(f) "Closing Time" means 1:00 p.m. (Toronto time) in Toronto on the
Closing Date or such other time on the Closing Date as the parties
hereto may agree upon;
(g) "Condition" of the Company means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs or
financial position of the Company;
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(h) "Control" means, with respect to any corporation, the ownership of
more than 50% of the voting shares of that corporation, including any
shares which are voting only upon the occurrence of a contingency
where such contingency has occurred and is continuing;
(i) "Disagreement Notice" - as defined in section 2.7 of this Agreement;
(j) (reserved)
(k) "Employment Agreement" means the form of the employment agreement
attached hereto as Exhibit "A";
(l) "Encumbrances" means mortgages, charges, pledges, security interests,
liens, encumbrances, actions, claims, demands and equities of any
nature whatsoever or howsoever arising and any rights or privileges
capable of becoming any of the foregoing;
(m) "Escrow Agreement" means the form of escrow agreement attached hereto
as Exhibit "B";
(n) "Financing" as defined in section 6.1(4) of this Agreement;
(o) "First Payment" - as defined in section 2.4(2)(a) of this Agreement;
(p) "generally accepted accounting principles" means the accounting
principles so described and promulgated by the Canadian Institute of
Chartered Accountants which are applicable as at the date on which any
calculation made hereunder is to be effective or as at the date of any
financial statements referred to herein, as the case may be;
(q) "Holdback Period" - as defined in section 2.7 of this Agreement;
(r) "Interim Financial Statements" means the unaudited interim financial
statements of the Company, prepared on a notice to reader basis, as at
and for the eleven month period ended November 30, 1999, consisting of
a balance sheet and an income statement, together with the notes
thereto, copies of which are attached hereto as Schedule 1.1(r), all
prepared in accordance with generally accepted accounting principles,
consistently applied;
(s) "Interim Period" means the period from and including the date of this
Agreement to and including the Closing Date;
(t) "Interim Statements Date" means November 30, 1999;
(u) "Inventory at Closing" means such portion of the Company's inventory
existing as of the Closing Date that, prior to the Closing Time, the
Purchaser and Vendors mutually agree to include in the calculation of
Working Capital at Closing;
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(v) "Leased Premises" means all premises leased by the Company under the
Leases;
(w) "Leases" means the leases and the agreements to lease under which the
Company leases any real property, as listed in Schedule 1.1(w)
attached hereto;
(x) "Liabilities at Closing" means all liabilities of the Company
outstanding as of the Closing Date which shall include, without
limiting the generality of the foregoing, all Governmental Charges (as
defined in section 3.1(17)) accrued up to the Closing Date;
(y) "Licences" means all of the trademarks, licences, registrations and
qualifications to do business held by the Company;
(z) "person" means and includes any individual, corporation, partnership,
firm, joint venture, syndicate, association, trust, government,
governmental agency or board or commission or authority, and any other
form of entity or organization;
(aa) "Purchase Price" means the sum of $1,500,000.00, which is the amount
payable by the Purchaser to the Vendors for all of the Purchased
Shares, subject to the adjustments described in Article 2 of this
Agreement;
(bb) "Purchased Shares" means the three issued and outstanding common
shares in the capital of the Company being sold by the Vendors and
purchased by the Purchaser hereunder;
(cc) "Real Properties" means the real properties owned by the Company,
which are described in Schedule 1.1(cc) attached hereto;
(dd) "Receivables" means accounts receivable of the Company billed in the
normal course that are outstanding on the Closing Date;
(ee) "Receivables at Closing" means Receivables, excluding such Receivables
that are greater than 60 days old;
(ff) "Trade Payables" means those Liabilities at the Closing Date that are
obligations owing to trade creditors of the Company;
(gg) "Unaudited Financial Statements" means the unaudited consolidated
financial statements of the Company, prepared on a notice to reader
basis, as at December 31, 1998 and for the two fiscal years preceding
and ended on December 31, 1998, consisting of a balance sheet and an
income statement, together with the notes thereto, copies of which are
attached hereto as Schedule 1.1(gg), all prepared in accordance with
generally accepted accounting principles, consistently applied;
(hh) "Valuation" - as defined in section 2.5 of this Agreement;
(ii) "Valuation Period"- as defined in section 2.7 of this Agreement;
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(jj) "Vendor Loan" - as defined in section 2.5 of this Agreement;
(kk) "Warranty Claim" means a claim made by either the Purchaser or the
Vendors based on or with respect to the inaccuracy or non-performance
or non-fulfillment or breach of any representation or warranty made by
the other party contained in this Agreement or contained in any
document or certificate given in order to carry out the transactions
contemplated hereby;
(ll) "Work in Progress at Closing" means such portion of the Company's work
in progress accrued as of the Closing Date that, prior to the Closing
Time, the Purchaser and Vendors mutually agree to include in the
calculation of Working Capital at Closing; and
(mm) "Working Capital at Closing" means the aggregate of the Company's cash
on hand as at the Closing Date plus the sum of all prepaid amounts and
deposits paid as at the Closing Date, Receivables at Closing, Work in
Progress at Closing and Inventory at Closing less the Trade Payables.
1.2 Best of Knowledge.
Any reference herein to "the best of the knowledge" of the Vendors will be
deemed to mean the actual knowledge of the Vendors and the Company and the
knowledge which they would have had if they had conducted a diligent inquiry
into the relevant subject matter.
1.3 Schedules.
The schedules, which are attached to this Agreement, are incorporated into this
Agreement by reference and are deemed to be part hereof.
1.4 Currency.
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
in lawful money of Canada.
1.5 Choice of Law and Attornment.
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable therein.
1.6 Interpretation Not Affected by Headings or Party Drafting.
The division of this Agreement into articles, sections, paragraphs, subsections
and clauses and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement. The
terms "this Agreement", "hereof", "herein", "hereunder" and similar expressions
refer to this Agreement and the schedules hereto and not to any particular
article, section, paragraph, clause or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto. The parties hereto
acknowledge that their respective legal counsel have reviewed and participated
in settling the terms of this
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Agreement, and the parties hereby agree that any rule of construction to the
effect that any ambiguity is to be resolved against the drafting party shall not
be applicable in the interpretation of this Agreement.
1.7 Number and Gender.
In this Agreement, unless there is something in the subject matter or context
inconsistent therewith:
(a) words in the singular number include the plural and such words shall be
construed as if the plural had been used;
(b) words in the plural include the singular and such words shall be construed
as if the singular had been used, and
(c) words importing the use of any gender shall include all genders where the
context or party referred to so requires, and the rest of the sentence
shall be construed as if the necessary grammatical and terminological
changes had been made.
1.8 Time of Essence.
Time shall be of the essence hereof.
ARTICLE 2 - PURCHASE AND SALE
2.1 Purchased Shares.
On the terms and subject to the fulfillment of the conditions hereof, the
Vendors will sell, assign and transfer to the Purchaser, and the Purchaser will
purchase and accept from the Vendors, the Purchased Shares.
2.2 Purchase Price.
The price payable by the Purchaser to the Vendors for the Purchased Shares will
be the sum of $1,500,000, subject to such adjustments, if any, as are provided
for in section 2.3 below.
2.3 Adjustments.
The Purchase Price shall be increased by the amounts listed in Schedule 2.3.
2.4 Payment of Purchase Price.
The Purchase Price will be paid as follows:
(1) upon the execution of this Agreement by all of the parties hereto, the
Purchaser will pay the sum of $100,000 (the "Deposit"), by certified cheque
or bank draft, to the Vendors'
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solicitors, in trust for the Purchaser, as a deposit. The Deposit will be
deposited by the Vendors' solicitors in an interest bearing account of a
Canadian chartered bank or trust company in the City of ▇▇▇▇▇▇▇ and will be
dealt with in accordance with the following provisions:
(a) if the purchase and sale of the Purchased Shares is completed on the
Closing Date, the Deposit plus all interest earned thereon will be
released from trust and applied toward satisfaction of the Purchase
Price;
(b) subject to section 2.4(1)(c) below, if the purchase and sale of the
Purchased Shares is not completed on the Closing Date, the Deposit
plus all interest earned thereon will be released from trust and
returned to the Purchaser; and
(c) if the purchase and sale of the Purchased Assets is not completed due:
(i) to the failure of the Purchaser to satisfy any of the conditions
set out in sections 6.3(1) or (3) hereof, or
(ii) to the failure of the Purchaser to secure satisfactory financing
to complete the purchase of the Purchased Shares on or before
the Closing Date,
then the Deposit plus all interest thereon will be released from trust
and forfeited and paid to the Vendors.
(2) At the Closing Time, the Purchaser will pay to the Vendors an amount equal
to the Purchase Price less the amount of the amount of the Deposit and all
interest earned thereon, payable in the following manner:
(a) subject to section 2.5, an amount equal to the Purchase Price, less
the sum of $75,000 and the amount of the Deposit and all interest
earned thereon, payable by certified cheque or bank draft (the "First
Payment") to the Vendors; and
(b) the sum of $75,000 (the "Escrow Funds") payable by certified cheque or
bank draft to the Vendors' solicitor (the "Escrow Agent") to be held
in trust on the terms and conditions of the Escrow Agreement (the
"Second Payment").
2.5 Shareholder Loans
At the Closing Time, those loans payable by the Company to the Vendors or to any
individual Vendor (the "Vendor Loans") shall be settled in the following manner:
(1) the Purchaser shall advance to the Company the amount of the Vendor Loans;
(2) the Company shall pay such amount to the Vendors or any of them in
satisfaction of the Vendor Loans; and
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(3) the amount of the Vendor Loans shall be deducted from the amount payable to
the Vendors or any of them in respect of the First Payment.
2.6 Closing Date Assets and Liabilities
On the Closing Date, the assets and liabilities of the Company shall consist of
the following:
(1) a minimum cash amount of $175,000 held in an account with a chartered bank;
(2) Working Capital at Closing in the amount of $400,000;
(3) capital assets, in good working order; and
(4) the Company shall be subject to no claims or liabilities other than the
Liabilities at Closing and, in any event, the Liabilities at Closing,
excluding Trade Payables, shall not exceed $50,000.
2.7 Valuation
The determination of the value of the Working Capital at Closing, and the
verification of the value of each of the Liabilities at Closing, Trade Payables,
Receivables at Closing Work in Progress at Closing and Inventory at Closing (the
"Valuation") shall be completed by the Vendors' accountant within 60 days
following the Closing Date (the "Valuation Period"). To the extent that a
Receivable is collected during the 60 day period following the Closing Date (the
"Holdback Period"), and such Receivable is not included in the calculation of
Working Capital at Closing because it not a Receivable at Closing, such
Receivable shall be taken into account in determining the Working Capital at
Closing. Receivables, excluding Receivables at Closing, that remain uncollected
for the duration of the Holdback Period shall be assigned by the Purchaser to
the Vendors for no additional consideration.
The Valuation shall be prepared as of a date subsequent to the expiry of the
Holdback Period. The Valuation shall contain the following information:
(1) the amount of the of the Liabilities at Closing, excluding the Trade
Payables;
(2) the amount of the Receivables at Closing, Work in Progress at Closing and
Inventory at Closing;
(3) the amount of the Receivables at Closing, if any, which remain uncollected
at the end of the Holdback Period; and
(4) the value of the Working Capital at Closing and the amount, if any, that
$400,000 exceeds the value of the Working Capital at Closing.
The Purchaser shall be provided with a copy of the Valuation, and shall have
five Business Days following the expiry of the Valuation Period to verify the
Valuation. If the Purchaser disagrees
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with the Valuation, the Purchaser shall give written notice (the "Disagreement
Notice") to the Vendors by the end of the fifth Business Day following the
expiry of the Valuation Period. If the Purchaser fails to provide a Disagreement
Notice, the Purchaser shall be deemed to agree with the Valuation so provided.
If the Purchaser delivers the Disagreement Notice to the Vendors, and the
Purchaser and Vendors cannot agree on the amount of the Valuation within 10
business days from the date of delivery of the Disagreement Notice, the parties
shall refer the matter to such established accounting firm as agreed to by the
Purchaser and Vendors (the "Auditor"), for an audited, binding, final and non-
appealable determination of the Valuation.
2.8 Post-Closing Adjustments
Notwithstanding the provisions of this or any ancillary agreement, to the extent
that the value of the Working Capital at Closing is greater than $400,000, the
Purchaser shall pay to the Vendors an amount equal to the excess as an increase
in the Purchase Price; and, subject to the provisions of Article 3 of the Escrow
Agreement, to the extent that the value of the Working Capital at Closing is
less than $400,000, the Vendors shall pay to the Purchaser an amount equal to
the deficiency as a decrease in the Purchase Price.
2.9 Employment of ▇▇▇▇▇▇▇ Tanunagara
On or prior to the Closing Date, the Purchaser and ▇▇▇▇▇▇▇ Tanunagara shall
enter into the Employment Agreement.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties by the Company and the Vendors.
The Company and the Vendors hereby jointly and severally represent and warrant
to the Purchaser as follows, and confirm that the Purchaser is relying upon the
accuracy of each of such representations and warranties in connection with the
purchase of the Purchased Shares and the completion of the other transactions
hereunder:
(1) Corporate Authority and Binding Obligation. The Company has good right,
full corporate power and absolute authority to enter into this Agreement
and to sell, assign and transfer the Purchased Shares to the Purchaser in
the manner contemplated herein and to perform all of the Company's
obligations under this Agreement. The Vendors have good right, full power
and authority to enter into this Agreement and to perform all of the
Vendor's obligations under this Agreement. Each of the Company and the
Vendors and the Company's shareholders and board of directors have taken
all necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the entering
into, and the execution, delivery and performance of this Agreement and the
sale and transfer of the Purchased Shares by the Vendors to the
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Purchaser. This Agreement is a legal, valid and binding obligation of the
Company and the Vendors, enforceable against each of them in accordance
with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally, and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
(2) No Other Purchase Agreements. No person has any agreement, option,
understanding or commitment, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement, option or
commitment, including convertible securities, warrants or convertible
obligations of any nature, for:
(a) the purchase, subscription, allotment or issuance of, or conversion
into, any of the unissued shares in the capital of the Company or any
securities of the Company;
(b) the purchase from any of the Vendors of any of the Purchased Shares;
or
(c) the purchase or other acquisition from the Company of any of its
undertaking, property or assets, other than in the ordinary course of
the Business.
(3) Contractual and Regulatory Approvals. Except as specified in Schedule
3.1(3) attached hereto, neither the Company nor any of the Vendors is under
any obligation, contractual or otherwise, to request or obtain the consent
of any person, and no permits, licenses, certifications, authorizations or
approvals of, or notifications to, any federal, provincial, municipal or
local government or governmental agency, board, commission or authority are
required to be obtained by the Company or the Vendors:
(a) in connection with the execution, delivery or performance by the
Vendors or the Company of this Agreement or the completion of any of
the transactions contemplated herein;
(b) to avoid the loss of any permit, licence, certification or other
authorization; or
(c) in order that the authority of the Company to carry on the Business in
the ordinary course and in the same manner as presently conducted
remains in good standing and in full force and effect as of and
following the closing of the transactions contemplated hereunder.
Complete and correct copies of any agreements under which the Company or
the Vendors is obligated to request or obtain any such consent have been
provided to the Purchaser.
(4) Status, Constating Documents and Licences.
(a) The Company is a corporation duly incorporated and validly subsisting
in all respects under the laws of Ontario. The Company is a "private
company", as
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defined in the Securities Act, R.S.O. 1990, c.S.5. The Company has all
necessary corporate power to own its properties and to carry on its
business as it is now being conducted.
(b) The articles, by-laws and other constating documents of the Company,
as amended to the date hereof, are listed in Schedule 3.1(4) attached
hereto, and complete and correct copies of each of those documents
have been delivered to the Purchaser.
(c) The Company is duly licensed, registered and qualified as a
corporation to do business, is up-to-date in the filing of all
required corporate returns and other notices and filings and is
otherwise in good standing in all respects, in each jurisdiction in
which:
(i) it owns or leases property, or
(ii) the nature or conduct of its business or any part thereof, or the
nature of the property of the Company or any part thereof, makes
such qualification necessary or desirable to enable the Business
to be carried on as now conducted or to enable the property and
assets of the Company to be owned, leased and operated by it.
All of the Company's Licences are listed in Schedule 3.1(4) attached hereto
and are valid and subsisting. Complete and correct copies of the Licences
have been delivered to the Purchaser. The Company is in compliance with
all terms and conditions of the Licences. There are no proceedings in
progress, pending or, to the best of the knowledge of the Vendors or the
Company, threatened, which could result in the revocation, cancellation or
suspension of any of the Licences.
(5) Compliance with Constating Documents, Agreements and Laws. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Vendors and the Company, and the
completion of the transactions contemplated hereby, will not constitute or
result in a violation or breach of or default under, or cause the
acceleration of any obligations of the Company or the Vendors, as the case
may be, under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of the Company;
(b) subject to obtaining the contractual consents referred to in Schedule
3.1(3) hereof, the terms of any agreement (written or oral),
indenture, instrument or understanding or other obligation or
restriction to which the Company or any of the Vendors is a party or
by which any of them is bound; or
(c) subject to obtaining the regulatory consents referred to in Schedule
3.1(3) hereof, any term or provision of any of the Licences or any
order of any court, governmental authority or regulatory body or any
law or regulation of any
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jurisdiction in which the Business is carried on.
(6) Corporate Records. The corporate records and minute books of the Company,
all of which have been provided to the Purchaser, contain complete and
accurate minutes of all meetings of the directors and shareholders of the
Company held since its incorporation, and original signed copies of all
resolutions and by-laws duly passed or confirmed by the directors or
shareholders of the Company other than at a meeting. All such meetings
were duly called and held. The share certificate books, register of
security holders, register of transfers and register of directors and any
similar corporate records of the Company are complete and accurate. All
exigible security transfer tax or similar tax payable in connection with
the transfer of any securities of the Company has been duly paid.
(7) Authorized and Issued Capital. The authorized capital of the Company
consists of an unlimited number of common shares of which 120 common shares
have been duly issued and are outstanding as fully paid and non-assessable
shares. No shares or other securities of the Company have been issued in
violation of any laws, the articles of incorporation, by-laws or other
constating documents of the Company or the terms of any shareholders'
agreement or any agreement to which the Company is a party or by which it
is bound. The Vendors own all of the issued and outstanding shares of the
Company as the shareholders of record and as the beneficial owners, with
good and marketable title thereto, free and clear of any and all
Encumbrances.
(8) Shareholders' Agreements, etc. There are no shareholders' agreements,
pooling agreements, voting trusts or other similar agreements with respect
to the ownership or voting of any of the shares of the Company.
(9) Financial Statements.
(a) The Unaudited Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis
consistent with that of the previous fiscal year, are true, correct
and complete in all material respects and present fairly the
consolidated financial condition of the Company as of December 31,
1998 and the two preceding fiscal years of the Company, including the
consolidated assets and liabilities of the Company as of December 31,
1998, and the consolidated revenues, expenses and results of the
operations of the Company for the fiscal year ended on December 31,
1998 and the two preceding fiscal years of the Company.
(b) The Interim Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the Unaudited Financial Statements, are true, correct and
complete in all material respects and present fairly, in all material
respects, the consolidated financial condition of the Company as of
November 30, 1999, including the consolidated assets and liabilities
of the Company as of November 30, 1999, the consolidated revenues,
expenses and results of the operations of the Company for the eleven
month period ended on November 30, 1999.
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(c) The financial condition of the Company is now at least as good as the
financial condition reflected in the Interim Financial Statements.
(10) Financial Records. All material financial transactions of the Company have
been recorded in the financial books and records of the Company in
accordance with good business practice, and such financial books and
records:
(a) accurately reflect, in all material respects, the basis for the
financial condition and the revenues, expenses and results of
operations of the Company shown in the Unaudited Financial Statements
and the Interim Financial Statements; and
(b) together with all disclosures made in this Agreement or in the
Schedules hereto, present fairly, in all material respects, the
financial condition and the revenues, expenses and results of the
operations of the Company as of and to the date hereof.
No information, records or systems pertaining to the operation or
administration of the Business are in the possession of, recorded, stored,
maintained by or otherwise dependent upon any other person.
(11) Liabilities of the Company. There are no liabilities (contingent or
otherwise) of the Company of any kind whatsoever, and there is no basis for
assertion against the Company of any liabilities of any kind, other than:
(a) liabilities disclosed or reflected in or provided for in the Unaudited
Financial Statements or the Interim Financial Statements;
(b) liabilities incurred since the Interim Financial Statements Date which
were incurred in the ordinary course of the routine daily affairs of
the Business and, in the aggregate, are not materially adverse to the
Business; and
(c) other liabilities disclosed in this Agreement or in the schedules
attached hereto.
(12) Availability of Financial Information. On or before February 10, 2000, the
Company will be in a position to provide or produce all information,
documentation and other materials necessary for an auditor to complete an
audit of the Business for the year ending December 31, 1999.
(13) Indebtedness. Except as disclosed in the Interim Financial Statements, the
Company has no bonds, debentures, mortgages, promissory notes or other
indebtedness maturing more than one year after the date of their original
creation or issuance, and is not under any obligation to create or issue
any bonds, debentures, mortgages, promissory notes or other indebtedness
maturing more than one year after the date of their original creation or
issuance.
(14) Absence of Certain Changes or Events. Since the Interim Statements Date,
the Company has not:
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(a) incurred any obligation or liability (fixed or contingent), except
normal trade or business obligations incurred in the ordinary course
of the Business, none of which is materially adverse to the Company;
(b) paid or satisfied any obligation or liability (fixed or contingent),
except:
(i) current liabilities included in the Interim Financial
Statements;
(ii) current liabilities incurred since the Interim Statements Date
in the ordinary course of the Business; and
(iii) scheduled payments pursuant to obligations under loan
agreements or other contracts or commitments described in this
Agreement or in the Schedules hereto.
(c) created any Encumbrance upon any of its properties or assets, except
as described in this Agreement or in the schedules hereto;
(d) sold, assigned, transferred, leased or otherwise disposed of any of
its properties or assets, except in the ordinary course of the
Business;
(e) purchased, leased or otherwise acquired any properties or assets,
except in the ordinary course of the Business and except for those
items listed in Schedule 2.3;
(f) waived, cancelled or written-off any rights, claims, accounts
receivable or any amounts payable to the Company, except in the
ordinary course of the Business;
(g) entered into any transaction, contract, agreement or commitment,
except in the ordinary course of the Business;
(h) terminated, discontinued, closed or disposed of any plant, facility or
business operation;
(i) had any supplier terminate, or communicate to the Company the
intention or threat to terminate its relationship with the Company, or
the intention to substantially reduce the quantity of products or
services it sells to the Company, except in the case of suppliers
whose sales to the Company are not, in the aggregate, material to the
Business or the Condition of the Company;
(j) had any customer terminate, or communicate to the Company the
intention or threat to terminate, its relationship with the Company,
or the intention to substantially reduce the quantity of products or
services it purchases from the Corporation, or its dissatisfaction
with the products or services sold by the Company, except in the case
of customers whose purchases from the Company are not, in the
aggregate, material to the Business or the Condition of the Company;
(k) made any material change in the method of billing customers or the
credit terms
-15-
made available by the Company to its customers;
(l) made any material change with respect to any method of management,
operation or accounting in respect of the Business;
(m) suffered any damage, destruction or loss (whether or not covered by
insurance) which has materially adversely affected or could materially
adversely affect the Business or the Condition of the Company;
(n) increased any form of compensation or other benefits payable or to
become payable to any of the employees of the Company, except
increases made in the ordinary course of the Business which do not
exceed 5% in the aggregate, of the amount of the aggregate salary
compensation payable to all of the Company's employees prior to such
increase;
(o) suffered any extraordinary loss relating to the Business;
(p) made or incurred any material change in, or become aware of any event
or condition which is likely to result in a material change in, the
Business or the Condition of the Company or its relationships with its
customers, suppliers or employees, or
(q) authorized, agreed or otherwise become committed to do any of the
foregoing.
(15) Commitments for Capital Expenditures. Save and except for those items
herein disclosed, the Company is not committed to make any capital
expenditures, nor have any capital expenditures been authorized by the
Company at any time since the Interim Statements Date, except for capital
expenditures made in the ordinary course of the routine daily affairs of
the Business which, in the aggregate, do not exceed $5,000.
(16) Dividends and Distributions. Since the Interim Statements Date and except
as disclosed in Schedule 3.1(16) attached hereto, the Company has not
declared or paid any dividend or made any other distribution on any of its
shares of any class, or redeemed or purchased or otherwise acquired any of
its shares of any class, or reduced its authorized capital or issued
capital, or agreed to any of the foregoing.
(17) Tax Matters.
(a) For purposes of this Agreement, the term "Governmental Charges" means
and includes all taxes, customs duties, rates, levies, assessments,
reassessments and other charges, together with all penalties, interest
and fines with respect thereto, payable to any federal, provincial,
municipal, local or other government or governmental agency,
authority, board, bureau or commission, domestic or foreign.
(b) The Company has duly and on a timely basis prepared and filed all tax
returns and other documents required to be filed by it in respect of
all Governmental Charges
-16-
and such returns and documents are complete and correct. Complete and
correct copies of all such returns and other documents filed in
respect of the three fiscal years of the Company ending prior to the
date hereof have been provided to the Purchaser.
(c) The Company has paid all Governmental Charges, which are due and
payable by it on or before the date hereof. Adequate provision was
made in the Unaudited Financial Statements and Interim Financial
Statements for all Governmental Charges for the periods covered by the
Unaudited Financial Statements and Interim Financial Statements,
respectively. The Company has no liability for Governmental Charges
other than those provided for in the Unaudited Financial Statements
and those arising in the ordinary course of the operation of the
Business since the Interim Statements Date.
(d) Canadian federal and provincial income tax assessments have been
issued to the Company covering all past periods up to and including
the fiscal year ended December 31, 1998. There are no actions, suits,
proceedings, investigations, inquiries or claims now pending or made
or, to the best of the knowledge of the Vendors and the Company,
threatened against the Company in respect of Governmental Charges.
(e) There are no agreements, waivers or other arrangements providing for
any extension of time with respect to the filing of any tax return or
other document or the payment of any Governmental Charges by the
Company or the period for any assessment or reassessment of
Governmental Charges. Only the fiscal years of the Company subsequent
to December 31, 1998 remain open for assessment for additional taxes.
(f) The Company has withheld from each amount paid or credited to any
person the amount of Governmental Charges required to be withheld
therefrom and has remitted such Governmental Charges to the proper tax
or other receiving authorities within the time required under
applicable legislation.
(g) Schedule 3.1(17) attached hereto accurately sets out, for purposes of
the Income Tax Act, S.C. 1970-71-72, c. 63 (Canada), the following:
(i) the paid-up capital of all issued and outstanding shares in the
capital of the Company;
(ii) all non-capital losses of the Company;
(iii) all net capital losses of the Company;
(iv) the amount of all investment tax credits available to the
Company;
(v) the adjusted cost base of the Company's capital properties;
-17-
(vi) the cost of the Company's depreciable properties, the capital
cost allowance taken in respect of each class of such
properties and the undepreciated capital cost of each class of
such properties;
(vii) the amount (if any) of the Company's capital dividend account;
(viii) the amount (if any) of the Company's cumulative eligible
capital account, and
(ix) the amount (if any) of the Company's refundable dividend tax on
hand.
(h) The Company is a Canadian-controlled private corporation, as defined
in the Income Tax Act, S.C. 1970-71-72, c. 63 (Canada), and has been
one since January 8, 1988.
(18) Litigation. Except for the matters referred to in Schedule 3.1(18)
attached hereto, there are no actions, suits or proceedings, judicial or
administrative pending or, to the best of the knowledge of the Vendors and
the Company, threatened, by or against or affecting the Company, at law or
in equity, or before or by any court or any federal, provincial, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Except for the matters referred to
in Schedule 3.1(18), there are no grounds on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of success.
(19) Environmental Matters.
(a) For the purposes of this Agreement, the following terms and
expressions shall have the following meanings:
(i) "Environmental Laws" means all applicable statutes,
regulations, ordinances, by-laws, and codes and all
international treaties and agreements, now or hereafter in
existence in Canada (whether federal, provincial or municipal)
and in the United States (whether federal, state or local)
relating to the protection and preservation of the environment,
occupational health and safety, product safety, product
liability or Hazardous Substances, including, without
limitation, the Environmental Protection Act, R.S.O. 1990, c.
E. 19 (Ontario), as amended from time to time (the "EPA"), and
the Canadian Environmental Protection Act, R.S.C. 1985, c. 16
(4th Supp.), as amended from time to time (the "CEPA").
(ii) "Environmental Permits" includes all orders, permits,
certificates, approvals, consents, registrations and licences
issued by any authority of competent jurisdiction under
Environmental Laws.
(iii) "Hazardous Substance" means, collectively, any contaminant (as
defined in the EPA), toxic substance (as defined in the CEPA),
dangerous goods (as defined in the Transportation of Dangerous
Goods Act, R.S.C. ▇▇▇▇, ▇.
-▇▇-
▇-▇▇ (▇▇▇▇▇▇), as amended from time to time) or pollutant or
any other substance which when released to the natural
environment is likely to cause, at some immediate or future
time, material harm or degradation to the natural environment
or material risk to human health.
(iv) "Release" means any release, spill, leak, emission, discharge,
▇▇▇▇▇, dumping, escape or other disposal which is or has been
made in contravention of any Environmental Laws.
(b) Except as disclosed in Schedule 3.1(19) attached hereto, the Company,
the operation of the Business, the property and assets owned or used
by the Company and the use, maintenance and operation thereof have
been and are in compliance with all Environmental Laws. The Company
has complied with all reporting and monitoring requirements under all
Environmental Laws. The Company has not received any notice of any
non-compliance with any Environmental Laws, and the Company has never
been convicted of an offence for non-compliance with any Environmental
Laws or been fined or otherwise sentenced or settled such prosecution
short of conviction.
(c) The Company has obtained all Environmental Permits necessary to
conduct the Business and to own, use and operate the properties and
assets of the Company. All such Environmental Permits are listed in
Schedule 3.1(19) and complete and correct copies thereof have been
provided to the Purchaser.
(d) Except as disclosed in Schedule 3.1(19), there are no Hazardous
Substances located on or in any of the properties or assets owned or
used by the Company, and no Release of any Hazardous Substances has
occurred on or from the properties and assets of the Company or has
resulted from the operation of the Business and the conduct of all
other activities of the Company. Except as disclosed in Schedule
3.1(19), the Company has not used any of its properties or assets to
produce, generate, store, handle, transport or dispose of any
Hazardous Substances and none of the Real Properties or Leased
Premises has been or is being used as a landfill or waste disposal
site.
(e) Without limiting the generality of the foregoing, except as disclosed
in Schedule 3.1(19), there are no underground or surface storage tanks
or urea formaldehyde foam insulation, asbestos, polychlorinated
biphenyl's (PCBs) or radioactive substances located on or in any of
the properties or assets owned or used by the Company. The Company is
not, and there is no basis upon which the Company could become,
responsible for any clean-up or corrective action under any
Environmental Laws. The Company has never conducted or caused to be
conducted an environmental audit, assessment or study of any of the
properties or assets of the Company.
(f) Except as disclosed in Schedule 3.1(19), there are no pending or
proposed changes to Environmental Laws, which would render illegal or
restrict the manufacture or sale of any products manufactured or sold
or services provided by
-19-
the Company.
(20) Title to Assets. The Company is the owner of and has good and marketable
title to all of its properties and assets, including, without limitation,
all properties and assets reflected in the Interim Financial Statements and
all properties and assets acquired by the Company after the Interim
Statements Date, free and clear of all Encumbrances whatsoever, except for:
(a) the properties and assets disposed of, utilized or consumed by the
Company since the Interim Statements Date in the ordinary course of
the Business;
(b) the Encumbrances disclosed or reflected in the Unaudited Financial
Statements or the Interim Financial Statements;
(c) liens for taxes not yet due and payable; and
(d) the Encumbrances described in Schedule 3.1(20) attached hereto.
No other person owns any assets, which are being used in the Business,
except for the Leased Premises and personal property leased by the Company.
There are no agreements or commitments to purchase property or assets by
the Company, other than in the ordinary course of the Business.
(21) Deposit Accounts and Safe Deposit Boxes of the Company. The name and
address of each bank, trust company or similar institution with which the
Company has one or more accounts or one or more safe deposit boxes, the
number of each such account and safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto are as set
forth in Schedule 3.1(21) attached hereto.
(22) Accounts Receivable. The accounts receivable of the Company reflected in
the Interim Financial Statements and all accounts receivable of the Company
arising since the Interim Statements Date arose from bona fide transactions
in the ordinary course of the Business and are valid, enforceable and fully
collectible accounts (subject to a reasonable allowance, consistent with
past practice, for doubtful accounts as reflected in the Interim Financial
Statements or as previously disclosed in writing to the Purchaser). Such
accounts receivable are not subject to any set-off or counterclaim.
(23) Inventory. The current inventory of the Company, subject to a reasonable
allowance for obsolete inventory (consistent with the allowances reflected
in the Unaudited Financial Statements and the Interim Financial
Statements), is good and usable and is capable of being processed and sold
in the ordinary course of the Business at normal profit margins.
(24) Real Properties. The Company does not own or have any right, title or
interest in any real property, except for the Company's leasehold interest
in the Leased Premises.
(25) Leased Premises. Schedule 1.1(w) attached hereto describes all leases or
agreements to lease under which the Company leases any real property.
Complete and correct copies of
-20-
the Leases have been provided to the Purchaser. The Company is exclusively
entitled to all rights and benefits as lessee under the Leases and the
Company has not sublet, assigned, licensed or otherwise conveyed any rights
in the Leased Premises or in the Leases to any other person. The names of
the other parties to the Leases, the description of the Leased Premises,
the term, rent and other amounts payable under the Leases and all renewal
options available under the Leases are accurately described in Schedule
1.1(w). All rental and other payments and other obligations required to be
paid and performed by the Corporation pursuant to the Leases have been duly
paid and performed. The Corporation is not in default of any of its
obligations under the Leases and, to the best of the knowledge of the
Vendors and the Company, none of the landlords or other parties to the
Leases are in default of any of their obligations under the Leases. The
terms and conditions of the Leases will not be affected by, nor will any of
the Leases be in default as a result of, the completion of the transactions
contemplated hereunder. The use by the Company of the Leased Premises is
not in breach of any building, zoning or other statute, by-law, ordinance,
regulation, covenant, restriction or official plan. The Company has
adequate rights of ingress to and egress from the Leased Premises for the
operation of the Business in the ordinary course.
(26) Work Orders and Deficiencies. There are no outstanding work orders, non-
compliance orders, deficiency notices or other such notices relative to the
Real Properties, the Leased Premises, the other properties and assets of
the Company or the Business which have been issued by any regulatory
authority, police or fire department, sanitation, environment, labour,
health or other governmental authorities or agencies. There are no matters
under discussion with any such department or authority relating to work
orders, non-compliance orders, deficiency notices or other such notices.
The Business is not being carried on, and none of the Real Properties, the
Leased Premises or the other properties or assets of the Company are being
operated in a manner, which is in contravention of any statute, regulation,
rule, code, standard or policy. No amounts are owing by the Company in
respect of the Real Properties or the Leased Premises to any governmental
authority or public utility, other than current accounts, which are not in
arrears.
(27) Condition of Properties and Equipment. The buildings and structures
comprising the Real Properties and, to the best of the knowledge of the
Vendors and the Company, those comprising the Leased Premises, are free of
any structural defect. The heating, ventilating, plumbing, drainage,
electrical and air conditioning systems and all other systems used in the
Real Properties and the Leased Premises and all machinery, equipment,
tools, furniture, furnishings and materials used in the Business are in
good working order, fully operational and free of any defect, except for
normal wear and tear.
(28) Leases of Personal Property. Except as set out in Schedule 3.1(28)
attached hereto, the Company is not the lessee under any lease of personal
property in respect of which the annual financial obligation exceeds
$1,000. Complete and correct copies of each of the leases referred to in
Schedule 3.1(28) have been provided to the Purchaser.
(29) Intellectual Property.
-21-
(a) Schedule 3.1(29) attached hereto lists and contains a description of:
(i) all patents, patent applications and registrations, trade
marks, trade ▇▇▇▇ applications and registrations, copyrights,
copyright applications and registrations, trade names and
industrial designs, domestic or foreign, owned or used by the
Company or relating to the operation of the Business;
(ii) all trade secrets, know-how, inventions and other intellectual
property owned or used by the Company or relating to the
Business, and
(iii) all computer systems and application software, including
without limitation all documentation relating thereto and the
latest revisions of all related object and source codes
therefor, owned or used by the Company or relating to the
Business,
(all of the foregoing being hereinafter collectively called the
"Intellectual Property").
(b) The Company has good and valid title to all of the Intellectual
Property, free and clear of any and all Encumbrances, except in the
case of any Intellectual Property licensed to the Company as disclosed
in Schedule 3.1(29). Complete and correct copies of all agreements,
whereby any rights in any of the Intellectual Property have been
granted or licensed to the Company, have been provided to the
Purchaser. No royalty or other fee is required to be paid by the
Company to any other person in respect of the use of any of the
Intellectual Property except as provided in such agreements delivered
to the Purchaser. The Company has protected its rights in the
Intellectual Property in the manner and to the extent described in
Schedule 3.1(29). Except as indicated in Schedule 3.1(29), the Company
has the exclusive right to use all of the Intellectual Property and
has not granted any licence or other rights to any other person in
respect of the Intellectual Property. Complete and correct copies of
all agreements whereby any rights in any of the Intellectual Property
have been granted or licensed by the Company to any other person have
been provided to the Purchaser.
(c) Except as disclosed in Schedule 3.1(29), there are no restrictions on
the ability of the Company or any successor to or assignee from the
Company to use and exploit all rights in the Intellectual Property.
All statements contained in all applications for registration of the
Intellectual Property were true and correct as of the date of such
applications. Each of the trademarks and trade names included in the
Intellectual Property is in use. None of the rights of the Company in
the Intellectual Property will be impaired or affected in any way by
the transactions contemplated by this Agreement.
(d) The conduct of the Business and the use of the Intellectual Property
does not infringe, and the Company has not received any notice,
complaint, threat or claim alleging infringement of, any patent, trade
▇▇▇▇, trade name, copyright, industrial
-22-
design, trade secret or other Intellectual Property or propriety right
of any other person, and the conduct of the Business does not include
any activity which may constitute passing off.
(i) The computer systems, including hardware and software, are free from
viruses and the Vendors and the Company have taken, and will continue
to take, all steps and implement all procedures necessary to ensure,
so far as reasonably possible, that such systems are free from viruses
and will remain so until the Closing Time.
(30) Year 2000 Compliance. The computer programs and software used by the
Vendors correctly recognize, calculate, sort, store, display and/or process
dates outside of the range of 1900 to 1998, including the years 1999, 2000
and beyond, and correctly recognize that the year 2000 is a leap year and
correctly handle all date calculations involving the date February 29,
2000. To the knowledge of the Vendors, the computer programs and software
used by the Vendors' suppliers, customers and creditors and financial
service and other service providers with which the Vendors have dealings
similarly correctly recognize, calculate, sort, store, display and/or
process dates outside of the range of 1900 to 1998, including the years
1999, 2000 and beyond, and correctly recognize that the year 2000 is a leap
year and correctly handle all date calculations involving the date February
29, 2000.
(31) Subsidiaries and Other Interests. The Company has no subsidiaries and does
not own any securities issued by, or any equity or ownership interest in,
any other person. The Company is not subject to any obligation to make any
investment in or to provide funds by way of loan, capital contribution or
otherwise to any person.
(32) Partnerships or Joint Ventures. The Company is not a partner or
participant in any partnership, joint venture, profit-sharing arrangement
or other association of any kind and is not party to any agreement under
which the Company agrees to carry on any part of the Business or any other
activity in such manner or by which the Company agrees to share any revenue
or profit with any other person.
(33) Customers. The Vendors shall have previously delivered to the Purchaser a
true and complete list of all customers of the Business as of the date
hereof. The Company is the sole and exclusive owner of, and has the
unrestricted right to use, such customer list. Neither the customer list
nor any information relating to the customers of the Business have, within
three years prior to the date of this Agreement, been made available to any
person other than the Purchaser. Neither the Vendors nor the Company has
any knowledge of any facts which could reasonably be expected to result in
the loss of any customers or sources of revenue of the Business which, in
the aggregate, would be material to the Business or the Condition of the
Company.
(34) Restrictions on Doing Business. The Company is not a party to or bound by
any agreement, which would restrict or limit its right to carry on any
business or activity or to solicit business from any person or in any
geographical area or otherwise to conduct the Business as the Company may
determine. The Company is not subject to any legislation or any judgment,
order or requirement of any court or governmental authority which is
-23-
not of general application to persons carrying on a business similar to the
Business. To the best of the knowledge of the Vendors and the Company,
there are no facts or circumstances which could materially adversely affect
the ability of the Company to continue to operate the Business as presently
conducted following the completion of the transactions contemplated by this
Agreement.
(35) Guarantees, Warranties and Discounts. Except as described in Schedule
3.1(35) attached hereto:
(a) the Company is not a party to or bound by any agreement of guarantee,
indemnification, assumption or endorsement or any other like
commitment of the obligations, liabilities (contingent or otherwise)
or indebtedness of any person;
(b) the Company has not given any guarantee or warranty in respect of any
of the products sold or the services provided by it, except warranties
made in the ordinary course of the Business and in the form of the
Company's standard written warranty, a copy of which has been provided
to the Purchaser, and except for warranties implied by law;
(c) during each of the three fiscal years of the Company ended immediately
preceding the date hereof, no claims have been made against the
Company for breach of warranty or contract requirement or negligence
or for a price adjustment or other concession in respect of any defect
in or failure to perform or deliver any products, services or work
which had, in any such year, an aggregate cost exceeding $5,000;
(d) there are no repair contracts or maintenance obligations of the
Company in favour of the customers or users of products of the
Business, except obligations incurred in the ordinary course of the
Business and in accordance with the Company's standard terms, a copy
of which has been provided to the Purchaser;
(e) the Company is not now subject to any agreement or commitment, and the
Company has not, within three years prior to the date hereof, entered
into any agreement with or made any commitment to any customer of the
Business which would require the Company to repurchase any products
sold to such customers or to adjust any price or grant any refund,
discount or other concession to such customer, and
(j) the Company is not required to provide any letters of credit, bonds or
other financial security arrangements in connection with any
transactions with its suppliers or customers.
(36) Licences, Agency and Distribution Agreements. Schedule 3.1(36) attached
hereto lists all agreements to which the Company is a party or by which it
is bound under which the right to manufacture, use or market any product,
service, technology, information, data, computer hardware or software or
other property has been granted, licensed or otherwise provided to the
Company or by the Company to any other person, or under which the
-24-
Company has been appointed or any person has been appointed by the Company
as an agent, distributor, licensee or franchisee for any of the foregoing.
Complete and correct copies of all of the agreements listed in Schedule
3.1(36) have been provided to the Purchaser. None of the agreements listed
in Schedule 3.1(36) grant to any person any authority to incur any
liability or obligation or to enter into any agreement on behalf of the
Company.
(37) Outstanding Agreements. The Company is not a party to or bound by any
outstanding or executory agreement, contract or commitment, whether written
or oral, except for:
(a) any contract, lease or agreement described or referred to in this
Agreement or in the schedules hereto;
(b) any contract, lease or agreement made in the ordinary course of the
routine daily affairs of the Business under which the Company has a
financial obligation of less than $5,000 per annum and which can be
terminated by the Company without payment of any damages, penalty or
other amount by giving not more than 30 days' notice, and
(c) the contracts, leases and agreements described in Schedule 3.1(37)
attached hereto.
Complete and correct copies of each of the contracts, leases and agreements
described in Schedule 3.1(37) have been provided to the Purchaser.
(38) Good Standing of Agreements. The Company is not in default or breach of
any of its obligations under any one or more contracts, agreements (written
or oral), commitments, indentures or other instruments to which it is a
party or by which it is bound and there exists no state of facts which,
after notice or lapse of time or both, would constitute such a default or
breach. All such contracts, agreements, commitments, indentures and other
instruments are now in good standing and in full force and effect without
amendment thereto, the Company is entitled to all benefits thereunder and,
to the best of the knowledge of the Vendors and the Company, the other
parties to such contracts, agreements, commitments, indentures and other
instruments are not in default or breach of any of their obligations
thereunder. There are no contracts, agreements, commitments, indentures or
other instruments under which the Company's rights or the performance of
its obligations are dependent upon or supported by the guarantee of or any
security provided by any other person.
(39) Employees. Schedule 3.1(39) attached hereto sets forth the name, job
title, duration of employment, vacation entitlement, employee benefit
entitlement and rate of remuneration (including bonus and commission
entitlement) of each employee of the Company. Schedule 3.1(39) also sets
forth the names of all employees of the Company who are now on disability,
maternity or other authorized leave or who are receiving workers'
compensation or short-term or long-term disability benefits.
(40) Employment Agreements. The Company is not a party to any written or oral
-25-
employment, service or consulting agreement relating to any one or more
persons, except for oral employment agreements which are of indefinite term
and without any special arrangements or commitments with respect to the
continuation of employment or payment of any particular amount upon
termination of employment. The Company does not have any employee who
cannot be dismissed upon such period of notice as is required by law in
respect of a contract of hire for an indefinite term.
(41) Labour Matters and Employment Standards.
(a) The Company is not subject to any agreement with any labour union or
employee association and has not made any commitment to or conducted
negotiations with any labour union or employee association with
respect to any future agreement and, to the best of the knowledge of
the Vendors and the Company, during the period of five years preceding
the date of this agreement there has been no attempt to organize,
certify or establish any labour union or employee association in
relation to any of the employees of the Company.
(b) There are no existing or, to the best of the knowledge of the Vendors
and the Company, threatened, labour strikes or labour disputes,
grievances, controversies or other labour troubles affecting the
Company or the Business.
(c) The Company has complied with all laws, rules, regulations and orders
applicable to it relating to employment, including those relating to
wages, hours, collective bargaining, occupational health and safety,
workers' hazardous materials, employment standards, pay equity and
workers' compensation. There are no outstanding charges or complaints
against the Company relating to unfair labour practices or
discrimination or under any legislation relating to employees. The
Company has paid in full all amounts owing under the Workplace Safety
and Insurance Act, R.S.O. 1990, c. W. 11 (Ontario) or comparable
provincial legislation, and the workers' compensation claims
experience of the Company would not permit a penalty reassessment
under such legislation.
(42) Employee Benefit and Pension Plans.
(a) Except as listed in Schedule 3.1(42) attached hereto, the Company does
not have, and is not subject to any present or future obligation or
liability under, any pension plan, deferred compensation plan,
retirement income plan, stock option or stock purchase plan, profit
sharing plan, bonus plan or policy, employee group insurance plan,
hospitalization plan, disability plan or other employee benefit plan,
program, policy or practice, formal or informal, with respect to any
of its employees, other than the Canada Pension Plan, R.S.C. 1985, c.
C-8, and the Health Insurance Act, R.S.O. 1990, c. H.6 (Ontario) and
other similar health plans established pursuant to statute. Schedule
3.1(42) also lists the general policies, procedures and work-related
rules in effect with respect to employees of the Company, whether
written or oral, including but not limited to policies regarding
-26-
holidays, sick leave, vacation, disability and death benefits,
termination and severance pay, automobile allowances and rights to
company-provided automobiles and expense reimbursements. (The plans,
programs, policies, practices and procedures listed in Schedule
3.1(42) are hereinafter collectively called the "Benefit Plans").
Complete and correct copies of all documentation establishing or
relating to the Benefit Plans listed in Schedule 3.1(42) or, where
such Benefit Plans are oral commitments, written summaries of the
terms thereof, and the most recent financial statements and actuarial
reports related thereto and all reports and returns in respect thereof
filed with any regulatory agency within three years prior to the date
hereof have been provided to the Purchaser.
(b) The pension plans included in the Benefit Plans are registered under
and are in compliance with all applicable federal and provincial
legislation and all reports, returns and filings required to be made
thereunder have been made. Such pension plans have been administered
in accordance with their terms and the provisions of applicable law.
Each pension plan has been funded in accordance with the requirements
of such plans and based on actuarial assumptions, which are
appropriate to the employees of the Company and the Business. Based
on such assumptions, there is no unfunded liability under any such
pension plan. No changes have occurred since the date of the most
recent actuarial report provided to the Purchaser in respect of such
pension plans which makes such report misleading in any material
respect and, since the date of such report, the Company has not made
or granted or committed to make or grant any benefit improvements to
which members of the pension plans are or may become entitled which
are not reflected in such actuarial report. No funds have been
withdrawn by the Company from any such pension plan or other Benefit
Plans.
(c) There are no pending claims by any employee covered under the Benefit
Plans or by any other person which allege a breach of fiduciary duties
or violation of governing law or which may result in liability to the
Company and, to the best of the knowledge of the Vendors and the
Company, there is no basis for such a claim. There are no employees
or former employees of the Company who are receiving from the Company
any pension or retirement payments, or who are entitled to receive any
such payments, not covered by a pension plan to which the Company is a
party.
(43) Insurance. Schedule 3.1(43) attached hereto contains a true and complete
list of all insurance policies maintained by the Company or under which the
Company is covered in respect of its properties, assets, business or
personnel as of the date hereof. Complete and correct copies of all such
insurance policies have been provided to the Purchaser. Such insurance
policies are in full force and effect and the Company is not in default
with respect to the payment of any premium or compliance with any of the
provisions contained in any such insurance policy. To the best of the
knowledge of the Vendors and the Company, there are no circumstances under
which the Company would be required to or, in order to maintain its
coverage, should give any notice to the insurers under any such insurance
policies which has not been given. The Company has not received notice
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from any of the insurers regarding cancellation of such insurance policies.
The Company has not failed to present any claim under any such insurance
policy in due and timely fashion. The Company has not received notice from
any of the insurers denying any claims.
(44) Non-Arm's Length Matters. The Company is not a party to or bound by any
agreement with, is not indebted to, and no amount is owing to the Company
by, the Vendors or any of the Vendor's Affiliates or any officers, former
officers, directors, former directors, shareholders, former shareholders,
employees (except for oral employment agreements with employees) or former
employees of the Company or any person not dealing at arm's length with any
of the foregoing. Since the Interim Statements Date, the Company has not
made or authorized any payments to any of the Vendors, or any of the
Vendors' Affiliates or any officers, former officers, directors, former
directors, shareholders, former shareholders, employees or former employees
of the Company or to any person not dealing at arm's length with any of the
foregoing, except for salaries and other employment compensation payable to
employees of the Company in the ordinary course of the routine daily
affairs of the Business and at the regular rates payable to them.
(45) Government Assistance. Schedule 3.1(45) attached hereto describes all
agreements, loans, other funding arrangements and assistance programs
(collectively called "Government Assistance Programs") which are
outstanding in favour of the Company from any federal, provincial,
municipal or other government or governmental agency, board, commission or
authority, domestic or foreign (collectively called "Government Agencies").
Complete and correct copies of all documents relating to the Government
Assistance Programs have been delivered to the Purchaser. The Company has
performed all of its obligations under the Government Assistance Programs,
and no basis exists for any Government Agencies to seek payment or
repayment by the Company of any amount or benefit received by it under any
Government Assistance Programs.
(46) Compliance with Laws. In relation to its business, the Company is not in
violation of any federal, provincial or other law, regulation or order of
any government or governmental or regulatory authority, domestic or
foreign.
(47) Vendors' Residency. Each one of the Vendors is not a non-resident of
Canada within the meaning of the Income Tax Act, S.C. 1970-71-72, c. 63
(Canada).
(48) Copies of Documents. Complete and correct copies (including all
amendments) of all contracts, leases and other documents referred to in
this Agreement or any schedule hereto or required to be disclosed hereby
have been delivered to the Purchaser.
(49) Disclosure. No representation or warranty contained in this section 3.01,
and no statement contained in any schedule, certificate, list, summary or
other disclosure document provided or to be provided to the Purchaser
pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact which is necessary in order to make
the statements contained therein not misleading.
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3.2 Representations and Warranties by the Purchaser.
The Purchaser hereby represents and warrants to the Vendors and the Company as
follows, and confirms that the Vendors and the Company are relying upon the
accuracy of each of such representations and warranties in connection with the
sale of the Purchased Shares and the completion of the other transactions
hereunder:
(1) Corporate Authority and Binding Obligation. The Purchaser has good right,
full power and authority to enter into this Agreement and to perform all of
the Purchaser's obligations under this Agreement. The Purchaser and the
Purchaser's shareholders and board of directors have taken all necessary or
desirable actions, steps and corporate and other proceedings to approve or
authorize, validly and effectively, the entering into, and the execution,
delivery and performance of this Agreement. This Agreement is a legal,
valid and binding obligation of the Purchaser, enforceable against each of
them in accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally, and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
(2) Corporate Status. The Purchaser is a corporation duly incorporated and
validly subsisting in all respects under the laws of its jurisdiction of
incorporation. The Purchaser has all necessary corporate power to own its
properties and to carry on its business as it is now being conducted.
(3) Compliance with Constating Documents, Agreements and Laws. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Purchaser, and the completion of
the transactions contemplated hereby, will not constitute or result in a
violation, breach or default under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of the Purchaser;
(b) the terms of any indenture, agreement (written or oral), instrument or
understanding or other obligation or restriction to which the
Purchaser is a party or by which it is bound, or
(c) any order of any court, governmental authority or regulatory body or
any law or regulation of any jurisdiction in which its business is
carried on.
(4) Investment Canada Act. The Purchaser is not a "non-Canadian" for purposes
of and within the meaning of the Investment Canada Act, R.S.C. 1985, c. 28
(1st Supp.).
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ARTICLE 4 - SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES
4.1 Survival of Warranties by the Vendors and the Company.
The representations and warranties made by the Vendors and the Company and
contained in this Agreement, or contained in any document or certificate given
in order to carry out the transactions contemplated hereby, will survive the
closing of the purchase of the Purchased Shares provided for herein and,
notwithstanding such closing or any investigation made by or on behalf of the
Purchaser or any other person or any knowledge of the Purchaser or any other
person, shall continue in full force and effect for the benefit of the
Purchaser, subject to the following provisions of this section.
(a) Except as provided in (b) and (c) of this section, no Warranty Claim may be
made or brought by the Purchaser after the date which is two years
following the Closing Date.
(b) Any Warranty Claim which is based upon or relates to the tax liability of
the Company for a particular taxation year may be made or brought by the
Purchaser at any time prior to the expiration of the period (if any) during
which an assessment, reassessment or other form of recognized document
assessing liability for tax, interest or penalties in respect of such
taxation year under applicable tax legislation could be issued, assuming
that the Company does not file any waiver or similar document extending
such period as otherwise determined.
(c) Any Warranty Claim which is based upon or relates to the title to the
Purchased Shares or which is based upon intentional misrepresentation or
fraud by the Vendors or the Company may be made or brought by the Purchaser
at any time.
After the expiration of the period of time referred to in (a) of this section,
the Vendors will be released from all obligations and liabilities in respect of
the representations and warranties made by the Vendors and the Company and
contained in this Agreement or in any document or certificate given in order to
carry out the transactions contemplated hereby, except with respect to any
Warranty Claims made by the Purchaser in writing prior to the expiration of such
period and subject to the rights of the Purchaser to make any claim permitted by
(b) and or (c) of this section.
4.2 Survival of Warranties by Purchaser.
The representations and warranties made by the Purchaser and contained in this
Agreement or contained in any document or certificate given in order to carry
out the transactions contemplated hereby will survive the closing of the
purchase and sale of the Purchased Shares provided for herein and,
notwithstanding such closing or any investigation made by or on behalf of the
Vendors or the Company or any other person or any knowledge of the Vendors or
the Company or any other person, shall continue in full force and effect for the
benefit of the Vendors and the Company; provided that no Warranty Claim may be
made or brought by the Vendors after the date which is two years following the
Closing Date.
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4.3 Limitations on Warranty Claims
(a) No party shall be entitled to make a Warranty Claim if that party has been
advised in writing or otherwise has actual knowledge prior to the Closing
Time of the inaccuracy, non-performance, non-fulfillment or breach which is
the basis for such Warranty Claim and the party completes the transactions
hereunder notwithstanding such inaccuracy, non-performance, non-fulfillment
or breach.
(b) The amount of any damages which may be claimed by the Purchaser pursuant to
a Warranty Claim shall be calculated to be the cost or loss to the
Purchaser after giving effect to any insurance proceeds available to the
Company in relation to the matter which is the subject of the Warranty
Claim
ARTICLE 5 - COVENANTS
5.1 Covenants by the Vendors and the Company.
The Vendors and the Company jointly and severally covenant to the Purchaser that
they will do or cause to be done the following:
(1) Investigation of Business and Examination of Documents. During the Interim
Period, the Vendors will cause and the Company will provide access to, and
will permit the Purchaser, through its representatives, to make such
investigation of, the operations, properties, assets and records of the
Company and of its financial and legal condition as the Purchaser deems
necessary or advisable to familiarize itself with such operations,
properties, assets, records and other matters. Without limiting the
generality of the foregoing, during the Interim Period the Vendors and the
Company will permit the Purchaser and its representatives to have access to
the premises used in connection with the Business, at such reasonable times
as may be designated by the Vendors so as not to disrupt the routine daily
affairs of the Business, and will produce for inspection and provide copies
to the Purchaser of:
(a) all agreements and other documents referred to in section 3.1 hereof
or in any of the schedules attached hereto and all other contracts,
leases, licenses, title documents, title opinions, insurance policies,
pension plans, information relating to employees of the Company,
customer lists, information relating to customers and suppliers of the
Company, documents relating to all indebtedness and credit facilities
of the Company, documents relating to legal or administrative
proceedings and all other documents of or in the possession of the
Company or relating to the Business;
(b) all minute books, share certificate books, registers of security
holders, registers of transfers of securities, registers of directors
and other corporate documents of the Company;
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(c) all books, records, accounts, tax returns and financial statements of
the Company, and
(d) all other information which, in the reasonable opinion of the
Purchaser's representatives, is required in order to make an
examination of the Company and the Business.
Subject to section 4.3 hereof, such investigations and inspections shall
not mitigate or affect the representations and warranties of the Vendors
and the Company hereunder, which shall continue in full force and effect.
(2) Conduct of Business. Except as contemplated by this agreement or with the
prior written consent of the Purchaser, during the Interim Period the
Vendors and the Company shall:
(a) operate the Business only in the ordinary course thereof, consistent
with past practices;
(b) take all actions within their control to ensure that the
representations and warranties in section 3.1 hereof remain true and
correct at the Closing Time, with the same force and effect as if such
representations and warranties were made at and as of the Closing
Time, and to satisfy or cause to be satisfied the conditions in
section 6.1 hereof;
(c) promptly advise the Purchaser of any facts that come to their
attention which would cause any of the Vendor's and the Company's
representations and warranties herein contained to be untrue in any
respect;
(d) take all action to preserve the Business and the goodwill of the
Company and its relationships with customers, suppliers and others
having business dealings with it, to keep available the services of
its present officers and employees and to maintain in full force and
effect all agreements to which the Company is a party, and take all
other action reasonably requested by the Purchaser in order that the
Business and the Condition of the Company will not be impaired during
the Interim Period;
(e) promptly advise the Purchaser in writing of any material adverse
change in the Business or the Condition of the Company during the
Interim Period;
(f) maintain all of the Company's tangible properties and assets in the
same condition as they now exist, ordinary wear and tear excepted;
(g) maintain the books, records and accounts of the Company in the
ordinary course and record all transactions on a basis consistent with
past practice;
(h) ensure that the Company does not create, incur or assume any long-term
debt (including obligations in respect of leases) or create any
Encumbrance upon any of its properties or assets or guarantee or
otherwise become liable for the
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obligations of any other person or make any loans or advances to any
person save and except for those items herein disclosed;
(i) ensure that the Company does not sell or otherwise dispose of any of
its properties or assets except in the ordinary course of the
Business;
(j) ensure that the Company does not terminate or waive any right of
substantial value of the Business;
(k) ensure that the Company does not make any capital expenditure in
excess of $1,000 in respect of any particular item or in excess of
$5,000 in the aggregate save and except for those items herein
disclosed;
(l) maintain the inventories of the Business in accordance with past
practice;
(m) keep in full force all of the Company's current insurance policies;
(n) take all actions within their control to ensure that the Company
performs all of its obligations falling due during the Interim Period
under all agreements to which the Company is a party or by which it is
bound;
(o) ensure that the Company does not enter into any agreement other than
agreements made in the ordinary course of the Business consistent with
past practice and which involve obligations of less than $1,000;
(p) not take any action to amend the articles of incorporation or by-laws
of the Company;
(q) ensure that the Company does not declare or pay any dividends, redeem
or repurchase any shares in the capital of the Company or make any
other distributions in respect of the shares of the Company, and
(r) ensure that the Company does not increase, in any manner, the
compensation or employee benefits of any of its directors, officers or
employees, or pay or agree to pay to any of its directors, officers or
employees any pension, severance or termination amount or other
employee benefit not required by any of the employee benefit plans and
programs referred to in the schedules attached hereto.
(3) Confidentiality. Pending completion of the transactions contemplated
herein, the Vendors shall keep confidential information, trade secrets, or
confidential financial or business documents (collectively, the
"Information") received by them from the Purchaser concerning the
Purchaser's Business and shall not disclose such Information to any third
party provided that any of such Information may be disclosed to the
Vendors' representatives and professional advisors (the "Advisors") who
need to know such Information in connection with the transactions
contemplated hereby (provided the Vendors shall use all reasonable efforts
to ensure that such directors, officers, employees, representatives and
professional advisors keep confidential such Information) and
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provided further that the Vendors will not be liable for disclosure of the
Information upon the occurrence of one or more of the following events:
(i) the closing of the share purchase contemplated hereby;
(ii) the Information becoming generally known to the public other than
through a breach of this section;
(iii) the Information being lawfully obtained by the Vendors from a third
party or parties without breach of this Agreement by the Vendors, as
shown by documentation sufficient to establish the third party as a
source of the Information;
(iv) the Information being known to the Vendors prior to disclosure by the
Purchaser, or its advisors, as shown by documentation sufficient to
establish such knowledge; or
the Purchaser having provided its prior written approval for such
disclosure by the Vendors.
(4) Transfer of Purchased Shares. At or before the Closing Time, the Vendors
will cause all necessary steps and corporate proceedings to be taken in
order to permit the Purchased Shares to be duly and regularly transferred
to the Purchaser.
(5) Resignation of Officers and Directors. At or before the Closing Time, the
Vendors will cause each person who is a director or officer of the Company,
other than such persons as may be designated in writing by the Purchaser,
to submit his or her written resignation as a director or officer to the
Company which will be effective at the Closing Time.
(6) Releases by the Vendors. At the Closing Time, the Vendors will execute and
deliver to the Company a release in the form of the draft release attached
hereto as Exhibit "C".
(7) Non-Competition Agreement. The Vendors acknowledge that an important part
of the benefits which the Purchaser will receive in connection with the
transaction contemplated herein is the ability to carry on the Business
free from competition from the Vendors, that an absence of such competition
is an essential premise of the bargain between the Purchaser and Vendors
and that the Purchaser would be unwilling to enter into this Agreement in
the absence of the promises by the Vendors not to compete with the
Business. Accordingly, the Vendors agree that the non-competition, non-
solicitation and non-disclosure covenants set forth in the employment
agreement between the Vendor ▇▇▇▇▇▇▇ Tanunagara and the Purchaser has been
entered into by ▇▇▇▇▇▇▇ Tanunagara to protect the interests of the
Purchaser hereunder and not merely in consideration of his agreement to
render services to the Purchaser
(8) Employment Agreement. At the Closing Time, the Vendor, ▇▇▇▇▇▇▇ Tanunagara,
will execute and deliver to the Company and the Purchaser the Employment
Agreement in the form of the draft agreement attached hereto as Exhibit
"A".
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(9) Escrow Agreement. At the Closing Time, the Vendors will execute and
deliver to the Purchaser the Escrow Agreement in the form of the draft
agreement attached hereto as Exhibit "B".
(10) Books and Records. At the Closing Time, the Vendors will cause all books
and records belonging or relating to the Company to be in possession of the
Company and the Vendors will make such books and records available to the
directors designated by the Purchaser.
(11) Liabilities at Closing. At or before the Closing Time, the Vendors will
deliver to the Purchaser a list of the Liabilities at Closing.
5.2 Covenants by the Purchaser.
The Purchaser covenants to the Vendors and the Company that it will do or cause
to be done the following:
(1) Confidentiality. Pending completion of the transactions contemplated
herein, the Purchaser shall keep confidential information, trade secrets,
or confidential financial or business documents (collectively, the
"Information") received by it from the Vendors and/or the Company
concerning the Company's Business and shall not disclose such Information
to any third party provided that any of such Information may be disclosed
to the Purchaser's directors, officers, employees, representatives and
professional advisors (the "Advisors") who need to know such Information in
connection with the transactions contemplated hereby (provided the
Purchaser shall use all reasonable efforts to ensure that such directors,
officers, employees, representatives and professional advisors keep
confidential such Information) and provided further that the Purchaser will
not be liable for disclosure of the Information upon the occurrence of one
or more of the following events:
(i) the closing of the share purchase contemplated hereby;
(ii) the Information becoming generally known to the public other than
through a breach of this section;
(iii) the Information being lawfully obtained by the Purchaser from a third
party or parties without breach of this Agreement by the Purchaser,
as shown by documentation sufficient to establish the third party as
a source of the Information;
(iv) the Information being known to the Purchaser prior to disclosure by
the Vendors, the Company, or their advisors, as shown by
documentation sufficient to establish such knowledge; or
(v) the Vendors or the Company having provided their prior written
approval for such disclosure by the Purchaser.
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(2) Change of Name. Prior to the Closing Time, the Purchaser shall provide to
the Vendor a name for the Company, which shall be acceptable to the Ontario
Ministry of Consumer and Commercial, Relations. The Purchaser acknowledges
that the name of the Company shall be changed to the name so provided by
the Purchaser at the Closing Time.
ARTICLE 6 - CONDITIONS
6.1 Conditions to the Obligations of the Purchaser.
Notwithstanding anything herein contained, the obligation of the Purchaser to
complete the transactions provided for herein will be subject to the fulfillment
of the following conditions at or prior to the Closing Time, and the Vendors and
the Company jointly and severally covenant to use their best efforts to ensure
that such conditions are fulfilled.
(1) Accuracy of Representations and Warranties and Performance of Covenants.
The representations and warranties of the Vendors and the Company contained
in this Agreement or in any documents delivered in order to carry out the
transactions contemplated hereby shall be true and accurate on the date
hereof and at the Closing Time with the same force and effect as though
such representations and warranties had been made as of the Closing Time
(regardless of the date as of which the information in this Agreement or in
any schedule or other document made pursuant hereto is given). In
addition, the Vendors and the Company shall have complied with all
covenants and agreements herein agreed to be performed or caused to be
performed by them at or prior to the Closing Time. In addition, the
Vendors and the Company shall have delivered to the Purchaser a certificate
confirming that the facts with respect to each of such representations and
warranties by the Vendors and the Company are as set out herein at the
Closing Time and that the Vendors and the Company have performed all
covenants required to be performed by them hereunder.
(2) Material Adverse Changes. During the Interim Period there will have been
no change in the Business or the Condition of the Company, howsoever
arising, except changes which have occurred in the ordinary course of the
Business and which, individually or in the aggregate, have not affected and
may not affect the Business or the Condition of the Company in any material
adverse respect. Without limiting the generality of the foregoing, during
the Interim Period:
(a) no damage to or destruction of any material part of the property or
assets of the Company shall have occurred, whether or not covered by
insurance;
(b) none of the employees of the Company shall have resigned or have
indicated their intention to resign from employment with the Company,
and
(c) none of the five largest customers of the Business will have ceased,
or advised the Company or the Purchaser of their intention to cease,
purchasing from or doing business with the Company.
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(3) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been made,
and no action or proceeding shall be pending or threatened which, in the
opinion of counsel to the Purchaser, is likely to result in an order,
decision or ruling:
(a) to disallow, enjoin, prohibit or impose any limitations or conditions
on the purchase and sale of the Purchased Shares contemplated hereby
or the right of the Purchaser to own the Purchased Shares, or
(b) to impose any limitations or conditions which may have a material
adverse effect on the Business or the Condition of the Company.
(4) Financing. The Purchaser shall have secured satisfactory financing to
complete the purchase of the Purchased Shares as contemplated by this
Agreement (the "Financing"). In the event that the Purchaser has not
secured the Financing by the Closing Date, the Vendors agree that, upon
request by the Purchaser, the Vendors shall agree to extend the Closing
Date to a date that shall be no later than March 15, 2000.
(5) Completion of Audit. Auditors retained by the Purchaser shall have
completed a financial audit of the operations of the Company and prepared
audited financial statements (including a balance sheet, statement of
operations and statement of changes in financial position) for the fiscal
year ended December 31, 1999 and the Vendors and the Company shall have
delivered and/or provided access to the Purchaser to all records and
personnel necessary for the purpose of completing such audit. The Vendors
and the Company agree to deliver all such records to the Purchaser no later
than February 10, 2000. In the event that the Purchaser, in its sole and
absolute discretion, is not satisfied with the financial condition of the
Company or the operations of the Company for the fiscal year ended December
31, 1999 based on said audited financial statements, the Purchaser shall
not be obligated to complete the transactions provided for herein.
(6) Releases by Directors and Officers. At the Closing Time, each person who
is a director or officer of the Company and who is resigning as such shall
have executed and delivered to the Company and the Purchaser a release in
the form of the draft release attached hereto as Exhibit "C".
(7) Opinion of Vendors' Counsel. At the Closing Time, the Purchaser shall have
received an opinion of legal counsel for the Vendors and the Company in a
form satisfactory to the Purchaser and the Purchaser's counsel.
6.2 Waiver or Termination by Purchaser.
The conditions contained in section 6.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived in whole or in part by the Purchaser
at any time. The Vendors and the Company acknowledge that the waiver by the
Purchaser of any condition or any part of any condition shall constitute a
waiver only of such condition or such part of such condition, as the case may
be, and shall not constitute a waiver of any covenant, agreement, representation
or warranty made by the Vendors or the Company herein that corresponds or is
related to such
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condition or such part of such condition, as the case may be, and shall not
constitute a waiver of any covenant, agreement, representation or warranty made
by the Vendors or the Company herein that corresponds or is related to such
condition or such part of such condition, as the case may be. If any of the
conditions contained in section 6.1 hereof are not fulfilled or complied with as
herein provided, the Purchaser may, at or prior to the Closing Time at its
option, rescind this Agreement by notice in writing to the Vendors and the
Company and in such event the Purchaser shall be released from all obligations
hereunder and, unless the condition or conditions which have not been fulfilled
are reasonably capable of being fulfilled or caused to be fulfilled by the
Vendors or the Company, then the Vendors and the Company shall also be released
from all obligations hereunder.
6.3 Conditions to the Obligations of the Vendors.
Notwithstanding anything herein contained, the obligations of the Vendors and
the Company to complete the transactions provided for herein will be subject to
the fulfillment of the following conditions at or prior to the Closing Time, and
the Purchaser will use its best efforts to ensure that such conditions are
fulfilled.
(1) Accuracy of Representations and Warranties and Performance of Covenants.
The representations and warranties of the Purchaser contained in this
Agreement or in any documents delivered in order to carry out the
transactions contemplated hereby will be true and accurate on the date
hereof and at the Closing Time with the same force and effect as though
such representations and warranties had been made as of the Closing Time
(regardless of the date as of which the information in this Agreement or
any such schedule or other document made pursuant hereto is given). In
addition, the Purchaser shall have complied with all covenants and
agreements herein agreed to be performed or caused to be performed by it at
or prior to the Closing Time. In addition, the Purchaser shall have
delivered to the Vendors a certificate confirming that the facts with
respect to each of the representations and warranties of the Purchaser are
as set out herein at the Closing Time and that the Purchaser has performed
each of the covenants required to be performed by it hereunder.
(2) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been made,
and no action or proceeding shall be pending or threatened which, in the
opinion of counsel to the Vendors or the Company, is likely to result in an
order, decision or ruling, to disallow, enjoin or prohibit the purchase and
sale of the Purchased Shares contemplated hereby.
(3) Opinion of Purchaser's Counsel. At the Closing Time, the Vendors shall have
received an opinion of legal counsel for the Purchaser in a form
satisfactory to the Vendors and the Vendors' counsel.
6.4 Waiver or Termination by Vendors and Company
The conditions contained in section 6.3 hereof are inserted for the exclusive
benefit of the Vendors and the Company and may be waived in whole or in part by
the Vendors and the Company at any time. The Purchaser acknowledges that the
waiver by the Vendors and the Company of any condition or any part of any
condition shall constitute a waiver only of such condition or such part of such
condition, as the case may be, and shall not constitute a waiver of any
covenant, agreement, representation or warranty made by the Purchaser herein
that
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corresponds or is related to such condition or such part of such condition, as
the case may be. If any of the conditions contained in section 6.3 hereof are
not fulfilled or complied with as herein provided, the Vendors and the Company
may, at or prior to the Closing Time at their option, rescind this Agreement by
notice in writing to the Purchaser and in such event the Vendors and the Company
shall each be released from all obligations hereunder and, unless the condition
or conditions which have not been fulfilled are reasonably capable of being
fulfilled or caused to be fulfilled by the Purchaser, then the Purchaser shall
also be released from all obligations hereunder.
ARTICLE 7 - CLOSING
7.1 Closing Arrangements.
Subject to the terms and conditions hereof, the transactions contemplated herein
shall be closed at the Closing Time at the offices of ▇▇▇▇▇▇, Pundit, Pathak &
▇▇▇▇▇▇▇▇ at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ or at such other
place or places as may be mutually agreed upon by the Vendors and the Purchaser.
7.2 Documents to be Delivered.
At or before the Closing Time, the Vendors and the Company shall execute, or
cause to be executed, and shall deliver, or cause to be delivered, to the
Purchaser all documents, instruments and things which are to be delivered by the
Vendors and the Company pursuant to the provisions of this Agreement, and the
Purchaser shall execute, or cause to be executed, and shall deliver, or cause to
be delivered, to the Vendors all cheques or bank drafts and all documents,
instruments and things which the Purchaser is to deliver or to cause to be
delivered pursuant to the provisions of this Agreement.
ARTICLE 8 - INDEMNIFICATION AND SET-OFF
8.1 Indemnity by the Vendors and the Company.
(1) The Vendors and the Company hereby jointly and severally agree to indemnify
and save the Purchaser harmless from and against any claims, demands,
actions, causes of action, damage, loss, deficiency, cost, liability and
expense which may be made or brought against the Purchaser or which the
Purchaser may suffer or incur as a result of, in respect of or arising out
of:
(a) any non-performance or non-fulfillment of any covenant or agreement on
the part of the Vendors or the Company contained in this Agreement or
in any document given in order to carry out the transactions
contemplated hereby;
(b) any misrepresentation, inaccuracy, incorrectness or breach of any
representation
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or warranty made by the Vendors or the Company contained in this
Agreement or contained in any document or certificate given in order
to carry out the transactions contemplated hereby, and
(c) all costs and expenses including, without limitation, legal fees on a
solicitor-and-client basis, incidental to or in respect of the
foregoing.
(2) The obligations of indemnification by the Vendors and the Company pursuant
to paragraph (1) of this section will be:
(a) subject to the limitations referred to in section 4.1 hereof with
respect to the survival of the representations and warranties by the
Vendors and the Company;
(b) subject to the limitations referred to in section 4.3 hereof, and
(c) subject to the provisions of section 8.2 hereof.
8.2 Provisions Relating to Indemnity Claims.
The following provisions will apply to any claim by the Purchaser for
indemnification by the Vendors pursuant to section 8.1 hereof (hereinafter, in
this section, called an "Indemnity Claim").
(a) Promptly after becoming aware of any matter that may give rise to an
Indemnity Claim, the Purchaser will provide to the Vendors written
notice of the Indemnity Claim specifying (to the extent that
information is available) the factual basis for the Indemnity Claim
and the amount of the Indemnity Claim or, if an amount is not then
determinable, an estimate of the amount of the Indemnity Claim, if an
estimate is feasible in the circumstances.
(b) If an Indemnity Claim relates to an alleged liability of the Company
to any other person (hereinafter, in this section, called a "Third
Party Liability"), including without limitation any governmental or
regulatory body or any taxing authority, which is of a nature such
that the Company is required by applicable law to make a payment to a
third party before the relevant procedure for challenging the
existence or quantum of the alleged liability can be implemented or
completed, then the Company or the Purchaser may, notwithstanding the
provisions of paragraphs (c) and (d) of this section, make such
payment or cause the Company to make such payment and forthwith demand
reimbursement for such payment from the Vendors in accordance with
this Agreement; provided that, if the alleged liability to the third
party as finally determined upon completion of settlement negotiations
or related legal proceedings is less than the amount which is paid by
the Vendors in respect of the related Indemnity Claim, then the
Company or the Purchaser, as the case may be, shall forthwith
following the final determination pay to the Vendors the amount by
which the amount of the liability as finally determined is less than
the amount which is so paid by the Vendors.
(c) The Purchaser shall not negotiate, settle, compromise or pay (except
in the case of
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payment of a judgment) any Third Party Liability as to which it
proposes to assert an Indemnity Claim, except with the prior consent
of the Vendors (which consent shall not be unreasonably withheld or
delayed), unless there is a reasonable possibility that such Third
Party Liability may materially and adversely affect the Business, the
Condition of the Company or the Purchaser, in which case the Purchaser
shall have the right, after notifying the Vendors, to negotiate,
settle, compromise or pay such Third Party Liability without prejudice
to its rights of indemnification hereunder.
(d) With respect to any Third Party Liability, provided the Vendors first
admit the Purchaser's right to indemnification for the amount of such
Third Party Liability which may at any time be determined or settled,
then in any legal, administrative or other proceedings in connection
with the matters forming the basis of the Third Party Liability, the
following procedures will apply:
(i) except as contemplated by subparagraph (iii) of this paragraph,
the Vendors will have the right to assume carriage of the
compromise or settlement of the Third Party Liability and the
conduct of any related legal, administrative or other
proceedings, but the Purchaser and the Company shall have the
right and shall be given the opportunity to participate in the
defence of the Third Party Liability, to consult with the
Vendors in the settlement of the Third Party Liability and the
conduct of related legal, administrative and other proceedings
(including consultation with counsel) and to disagree on
reasonable grounds with the selection and retention of counsel,
in which case counsel satisfactory to the Vendors and the
Purchaser shall be retained by the Vendors;
(ii) the Vendors will co-operate with the Purchaser in relation to
the Third Party Liability, will keep it fully advised with
respect thereto, will provide it with copies of all relevant
documentation as it becomes available, will provide it with
access to all records and files relating to the defence of the
Third Party Liability and will meet with representatives of the
Purchaser at all reasonable times to discuss the Third Party
Liability, and
(iii) notwithstanding subparagraphs (i) and (ii) of this paragraph,
the Vendors will not settle the Third Party Liability or conduct
any legal, administrative or other proceedings in any manner
which could, in the reasonable opinion of the Purchaser, have a
material adverse effect on the Business, the Condition of the
Company or the Purchaser, except with the prior written consent
of the Purchaser.
(e) If, with respect to any Third Party Liability, the Vendors do not
admit the Purchaser's right to indemnification or decline to assume
carriage of the settlement or of any legal, administrative or other
proceedings relating to the Third Party Liability, then the following
provisions will apply:
(i) the Purchaser, at its discretion, may assume carriage of the
settlement or of
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any legal, administrative or other proceedings relating to the
Third Party Liability and may defend or settle the Third Party
Liability on such terms as the Purchaser, acting in good faith,
considers advisable, and
(ii) any cost, loss, damage or expense incurred or suffered by the
Purchaser and the Company in the settlement of such Third Party
Liability or the conduct of any legal, administrative or other
proceedings shall be added to the amount of the Indemnity Claim.
8.3 Right of Set-Off.
Each of the Purchaser and the Company shall have the right to satisfy any amount
from time to time owing by it to the Vendors by way of set-off against any
amount from time to time owing by the Vendors to the Purchaser or the Company,
including any amount owing to the Purchaser pursuant to the Vendors'
indemnification pursuant to section 8.1 hereof.
ARTICLE 9 - GENERAL PROVISIONS
9.1 Further Assurances.
Each of the Vendors and the Purchaser hereby covenants and agrees that at any
time and from time to time after the Closing Date it will, upon the request of
the others, do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required for the better carrying out and
performance of all the terms of this Agreement.
9.2 Remedies Cumulative.
The rights and remedies of the parties under this Agreement are cumulative and
in addition to and not in substitution for any rights or remedies provided by
law. Any single or partial exercise by any party hereto of any right or remedy
for default or breach of any term, covenant or condition of this Agreement does
not waive, alter, affect or prejudice any other right or remedy to which such
party may be lawfully entitled for the same default or breach.
9.3 Notices.
(1) Any notice, designation, communication, request, demand or other document,
required or permitted to be given or sent or delivered hereunder to any
party hereto shall be in writing and shall be sufficiently given or sent or
delivered if it is:
(a) delivered personally to an officer or director of such party;
(b) sent to the party entitled to receive it by registered mail, postage
prepaid, mailed in Canada, or
(c) sent by telecopy machine.
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(2) Notices shall be sent to the following addresses or telecopy numbers:
(a) in the case of the Vendors,
▇▇. ▇▇▇▇▇▇▇ Tanunagara
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Tel:
Fax:
Ms. ▇▇▇▇▇▇▇ Tanunagara
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Mr. ▇▇▇▇▇▇ Tanunagara
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
and their solicitors,
Rigobon, Carli
Barristers & Solicitors, Trade ▇▇▇▇ Agents
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail:▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
(b) in the case of the Purchaser,
1348485 Ontario Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
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(c) in the case of the Company,
▇▇▇▇▇▇ ▇▇▇ Investments Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Tel:
Fax:
Attention: ▇▇. ▇▇▇▇▇▇▇ Tanunagara
or to such other address or telecopier number as the party entitled to or
receiving such notice, designation, communication, request, demand or other
document shall, by a notice given in accordance with this section, have
communicated to the party giving or sending or delivering such notice,
designation, communication, request, demand or other document.
(3) Any notice, designation, communication, request, demand or other document
given or sent or delivered as aforesaid shall:
(a) if delivered as aforesaid, be deemed to have been given, sent,
delivered and received on the date of delivery;
(b) if sent by mail as aforesaid, be deemed to have been given, sent,
delivered and received (but not actually received) on the fourth
Business Day following the date of mailing, unless at any time between
the date of mailing and the fourth Business Day thereafter there is a
discontinuance or interruption of regular postal service, whether due
to strike or lockout or work slowdown, affecting postal service at the
point of dispatch or delivery or any intermediate point, in which case
the same shall be deemed to have been given, sent, delivered and
received in the ordinary course of the mails, allowing for such
discontinuance or interruption of regular postal service, and
(c) if sent by telecopy machine, be deemed to have been given, sent,
delivered and received on the date the sender receives the telecopy
answer back confirming receipt by the recipient.
9.4 Counterparts.
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together shall
constitute but one and the same instrument.
9.5 Expenses of Parties.
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Each of the parties hereto shall bear all expenses incurred by it in connection
with this Agreement including, without limitation, the charges of their
respective counsel, accountants, financial advisors and finders.
9.6 Brokerage and Finder's Fees.
The Vendors agree to indemnify the Purchaser and the Company and hold each of
them harmless in respect of any claim for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereby which is
caused by actions of the Vendors. The Purchaser will indemnify the Vendors and
hold them harmless in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby which is
caused by actions of the Purchaser or any of its Affiliates.
9.7 Announcements.
No announcement with respect to this Agreement will be made by any party hereto
without the prior approval of the other parties. The foregoing will not apply to
any announcement by any party required in order to comply with laws pertaining
to timely disclosure, provided that such party consults with the other parties
before making any such announcement.
9.8 Assignment.
The rights of the Vendors hereunder shall not be assignable without the written
consent of the Purchaser. The rights of the Purchaser hereunder shall not be
assignable without the written consent of the Vendors.
9.9 Successors and Assigns.
This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing herein,
express or implied, is intended to confer upon any person, other than the
parties hereto and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
9.10 Entire Agreement.
This Agreement and the schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof. None of the parties hereto shall be bound or charged with
any oral or written agreements, representations, warranties, statements,
promises, information, arrangements or understandings not specifically set forth
in this Agreement or in the schedules, documents and instruments to be delivered
on or before the Closing Date pursuant to this Agreement. The parties hereto
further acknowledge and agree that, in entering into this Agreement and in
delivering the schedules, documents and instruments to be delivered on or before
the Closing Date, they have not in any way relied, and will not in any way rely,
upon any oral or written agreements, representations, warranties, statements,
promises, information, arrangements or understandings, express or implied, not
specifically set forth in this Agreement
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or in such schedules, documents or instruments.
9.11 Waiver.
Any party hereto which is entitled to the benefits of this Agreement may, and
has the right to, waive any term or condition hereof at any time on or prior to
the Closing Time provided, however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.
9.12 Amendments.
No modification or amendment to this Agreement may be made unless agreed to by
the parties hereto in writing.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement
under seal as of the day and year first written above.
SIGNED, SEALED & DELIVERED )
in the presence of: )
) 1348485 Ontario Inc.
)
)
) Per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ c/s
) -----------------------------------
) A.S.O.
)
) ▇▇▇▇▇▇ ▇▇▇ Investments Inc.
)
)
)
) Per: /s/ ▇▇▇▇▇▇▇ Tanunagara c/s
) -----------------------------------
) A.S.O.
)
)
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ) /s/ ▇▇▇▇▇▇▇ Tanunagara
----------------------- ) -----------------------------------
Witness ) ▇▇▇▇▇▇▇ Tanunagara
)
/s/ ▇▇▇ ▇▇▇▇▇▇ ) /s/ ▇▇▇▇▇▇▇ Tanunagara
----------------------- ) -----------------------------------
Witness ) ▇▇▇▇▇▇▇ Tanunagara
)
/s/ ▇▇▇ ▇▇▇▇▇▇ ) /s/ ▇▇▇▇▇▇ Tanunagara
----------------------- ) -----------------------------------
Witness ) ▇▇▇▇▇▇ Tanunagara
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SCHEDULES
1.1(r) Interim Financial Statements
1.1(w) Leases
1.1(cc) Real Properties
1.1(gg) Unaudited Financial Statements
2.3 Purchase Price Adjustments
3.1(3) Contractual and Regulatory Approvals
3.1(4) Constating Documents/Licenses
3.1(16) Dividends and Distributions
3.1(17) Tax Matters
3.1(18) Litigation
3.1(19) Environmental Matters
3.1(20) Encumbrances
3.1(21) Access to Accounts
3.1(28) Leases of Personal Property
3.1(29) Intellectual Property
3.1(35) Guarantees, Warranties and Discounts
3.1(36) Licenses, Agency and Distribution Agreements
3.1(37) Outstanding Agreements
3.1(39) Employees
3.1(42) Employee Retirement and Pension Plans
3.1(43) Insurance
3.1(45) Government Assistance
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EXHIBITS
A. Employment Agreement
B. Escrow Agreement
C. Releases by the Vendors