ASSET PURCHASE AGREEMENT Among COLLECTORS UNIVERSE, INC., GEMPRINT CORPORATION, CVF TECHNOLOGIES CORPORATION, HEPTAGON INVESTMENTS LTD. and 1456733 ONTARIO, INC. Dated: November 25, 2005
Among
COLLECTORS
UNIVERSE, INC.,
GEMPRINT
CORPORATION,
CVF
TECHNOLOGIES CORPORATION,
HEPTAGON
INVESTMENTS LTD.
and
1456733
ONTARIO, INC.
Dated:
November
25, 2005
ARTICLE
I DEFINITIONS
1
1.1 Specific.
1
1.2 General.
11
ARTICLE
II SALE
AND
PURCHASE OF
ASSETS
11
2.1 Assets
to
be
Transferred.
11
2.2 Excluded
Assets.
11
2.3 Title
to
Purchased
Assets.
12
2.4 Consents
to
Assignment.
12
ARTICLE
III ASSUMPTION
OF
LIABILITIES
12
3.1 Assumed
Liabilities 12
3.2 Excluded
Liabilities.
13
3.3 Contested
Obligations.
15
ARTICLE
IV PURCHASE
PRICE, ESCROW, PAYMENT AND RELATED
MATTERS
15
4.1 Purchase
Price.
15
4.2 Contingent
Payments
15
4.3 Escrow.
16
4.4 Payment
of the Purchase
Price. 16
4.5 Disbursement
Schedule
16
4.6 Transfer
Taxes
17
4.7 Allocation
of Purchase
Price.
17
4.8 [Intentionally
omitted.] 17
4.9 [Intentionally
omitted.]
17
4.10
GST
Election
17
4.11
Accounts
Receivable
Election
17
4.12
Deferred
Revenue
Election 17
ARTICLE
VCLOSING
18
5.1 Time
and
Place
18
5.2 Transactions
Upon the Execution of this
Agreement 18
5.3 Transactions
at the
Closing.
18
ARTICLE
VI REPRESENTATIONS
AND WARRANTIES OF SELLER, CVF AND
HEPTAGON
20
6.1 Organization;
Authority; Due
Authorization. 20
6.2 No
Violation
21
6.3 Licenses;
Regulatory and Other
Approvals.
22
6.4 Title
to
Purchased
Assets
22
6.5 Financial
Condition.
22
6.6 Tax
Matters.
25
i
6.7 Compliance
with Applicable Laws; Governmental
Matters.
26
6.8 Litigation.
28
6.9 Property
of
Seller.
29
6.10
Agreements.
31
6.11
Labor
and
Employment
Matters.
32
6.12
Employee
Benefits 33
(a) Compliance
with Applicable Law,
etc 33
(b) Pension
Plan
33
6.13
Insurance.
34
6.14
Customers,
Licensees and
Suppliers.
34
6.15
Potential
Conflicts of
Interest.
34
6.16
Certain
Transactions
34
6.17
Solvency.
35
6.18
Books
and
Records.
35
6.19
Delivery
of
Documents.
35
6.20
Subsidiaries
35
6.21
No
Broker
35
6.22
Non-Residency
35
6.23
Full
Disclosure.
35
ARTICLE
VII REPRESENTATIONS
AND WARRANTIES OF
BUYER
37
7.1 Due
Incorporation. 37
7.2 Authority
to Execute and Perform
Agreements. 37
7.3 Due
Authorization;
Enforceability 37
7.4 No
Violation
37
7.5 Regulatory
and Other
Approvals.
38
7.6 No
Broker.
38
7.7 Investment
Canada
Act 38
ARTICLE
VIII COVENANTS
AND AGREEMENTS OF THE PARTIES EFFECTIVE PRIOR TO
CLOSING 38
8.1 Business
Examinations and Physical Investigations of Purchased
Assets
38
8.2 Cooperation;
Consents.
39
8.3 Preservation
and Conduct of
Business.
39
8.5 Interim
Seller Financial
Statements
41
8.6 Notices.
42
8.7 Non-Competition
42
8.8 Employment
Matters. 42
8.9 No
Solicitation or
Negotiation 43
8.10
Risk
of
Loss
43
8.11
Transition
Assistance.
43
8.12 Assistance
in Transfer of Records and
Data.
44
8.13 Change
of
Record
Title
44
8.14
Meeting
of Seller’s
Shareholders
44
8.15
Bulk
Sales 44
8.16
GST
Registration
44
ii
8.17
[Intentionally
omitted.]
44
8.18
SIL
44
8.19
Class
B
Stock
44
ARTICLE
IX CONDITIONS
PRECEDENT TO THE OBLIGATION OF EACH PARTY TO
CLOSE
45
9.1 No
Action
or
Proceeding.
45
9.2 Governmental
and Other
Approvals.
45
9.3 Shareholder
Approval
45
ARTICLE
X CONDITIONS
PRECEDENT TO THE OBLIGATION OF BUYER TO
CLOSE
45
10.1 Representations
and
Warranties
45
10.2 Performance
of
Covenants 46
10.3 No
Adverse
Change
46
10.4 Opinion
of Counsel to
Seller.
46
10.5 Litigation
46
10.6 Pay-Off
Letters.
46
10.7 Non-Competition
Agreements.
47
10.8 [Intentionally
omitted.]
47
ARTICLE
XI CONDITIONS
PRECEDENT TO THE OBLIGATION OF SELLER TO
CLOSE
47
11.1 Representations
and
Warranties
47
11.2 Performance
of
Covenants. 47
ARTICLE
XII COVENANTS
AND AGREEMENTS OF THE PARTIES AFTER
CLOSING
47
12.1 Continuation
of
Existence.
47
12.2 Change
Seller’s
Name 47
12.3 NWT
Receivable 48
12.4 Refunds
and
Remittances 48
ARTICLE
XIII INDEMNIFICATION
48
13.1 Indemnification
by Seller, CVF and
Heptagon.
48
13.2 Indemnification
by
Buyer 49
13.3 Computation
of
Losses
49
13.4 Notice
to
Indemnifying
Party.
50
13.5 Third
Party
Claims. 50
13.6 Survival
of Representations and Covenants of Seller and the
Shareholders
51
13.7 Survival
of Representations and Covenants of
Buyer
52
13.8 Determination
of Indemnification Amounts;
Limitations.
52
13.9 No
Waiver
Relating to Claims for
Fraud
53
13.10
Disbursements
53
iii
ARTICLE
XIV
TERMINATION;
REMEDIES
53
14.1 Termination
Without
Default
53
14.2 Termination
Upon
Default
54
14.3 Specific
Performance.
54
14.4 Attorneys’
Fees
54
ARTICLE
XV EXPENSES;
CONFIDENTIALITY
55
15.1 Expenses.
55
15.2 Confidentiality
55
15.3 Publicity.
56
ARTICLE
XVI NOTICES
56
16.1 Notices.
56
ARTICLE
XVII MISCELLANEOUS
57
17.1 Further
Assurances.
57
17.2 Modifications
and Amendments; Waivers and
Consents.
58
17.3 Entire
Agreement.
58
17.4 Governing
Law and
Venue
58
17.5 Binding
Effect.
58
17.6 Counterparts/Facsimile
Signatures.
59
17.7 Section
Headings. 59
17.8 Currency.
59
17.9 Severability.
59
17.10
No
Third
Party
Rights.
59
17.11
Construction. 59
17.12
Time
59
17.13
No
Contra
Proferentem
59
iv
Annex
Annex
I Shareholders
Exhibits
Exhibit
A Escrow
Agreement
Exhibit
B Non-Competition
Agreement
Exhibit
C Lock-Up
Agreement
Exhibit
D Opinion
of Seller’s Counsel
Schedules
Schedule
1.1(a) Assumed
Contracts
Schedule
1.1(b) Prepaid
Items
Schedule
6.1 Jurisdictions
Schedule
6.2 No
Violations
Schedule
6.3(a) Licenses;
Required Governmental Approvals
Schedule
6.3(b) Required
Contractual Consents
Schedule
6.4
Liens
to
be Released
Schedule
6.5(a) Financial
Statements
Schedule
6.5(b) No
Undisclosed Liabilities
Schedule
6.5(c) Inventories
Schedule
6.5(d) Accounts
Receivable
Schedule
6.5(e) Accounts
Payable
Schedule
6.5(f) Absence
of Changes
Schedule
6.6
Tax
Matters
Schedule
6.7(b) Hazardous
Substances
Schedule
6.8
Litigation
Schedule
6.9(a) Tangible
Personal Property
Schedule
6.9(b) Intellectual
Property
Schedule
6.9(c) Real
Estate
Schedule
6.10
Agreements
Schedule
6.11
Labor
Agreements
Schedule
6.12(b) Pension
Plan
Schedule
6.13
Insurance
Schedule
6.14 Customers,
Licensees and Suppliers
Schedule
6.15
Conflicts
of Interest
Schedule
6.16
Certain
Transactions
Schedule
6.1(A)(c) Shareholders
- No Violations
Schedule
6.1(A)(d) Shareholders-
Consents
v
ASSET
PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (this “Agreement”)
dated
as of November 25, 2005 is made and entered into by and among Collectors
Universe, Inc., a Delaware corporation (“Buyer”),
Gemprint Corporation, a corporation incorporated pursuant to the laws of Canada
(“Seller”),
CVF
Technologies Corporation, a Nevada corporation (“CVF”),
Heptagon Investments Ltd., a British Virgin Islands corporation (“Heptagon”),
and
1456733 Ontario, Inc., an Ontario, Canada corporation (“Shepherd
Group”).
RECITALS
A. Seller
is
engaged in the business of maintaining and marketing a non-invasive
identification and registration system for diamonds and other
gemstones.
B. CVF,
Heptagon and Shepherd Group (collectively, the “Shareholders”)
own
64.9%, 4.45%, and 11.6%, respectively, of the issued and outstanding stock
of
Seller.
C. CVF
and
Heptagon have each made loans to Seller and hold substantially all of the
indebtedness of Seller.
D. Buyer
wishes to purchase from Seller the Business (as defined below) together with
the
Purchased Assets (as defined below), and to assume the Assumed Liabilities
(as
defined below), and Seller wishes to sell to Buyer the Business together with
the Purchased Assets and to have Buyer assume the Assumed Liabilities, upon
the
terms and conditions of this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Specific.
When
used in this Agreement, the following terms shall have the respective meanings
set forth below:
“Accounts
Receivable”
of
a
Person shall mean all accounts, notes, accounts receivable, payment intangibles,
contract rights, drafts, and other forms of claims, demands, instruments,
receivables and rights to the payment of money or other forms of consideration,
whether for goods or other property sold, leased or licensed, services performed
or to be performed, or otherwise, owned by that Person or in which that Person
has any interest, together with all guarantees, security agreements and other
rights and interests guaranteeing or securing the same.
“Affiliate”
shall
mean with respect to any Person (i) a Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) a
Person owning or controlling 10% or more of the outstanding voting securities
of
such Person or (iii) an officer, director, member or partner of such
Person. When the Affiliate is an officer, director, member or
1
partner
of such Person, any other Person for which the Affiliate acts in that capacity
shall also be considered an Affiliate. For these purposes, control means the
possession, direct or indirect, of the power to direct or cause the direction
of
the management and policies of a Person, whether its the ownership of voting
securities, by contract or otherwise.
“Agreement”
shall
mean this Asset Purchase Agreement, including all exhibits and schedules
thereto, as the same may hereafter be amended, modified or supplemented from
time to time in accordance with the provisions of Section 17.2.
“Alternative
Proposal”
shall
mean a proposal or offer (other than by Buyer) for a stock purchase, asset
acquisition, merger, consolidation or other business combination involving
Seller or any proposal to acquire in any manner a direct or indirect substantial
equity interest in, or all or any substantial part of the assets of, Seller
(including without limitation, any debt or equity interests in Seller held
by
any Shareholder, or any interest in CVF).
“Applicable
Authority”
shall
have the meaning specified in Section 6.7(b).
“Applicable
Law”
shall
mean, with respect to any Person, any domestic or foreign, federal, state,
provincial or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Authority applicable to such Person or any of its
Affiliates or any of their respective properties, assets, officers, directors,
general partners, managers, employees, consultants or agents (in connection
with
such officer’s, director’s, general partner’s, manager’s, employee’s,
consultant’s or agent’s activities on behalf of such Person or any of its
Affiliates).
“Assumed
Contracts”
shall
mean Seller Contracts specified in Schedule
1.1(a)
and,
subject to the terms and conditions of Section
8.3,
all
Contracts entered into by Seller in the ordinary course of business and in
accordance with the terms of this Agreement after the date hereof, but shall
not
include any Deferred Item until a Deferred Consent is obtained.
“Assumed
Liabilities”
shall
have the meaning specified in Section
3.1.
“Authority”
shall
mean any governmental, regulatory or administrative body, agency or authority,
any court of judicial authority, any arbitrator or any public, private or
industry regulatory authority, whether Federal, state, local or
foreign.
“Books
and Records”
of
a
Person shall mean all books and records, ledgers, employee records, customer
lists, files, correspondence, computer data bases, accounting information and
other records of every kind, whether written, computerized or maintained in
any
other medium, which are owned by that Person or in which that Person has any
interest.
“Business”
shall
mean a non-invasive identification and registration system for diamonds and
other gemstones conducted by Seller using the Purchased Assets, as currently
constituted and operated and as the same continues to be constituted and
operated until the Closing.
“Business
Day”
shall
mean a day other than a Saturday, Sunday or other day on which commercial banks
in Los Angeles, California are authorized or required by Applicable Law to
close.
2
“Buyer”
shall
mean Collectors Universe, Inc. a Delaware corporation.
“Buyer
Documents”
shall
mean this Agreement and all other agreements, instruments and certificates
to be
executed and delivered by Buyer in connection with this Agreement.
“Cash”
shall
mean money, currency or a credit balance in a deposit account or “money market”
account at a bank, brokerage firm or other financial institution.
“Cash
Equivalents”
shall
mean (i) marketable direct obligations issued or unconditionally guaranteed
by
the United States or Canadian Government or issued by any agency thereof and
backed by the full faith and credit of the United States or Canada, in each
case
maturing within one (1) year from the date of acquisition, (ii) marketable
direct obligations issued by any state of the United States of America, any
province of Canada or any political subdivision thereof, (iii) commercial
paper issued by any bank or any bank holding company owning any bank maturing
no
more than one (1) year from the date of its creation and, at the time of
acquisition, and (iv) certificates of deposit or bankers’ acceptances maturing
within one (1) year from the date of acquisition issued by any commercial bank
organized under the laws of the United States of America, Canada or any state
or
province thereof having combined capital and surplus of not less than
$250,000,000.
“Closing”
shall
mean the consummation of the transactions contemplated in this
Agreement.
“Closing
Date”
shall
mean the date upon which the Closing occurs.
“Closing
Payment”
shall
have the meaning specified in Section
4.4.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Contingent
Payment”
shall
have the meaning specified in Section 4.2
“Contracts”
of
a
Person shall mean all contracts, agreements, warranties, guaranties, indentures,
bonds, options, leases, subleases, mortgages, plans, collective bargaining
agreements, licenses, registration or verification agreements, maintenance
or
support agreements, commitments or binding arrangements of any nature
whatsoever, express or implied, written or unwritten, and all amendments
thereto, entered into or binding upon that Person or to which any property
of
that Person may be subject.
“▇▇▇▇▇▇▇
▇▇▇▇”
shall
mean ▇▇▇▇▇▇▇ ▇▇▇▇ Melody, Inc., a Delaware corporation.
“CVF”
shall
have the meaning specified in the Preamble.
“Deferred
Consent”
shall
have meaning specification in Section 2.4.
“Deferred
Item”
shall
have meaning specification in Section 2.4.
“Disbursement
Schedule”
shall
have the meaning specified in Section 4.5.
3
“Effective
Time”
shall
mean 12:01 a.m. Los Angeles time on the day after the Closing
Date.
“Environmental
Laws”
shall
have the meaning specified in Section 6.7(b).
“Environmental
Orders”
shall
have the meaning specified in Section
6.7(b).
“Escrow”
shall
mean the escrow to be opened with the Escrow Agent and established for the
sale
to Buyer of all of the Purchased Assets in accordance with the terms of this
Agreement.
“Escrow
Agreement”
shall
have the meaning given such term in Section 4.3.
“Escrow
Holdback”
shall
mean the $425,000 portion of the Purchase Price to be held in Escrow in
accordance with the terms of this Agreement.
“Excluded
Assets”
shall
mean:
(a) all
of
Seller’s Cash, Cash Equivalents and marketable securities;
(b) all
Seller Contracts which are not Assumed Contracts;
(c) all
of
Seller’s rights to refunds of all or any part of any Taxes paid by Seller prior
to, at or after the Effective Time;
(d) all
of
Seller’s tax and information returns; all correspondence between Seller and its
shareholders; all corporate documents relating to the formation, capitalization
and borrowings of Seller or pertaining to its relations with its shareholders;
and all other financial records of Seller which do not relate exclusively to
Seller’s ownership and operation of the Purchased Assets or the Business;
provided, however, that upon reasonable notice from Buyer to Seller or its
successors-in-interest, Seller or its successors-in-interest shall provide
Buyer
with access at no charge to any of the foregoing described material and with
copies of any of said documents; and
(e) all
of
Seller’s right to receive mail and other communications which do not relate to
the ownership of the Purchased Assets or the operation of the
Business.
“Excluded
Liabilities”
shall
mean all liabilities and obligations of Seller which are not Assumed
Liabilities, including, without limitation, all such liabilities and obligations
referred to in Section 3.2
and all
other liabilities and obligations of Seller which pertain exclusively to the
Excluded Assets, all as determined in a manner consistent with the manner in
which the same are determined on Seller Balance Sheet.
“GAAP”
shall
mean United States generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements
of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, as in effect on the date of this Agreement.
4
“GST”
means
all goods and services tax payable under the Excise
Tax Act (Canada)
or under any provincial legislation similar to such Act and any reference to
a
specific provision of such Act or any such provincial legislation shall refer
to
any successor provision thereto of like or similar effect.
“Hazardous
Substances”
shall
have the meaning specified in Section 6.7(b).
“Heptagon”
shall
have the meaning specified in the Preamble.
“Indemnified
Party”
shall
have the meaning specified in Section
13.4.
“Indemnifying
Party”
shall
have the meaning specified in Section
13.4.
“Indemnity
Cap Amount”
shall
mean (i) the sum of the Purchase Price and the Assumed Liabilities with
respect to Section
13.1(f),
the
representations and warranties set forth in Sections
6.1,
6.4,
6.9(b),
6.1(A)(b)
and
6.1(A)(e),
and any
other representations and warranties of Seller as to title to any of the
Purchased Assets or as to any Liens or Permitted Liens relating thereto, and
(ii) $1,500,000 with respect to all other representations and warranties of
Seller or the Shareholders.
“Indemnity
Percentage”
shall,
for each of CVF and Heptagon, be the percentage set forth opposite such
Shareholder’s name on Annex I.
“Intellectual
Property”
of
a
Person shall mean all intangible properties owned by that Person or in which
that Person has any interest (including the right to use by license or
otherwise), and includes, without limitation, (i) all registered and
unregistered trademarks, service marks, trade names, trade dress, logos,
corporate names, slogans and commercial symbols, all applications therefor,
and
all associated goodwill; (ii) all domain names and URL’s (including, in the case
of Seller, the domain name “▇▇▇▇▇▇▇▇.▇▇▇”), and all websites and the “look and
feel” of all such websites (including, without limitation, each such website’s
particular typefaces, color schemes, themes and the like); (iii) all
statutory, common law and registered copyrights, all applications therefor
and
all associated goodwill; (iv) all patents and patent applications, all
associated technical information, shop rights, know-how, trade secrets,
processes, operating, maintenance and other manuals, drawings and
specifications, process flow diagrams and related data, and all associated
goodwill; (v) all software developed for Seller pursuant to an agreement
between Seller and the software designer designating the software a “work made
for hire,” all software developed by an employee of Seller, and all
documentation thereof, (including all electronic data processing systems and
program specifications, functional specifications, source and object codes,
algorithms, architecture, input data, report layouts and format, record file
layouts, diagrams, narrative descriptions and flow charts) (collectively, the
“owned software,”) and all “off the shelf” software purchased in retail
transactions (collectively
5
the
“licensed software”) (the “owned software” and the “licensed software”
collectively referred to herein as the “Software”); (vi) all other mask
works, moral rights, inventions, discoveries, improvements, processes, formulae
(secret or otherwise), data, drawings, specifications, trade secrets,
confidential information, financial, marketing and business data, the database
of scans generated from the operation of the Business and all other databases,
pricing and cost models and information, business and marketing plans, operating
procedures, customer and supplier lists, knowledge of customer preferences
and
buying practices and all other ideas (including those in the possession of
third
parties, but which are the property of that Person); (vii) all drawings,
records, books or other tangible media embodying the foregoing; (viii) all
rights to obtain and rights to register patents, trademarks and copyrights;
and
(ix) all rights to ▇▇▇ or recover and retain damages and costs and attorneys
fees for present and past infringement of any of the foregoing.
“Inventories”
of
a
Person shall mean all inventories, including, without limitation, inventories
of
raw materials, work-in-progress, storehouse stocks, materials, supplies,
Gemprint certificates of registration, finished goods and consigned goods,
owned
by that Person or in which that Person has any interest (including the right
to
use), whether located on the premises of that Person, in transit to or from
such
premises, in storage facilities or otherwise.
“Knowledge”
shall
mean, with respect to Seller, the actual knowledge of each of its directors,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, and its
executive officers, ▇▇▇▇ ▇▇▇▇▇▇ (Chairman), ▇▇▇▇ ▇▇▇▇▇ (President), and ▇▇▇▇▇
▇▇▇▇▇ (Chief Financial Officer and Secretary), and the knowledge that each
such
Person would have acquired upon diligent inquiry and the knowledge that is
imputed to each such Person and/or Seller by operation of Applicable Law.
“Labor
Agreements”
of
a
Person shall mean, collectively, (i) all employment agreements, collective
bargaining agreements or other labor agreements to which that Person is a party
or by which any of its properties is bound; (ii) all pension, profit
sharing, deferred compensation, bonus, stock option, stock purchase, savings,
retainer, consulting, retirement, welfare or incentive plans or to which that
Person is a party or by which any of its properties is bound; and (iii) all
plans or agreements under which “fringe benefits” (including, but not limited
to, hospitalization plans or programs, medical insurance, vacation plans or
programs, sick plans or programs and related benefits) are afforded to any
employees of that Person.
“Licenses”
of
a
Person shall mean all licenses and permits issued to that Person or in which
that Person has any interest (including the right to use).
“Lien”
shall
mean any lien, pledge, mortgage, security interest, lease, charge, conditional
sales contract, option, restriction, reversionary interest, right of first
refusal, voting trust arrangement, preemptive right, claim under bailment or
storage contract, easement or any other adverse claim or right
whatsoever.
“Losses”
shall
mean all damages, awards, judgments, assessments, fines, sanctions, penalties,
charges, costs, expenses, payments, Taxes, diminutions in value and other
losses, however suffered or characterized, all interest thereon, all costs
and
expenses of investigating any claim, lawsuit or arbitration and any appeal
therefrom, all actual attorneys’ fees incurred in connection therewith, whether
or not such claim, lawsuit or arbitration is ultimately defeated and, subject
to
Section
13.5,
all
amounts paid incident to any compromise or settlement of any such claim, lawsuit
or arbitration.
“NWT”
shall
mean the jurisdiction referred to as the North West Territories.
6
“NWT
Receivable”
shall
mean the receivable identified in Schedule
6.5(d)
as the
“NWT Receivable” in an amount which is outstanding as of Closing.
“Order”
shall
mean any decree, order, judgment, writ, award, injunction, rule or consent
of or
by an Authority.
“Paid
Registration”
shall
mean a computerized identification scan of a diamond or other gemstone that
satisfies all of the following conditions: (a) the scan is made after the
Closing Date, (b) the scan is done by a Person using the product presently
known as the “Gemprint ISi Registration System,” or such other product as may be
marketed or developed by Buyer which utilizes all or part of the Intellectual
Property described in Schedule 6.9(b)
or any
derivative thereof, and (c)(i) the Person making the scan has paid a
registration or license fee to Buyer and/or any of its Affiliates with respect
to such scan or (ii) if a fee was not paid, the Person making the scan has
caused the scan to be stored in a registration system to be maintained by Buyer,
any of its Affiliates or any other Person from whom Buyer receives a direct
or
indirect economic benefit.
“Permitted
Liens”
shall
mean (i) Liens for Taxes or governmental assessments, charges or claims the
payment of which is not yet due or payable and that are not yet delinquent,
or
Liens for Taxes the validity of which are being contested in good faith by
appropriate proceedings; (ii) statutory Liens of landlords and Liens of
laboratories, carriers, warehousemen, mechanics, materialmen and other similar
Persons and other Liens imposed by Applicable Law incurred in the ordinary
course of business for sums not yet due or payable and that are not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security or
to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) Liens securing executory obligations under any lease that constitutes
an “operating lease” under GAAP.
“Person”
shall
mean any entity, corporation, company, association, joint venture, joint stock
company, partnership, trust, organization, individual (including personal
representatives, executors and heirs of a deceased individual), nation, state,
government (including agencies, departments, bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator, as well as any
syndicate or group that would be deemed to be a Person under
Section 13(d)(3) of the Securities Exchange Act of 1934.
“Prepaid
Items”
of
a
Person shall mean all prepaid items (such as insurance deposits, municipal
or
local tax payments or deposits, utility deposits and the like), deferred
charges, reserve accounts and other security and similar deposits owned by
that
Person or in which that Person has any interest.
“Proceeding”
shall
have the meaning specified in Section
6.6(b).
“Publication
Names and Marks”
shall
have the meaning specified in Section 12.2.
7
“Purchased
Assets”
shall
mean all of the Business, goodwill, assets, properties and rights (other than
the Excluded Assets) of every nature, kind and description, whether tangible
or
intangible, real, personal or mixed, wherever located and whether or not carried
or reflected on the Books and Records of Seller, which are owned by Seller
or in
which Seller has any interest (including the right to use), including, but
not
limited to the following:
(a) all
Intellectual Property of Seller;
(b) all
Tangible Personal Property of Seller;
(c) all
Inventories of Seller;
(d) all
of
Seller’s Real Property;
(e) all
Prepaid Items of Seller, including, without limitation, those Prepaid Items
described in Schedule
1.1(b);
(f) all
transferable Licenses of Seller;
(g) the
Assumed Contracts;
(h) all
Accounts Receivable of Seller;
(i) all
Books
and Records of Seller;
(j) all
rights of Seller under express or implied warranties from the suppliers of
Seller with respect to the Purchased Assets, to the extent
assignable;
(k) all
of
Seller’s claims, causes of action, chooses in action, rights of recovery and
rights of set-off of any kind other than those relating to the Excluded Assets
or Excluded Liabilities;
(l) all
of
Seller’s right to receive mail and other communications with respect to the
Business and the Purchased Assets, including, without limitation, all telephone
and facsimile numbers and electronic mail addresses of Seller;
(m) all
certifications and approvals from all certifying agencies issued to Seller
and
all of Seller’s rights to all data and records held by certifying
agencies;
(n) any
and
all of the Seller’s equity interests in ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Inc.;
(o) all
goodwill of the Business as a going concern; and
(p) all
other
properties, tangible and intangible, not otherwise referred to above which
are
owned by Seller or in which it has any interest.
“Purchase
Price”
shall
have the meaning specified in Section
4.1.
“Real
Property”
of
a
Person shall mean, collectively, all real properties owned by that Person or
in
which that Person has any interest or estate (including the right to use or
lease), together with all buildings, fixtures, trade fixtures, plant, and all
other equipment and improvements located thereon or attached thereto, all of
that Person’s rights arising out of ownership or use or lease thereof (including
oil and mineral rights), and all subleases, franchises, licenses, permits,
easements and rights-of-way which are appurtenant thereto.
8
“Required
Contractual Consents”
shall
mean those consents listed in Schedule
6.3(b).
“Required
Governmental Approvals”
shall
mean those filings, notices or approvals listed in Schedule
6.3(a).
“Seller”
shall
mean Gemprint Corporation, a corporation incorporated pursuant to the laws
of
Canada.
“Seller
Balance Sheet”
shall
mean the balance sheet contained in Seller Financial Statements.
“Seller
Balance Sheet Date”
shall
mean September 30, 2005.
“Seller
Contract”
shall
mean any Contract to which Seller is a party.
“Seller
Documents”
shall
mean this Agreement and all other agreements, instruments and certificates
to be
executed by Seller in connection with this Agreement.
“Seller
Financial Statements”
shall
mean the unaudited balance sheet and statement of income of Seller as of and
for
the nine-month period ended September 30, 2005, including all notes
thereto.
“Seller
Material Adverse Effect”
or
other similar phrase including the word “material” with respect to Seller shall
mean any condition, circumstance, change in or effect on the condition
(financial or otherwise), intellectual property rights or other assets,
liabilities, business, operations or prospects of Seller or the Business that,
individually or in the aggregate with any other condition, circumstance, change
in or effect thereon, results in or is reasonably likely to result in (i) an
adverse effect individually or in the aggregate, of at least $150,000, (ii)
a
material adverse effect upon the validity, binding effect or enforceability
of
this Agreement or any other Seller Document or (iii) a material adverse effect
upon the ability of Seller to perform its obligations under this Agreement
or
any other Seller Document.
“Seller
Material Contracts”
shall
mean, collectively, the Contracts of Seller which are required to be identified
anywhere in the Schedules
by the
terms and provisions of this Agreement.
“Shareholders”
shall
have the meaning specified in the Recitals.
“Shareholder
Documents”
shall
mean this Agreement and all other agreements, documents, instruments and
certificates to be executed and delivered by the Shareholders, or any of them,
in connection with this Agreement.
“Shepherd
Group”
shall
have the meaning specified in the Preamble.
“Software”
shall
have the meaning specified in the definition of Intellectual
Property.
9
“Subsidiary”
of
a
Person shall mean each corporation, limited liability company, partnership,
joint venture, trust or other entity in which that Person has, directly or
indirectly, (a) an equity interest representing 10% or more of any class of
the
capital stock thereof or other equity interest therein or the management and
policies of which that Person has the ability to direct, whether by contract,
voting power or otherwise, or
(b) at
least 50% of the securities or other ownership interests having by their terms
ordinary voting power to elect at least 50% of the board of directors or other
Persons performing similar functions is directly or indirectly owned or
controlled by such Person, by any one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries.
“Tangible
Personal Property”
of
a
Person shall mean all machinery, equipment, vehicles, furniture, trade fixtures,
computers, supplies, spare parts, tools, stores and other tangible personal
property owned by that Person, leased by that Person or in which that Person
has
any other interest (including the right to use), other than the Inventories
and
the Books and Records of that Person.
“Tax”
shall
mean any federal, state, provincial, local or foreign tax, charge, fee, levy,
deficiency or other assessment of whatever kind or nature (including without
limitation, any net income, gross income, gross receipts, sales, use, value
added, GST, ad valorem, employer health, transfer, franchise, profits, workers’
compensation, license, withholding, payroll, employment, unemployment, excise,
estimated, severance, stamp, occupation, real property (land transfer), personal
property, intangible property, occupancy, recording, minimum, capital, Canada
or
Quebec pension plan, environmental and windfall profits tax, or as a result
of
any tax sharing or similar agreement, together with any interest, penalty,
addition to tax or additional amount imposed by any Tax Authority. “Taxing”
and
Taxable”
shall
have the correlative meanings.
“Tax
Authority”
shall
mean any Authority having jurisdiction over the reporting and payment of any
Taxes.
“Tax
Benefit”
shall
mean the aggregate of (a) any increased deductions or losses allowable to the
Indemnified Party for federal income tax purposes in the same year or in a
subsequent taxable period or reduction in income or gains for federal income
tax
purposes in the same year or in a subsequent taxable period, multiplied by
the
aggregate tax-effected marginal tax rate for the Indemnified Party, and (b)
the
amount of any increase in any Tax credit allowable to the Indemnified Party
in
the same year or in a subsequent taxable period or reduction in any recapture
of
Tax credits allowable to the Indemnified Party in the same year or in a
subsequent taxable period, in each case determined under the Applicable Laws
in
effect on the date of payment and discounted to present value from the due
date
of the Tax Return (without extension) for the period in which such items are
allowable to the date of payment of the indemnification amount at the prime
rate
of interest in effect on the date of payment as quoted in The Wall Street
Journal.
“Tax
Liability”
shall
have the meaning specified at Section
6.6(b).
“Tax
Return”
shall
mean any report, election, declaration, claim for refund, estimate, information
statement or return (including any schedules and attachments thereto) and any
amendments relating to or required to be filed in connection with any Taxes
pursuant to the statutes, rules or regulations of any Tax
Authority.
10
“Third
Party Claim”
shall
have the meaning specified in Section
13.5(a).
“Tolkowsky”
shall
mean Gabi Tolkowsky & Sons B.V.B.A.
“Transfer
Taxes”
shall
mean all Taxes (other than Taxes measured on or by net income) incurred or
imposed upon Buyer, Seller or any Subsidiary thereof by reason of the transfer
of the Purchased Assets to Buyer pursuant to this Agreement, including, without
limitation, sales and use taxes, real property transfer taxes, GST, retail
sales
tax, excise taxes, and stamp, documentary, filing, recording, permit, license,
registration or authorization duties or fees (including penalties and interest
in respect of any of the foregoing).
1.2 General.
References in this Agreement to “Articles,”
“Sections,”
“Exhibits”
and
“Schedules,”
shall
be to the Articles, Sections, Exhibits and Schedules of this Agreement, unless
otherwise specifically provided; where the context or construction requires,
all
words applied in the plural shall be deemed to have been used in the singular,
and vice versa; the masculine shall include the feminine and neuter, and vice
versa; and the present tense shall include the past and future tense, and vice
versa; the words “herein”, “hereof” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not
to
any particular provision of this Agreement; and except as otherwise specified
in
this Agreement, all references in this Agreement (a) to any Person shall be
deemed to include such Person’s permitted heirs, personal representatives,
successors and assigns, (b) to any agreement, any document or any other
written instrument shall be a reference to such agreement, document or
instrument together with all exhibits, schedules, attachments and appendices
thereto, and in each case as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof prior to the
Effective Time and (c) to any law, statute or regulation shall be
deemed
references to such law, statute or regulation as the same may be supplemented,
amended, consolidated, superseded or modified from time to time prior to the
Effective Time. All accounting terms used herein have the meanings ascribed
to
them under GAAP. References in this Agreement to “Dollars”
or
“$”
shall
be to United States dollars.
ARTICLE
II
SALE
AND PURCHASE OF ASSETS
2.1 Assets
to be Transferred.
Subject
to the terms and conditions set forth in this Agreement and in reliance upon
the
representations and warranties of Seller, the Shareholders and Buyer herein
set
forth, at the Closing, Seller shall sell, transfer, convey, assign and deliver
to Buyer, by appropriate deeds, bills of sale, assignments and other instruments
satisfactory to Buyer and its counsel, and Buyer shall purchase from Seller,
all
of Seller’s right, title and interest, as of the Effective Time, in and to the
Purchased Assets.
2.2 Excluded
Assets.
The
Excluded Assets shall be excluded from the Purchased Assets purchased
hereunder.
2.3 Title
to Purchased Assets.
The
Purchased Assets shall be conveyed free and clear of all Liens, excepting only
the Assumed Liabilities and the Permitted Liens.
11
2.4 Consents
to Assignment.
Anything
in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign or transfer any contract, lease,
authorization, license or permit, or any claim, right or benefit arising
thereunder or resulting therefrom, if an attempted assignment or transfer
thereof, without a Required Contractual Consent or Required Governmental
Approval, would constitute a breach thereof or in any way adversely affect
the
rights of Buyer thereunder. If a Required Contractual Consent or Required
Governmental Approval is not obtained (a “Deferred
Consent”),
or if
an attempted assignment or transfer thereof would be ineffective or would affect
the rights thereunder so that Buyer would not receive all such rights, then,
in
each such case at Closing, (a) the Contract or License to which such Deferred
Consent relates (a “Deferred
Item”)
shall
be withheld from sale pursuant to this Agreement, (b) from and after the
Closing, Seller and Buyer will cooperate, in all reasonable respects, to obtain
such Deferred Consent as soon as practicable after the Closing, (c) until such
Deferred Consent is obtained, Seller and Buyer will cooperate, in all reasonable
respects, to provide to Buyer the benefits under the Deferred Item to which
such
Deferred Consent relates (with Buyer entitled to all the gains and responsible
for all the losses, taxes liabilities and/or obligations thereunder), and (d)
upon obtaining such Deferred Consent after the Closing, Seller shall execute
such transfer instrument for the Deferred Item in form satisfactory to Buyer
and
its counsel. In particular, in the event that any such Deferred Consent is
not
obtained prior to the Closing, then Buyer and Seller shall enter into such
arrangements (including subleasing or subcontracting if permitted) to provide
to
the parties the economic and operational equivalent of obtaining such Deferred
Consent and assigning or transferring such Contract or License, including
enforcement for the benefit of Buyer of all claims or rights arising thereunder,
and the performance by Buyer of the obligations thereunder on a prompt and
punctual basis. Notwithstanding
the foregoing, if a Deferred Consent is not obtained within twelve (12) months
after the Closing, Buyer may elect not to accept an assignment of such Deferred
Item or to assume the obligations thereunder in which event such Deferred Item
shall thereupon be an Excluded Asset and all obligations thereunder an Excluded
Liability.
ARTICLE
III
ASSUMPTION
OF LIABILITIES
3.1 Assumed
Liabilities.
As
further consideration for the purchase and sale of the Purchased Assets, Buyer
shall, from and after the Effective Time, assume, perform, discharge and pay
when due those obligations and liabilities (the “Assumed
Liabilities”)
of
Seller relating to the Business which are specifically set forth in this
Section
3.1,
but
only to the extent specifically set forth in this Section
3.1
and
subject to any contrary provisions which may be contained in Section 3.2:
(a) all
unpaid or unperformed obligations and liabilities of Seller under the Assumed
Contracts (including, without limitation, under that certain Lease Agreement
dated as of March 10, 2005 by and between Fana Burnhamthorpe Corp. and Seller,
as amended) arising after the Effective Time, but not arising out of any breach
or default thereof prior to the Effective Time; provided, however, that, with
respect to a Deferred Item, no assumption shall occur until such time as the
Deferred Consent relating thereto has been obtained and if such Deferred Consent
is obtained, the assumption shall only be with respect to the unpaid or
unperformed obligations and liabilities of Seller under the Deferred Item
arising after the date the Deferred Consent is obtained. No person who is not
a
party to this Agreement shall have any equitable or other rights against Seller
or Buyer by virtue of this Agreement;
12
(b) the
trade
payables and accrued expenses of Seller set forth on Schedule
6.5(e)
which
remain outstanding as of the Closing and are reflected on the Disbursement
Schedule (other than the obligation owed to NWT in excess of the amount of
the
NWT Receivable), and such payables or expenses as may hereafter be incurred
in
the ordinary course of business conducted in accordance with this Agreement
provided, that such additional payables or expenses are reflected on the
Disbursement Schedule and the aggregate amount of all such trade payables and
accrued expenses, excluding any payables owing to NWT, does not exceed
$150,000;
(c) to
the
extent immediately following the Closing, Buyer employs ▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇, each of whom is presently an employee of Seller, and Buyer thereafter
terminates either such employee, (i) Buyer shall be responsible for fifty
percent (50%) of any severance obligations to such employee based on such
employees’ salary and benefits immediately prior to the Closing if the
termination occurs within six (6) months of Closing, and (ii) one hundred
percent (100%) of any severance obligations to such employee if the termination
occurs six (6) months after the Closing;
(d) all
unpaid or unperformed obligations and liabilities of Seller under the Licenses
assigned to Buyer hereunder arising after the Effective Time, but not arising
out of any breach or default thereof prior to the Effective Time;
(e) the
performance of all warranty work, arising after the Effective Time but relating
to products of Seller manufactured or sold by Seller or services provided by
Seller prior to the Effective Time;
(f) the
amount payable to Scientific Instrumentation, Ltd. referred to in Section
8.18,
but
which shall not exceed $41,050 CDN less the trade payable of Seller owed to
such
party; and
(g) to
the
extent not covered by insurance in effect for the benefit of Seller as of the
Effective Time, all claims for real or personal injury or property damage which
is caused by any defect in any product manufactured by Seller but sold by Buyer
after the Effective Time.
3.2 Excluded
Liabilities.
Except
for the Assumed Liabilities, Buyer shall not assume or be liable for any
liabilities or obligations of Seller, direct or indirect, fixed, contingent
or
otherwise, known or unknown, which exist at the Effective Time or which arise
thereafter as a result of any act, omission or circumstance taking place prior
to the Effective Time, and whether or not the same are reflected on Seller
Balance Sheet. Furthermore, notwithstanding anything to the contrary stated
in
Section
3.1,
Buyer
shall not assume or be liable for any of the following liabilities or
obligations:
13
(a) any
of
Seller’s liabilities or obligations under any Seller Contract which is not an
Assumed Contract, or under any Assumed Contract to the extent such liabilities
or obligations arise prior to the Effective Time;
(b) any
indebtedness
and any
trade or other current liability of Seller which is not within the liabilities
described in Section 3.1(b);
(c) any
and
all liabilities to NWT in excess of the amount of the NWT Receivable;
and
(d) any
Tax
imposed on Seller;
(e) except
as
expressly set forth in Section 3.1(c),
any of
Seller’s liabilities or obligations relating to the employment of its employees
or relating to any Seller benefit plan, including but not limited to unpaid
or
unperformed wages, salaries, payroll taxes, sick pay, vacation pay, fringe
benefits and other employee benefits
(f) except
as
expressly set forth in Section 3.1(c),
any of
Seller’s liabilities or obligations for any severance, “parachute” or other
similar payment to any officer, director or employee of Seller arising by virtue
of the transactions contemplated herein;
(g) any
of
Seller’s liabilities or obligations under any Applicable Law or
Order;
(h) any
of
Seller’s liabilities or obligations arising from the litigations or other
matters described in Schedule
6.8;
(i) any
of
Seller’s liabilities or obligations for Taxes, expenses or fees incident to or
arising out of the negotiation, preparation, approval or authorization of this
Agreement or the consummation (or preparation of the consummation) of the
transactions contemplated hereby, including, without limitation, all attorney’s
and accountant’s fees;
(j) any
of
Seller’s liabilities or obligations arising outside of the ordinary course of
the Business or otherwise arising by reason of any breach of contract, tort
or
infringement of the rights of another;
(k) any
of
Seller’s liabilities or obligations which would not have existed had each of
Seller’s representations and warranties been true as of the date hereof and as
of the Effective Time and had Seller complied with each of its covenants
contained in this Agreement;
(l) any
of
Seller’s liabilities or obligations of any nature to any past or present
shareholder of Seller or holder of any indebtedness of Seller; and
(m) Without
limiting Section 3.2(a)
or
(g),
any
obligation or liability of Seller to the National Research Council of Canada
or
any other Person with respect to any Industrial Research Assistance Program,
any
Contract entered into in connection therewith or any condition or Applicable
Law
relating thereto.
14
3.3 Contested
Obligations.
Nothing
contained herein shall require Buyer to pay or discharge any debts or
obligations expressly assumed hereby so long as Buyer shall in good faith
contest or cause to be contested the amount or validity thereof.
ARTICLE
IV
PURCHASE
PRICE, ESCROW, PAYMENT AND RELATED MATTERS
4.1 Purchase
Price.
The
total purchase price (the “Purchase
Price”)
for
the Purchased Assets shall consist of a base purchase price of $7,500,000
and, if applicable, contingent payments as specified in Section
4.2.
4.2 Contingent
Payments.
For
a
period of five (5) years from the Closing Date, Buyer shall pay to Seller a
contingent payment of $1.00 for each Paid Registration in excess of 100,000
Paid
Registrations during each twelve (12) month period (or such lesser period
described below) ending June 30th
(the
“Contingent
Payments”);
provided, however, that (a) for the period commencing on the Closing Date
and ending on June 30, 2006, the number of Paid Registrations which must be
exceeded before a Contingent Payment is payable shall be prorated based on
the
number of days in such period, (b) for the period commencing on July 1,
2010 and ending on the fifth
anniversary of the Closing Date, the number of Paid Registrations which must
be
exceeded before a Contingent Payment is payable shall be prorated based on
the
number of days in such period, and (c) no Contingent Payments shall be payable
with respect to Paid Registrations arising after the fifth anniversary of the
Closing Date (other than for Paid Registrations relating to scans made prior
to
such date and for which payment is received by Buyer with ninety (90) days
of
such date). Contingent Payments, if any, for any period shall be paid by Buyer
within ninety (90) days of the end of such period or if the threshold for making
a Contingent Payment has been satisfied during such twelve (12) month period,
within forty-five (45) days after the end of each quarter during such period,
commencing with the quarter in which such threshold is satisfied. Buyer shall
furnish to Seller, within ninety (90) days of the end of each twelve (12) month
period (or such lesser period) as described above, or such earlier date upon
which a Contingent Payment is made, a written Paid Registration and Contingent
Payments report setting forth information relating to the determination of
the
amount of the Contingent Payments for the period. The report shall be certified
by the Director of Finance or Chief Financial Officer of the Buyer. During
the
five (5) year period in which Contingent Payments apply and for a period of
two
(2) years thereafter, Buyer shall keep accurate and complete records in
sufficient detail to enable the Contingent Payments payable under this Agreement
to be determined.
During
such five (5) years and for a period of two (2) years thereafter, Seller may,
upon reasonable notice and subject to the execution of a confidentiality
agreement in form satisfactory to Buyer, appoint, at its expense, a member
or
other employee of a national accounting firm to audit Buyer’s books and records,
not more than one time during any twelve (12) month period, relative to Paid
Registrations and Contingent Payments reasonably necessary to determine the
Contingent Payments payable under this Agreement. If as a result of such audit.
Seller disputes the amount of Contingent Payments made by Buyer for the
applicable period, Seller shall, within thirty (30) days of the completion
of
such audit, notify Buyer in writing of each disputed item, specifying the amount
thereof in dispute and setting forth, in reasonable detail, the basis for such
dispute, and providing Buyer with a copy of the complete audit report prepared
by such accounting firm. In the event of such a dispute, Buyer and Seller shall
attempt to resolve in good faith any disputed items and reach a written
agreement with respect thereto. If Buyer and Seller are unable to reach a
resolution within thirty (30) days after receipt by Buyer of Seller’s written
notice of dispute, Buyer and Seller shall submit the items remaining in dispute
for final binding resolution to the New York office of an independent national
accounting firm as may be mutually acceptable to Buyer and Seller (the
“Arbitrating
Accountants”),
the
cost and expenses of which shall be shared equally by Buyer and Seller (or
the
Shareholders based on their respective Indemnity Percentages). If the disputed
items are referred to the Arbitrating Accountants, the Contingent Payments
under
dispute shall be determined by the Arbitrating Accountants. Such determination
shall be (i) in writing, (ii) furnished to Buyer and Seller as soon as
practicable, but in no event later than sixty (60) days from the date of
submission to the Arbitrating Accountants, (iii)made in accordance with this
Agreement, and (iv) nonappealable by the Shareholders, Seller and Buyer or
any of their respective Affiliates and successors and not to be subject to
collateral attack for any reason other than manifest error or fraud. In the
event that the parties agree, or the Arbitrating Accountants, determine, that
a
shortfall in the payment of Contingent Payments for any twelve (12) month period
(or such lesser period described above)
15
of
the
Contingent Payment due for such period occurred, Buyer shall pay such shortfall
within fourteen (14) days of demand to Seller. In addition, should the shortfall
be greater than five percent (5%) of the Contingent Payment Buyer shall pay
Seller the reasonable costs of the audit undertaken with respect to the
determination of such shortfall.
4.3 Escrow.
Immediately upon the execution hereof by the parties hereto, the parties shall
deposit an original counterpart of this Agreement with the Escrow Agent. The
parties hereto agree that this Agreement, together with the Escrow Agreement
attached hereto as Exhibit
A,
shall
constitute the escrow instructions for the transfer of the Purchased Assets
and
the release of the Purchase Price and the Escrow Holdback (the “Escrow
Agreement”).
In
the event of a conflict between the Escrow Agreement and the terms of this
Agreement (exclusive of Exhibit
A)
then
the terms of this Agreement (exclusive of Exhibit
A)
shall
control.
4.4 Payment
of the Purchase Price. At
the
Closing, Buyer shall pay the sum of $7,500,000 (the “Closing
Payment”)
to the
Escrow Agent by means of a wire transfer of immediately available funds into
a
bank account designated in writing by the Escrow Agent on or before the 2nd
business day prior to the Closing.
4.5 Disbursement
Schedule.
At
least three (3) Business Days prior to Closing, Seller shall deliver to Buyer
for its review and approval a schedule certified by the President and Chief
Financial Officer of Seller (the “Disbursement
Schedule”)
setting forth all of Seller’s outstanding payment obligations as of the date of
the Disbursement Schedule (including without limitation all amounts payable,
including the redemption amount and accrued and unpaid dividends plus interest,
if any, required to be paid to holders of Seller’s “Class B Stock” under the
Seller’s articles of incorporation and amendment for the redemption of such
stock and/or with respect to other claims of such holders) together with an
estimate of all additional payment obligations that may accrue through the
Closing, in each case with the name and address of the payee to whom such
obligation is owed. Seller shall make such changes to the Disbursement Schedule
as Buyer may reasonably require. Without limiting the foregoing, if the
aggregate amount of such obligations (but excluding those trade payables of
Seller set forth on Schedule
6.5(e)
which
are deemed Assumed Liabilities) exceeds $7,000,000, CVF and Heptagon shall,
on a
pro rata basis, convert into equity of Seller such portion of Seller’s
obligations to each of them as may be necessary until the aggregate obligations
set forth on the Disbursement Schedule approved by Buyer do not exceed
$7,000,000.
16
4.6 Transfer
Taxes.
All
Transfer Taxes arising out of the sale of the Purchased Assets hereunder, as
well as all charges for or in connection with the recording of any document
or
instrument herein provided, shall be paid by Buyer. Buyer shall also duly and
timely file all Tax Returns in connection with such Transfer Taxes.
4.7 Allocation
of Purchase Price.
It is
understood that the total consideration to be received by Seller for the
transfer of the Purchased Assets to Buyer shall be the Purchase Price, plus
Buyer’s assumption of the Assumed Liabilities, subject to increase by the
Contingent Payments, if any. As
soon
as is reasonably practicable, but in no extent later than 30 calendar days
after
the Closing, Seller and Buyer shall agree upon the allocation of such total
consideration
among the Purchased Assets and Assumed Liabilities with the specific allocation
amounts subject to the results of a fair market valuation obtained by Buyer;
provided, however, that such allocation shall reflect no more than $1,000,000
of
tangible assets. Buyer and Seller agree to file the requisite tax forms with
their respective federal income tax returns (or as otherwise required by
Applicable Law) reflecting the allocation of the Purchase Price. Each party
hereto further agrees that it shall not file any return (or treat any item
or
items thereon) nor make any other statement or submission to the Internal
Revenue Service, Canada Revenue Agency or any comparable state or provincial
agency, or any court or other judicial or administrative body, which return,
item, statement or submission is inconsistent in whole or in part with the
agreed upon allocation.
4.8 [Intentionally
omitted.]
4.9 [Intentionally
omitted.]
4.10 GST
Election.
Buyer
and Seller shall elect jointly pursuant to the provision of subsection 167.(1.1)
of the Excise
Tax Act (Canada) by
completing and filing all prescribed forms and related documents in such manner
and at such time as is prescribed, that for the purposes of such Act, no tax
is
payable under such Act in respect of the Purchased Assets and the Buyer shall
be
deemed to have acquired the Purchased Assets for use exclusively in commercial
activities of the Buyer.
4.11 Accounts
Receivable Election.
Buyer
and Seller shall, at the Closing, jointly execute elections under subsection
22(1) of the Income
Tax Act (Canada)
in the form prescribed for such purpose in respect of the accounts receivable
sold by Seller to Buyer pursuant to the Agreement. Such election shall designate
the portions of the Purchase Price allocated in accordance with Schedule
4.7
to such
accounts receivable as the consideration paid by Buyer to Seller for the
accounts receivable under this Agreement.
4.12 Deferred
Revenue Election.
Buyer
and Seller shall, at the Closing, execute a joint election to have the provision
of subsection 20(24) of the Income
Tax Act (Canada)
apply and shall agree to make such election on a timely basis in accordance
with
the provisions of subsection 20(25) of such Act. Seller and Buyer agree that
Seller shall transfer a portion of the Purchased Assets to Buyer as
consideration for the assumption by Buyer of Seller’s obligations pursuant to
subsection 12(1)(a) of such Act.
17
ARTICLE
V
CLOSING
5.1 Time
and Place.
Subject
to the provisions of Section
14.1
as to
termination without default, the Closing shall take place at the offices of
Loeb
& Loeb LLP, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, at 10:00 a.m. local time on the date which is two (2) Business Days
after
all conditions precedent to each party’s obligations hereunder have been
satisfied or waived or at such other time and place as Buyer and Seller mutually
agree in writing, provided, however, that (i) if the Buyer has not obtained
its
registration
under subdivision (d) of Division I of Part IX of the Excise
Tax Act
(Canada)
with respect to GST by such date, Buyer may postpone the Closing for up to
45
days until a date which is two (2) Business Days after such registration is
obtained, and (ii) without the prior written consent of Buyer, the Closing
shall
not occur after December 31, 2005. The parties shall use their best efforts
to provide originally signed counterpart documents (and where appropriate
facsimile or PDF copies of originally signed counterpart documents) to Loeb
& Loeb, LLP and ▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP in advance of
the Closing to be held in trust pending authorization by such legal counsel
to
release and deliver such documents, so that the Closing may occur without the
need for the parties to be present at such offices on the Closing Date. The
Closing shall be effective (and the possession and control of the Purchased
Assets and the responsibility for the Assumed Liabilities shall vest in Buyer)
as of the Effective Time, and all transactions and deliveries at the Closing
shall be deemed to have occurred simultaneously.
5.2 Transactions
Upon the Execution of this Agreement.
Upon
the execution and delivery of this Agreement, each of the Shareholders shall
execute and deliver to Buyer the Lock-Up Agreement in the form of Exhibit
C.
5.3 Transactions
at the Closing.
At the
Closing, the following shall occur:
(a) Buyer
shall pay the Closing Payment to the Escrow Agent;
(b) The
Escrow Agent shall disburse the Closing Payment to or for the benefit of Seller
in accordance with the Disbursement Schedule; provided, however that (a) any
amounts payable to Seller’s employees shall be remitted to Seller for
disbursement, (b) any expenses or other amounts payable by Seller hereunder
shall be retained by the Escrow Agent for appropriate payment disbursement
in
accordance with this Agreement or the Escrow Agreement, (c) the Escrow
Holdback shall be retained by the Escrow Agent to be held and disbursed in
accordance with the Escrow Agreement, and (d) the balance, if any, shall be
paid
by the Escrow Agent to Seller in accordance with written instructions provided
by Seller.
(c) Buyer
shall deliver to Seller the certificates referred to in Sections
11.1
and
11.2;
(d) Buyer
shall deliver to Seller executed copies of the Tax elections described in
ARTICLE
IV;
18
(e) Buyer
shall provide to Seller a certificate of good standing with respect to its
jurisdiction of formation;
(f) Seller
shall deliver to Buyer an assignment of Contracts, Licenses, assignments in
registrable form of all trademarks, service marks, patents, copyrights, domain
names, general intellectual property and registrations or applications for
the
same included within the Purchased Assets and a ▇▇▇▇ of sale and assignment
covering the balance of the Purchased Assets, in form satisfactory to Buyer
and
its counsel, together with such other instruments of sale, transfer, conveyance,
assignment and confirmation, and Seller shall take such
further actions, as Buyer may reasonably deem necessary or desirable in order
to
transfer, convey and assign to Buyer, and to confirm Buyer’s title to, all of
the Purchased Assets, to put Buyer in actual possession and operating control
thereof and to assist Buyer in exercising all rights with respect
thereto;
(g) Seller
shall deliver to Buyer a copy of all of the Books and Records of
Seller;
(h) Seller
and the Shareholders shall deliver to Buyer the certificates referred to in
Sections
10.1,
10.2
and
10.3;
(i) Seller
shall deliver to Buyer the opinion of counsel referred to in Section 10.4;
(j) Seller
shall provide to Buyer a certificate of compliance with respect to its
jurisdiction of formation and certificate of status for each other jurisdiction
in which Seller does business;
(k) Seller
shall deliver to Buyer certified copies of personal property security reports
for each jurisdiction in which Seller does business, obtained by Seller at
its
sole expense, with currency dates of not earlier than five (5) days prior to
the
Closing Date, showing that as of the currency date of said report, there are
no
financing statements on file in the personal property registration systems
of
such jurisdictions with respect to any of the Purchased Assets except for
Permitted Liens or Liens for which pay-off letters in form satisfactory to
Buyer
have been delivered in the manner described in Section 10.6;
(l) Seller
shall deliver to Buyer a certificate issued by the Ministry of Finance of
Ontario pursuant to section 6 of the Retail
sales Tax Act (Ontario),
which indicates that the Seller has paid all taxes collectible or payable under
the said Act up to the Closing Date or has entered into an arrangement
satisfactory to the said Minster for the payment of such taxes;
(m) Seller
shall deliver to Buyer all other properties, documents and certificates required
to be delivered to Buyer hereunder, to the extent not theretofore delivered;
and
(n) Seller
shall deliver to Buyer executed copies of the Tax elections described in
ARTICLE
IV;
19
(o) Seller,
CVF, Heptagon and Shepherd Group shall execute and deliver the Non-Competition
Agreement referred to in Section
10.7;
(p) Seller
shall deliver a certified copy of its articles of incorporation, by-laws and
the
resolutions of its board of directors and minutes of the meeting of its
shareholders approving the transactions contemplated herein, together with
duly
executed incumbency certificates; and
(q) Escrow
Agent shall either cause lien releases to be filed with respect to each Lien
that is to be paid out of the Closing Payment or shall appoint ▇▇▇▇▇▇▇ ▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇ LLP, Buyer’s Canadian counsel, as agent to make such filings on
its behalf.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES
OF
SELLER,
CVF
AND HEPTAGON
Seller
and each of CVF and Heptagon hereby jointly and severally, subject to
Section 13.8,
represents and warrants to Buyer that:
6.1 Organization;
Authority; Due Authorization.
(a) Organization
and Good Standing.
Seller
is a corporation duly organized, validly existing and in good standing under
the
Applicable Laws of its jurisdiction of incorporation; has all requisite power
to
own, lease and operate its assets, properties and business and to carry on
its
business as conducted during the twelve-month period prior to the date hereof,
as now conducted and as proposed to be conducted; and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
every jurisdiction in which the nature of its business or the location of its
properties requires such qualification or licensing, except for such
jurisdictions where the failure to so qualify or be licensed would not have
any
adverse effect on the enforceability of any of Seller Material Contracts or
Seller’s ability to bring or defend lawsuits, or a Seller Material Adverse
Effect. Schedule
6.1
sets
forth all jurisdictions in which Seller is qualified or licensed to do business
as a foreign corporation and all fictitious business names used by Seller within
the last five (5) years. Seller changed its corporate name from Omphalos
Recovery Systems, Inc. to Gemprint Corporation in accordance with Applicable
Law. CVF, Heptagon and ▇▇▇▇▇▇▇ Group are the record and beneficial owners of
64.9%, 4.45% and 11.6%, respectively, of the issued and outstanding stock of
Seller.
(b) Authority
to Execute and Perform Agreements.
Except
for obtaining the approval of Seller’s shareholders at a duly noticed meeting
(which meeting and approval shall occur prior to Closing), Seller has all
requisite power, authority and approvals required to enter into, execute and
deliver this Agreement and all of the other Seller Documents and (assuming
the
Required Contractual Consents, the Required Governmental Approvals and such
approval of Seller’s shareholders are obtained) to perform fully its obligations
hereunder and thereunder.
(c) Due
Authorization; Enforceability.
Except
for obtaining the approval of Seller’s shareholders at a duly noticed meeting
(which meeting and approval shall occur prior to Closing), Seller has taken
all
corporate actions necessary to authorize it to enter into and perform fully
its
obligations under this Agreement and all of the other Seller Documents to be
executed by it and to consummate the transactions contemplated herein and
therein. Seller has delivered to Buyer a true and correct certified copy of
the
resolutions adopted by its board of directors with respect to the foregoing.
This Agreement has been duly and validly executed by Seller and (assuming due
authorization, execution and delivery by Buyer and obtaining the approval of
Seller’s
shareholders as described herein) constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Applicable Laws affecting creditors’ rights generally or
by general equitable principles affecting the enforcement of
contracts.
20
(d) Approval
of Shareholders.
Approval to the transactions contemplated by this Agreement by Seller’s
shareholders under Applicable Law and Seller’s articles of incorporation and
by-laws shall occur upon obtaining the approval of holders of at least 2/3
of
the issued
and outstanding stock of Seller at a duly noticed meeting. All classes of stock
shall be aggregated for purposes of determining whether such approval is
obtained and the approval of shareholders of each class of Seller’s stock is not
required to approve such transactions.
(e) Class
B Stock.
As of
the date hereof, CIC Industrial Interests Inc. is the registered owner of all
of
the issued and outstanding "Class B Stock" of Seller, such shares having been
transferred to CIC Industrial Interests Inc. by Saskatoon Community Bond
Corporation pursuant to a Share Sale Agreement dated December 4, 1998. On or
about October 31, 1997, Saskatoon Community Bond Corporation delivered a
redemption notice to Seller with respect to 860,927 of the shares of “Class B
Stock”, requiring Seller to redeem such issued and outstanding "Class B Stock"
and triggering the provisions for redeeming such shares under Seller's articles
of incorporation and amendment. While Seller is unable to locate a second
redemption notice from Saskatoon Community Bond Corporation triggering the
redemption provisions for the remainder of the issued and outstanding shares
of
“Class B Stock”, the Share Sale Agreement dated December 4, 1998 between
Saskatoon Community Bond Corporation and CIC Industrial Interests Inc. confirms
that Saskatoon Community Bond Corporation triggered the redemption provisions
under Seller’s articles of incorporation for all of its issued and outstanding
shares of “Class B Stock” prior to the date of such agreement. As of the date
hereof, the "Class B Stock" has not been redeemed by Seller. Further, Saskatoon
Community Bond Corporation has not provided Seller with notice revoking its
redemption notices for any “Class B Stock” as of the date hereof.
6.2 No
Violation.
Except
as disclosed in Schedule
6.2,
and
assuming that the Required Governmental Approvals and the Required Contractual
Consents are obtained and that the approval of the shareholders of the Seller
are obtained at a duly noticed meeting, neither the execution or delivery by
Seller of this Agreement or any of Seller Documents nor the consummation of
the
transactions contemplated herein or therein will: (a) violate any provision
of the Articles of Incorporation, bylaws or other charter documents of such
party; (b) violate, conflict with or constitute a default under, permit the
termination or acceleration of, or cause the loss of any rights or options
under, any Seller Material Contract; (c) require any authorization, consent
or approval of, exemption or other action by, or notice to, any party to any
Seller Material Contract; (d) result in the creation or imposition of any
Lien upon any of the Purchased Assets which is not a Permitted Lien or
(e) violate or require any consent or notice under any Applicable Law or
Order to which Seller or any of its properties is subject (including, without
limitation, the Bulk Sales Act (Ontario).
21
6.3 Licenses;
Regulatory and Other Approvals. Schedule
6.3(a)
sets
forth a complete and accurate description of all Licenses of Seller, denoting
which of same are transferable to Buyer pursuant to Applicable Law and which
are
not transferable to Buyer. All of such Licenses are in effect and in good
standing. Schedules
6.3 (b)
sets
forth a complete and accurate description of each consent, approval,
authorization, notice, filing, exemption or other requirement which must,
pursuant to any Applicable Law or Order or the terms of any Seller Material
Contract, be obtained from any Authority or Person or which must otherwise
be
satisfied by Seller or any Shareholder in order that (a) the execution or
delivery by Seller or any Shareholder of this Agreement or any of the other
Seller Documents, and (b) the consummation of the transactions contemplated
herein or therein, will not (i) violate in any material respect any Applicable
Law, any applicable Order to which such party is subject or any License of
Seller; (ii) constitute a material default under, or give rise to a right of
termination or acceleration of, or to a loss of any material benefits by Buyer
under, any assigned Seller Material Contract; or (iii) result in the creation
or
imposition of any Lien upon any of the Purchased Assets which is not a Permitted
Lien.
6.4 Title
to Purchased Assets.
Without
limiting the specific representations and warranties as to specific classes
of
Purchased Assets contained elsewhere herein, Seller is the absolute beneficial
owner of the Purchased Assets and has good and marketable title to each of
the
Purchased Assets owned by it and the valid and enforceable right to receive
and/or use each of the Purchased Assets in which Seller has any other interest,
free and clear of all Liens, other than (a) Permitted Liens or (b) the
Liens listed in Schedule 6.4
which
shall be paid in full at Closing out of the Closing Payment. Without limiting
the generality of the foregoing, there has been no assignment, subletting or
grants of any Lien by Seller in respect of any of the Purchased Assets except
as
expressly disclosed herein. The delivery to Buyer of the instruments of transfer
of beneficial and legal ownership contemplated by this Agreement will at the
Effective Time vest good and marketable title to, or the valid and enforceable
right to receive and/or use, each such Purchased Asset in Buyer, free and clear
of all Liens, other than Permitted Liens.
No
person other than Buyer has any agreement or option or right to purchase the
Purchased Assets from Seller.
6.5 Financial
Condition.
(a) Financial
Statements.
Schedule
6.5(a)
sets
forth (i) the balance sheets of Seller as of December 31, 2002, 2003
and 2004 and the related statements of income and retained earnings and changes
of financial position for the fiscal years then ended, which were examined
by
independent certified public accountants as part of the annual audit of the
consolidated financial statements of CVF, and issued an unqualified opinion
(except for a going concern issue) with respect thereto, and (ii) the
unaudited Seller internally prepared balance sheets and statements of income
of
Seller for the nine-month period ended September 30, 2005. Said financial
statements (i) were prepared in accordance with the Books and Records of
Seller; (ii) were prepared in accordance with GAAP except that: (A) a
cumulative non-cash adjustment to reflect a valuation for the convertibility
features of Seller’s debt obligations to CVF has not been made, (B) an
evaluation of the foreign currency translation effects has not been performed
and (C) the footnotes to the balance sheets and the related statements of income
do not contain all
of
the information required by GAAP; (iii) fairly present Seller’s financial
condition and the results of its operations as of the relevant dates thereof
and
for the periods covered thereby; (iv) contain and reflect all necessary
adjustments and accruals for a fair presentation of Seller’s financial condition
and the results of its operations for the periods covered by said financial
statements (except that the unaudited balance sheet as of September 30, 2005
and
the related statements of income are subject to year-end audit adjustments,
the
net effect of which could not reasonably be expected to have a Seller Material
Adverse Effect); (v) contain and reflect adequate provisions for all reasonably
anticipated liabilities for all Taxes, with respect to the period then ended
and
all prior periods; and (vi) with respect to contracts and commitments for
the sale of goods or the provision of services by Seller, contain and reflect
adequate reserves for all reasonably anticipated material losses and costs
and
expenses in excess of expected receipts.
22
(b) No
Undisclosed Liabilities.
Except
for (i) those liabilities specifically accrued or reserved against on
Seller Balance Sheet, (ii) those current liabilities for trade or business
obligations incurred since Seller Balance Sheet Date in connection with the
purchase of goods or services in the ordinary course of the Business and
consistent with past practices, (none of which is, individually or in the
aggregate, material and none of which is for breach of contract, breach of
warranty, tort or infringement), (iii) those liabilities arising under any
Seller Material Contract (none of which liabilities is for breach of contract,
breach of warranty, tort or infringement) or (iv) those liabilities
otherwise specifically disclosed in Schedule
6.5(b)
(none of
which liabilities is for breach of contract, breach of warranty, tort or
infringement), Seller has, as of the date hereof, no direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, and whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement, which
individually or in the aggregate are material to the condition (financial or
otherwise), assets, liabilities, business, operations, properties or prospects
of Seller. Seller has no Knowledge of any circumstances, conditions, events
or
arrangements which may hereafter give rise to any liabilities of Seller except
in the ordinary course of the Business or as otherwise set forth in Schedule 6.5(b).
(c) Inventories.
All
Inventories shown on Seller Balance Sheet (which are described in Schedule 6.5(c))
and all
Inventories existing as of the date hereof consisted of, and consist of, items
of a quality and quantity useable and saleable in the ordinary course of
business by Seller without markdown or discount, were, and are, merchantable
and
fit for their particular purpose, except for obsolete and slow-moving items
and
items below standard quality (which in any event did not, and do not, exceed
normal commercial standards in amount), all of which had been, and have been,
written down on the books of Seller to the lower of cost or net realizable
market value or had been, and have been, provided for by adequate reserves.
Except as set forth in Schedule
6.5(c),
all
such Inventories were, and are, owned by Seller and will be free and clear
of
any Liens, other than Permitted Liens, as of the Closing. No items included
in
such Inventories were, or are, held by Seller on consignment from others. The
amounts of all such Inventories shown on Seller Balance Sheet were based on
quantities determined by physical count or measurement taken on Seller Balance
Sheet Date and valued at the lower of cost (determined
on a first-in, first-out basis) or market value and on a basis consistent with
that of prior years.
As of
the Effective Time, the Inventories will be at such levels and include such
items as are adequate and sufficient to enable Buyer to conduct the Business
in
the ordinary course for a period of at least ten (10) weeks after the Effective
Time, in a manner consistent with Seller’s prior practices.
23
(d) Accounts
Receivable.
Schedule
6.5(d)
sets
forth a complete and accurate schedule of the Accounts Receivable of Seller
as
of Seller Balance Sheet Date, as reflected in Seller Balance Sheet, together
with an accurate aging of the same. All Accounts Receivable of Seller accrued
on
Seller Balance Sheet and all Accounts Receivable of Seller existing as of the
date hereof resulted from valid sales in the ordinary course of the Business
and
were, and are, subject to no valid offsets or counterclaims. Except as set
forth
in Schedule
6.5(d),
all
such Accounts Receivable were, and are, owned by Seller and will be free and
clear of any Liens, other than Permitted Liens, as of the Closing. All
allowances for doubtful accounts and warranty returns reflected on Seller
Balance Sheet have been established in accordance with GAAP.
Within
six (6) months of the Closing Date, the obligors of the NWT Receivable shall
have paid the entire amount of the NWT Receivable to Buyer.
(e) Accounts
Payable.
Schedule
6.5(e)
sets
forth a true and correct aged list of all trade payables, accrued expenses
and
indebtedness of Seller as of Seller Balance Sheet Date and as of the date
hereof. The payment to be made by the Escrow Agent at Closing in accordance
with
the Disbursement Schedule and the assumption by Buyer of the Assumed Liabilities
shall operate to provide compliance under Applicable Law relating to bulk
transfers and all amounts (including without limitation, all accrued dividends)
required to be paid by Seller to holders of its “Class B Stock.”
(f) Absence
of Certain Changes.
Except
as indicated in Schedule
6.5(f),
since
Seller Balance Sheet Date, Seller has conducted the Business only in the
ordinary course consistent with its past practices and has not:
(i) suffered
any change, event or condition which, in any case or in the aggregate, has
had
or could reasonably be expected to have a Seller Material Adverse
Effect;
(ii) suffered
any destruction, damage to or loss of any asset (whether or not covered by
insurance) which has had or could reasonably be expected to have a Seller
Material Adverse Effect;
(iii) incurred
any obligation or liability or taken property subject to any liability, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
except current liabilities for trade or business obligations incurred since
Seller Balance Sheet Date in connection with the purchase of goods or services
in the ordinary course of the Business and consistent with its prior practices,
none of which liabilities, in any event, involved a potential liability of
Seller in excess of $25,000, individually, or $150,000, in the
aggregate;
(iv) mortgaged,
pledged or subjected to any Lien any of its property, business or assets,
tangible or intangible;
(v) sold,
transferred, leased to others or otherwise disposed of any of its assets,
tangible or intangible, except for inventory sold in the ordinary course of
the
Business consistent with its past practices or immaterial amounts of other
tangible personal property not required by the Business;
24
(vi) amended
or terminated any Seller Material Contract or any License of Seller or received
any notice of termination of any Seller Material Contract, committed a material
default under any such Seller Material Contract or License, or suffered a
material default by any other party thereto;
(vii) declared
or made any payment of dividends or other distribution to its shareholders
or
upon or in respect of any shares of its capital stock, or purchased, retired
or
redeemed, or obligated itself to purchase, retire or redeem, any of its shares
of capital stock or other securities;
(viii) changed
its accounting methods or practices (including, without limitation, any change
in depreciation or amortization policies or rates) or revalued any of its
assets;
(ix) entered
into any transaction, contract or commitment other than in the ordinary course
of the Business and consistent with its prior practices;
(x) suffered
any loss of one or more material customers or any material amounts of business,
in the aggregate or received notice of any such impending loss; or
(xi) entered
into any agreement or made any commitment to take any of the types of actions
described in subparagraphs (i) through (x) above.
(g) Books
of Account.
The
books of account of Seller are stated in reasonable detail and accurately and
fairly reflect in all material respects the transactions and dispositions of
the
assets of Seller as required by GAAP (other than as noted in Section 6.5(a)).
Seller
has devised and maintains a system of internal accounting controls sufficient
to
provide reasonable assurances that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary (A) to permit the preparation of financial statements
in
conformity with GAAP (other than as noted in Section 6.5(a))
and (B)
to maintain accountability for assets; and (iii) the amount recorded for assets
on the books and records of Seller is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
6.6 Tax
Matters.
Except
as indicated in Schedule
6.6:
(a) Tax
Returns.
Seller
has (i) duly and timely filed all Tax Returns required to be filed by it on
or prior to the date hereof, which Tax Returns are true, correct and complete,
and (ii) duly and timely paid all Taxes due and payable in respect of all
periods up to and including the date hereof and properly accrued on Seller
Financial Statements all Taxes not yet payable in respect of all periods up
to
and including the date hereof. Seller has heretofore provided
Buyer with (i) a true and accurate schedule which sets forth each Taxing
jurisdiction in which Seller has filed or is required to file, or be included
in, Tax Returns and indicating whether Seller has filed unitary or separate
income or franchise Tax Returns with respect to each such jurisdiction, (ii)
a
true and complete copy of each Tax Return of Seller for the last five complete
fiscal years and such other Tax Returns as have been requested by Buyer, (iii)
a
schedule of all material elections with respect to Taxes affecting Seller or
for
which Seller is or may be liable that are in effect as of the Closing Date,
and
(iv) a schedule of any and all deferred intercompany transactions and excess
loss accounts, including, in each case, a description and the amounts thereof.
Seller has timely and properly withheld or collected, paid over and reported
all
Taxes required to be withheld or collected by Seller on or before the date
hereof.
25
(b) Asserted
Tax Liabilities.
(i) No Tax Authority has asserted any adjustment that could result in an
additional Tax for which Seller is or may be liable or that could result in
a
Lien on any of its assets (collectively, “Tax
Liability”);
(ii)
there is no pending audit, examination, investigation, dispute, proceeding
or
claim (collectively, “Proceeding”)
relating to any Tax Liability and, to the Knowledge of Seller, no Tax Authority
is contemplating such a Proceeding and there is no basis for any such
Proceeding, (iii) no statute of limitations with respect to any Tax has been
waived or extended (unless the period to which it has been waived or extended
has expired); (iv) there is no outstanding power of attorney authorizing
anyone to act on behalf of Seller in connection with any Tax Liability, Tax
Return or Proceeding relating to any Tax; (v) there is no outstanding closing
agreement, ruling request, request to consent to change a method of accounting,
subpoena or request for information with or by any Tax Authority with respect
to
Seller, its income, assets or business, or any Tax Liability; (vi) Seller
is not required to file Tax Returns or pay Taxes under any Applicable Law of
the
United States of America or any of its States or local government;
(vii) Seller has not deferred any income to a period after the Closing Date
that has economically accrued on or prior to the Closing Date or accelerated
any
deduction into a period on or before the Closing Date that economically accrues
after the Closing Date; (viii) Seller is not and has never been a party to
any Tax sharing or Tax allocation agreement, arrangement or understanding;
(ix) Seller is not and has never been included in any consolidated,
combined or unitary Tax Return with any Person other than Seller; (x) all
Taxable periods for the assessment or collection of any Tax Liability are closed
by agreement or by operation of the normal statute of limitations (without
extension) or will close by operation of the normal statute of limitations
for
such Taxes (in each case determined without regard to any omission, fraud or
other special circumstance other than the timely filing of the Tax Return)
and
(xi) no Tax Authority has ever asserted that Seller should file
a
Tax Return in any jurisdiction where it does not file.
(c) Seller’s
GST Registration.
Seller
is duly registered under subdivision (d) of Division I of Part IX of the
Excise
Tax Act (Canada) with
respect to GST and its registration number is 103995262RT0001. The Purchased
Assets constitute all or substantially all of the assets owned and primarily
used by Seller in respect of the operations of the Business.
6.7 Compliance
with Applicable Laws; Governmental Matters.
(a) General.
Seller
has, in all material respects, complied with and is now, in all material
respects, in compliance with all Applicable Laws and Orders, and no material
capital expenditures will be required in order to insure continued compliance
therewith. Except for the Licenses already held by Seller, no other franchise,
license, permit, Order or approval of any Authority is material to or necessary
for the conduct of the Business as previously conducted during the twelve-month
period prior to the date hereof, as presently conducted or as proposed to be
conducted. Each such License is in full force and effect; Seller is now and
has
at all times in the past been in full compliance with each thereof; no
violations are or have been recorded by any Authority in respect of any thereof;
and no proceeding is pending, or to the Knowledge of Seller, threatened, to
revoke, amend or limit any thereof. Except as indicated in Schedule
6.7(a),
there
are no pending or threatened proceedings by or before any Authority which
involve new special assessments, assessment districts, bonds, Taxes,
condemnation actions, Applicable Laws or Orders or similar matters which, if
instituted, could be reasonably expected to have a Seller Material Adverse
Effect.
26
(b) Environmental
and Industrial Hygiene Compliance.
Except
as set forth in Schedule
6.7(b),
(i)
there
are no Hazardous Substances located on or in or under any of the Real Property
of Seller; Seller has not used any of the Real Property of Seller or any other
real property to produce, generate, manufacture, treat, store, handle,
transport, or dispose of any Hazardous Substances except in compliance with
Environmental Laws; (ii) Seller and the Shareholders do not have Knowledge
of
Seller or any of its predecessors having caused or permitted the Release of
any
Hazardous Substances on or off-site from any of the Real Property of Seller
or
any other place or places where Seller conducts or has conducted the Business
or
in the course of transportation by Seller from or to any real property; all
Hazardous Substances disposed of, treated, or stored by Seller or, to the best
of Seller’s and the Shareholders’ Knowledge, any predecessors of Seller, have
been disposed of, treated and stored in compliance with all Environmental Laws;
Seller has not transported any Hazardous Substances outside of Canada; and
(iii) to the best Knowledge of Seller, there are no underground or
above-ground storage tanks or associated piping or appurtenances (active or
abandoned), or urea formaldehyde foam insulation, asbestos, polychlorinated
biphenyls, or radioactive substances located on or in or under the surface
of
any of the Real Property of Seller or other assets used thereon.
For
purposes of this Section, the defined terms being as follows:
“Applicable
Authority”
means
any: (i) multinational, national, federal, provincial, state, regional,
municipal, local, or other government, governmental or public department,
central bank, court, tribunal, arbitral body, commission, board, bureau, or
agency, whether domestic or foreign; (ii) any subdivision, agent, commission,
board, or authority of any of the foregoing; or (iii) any quasi-governmental,
private, or self-regulatory body, organization, or agency.
“Environmental
Laws”
means
all federal, provincial, municipal, or local laws, statutes, regulations,
ordinances, rules, guidelines, orders, directives, and other requirements of
any
Applicable Authority or of any court, tribunal, or other similar body, relating
to environmental or health matters, including legislation governing the
labeling, use, and storage of Hazardous Substances.
“Environmental
Orders”
means
applicable orders, decisions, or the like rendered by any Authority under or
pursuant to any Environmental Laws.
“Hazardous
Substances”
means
petroleum and petroleum products, polychlorinated biphenyls, asbestos, urea
formaldehyde foam insulation, any flammable and/or radioactive materials, or
any
other substance or material that is prohibited, controlled, or regulated under
any Environmental Laws.
27
“Release”
means
a
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leeching, spraying, burying, abandoning, incinerating,
disposing, or dumping of Hazardous Substances or Hazardous Waste, or threat
thereof, which is in breach of any Environmental Law or Environmental
Order.
(c) Indemnity
and Hold Harmless.
Without
limiting any other indemnity contained herein, Seller, CVF and Heptagon shall,
subject to Section 13.8,
from
and after the Effective Time, jointly and severally indemnify and hold harmless
Buyer, and its respective shareholders, directors, officers, employees, agents
and attorneys, and any successors to Seller’s interest in any such affected
property, and their respective shareholders, directors, officers, employees,
agents and attorneys, from and against any and all Losses directly or indirectly
arising out of the presence, use, generation, storage, or disposal of Hazardous
Substances on any property of Seller, whether the same was the fault of Seller
or any prior owner or operator of such affected property or any other Person,
including, without limitation, all general, special, foreseeable or
unforeseeable consequential damages and the cost of any required or necessary
repair, cleanup, or detoxification and the preparation of any closure or other
required plans, whether or not such action is required or necessary prior to
or
following transfer of title to any such affected property, and to the full
extent that such action is attributable, directly or indirectly, to the presence
or use, generation, storage, release, threatened release, or disposal of
Hazardous Substances by any Person on any property of Seller prior to the
Effective Time.
6.8 Litigation. Schedule
6.8
sets
forth an accurate and complete description of every pending or, to the Knowledge
of Seller, threatened adverse claim, dispute, governmental investigation, suit,
action (including, without limitation, nonjudicial real or personal property
foreclosure actions), arbitration, legal, administrative or other proceeding
of
any nature, domestic or foreign, criminal or civil, at law or in equity, by
or
against or otherwise affecting Seller, or its businesses, operations,
properties, financial conditions or prospects and which could be reasonably
expected to result individually (aggregating related actions) in Losses of
$150,000 or more (in excess of Losses irrevocably accepted as covered under
any
insurance policy issued by a credit worthy insurance company). Schedule
6.8
also
sets forth an accurate and complete description of every pending, or to the
Knowledge of Seller, threatened action, claim, dispute, governmental
investigation, suit, arbitration or other proceeding which challenges or seeks
to prevent, enjoin, alter or materially delay any of the transactions
contemplated by this Agreement. Seller has delivered to Buyer copies of all
relevant court papers and other documents relating to the matters referred
to in
Schedule
6.8.
Except
as disclosed in Schedule
6.8:
(a) no
such
matter or matters, if decided adversely to Seller, could reasonably be expected
to have a Seller Material Adverse Effect;
(b) Seller
is
not in default with respect to any Order by which it is bound or to which its
property is subject and there exists no Order enjoining or requiring Seller
to
take any action of any kind with respect to the Business;
(c) neither
Seller nor, to the Knowledge of Seller, any officer, director, manager or
employee of Seller has been permanently or temporarily enjoined by any Order
from engaging in or continuing any conduct or practice in connection with the
Business; and
28
(d) to
the
Knowledge of Seller, no basis exists for any claim, investigation, suit or
proceeding which, if decided adversely to Seller, could reasonably be expected
to have a Seller Material Adverse Effect.
6.9 Property
of Seller.
(a) Tangible
Personal Property.
Schedule
6.9(a)
sets
forth (i) a description, including the location, of each item of Tangible
Personal Property owned by Seller which is (A) licensed to, and in the
possession of, a Person other than Seller, or (B) having on the date hereof
either a depreciated book value or estimated fair market value per unit in
excess of $25,000, or not owned by Seller but in the possession of or used
in
the Business and having rental payments therefor in excess of $2,000 per month
or $25,000 per year; (ii) a description of the owner of, and any Seller
Contract relating to the use of, each such item of Tangible Personal Property
not owned by Seller and the circumstances under which such property is used
and
(iii) the Tangible Personal Property of Seller reflected in the Seller Balance
Sheet. Except as indicated in Schedule
6.9(a):
(i) Seller
has good and marketable title to each item of its Tangible Personal Property,
free and clear of all Liens other than Permitted Liens and the Liens listed
in
Schedule
6.4
that
will be paid in full at Closing out of the Closing Payment;
(ii) no
officer, director, shareholder or employee of Seller, nor any Affiliate thereof,
owns directly or indirectly, in whole or in part, any item of the Tangible
Personal Property of Seller or has any other interest therein; and
(iii) each
item
of Tangible Personal Property owned or used by Seller or its licensees is in
good operating condition and repair, usable in the ordinary course of the
Business, and the operation thereof as conducted during the twelve-month period
prior to the date
hereof, as presently conducted and as proposed to be conducted is not in
violation of any Applicable Law, including, without limitation, applicable
Environmental Laws and Orders and laws relating to occupational health and
safety.
(b) Intellectual
Property. Schedule
6.9(b)
sets
forth, as of the date hereof, (i) a true and complete description of
Seller’s proprietary identification and registration system of gemstones;
(ii) a true and complete schedule of each patent, patent application and
associated invention, industrial model, process and design, technical
information, know-how and operating maintenance or other manual and each
registration and application for any of the foregoing, constituting a part
of
such Intellectual Property (including, without limitation, any registrations
and/or applications filed with the Canadian Intellectual Property Office);
(iii) registered and unregistered fictitious business name, trademark,
service ▇▇▇▇, trade name, domain name, URL, web site and slogan, and each
registration and application for any of the foregoing, constituting a part
of
the Intellectual Property of Seller (including, without limitation, any
registrations and/or applications filed with the Canadian Intellectual Property
Office); (iv) a true and complete schedule of each statutory, common law
and registered copyright, and each registration and application for any of
the
foregoing, constituting a part of such Intellectual Property (including, without
limitation, any registrations and/or applications filed with the Canadian
Intellectual Property Office); (v) each item of Software and associated
documentation constituting a part of such Intellectual Property other than:
(A)
“shrink wrap” software and (B) third party software generally available to the
public at a cost of less than $2,500;
(vi) a
true and complete list, without extensive or revealing descriptions, of each
trade secret constituting a part of such Intellectual Property, including each
related process or item of know-how or other technical data, and including,
as
to each such trade secret, the specific location of each writing, computer
program or other tangible medium containing its complete description,
specifications, source codes, charts, procedures, manuals and other descriptive
material relating to it; (vii) a true and complete list of all Contracts to
which Seller is a licensee relating to any item of such Intellectual Property;
(viii) a true and complete list of all Contracts to which Seller is a licensor
relating to any item of such Intellectual Property; and (ix) a true and complete
list of all Contracts under which Seller is obligated to provide maintenance,
support or update any of such Intellectual Property. The consummation of the
transactions contemplated herein will not adversely affect in any manner the
nature or usefulness of any item of such Intellectual Property in the hands
of
Seller. Except as indicated in Schedule
6.9(b):
29
(A) Seller
is
the owner of all right, title and interest in and to each item of its
Intellectual Property, free and clear of all Liens, other than Permitted Liens
and Liens that will be paid in full, and released, at Closing out of the Closing
Payment;
(B) all
patents, trademarks, service marks, copyrights and other state, provincial,
federal and foreign registrations and all applications therefor listed in
Schedule
6.9(b)
are
valid and in full force and effect and are not subject to any Taxes, maintenance
fees or actions falling due within 90 days after the date hereof;
(C) all
of
the Software of Seller performs in full compliance with all of the
specifications therefor (including, without limitation, functional
specifications) set forth in user manuals, promotional materials or license
agreements;
(D) accurate
and complete copies of all source codes relating to all versions of each item
of
Software of Seller exist and have been made available to Buyer;
(E) all
items
of Software of Seller (other than licensed Software), including all prior
versions thereof, were conceived, made and reduced to practice solely by Persons
who were employees of Seller, and such Software resulted exclusively from work
performed by those employees for Seller; any and all ideas, designs, concepts,
techniques, inventions and discoveries which were conceived, made or reduced
to
practice by those employees relating in any way to such Software are “works made
for hire” as a matter of law and are owned exclusively by Seller; and valid
registrations exist and are in effect with respect to all of such
Software;
(F) the
patents and Software owned by Seller do not infringe the rights of any Person,
there are no pending claims, actions, judicial or other adversary proceedings,
disputes or disagreements involving Seller concerning any item of its
Intellectual Property, and, to the Knowledge of Seller, no such action,
proceeding, dispute or disagreement is threatened and no basis exists for such
action, proceeding, dispute or disagreement;
30
(G) all
current officers, employees and consultants of Seller (other than employees
and
consultants who have not been involved in developing any Intellectual Property
of Seller and who have no managerial responsibilities) have executed and
delivered to Seller agreements regarding the protection of proprietary
information and the assignment to Seller of all Intellectual Property rights
arising from the services performed for Seller by such Persons, and Seller
has
made available to Buyer or its counsel copies of all such agreements;
(H) to
the
Knowledge of Seller, no employee or consultant of Seller is in violation of
any
term of any employment Contract, patent disclosure agreement, non-competition
agreement or any other Contract or restrictive covenant relating to the right
of
such Person to be employed or engaged by Seller or to use the Intellectual
Property rights of others; and
(I) Neither
the National Research Council of Canada, any other Authority nor any other
Person has any right to, or claim against, Seller’s Intellectual Property as a
result of any Industrial Research Assistance Program, any Contract entered
into
in connection therewith or any condition or Applicable Law relating
thereto.
(c) Real
Property.
Schedule
6.9(c)
sets
forth: (i) a true and complete description of all Real Property in which
Seller has any interest, and all buildings and other structures located on
that
Real Property; and the nature of the interest therein of Seller; and
(ii) an identification of all Seller Contracts together with all amendments
thereto, under which Seller has any interest or estate in any Real Property.
(d) Necessary
Properties.
Except
for the Real Property, the Purchased Assets include all of the assets, real
properties, tangible personal properties and intangible properties necessary
for
the conduct of the Business as conducted during the twelve-month period prior
to
the date hereof, as presently conducted and as proposed to be conducted and
include substantially all of those properties actually used in the conduct
of
such businesses during the twelve-month period prior to the date
hereof.
6.10 Agreements. Schedule
6.10
sets
forth a true and correct list of each Seller Contract except any Seller
Contract which is specifically identified in Schedules
6.9(a),
6.9(b), 6.9(c),
6.11,
6.12
or
6.13.
Seller
has delivered to Buyer a true and correct copy of the Amendment to Founders
Agreement between Seller and Tolkowsky, the Amendment to License Agreement
between Seller and ▇▇▇▇▇▇▇ ▇▇▇▇ Melody, Inc. and the Amendment to Escrow
Agreement between Seller and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Inc., all entered into and
effective as of November 22, 2005.
Except
as
indicated in Schedule
6.10:
(a) each
Seller Material Contract is the valid and binding obligation of the other
contracting party, enforceable in accordance with its terms against the other
contracting party and in full force and effect, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Applicable Laws affecting creditors’ rights generally or by general
equitable principles affecting the enforcement of contracts; there is no default
or event which, with notice or lapse of time or both, would constitute a default
by any other contracting party thereunder; no consent need be obtained from
any
Person in respect thereof in connection with the transactions contemplated
hereby; and all rights of Seller thereunder are owned free and clear of any
Liens, other than Permitted Liens and the Liens listed in Schedule
6.4;
31
(b) Seller
has fulfilled all material obligations required pursuant to each Seller Material
Contract to have been performed by it prior to the date hereof, and provided
that CVF and Heptagon fulfill their obligations under Section
8.3
to
advance funds to Seller, Seller has no reason to believe that Seller will not
be
able to fulfill, when due, all of its obligations under each Seller Material
Contract which remain to be performed after the date hereof;
(c) no
other
contracting party to any Seller Material Contract has breached such Seller
Material Contract in any material respect within the twelve-month period prior
to the date hereof; Seller has no Knowledge of any anticipated material breach
thereof by any such party; and there are not now, nor have there been in the
twelve-month period prior to the date hereof, any disagreements or disputes
between Seller and any other party to any Seller Material Contract relating
to
the validity or interpretation of such Seller Material Contract or to the
performance by any party thereunder;
(d) Seller
is
not a party to, nor is any of its property bound by, any Seller Contract, or
any
provision of its Articles of Incorporation or Bylaws, which (i) restricts
the conduct of the Business anywhere in the world or its ability to sell
products or services to a specific Person, (ii) grants most favored nation
pricing and/or terms to any Person, (iii) requires or may potentially require
the renegotiation of government Contracts or (iv) contains any unusual or
burdensome provisions which could reasonably be expected to have a Seller
Material Adverse Effect;
(e) Seller
is
not under any material liability or obligation with respect to the return of
inventory or products sold by Seller which are in the possession of
distributors, wholesalers, retailers or customers, or with respect to credit
for
services rendered to third parties; and
(f) the
Assumed Contracts include all of the contracts and agreements necessary for
the
conduct of the Business as conducted during the twelve-month period prior to
the
date hereof, as presently conducted by Seller and as proposed to be conducted,
and include substantially all of Seller.
6.11 Labor
and Employment Matters.
(a) Labor
Agreements.
Schedule
6.11
sets
forth a true and current list of all of the Labor Agreements to which Seller
is
a party. Schedule
6.11
also
includes a true and complete schedule listing the names, total annual
compensation, total accrued vacation, overtime, sick leave and other fringe
benefits and bonuses of each person employed by Seller presently receiving
compensation.
32
Except
as
set forth in Schedule
6.11:
(i) the
employment of each employee of Seller may be terminated immediately by Seller,
except as otherwise provided by statute or decisional authority;
(ii) to
the
Knowledge of Seller, no key executive employee of Seller and no group of
employees of Seller has plans to terminate his, her or its employment at or
prior to the Closing, whether or not as a result of the transactions
contemplated herein;
(iii) Seller
has no material labor relations problems and
(iv) Seller
is
not a party to any collective bargaining agreements and, to the Knowledge of
Seller, no labor group or group of employees has made a claim for recognition
or
certification.
(b) Compliance
With Labor Laws and Agreements.
Seller
has complied in all material respects with all Applicable Laws and Orders
relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of Taxes and other sums
as
required by appropriate Authorities and has withheld and paid to the appropriate
Authorities, or is holding for payment not yet due to such Authorities, all
amounts required to be withheld from such employees of Seller and is not liable
for any arrears of wages, Taxes, penalties or other sums for failure to comply
with any of the foregoing.
6.12 Employee
Benefits.
(a)
Compliance with Applicable Law, etc. Seller has deducted and remitted to
the relevant governmental authority all income Taxes, unemployment insurance
contributions, Canada Pension Plan contributions, Workplace Safety &
Insurance premiums, provincial health insurance premiums and any taxes or other
amounts which it is required by statute to collect and remit to any governmental
authority. All accruals for unpaid vacation pay, premiums for unemployment
insurance, health premiums, Canadian Pension Plan premiums, accrued wages,
salaries and commissions, employee benefit plan payments and overtime have
been
properly reflected in the books and records of Seller. No notice has been
received by Seller of any complaints filed by any of the employees employed
or
formerly employed in the Business against Seller claiming that Seller has
violated the Employment Standards Act (Ontario) or the Human Rights Code
(Ontario) (or any applicable employee or human rights or similar legislation
in
the other jurisdictions in which the Business is conducted), which are currently
outstanding or of any complaints or proceedings of any kind involving Seller
in
respect of the employees of Seller or, to Seller’s Knowledge, after due inquiry,
any of the employees of Seller, before any labor relations board. There are
no
outstanding orders or charges against Seller under the Workplace Safety and
Insurance Act (Ontario) (or any applicable health and safety legislation in
at
the other jurisdictions in which the Business is conducted).
(b)
Pension Plan. Except as set forth on Schedule 6.12(b),
Seller has no retirement, pension, bonus, stock purchase, profit sharing, stock
option, deferred compensation, severance or termination pay, insurance, medical,
hospital, dental, vision care, drug, sick leave, disability, salary
continuation, legal benefits, unemployment benefits, vacation, incentive or
other compensation plan or arrangement or other employee benefit that is
maintained or otherwise contributed to, or required to be contributed to, by
Seller for the benefit of employees or former employees employed in the
Business.
33
6.13 Insurance. Schedule
6.13
sets
forth a true and correct list of all policies or binders of fire, liability,
workers’ compensation, vehicular or other insurance held by or on behalf of
Seller specifying the insurer, the policy number or covering note number with
respect to binders, and describing each pending claim thereunder of more than
$25,000. Such policies and binders are in full force and effect and are in
all
material respects in accordance with the customary insurance requirements for
the industry of Seller and in compliance with all Applicable Laws and Orders.
Seller is not in default, nor has ever been in default, with respect to any
provision contained in any such policy or binder or has failed to give any
notice or present any claim under any such policy or binder in due and timely
fashion. Seller has complied with the terms of any co-insurance
provisions contained in any such policy or policies of insurance. There are
no
outstanding unpaid claims under any such policy or binder. Seller has not
received a notice of cancellation or non-renewal of any such policy or binder.
Seller has no Knowledge of any inaccuracy in any application for such policies
or binders, any failure to pay premiums when due, or any similar state of facts
which may form the basis for termination of any such insurance. Seller has
never
been refused any insurance with respect to its properties or operations, nor
has
its insurance coverage ever been limited.
6.14 Customers,
Licensees and Suppliers. Schedule
6.14
is a
correct and current list of all customers, licensees, and suppliers of the
Business who purchased more than $25,000 of products or services from Seller,
generated more than 250 registrations to Seller or sold more than $25,000 of
products or services to Seller during the last fiscal year, together with
summaries of the sales made to each such customer, registrations generated
by
such licensees and purchases made from each such supplier during Seller’s last
fiscal year. Except as indicated in Schedule
6.14,
no
single customer of Seller, licensee or supplier is of material importance to
Seller.
6.15 Potential
Conflicts of Interest.
Except
as indicated in Section
6.15,
no
officer or director of Seller or any Shareholder, no key employee of Seller
or
any Shareholder and no Affiliate of any of the foregoing (a) owns, directly
or indirectly, any interest in (excepting not more than a one percent (1%)
shareholding for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
which is a competitor, lessor, lessee, customer, licensee or supplier of Seller;
(b) holds a beneficial interest in any Seller Contract (other than stock
options and other contracts, commitments or agreements between Seller and such
persons in their capacities as employees, officers or directors of Seller);
(c) owns, directly or indirectly, in whole or in part, any tangible or
intangible property (including, without limitation any patent, trademark, trade
name, service ▇▇▇▇, franchise, invention, permit, license, trade secret or
confidential information) which Seller is using or the use of which is necessary
for its conduct of the Business; or (d) has any cause of action or other
claim whatsoever against Seller, except for claims in the ordinary course of
the
Business, such as for accrued vacation pay, accrued benefits under employee
benefit plans and similar matters and agreements existing on the date
hereof.
6.16 Certain
Transactions.
Schedule
6.16
contains
a detailed description (including all material terms thereof) of all purchases
and sales or other transactions, if any, between Seller, on the one hand, and
any officer, director, manager, shareholder, partner, member, key employee
or
Affiliate thereof, on the other hand, within the five years immediately
preceding the date of this Agreement. Except as disclosed in Schedule
6.16,
all
such purchases and sales or other transactions were made on the basis of
prevailing market rates and terms such that from the perspective of Seller,
all
such transactions were made on terms no less favorable than those which would
have been available from unrelated third parties.
34
6.17 Solvency.
As
of the
Closing and immediately after consummating the transactions contemplated by
this
Agreement, Seller will not (i) be insolvent (either because its financial
condition is such that the sum of its debts is greater than the fair value
of
its assets or because the present fair salable value of its assets will be
less
than the amount required to pay its probable
liability on its debts as they become absolute and matured), (ii) have
unreasonably small capital with which to engage in its business, or (iii) have
incurred or plan to incur debts beyond its ability to repay such debts as they
become due and payable and/or absolute and matured.
6.18 Books
and Records.
Seller
has made all of its Books and Records available to Buyer for its inspection,
each of which is accurate and complete in all material respects.
6.19 Delivery
of Documents.
Seller
has delivered to Buyer true and current copies of all agreements and documents
referred to in the Schedules.
6.20 Subsidiaries.
Except
for its equity interests in ▇▇▇▇▇▇▇ ▇▇▇▇ Melody, Inc., Seller does not own
directly or indirectly, any interest or investment (whether equity or debt)
in
any Person.
6.21 No
Broker.
No
broker, finder, agent or similar intermediary has acted for or on behalf of
Seller or the Shareholders in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent, similar intermediary or
other
Person is entitled to any broker’s, finder’s, or similar fee, other commission
or payment in connection therewith based on any agreement, arrangement or
understanding with Seller or the Shareholders or any action taken by Seller
or
the Shareholders.
6.22 Non-Residency.
Seller
is not a non-resident of Canada within the meaning of the Income
Tax Act (Canada).
6.23 Full
Disclosure.
All
documents and other papers delivered to Buyer by or on behalf of Seller in
connection with this Agreement and the transactions contemplated hereby are
true, complete and authentic. The information furnished to Buyer by or on behalf
of Seller in connection with this Agreement and the transactions contemplated
herein does not contain any untrue statement of a material fact and does not
omit to state any material fact necessary to make the statements made, in the
context in which made, not false or misleading. There is no fact which Seller
has not disclosed to Buyer in writing which could reasonably be expected to
have
a Seller Material Adverse Effect.
35
ARTICLE
VI(A)
REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
Subject
to the exceptions and limitations set forth in this Agreement, each Shareholder
hereby represents and warrants, to Buyer for itself and only with respect to
itself as follows:
6.1(A) Authority,
Enforceability, No Violation, Consents, Title to Shares, Etc.
(a) Organization
and Good Standing.
The
Shareholder is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to own and vote its stock in the capital of
Seller.
(b) Authority;
Authorization of Transactions Contemplated by this Agreement.
The
Shareholder has approved and authorized Seller to execute this Agreement and
all
of the Seller Documents to be executed by Seller and to consummate the
transactions herein and therein in accordance with the Agreement. The
Shareholder has all requisite power and authority to execute and deliver this
Agreement and the other Shareholder documents required to be delivered by such
Shareholder to which such Shareholder is a party, to consummate the transactions
contemplated hereby and thereby and to perform such Shareholder’s obligations
under each Shareholder Document. The execution and delivery by the Shareholder
of each of the Shareholder Documents to which the Shareholder is or will be
a
party and the performance by the Shareholder of such Shareholder’s obligations
hereunder and thereunder have been duly and validly authorized by all necessary
action. Each of the Shareholder Documents to which the Shareholder is or will
be
a party is, or upon its execution and delivery will be (assuming the valid
authorization, execution and delivery of such Shareholder Document by the other
parties thereto), a valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with the terms thereof,
except to the extent that such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Applicable
Laws relating to creditors’ rights generally and to general principles of
equity. The Shareholder has delivered to Buyer the Shareholder’s duly executed
Lock-Up Agreement adopting and approving this Agreement and the transactions
contemplated hereby in accordance with the applicable requirements of Applicable
Law, and such remains in full force and effect.
(c) No
Violation.
Except
as set forth on Schedule
6.1(A)(c),
neither
the execution or delivery by the Shareholder of any of the Shareholder Documents
to which the Shareholder is or will be a party, the consummation by such
Shareholder of the transactions contemplated hereby and thereby, nor the
performance by such Shareholder of its obligations hereunder and thereunder
will
(i) if the Shareholder is an entity, violate any provision of the articles
of
incorporation, bylaws, or other charter documents of such Shareholder or any
resolution adopted by the equityholders of such Shareholder or the board of
directors (or other responsible governing body) or any committee of thereof,
or
the Lock-Up Agreement (ii) violate, or give any Authority or other Person the
right to challenge the transactions contemplated by this Agreement or any of
the
other or to exercise any remedy or obtain any relief under, Applicable
Law.
36
(d) Consents.
Except
as set forth on Schedule
6.1(A)(d),
no
material filing with, and no material permit, authorization, consent or approval
of, any Person is necessary for the Shareholder’s execution and delivery of this
Agreement and the other Shareholder Documents, the consummation by the
Shareholder of the transactions contemplated hereby or thereby or the
Shareholder’s performance of the Shareholder’s obligations hereunder or
thereunder.
(e) Title
to Shares.
The
Shareholder is the sole record and beneficial owner, free and clear of any
and
all Liens, of the shares of Seller’s capital stock set forth opposite such
Shareholder’s name on Annex
I,
and the
shares of the Seller’s capital stock set forth therein constitute all of the
shares of Seller’s capital stock beneficially owned or held of record by the
Shareholder.
There are no rights, obligations or other agreements or commitments (written
or
oral) obligating the Shareholder with respect to voting the shares of Seller’s
capital stock owned by the Shareholder.
ARTICLE
VII
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Seller and the Shareholders as follows:
7.1 Due
Incorporation.
Buyer is
a corporation duly organized, validly existing and in good standing under the
Applicable Laws of its jurisdiction of incorporation.
7.2 Authority
to Execute and Perform Agreements.
Buyer
has all requisite power, authority and approval required to enter into, execute
and deliver this Agreement and the other Buyer Documents and (assuming the
Required Contractual Consents and the Required Governmental Approvals are
obtained) to perform fully Buyer’s obligations hereunder and
thereunder.
7.3 Due
Authorization; Enforceability.
Buyer
has taken all corporate actions
necessary to authorize it to enter into and perform its obligations under this
Agreement and all other Buyer Documents and to consummate the transactions
contemplated herein and therein. Buyer has delivered to Seller a true and
correct certified copy of the resolutions adopted by its board of directors
with
respect to the foregoing. This Agreement has been duly and validly executed
by
Buyer and (assuming the due authorization, execution and delivery by Seller)
constitutes the legal, valid and binding obligations of Buyer, enforceable
in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws
affecting creditors’ rights generally or by general equitable principles
affecting the enforcement of contracts.
7.4 No
Violation.
Neither
the execution and delivery of this Agreement and all other Buyer Documents
nor
the consummation of the transactions contemplated hereby and thereby will
(a) violate any provision of the Certificate of Incorporation or bylaws of
Buyer; (b) violate, conflict with, or constitute a default under any
contract or other lease agreement or other instrument to which Buyer is a party
or by which it or its property is bound; (c) require the consent of any
party to any material contract or other agreement to which Buyer is a party
by
which it or its property is bound; or (d) violate any Applicable Laws or
Orders to which Buyer or its property is subject.
37
7.5 Regulatory
and Other Approvals.
Except
for such approvals as have already been obtained, no other consent, approval,
authorization, notice, filing, exemption or other requirement must, pursuant
to
any Applicable Law or Order or the terms of any material Contract to which
Buyer
is a party or to which its properties are subject, be obtained from any
Authority or Person or must otherwise be satisfied by Buyer in order that (i)
the execution or delivery by Buyer of this Agreement and any of Buyer Documents
or (ii) the consummation of the transactions contemplated herein or therein
will
not violate any Applicable Law or Order or the terms of any such material
Contract of Buyer.
7.6 No
Broker.
Other
than Lazard Freres & Co. LLC, no broker, finder, agent or similar
intermediary has acted for or on behalf of Buyer in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to, or will be paid, any broker’s, finder’s,
or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with Buyer or any action taken by Buyer.
Buyer shall fully discharge all obligations to Lazard Freres & Co. LLC, in
connection with this Agreement and the transactions contemplated
hereby.
7.7 Investment
Canada Act.
Buyer
is a non-Canadian within the meaning of the Investment
Canada Act
(Canada).
ARTICLE
VIII
COVENANTS
AND AGREEMENTS OF THE PARTIES
EFFECTIVE
PRIOR TO CLOSING
The
parties hereto covenant and agree as follows:
8.1 Business
Examinations and Physical Investigations of Purchased Assets.
Prior
to the Effective Time Buyer shall be entitled, through its employees and
representatives, including, without limitation, Loeb & Loeb LLP, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP and Buyer’s lenders, prospective lenders, investment bankers and
consultants, to make such investigations and examinations of the Business,
the
Purchased Assets, the Books and Records of Seller and the affairs and financial
condition of Seller as Buyer may request for the purpose of familiarizing Buyer
with the Business, the Purchased Assets and the Assumed Liabilities and
obtaining any Required Governmental Approvals, any Required Contractual Consents
or any required Licenses or Permits. In order that Buyer may have the full
opportunity to do so, Seller shall furnish Buyer and its representatives during
such period with all information concerning the Business, the Purchased Assets
and the affairs and financial condition of Seller as Buyer or such
representatives may request and cause Seller’s officers, employees, consultants,
agents, accountants and attorneys to cooperate fully with Buyer and such
representatives and to make full disclosure of all information and documents
requested by Buyer and/or such representatives; provided, however, that without
the consent of the relevant employee, no personnel file of any employee of
Seller shall be made available to Buyer or its representatives. Any such
investigations and examinations shall be conducted at reasonable times and
under
reasonable circumstances and all confidential information shall be subject
to
the Confidentiality Agreement between Buyer and Seller dated June 23, 2005.
No investigation by Buyer shall, however, diminish or obviate in any way, or
affect Buyer’s right to rely upon, any of the representations, warranties,
covenants or agreements of Seller contained in this Agreement.
38
8.2 Cooperation;
Consents.
Prior to
the Closing Date, each party shall cooperate with the other to the end that
the
parties shall (i) in a timely manner make all necessary filings with, and
conduct negotiations with, all Authorities and other Persons the consent or
approval of which, or a license or permit from which, is required for the
consummation of the transactions contemplated herein and (ii) provide to
each other party such information as the other party may reasonably request
in
order to enable it to prepare such filings and to conduct such negotiations.
The
Shareholders shall cause Seller to timely fulfill its obligations hereunder
and
shall not, either directly or indirectly through any of their representatives
or
otherwise, take any action to hinder, delay or frustrate the consummation of
the
transactions described herein. Without limiting the foregoing, the Shareholders
shall not revoke, rescind, withdraw or cancel their authorization and approval
of the transactions described herein. The parties shall also use their
respective best efforts to expedite the review process and to obtain all such
necessary consents, approvals, licenses and permits as promptly as practicable.
To the extent permitted by Applicable Law, the parties shall request that each
Authority or other Person whose review, consent or approval is requested treat
as confidential all information which is submitted to it. Notwithstanding the
foregoing, in no event shall Buyer, Seller or any of their Affiliates be
obligated (i) to make any payments to third parties (other than filing fees
payable to Authorities), (ii) to consent to any change in the terms of any
agreement or arrangement which would be materially adverse to its interests
or
the interests of its Affiliates, (iii) to make any disposition, including,
without limitation any disposition of any Subsidiary, asset, business or line
of
products or (iv) to comply with any condition or undertaking or take any action
which is reasonably unacceptable to it, to obtain any such Required Governmental
Approval or Required Contractual Consent. Seller and Buyer shall bear their
own
costs and expenses incurred or fees paid to Authorities to obtain the Required
Governmental Approvals and Required Contractual Consents. Each Party shall
bear
its own costs and expenses (including fees paid to authorities) incurred to
obtain such consents, approvals, licenses or permits.
8.3 Preservation
and Conduct of Business.
From the
date hereof through the Effective Time, Seller shall conduct the Business only
in the ordinary course and consistent with prudent commercial practices and
shall use its best efforts (i) to preserve the Business intact,
(ii) to keep available to Buyer the services of its present officers,
employees, agents and independent contractors, (iii) to pay its current
obligations in a manner consistent with its past practices, and (iv) to preserve
for the benefit of Buyer the goodwill of its customers, licensees, suppliers
and
others having business relations with it.
If
Seller requires additional funds in order to operate pending Closing, CVF and
Heptagon shall from time to time advance such funds to Seller on a timely basis.
Such advances shall be Excluded Liabilities and shall either be repaid by Seller
or, if applicable, shall be converted into equity of Seller in accordance with
Section
4.5.
8.4 Covenants.
Without
limiting the foregoing, from and after the execution of this Agreement through
the Effective Time:
39
(a) Affirmative
Covenants.
Seller
shall:
(i) (A)
maintain its assets in the ordinary course of its business consistent with
its
past practices in good operating order and condition, reasonable wear and tear,
damage by fire and other casualty excepted, (B) promptly repair, restore or
replace assets in the ordinary course of its business consistent with its past
practices, and (C) upon any damage, destruction or loss to any of its assets,
apply any and all insurance proceeds received with respect thereto to the prompt
repair, replacement and restoration thereof to the condition of its assets
before such event;
(ii) comply
in
all material respects with all Applicable Laws;
(iii) maintain
in force (including necessary renewals thereof) the insurance policies listed
on
Schedule
6.13,
except
to the extent that they may be replaced with equivalent policies appropriate
to
insure its respective assets, properties and business to the same extent as
currently insured at the same rates or at different rates approved by
Buyer;
(iv) promptly
notify Buyer of any lawsuits, claims, proceedings or investigations which after
the date hereof are threatened or commenced against Seller or any officer,
director, employee, consultant, agent or shareholder thereof, in their
capacities as such, which, if decided adversely, could reasonably be expected
to
have a Seller Material Adverse Effect; and
(v) promptly
notify Buyer in writing of any other action, event, condition or circumstance,
or group of actions, events, conditions or circumstances, that results in,
or
could reasonably be expected to result in, a Seller Material Adverse Effect,
other than changes in general economic conditions.
(b) Negative
Covenants.
Without
Buyer’s prior written consent, which shall not be unreasonably withheld, Seller
shall not:
(i) merge
or
consolidate with any other Person, acquire control of all or substantially
all
of the assets of any other Person, or take any steps incident to, or in
furtherance of, any of such actions, whether by entering into an agreement
or
otherwise;
(ii) purchase,
lease, license or otherwise acquire any material amount of rights or assets
from
any other Person other than in the ordinary course of its business and
consistent with its past practices;
(iii) sell,
assign, lease, license, transfer or otherwise dispose of, or mortgage, pledge
or
encumber (other than by a Permitted Lien) any material amount of its assets
other than in the ordinary course of its business consistent with its past
practices;
(iv) make
or
commit to make any capital expenditure if, after giving effect thereto, the
aggregate of capital expenditures made or committed to be made after the date
of
this Agreement would exceed $25,000;
40
(v) except
in
accordance with Section 8.3,
create,
incur, assume, or guarantee any indebtedness for borrowed money or enter into
any “keep well” or other agreement to maintain any financial statement
condition, in each case other than in the ordinary course of its business where
the aggregate dollar amount of all of the foregoing by Seller does not exceed
$50,000;
(vi) issue
or
sell any shares of its capital stock of any class or any other of its
securities, or issue, grant or create any warrants, obligations, subscriptions,
options, convertible securities, stock appreciation rights or other commitments
to issue shares of capital stock;
(vii) amend
its
Articles of Incorporation, charter bylaws or other charter
documents;
(viii) pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
contingent or otherwise), other than the payment, discharge or satisfaction
for
fair and equivalent value in the ordinary course of its business consistent
with
its past practices of liabilities or obligations reflected or reserved against
in its Company Balance Sheet or incurred in the ordinary course of its business
since the Seller Balance Sheet Date or as otherwise contemplated by this
Agreement;
(ix) amend,
renew or terminate any Seller Material Contract or any License or Permit to
which it is a party, or relinquish or fail to renew any Seller Material Contract
or any License or Permit to which it is a party or waive, release or assign
any
material rights or claims thereunder, in each case in a manner that could
reasonably be expected to have a Seller Material Adverse Effect;
(x) commit
a
material default under any term or provision of, or suffer or permit to exist
any condition or event which, with notice or lapse of time or both, would
constitute a material default by it under, any Seller Material Contract or
any
of its Licenses or Permits;
(xi) dispose
of or permit to lapse any rights to the use of any Intellectual Property or
dispose of or disclose any Intellectual Property not a matter of public
knowledge, except for dispositions and lapses which, in the aggregate, do not
have a Seller Material Adverse Effect;
(xii) take
any
action which could reasonably be expected to have a Seller Material Adverse
Effect; or
(xiii) agree
to
do any of the things described in the preceding clauses (i)-(xii).
8.5 Interim
Seller Financial Statements.
From
the date hereof through the Effective Time, within 30 calendar days following
the end of each calendar month, Seller shall deliver to Buyer a Seller “in
house” prepared summary of its earnings for the period from Seller Balance Sheet
Date through the end of such calendar month and the applicable comparative
period in the preceding fiscal year and balance sheet as of the end of such
month, in each case accompanied by a certificate of the President of Seller
to
the effect that all such financial statements fairly present the financial
position and results of operations of Seller as of the date or for the periods
indicated, in accordance with GAAP, except as otherwise indicated in such
statements or described in Section 6.5(a)
and
subject to year end audit adjustments. Such certificate shall also state that
except as noted, from Seller Balance Sheet Date through the end of the previous
month there has been no Seller Material Adverse Effect.
41
8.6 Notices.
From the
date hereof through the Effective Time, Seller shall give to Buyer prompt
written notice of the occurrence or existence of any event, condition or
circumstance occurring which would constitute a violation or breach of this
Agreement by Seller or the Shareholders or which would render inaccurate in
any
material respect any of Seller’s representations or warranties of Seller or the
Shareholders contained herein. Upon the request of Buyer and, in any event,
two
(2) Business Days prior to Closing, Seller shall provide Buyer with a copy
of
each Contract entered into by Seller after the date hereof.
8.7 Non-Competition.
On or
prior to the Closing Date, Seller and each Shareholder shall execute and deliver
to Buyer the Non-Competition Agreement in the form of Exhibit B.
8.8 Employment
Matters.
Certain
Employee Matters.
(i) Except
as
provided in Section 3.1(c),
Seller
shall pay to all employees who are employed in the Business prior to or as
of
the Closing Date all compensation and benefits to which they are entitled
(whether pursuant to Seller policy, employment agreements, severance or
termination agreements, notice requirements under Applicable Law or any labor
union or collective bargaining agreements) for periods prior to the Closing
Date, including without limitation salaries, commissions, bonuses, deferred
compensation, severance, insurance, pensions and profit sharing, and including
any contingent payments, bonuses or incentive compensation accrued but unpaid
through the Closing Date, and shall be responsible for severance payments to
any
such employees who are employed by Buyer in the Business after the Closing
Date.
(ii) Buyer
shall have the right, in its sole and absolute discretion (but not any
obligation), to offer employment on or after Closing Date on, subject to
Applicable Law, an “at will” basis to any of the employees of Seller, in each
instance whether or not any of such persons is on disability or workers’
compensation leave as of the Closing Date, and in each instance, on terms and
conditions determined by Buyer, in its sole and absolute discretion. In this
regard, if Buyer so desires, from the date hereof through the Closing Date,
Seller shall permit Buyer to approach and negotiate with any or all employees
of
Seller, including, but not limited to, managerial staff, in an effort to
persuade them to continue in the employ of Seller pending the Closing and in
the
employ of Buyer thereafter, and Seller shall use reasonable efforts to assist
Buyer in such negotiations.
(iii) To
the
extent the consummation of the transactions contemplated herein (which may
include the termination of Seller’s employees) requires the giving of any such
notices, Seller shall be responsible for providing on a timely basis any and
all
required notices under Applicable Law to its employees or other Persons. Seller,
CVF and Heptagon shall, subject to Section 13.8,
jointly
and severally indemnify and hold harmless Buyer, its Affiliates and their
respective shareholders, members, directors, officers, managers, employees,
agents, attorneys and successors-in-interest from and against any and all Losses
which Buyer and any such other Persons may incur relating to or arising from
any
termination of any employee of the Business
before Closing, including, without limitation, Losses related to severance
expenses and payments, the failure to timely provide notice prior to
termination, or costs and expenses and claims arising under any statute, rule,
regulation, ordinance, policy, common law or contract.
42
(iv) Notwithstanding
any possible inferences to the contrary, nothing contained in this Agreement
shall confer upon any employee of Seller who is hired by Buyer any right with
respect to continuance of employment by Buyer, nor shall anything herein
interfere with the right of Buyer to terminate the employment of any such
employee at any time, with or without cause, or restrict Buyer in the exercise
of its independent business judgment in modifying any of the terms and
conditions of the employment of any such employee. No provision of this
Agreement shall create any third party beneficiary rights in any employee of
the
Business, any beneficiary or dependents thereof, or any collective bargaining
representative thereof with respect to the compensation, terms and conditions
of
employment and benefits that may be provided to any such employee by Buyer
or
under any benefit plan which Buyer may maintain.
8.9 No
Solicitation or Negotiation.
Unless
and until this Agreement is terminated, neither Seller nor any Shareholder
shall, nor shall any of them cause, suffer or permit any of their directors,
officers, employees, representatives, agents, investment bankers, advisors,
accountants or attorneys to, initiate or solicit, directly or indirectly, any
inquiries or the making of any proposal that constitutes or could be reasonably
expected to lead to an Alternative Proposal from any Person, or engage in any
discussions or negotiations relating thereto, or accept any Alternative
Proposal, or make or authorize any statement, recommendation or solicitation
in
support of any Alternative Proposal, or provide any confidential information
or
data to any Person with respect to any Alternative Proposal, or otherwise
facilitate, attempt to seek or continue any of the foregoing. Seller or such
Shareholder who receives any of the foregoing shall notify Buyer orally and
in
writing of the receipt of any such inquiries, offers or proposals (including
term and conditions of any such offer or proposal, the identity of the Person
making it and a copy of any written Alternative Proposal), as promptly as
practicable and in any event within forty-eight (48) hours after the receipt
thereof, and shall keep Buyer informed of the status and details of any such
inquiry, offer or proposal.
8.10 Risk
of Loss.
Seller
hereby assumes all risk of loss, damage and destruction to all or any part
of
the Purchased Assets until the Effective Time from any cause whatsoever, whether
or not Seller is insured therefor, including, but not limited to, fire, flood,
accident, acts of God, earthquake, insurrection, riot, or other causes commonly
referred to as force majeure events. Seller further assumes all risk until
the
Effective Time of any Seller Material Adverse Effect from any cause
whatsoever.
8.11 Transition
Assistance.
Seller
will use reasonable efforts (without incurring costs) to assist Buyer in
transitioning third party provided services such as internet access, utilities,
phone service, etc. and in transitionary licensees.
43
8.12 Assistance
in Transfer of Records and Data.
Seller
will fully cooperate with Buyer and make such advance preparations (including
making copies in advance, collecting paperwork, coordinating information about
computer systems and configurations) as are necessary so that Seller can
deliver, and Seller shall deliver, the data, records and other Intellectual
Property to Buyer on the Closing Date.
8.13 Change
of Record Title.
To the
extent that record title to any of the Purchased Assets continues to be held
by
Seller in the name of Omphalos Recovery Systems, Inc., Seller shall, prior
to
the Closing Date, cause record title in such Purchased Assets to be changed
to
its current corporate name and provide Buyer with confirmation of such change
in
record title in form satisfactory to Buyer and its counsel.
8.14 Meeting
of Seller’s Shareholders.
Within
one (1) Business Day of the execution of this Agreement by all parties, the
Shareholders shall cause Seller to provide notice of a meeting of all
shareholders of Seller upon 21 days’ notice in accordance with its by-laws and
to provide such 21 days’ notice to all shareholders of Seller of the execution
of this Agreement and the desire to complete the transaction which will be
voted
on such meeting. Seller has provided to Buyer a true and correct copy of the
notice that it shall provide to its shareholders in accordance with the
preceding sentence. Seller shall hold such meeting of all shareholders of Seller
on the day specified in the notice and shall not adjourn or postpone the meeting
without conducting a vote on the approval of this transaction.
8.15 Bulk
Sales.
If
Seller does not obtain an order under Section 3 of the Bulk Sales Act (Ontario)
exempting the sale of the Purchased Assets from the application of such Act
at
least three (3) Business Days prior to the Closing Date, then Seller shall
comply with the provisions of such Act and, in particular, Seller shall provide
to Buyer duplicate originals of a statement of its secured and unsecured trade
creditors in accordance with Section 4 of such Act at Closing and Buyer shall
deduct from the Purchase Price and pay directly, or cause to be paid through
Escrow by the Escrow Agent, to such creditors the amount of Seller’s
indebtedness to them (other than any Assumed Liabilities) by certified cheques,
provided that Buyer shall be under no obligation to pay any creditors if the
aggregate amount and such indebtedness is more than the Purchase
Price.
8.16 GST
Registration.
Prior
to the Closing, Buyer shall duly register under subdivision (d) of Division
I of
Part IX of the Excise
Tax Act (Canada)
with respect to GST.
8.17 [Intentionally
omitted.]
8.18 SIL.
Upon
Closing, and the payment by Buyer to Scientific Instrumentation, Ltd. of the
amounts set forth in the Disbursement Schedule, Seller shall cause Scientific
Instrumentation, Ltd. to deliver to Buyer all drawings, designs, sketches and
other tangible and intangible assets relating to the manufacture of Seller’s ISi
and other equipment, together with 14 completed ISi units, and all parts and
supplies relating thereto.
8.19 Class
B Stock.
Seller
shall use its best efforts to enter into an agreement prior to Closing with
the
holder of all of the issued and outstanding “Class B Stock” as to the amount
payable to such holder in respect of such stock or other claims. Such agreement
shall also contain a waiver from both Seller and the holder of the “Class B
Stock” waiving the requirement in Seller’s articles of incorporation (as amended
and supplemented) that the “Class B Stock” can only be redeemed sixty (60) days
after Seller receives a redemption notice from the holder of the “Class B
Stock”. In any event, Seller shall cause to be paid to such holder from the
Purchase Price such amounts.
44
ARTICLE
IX
CONDITIONS
PRECEDENT TO THE OBLIGATION
OF
EACH PARTY TO CLOSE
The
obligations of Seller, the Shareholders and Buyer to consummate the transactions
contemplated herein shall be subject to the fulfillment, at or prior to the
Closing of all of the conditions set forth below in this ARTICLE
IX.
9.1 No
Action or Proceeding.
The
consummation of the transactions contemplated herein shall not violate any
Applicable Law. Further, no temporary restraining Order, preliminary or
permanent injunction, cease and desist Order or other legal restraint preventing
the consummation of the transactions contemplated herein, or imposing material
damages in respect thereof, shall be in effect, nor shall there be any action
or
proceeding pending or threatened by any Person which seeks any of the foregoing
or seeks to impose conditions which would be materially burdensome upon the
Business, and which presents a substantial risk that the relief sought will
be
granted.
9.2 Governmental
and Other Approvals.
Other
than with respect to Deferred Consents, all Required Governmental Approvals
and
all Required Contractual Consents shall have been obtained without the
imposition of any conditions that are or would be materially burdensome upon
the
Business. Other than with respect to Deferred Consents, all Required
Governmental Approvals and Required Contractual Consents shall be in effect
and
all conditions and requirements prescribed by any of the same to be satisfied
on
or prior to the Closing Date shall have been satisfied.
9.3 Shareholder
Approval.
The
transactions contemplated by the Agreement shall have been approved by the
shareholders of Seller at a meeting duly called for that purpose upon 21 days’
notice to such shareholders.
ARTICLE
X
CONDITIONS
PRECEDENT TO THE OBLIGATION
OF
BUYER TO CLOSE
The
obligation of Buyer to consummate the transactions contemplated herein shall
be
subject to the fulfillment, at or before the Closing Date, of all of the
conditions set forth below in this ARTICLE
X.
10.1 Representations
and Warranties.
The
representations and warranties of Seller and the Shareholders contained in
this
Agreement and in each other Seller Document shall have been true and correct
when made and shall be true and correct in all material respects on and as
of
the Closing Date with the same force and effect as though made on and as of
the
Closing Date, other than such representations and warranties as are made as
of
another specified date, which shall be true and correct as of such date;
provided, however, that if any portion of any representation or warranty is
already qualified by materiality, then for purposes of determining whether
this
Section
10.1
has been
satisfied, that portion of such representation or warranty as so qualified
must
be true and correct in all respects. At the Closing Seller and the Shareholders
shall have delivered to Buyer certificates to such effect signed by the
President and the Chief Financial Officer of Seller and each Shareholder, and
addressed to Buyer.
45
10.2 Performance
of Covenants.
Each
obligation of Seller or a Shareholder to be performed by it on or before the
Closing Date pursuant to the terms of this Agreement and each other Seller
Document shall have been duly performed on or before the Closing
Date
and such
party shall have delivered to Buyer a certificate to such effect signed by
its
President and Chief Financial Officer and addressed to Buyer.
10.3 No
Adverse Change.
There
shall not have occurred between the date hereof and the Closing Date any Seller
Material Adverse Effect, nor shall there have occurred any event, development
or
state of facts or circumstances (other than a change in general economic
conditions) which could reasonably be expected to result in any of the
foregoing, either alone or together with other such occurrences. At the Closing
Seller shall have delivered to Buyer a certificate to such effect signed by
the
President and Chief Financial Officer of Seller and addressed to Buyer and
its
lenders.
10.4 Opinion
of Counsel to Seller.
Buyer
shall have received the favorable opinion of ▇▇▇▇▇▇▇▇ Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, counsel to Seller, dated as of the Closing Date, addressed to
Buyer,
in the
form of Exhibit
D.
10.5 Litigation.
No
action, suit or proceeding shall have been instituted before any court or
governmental body or instituted or threatened by any governmental agency or
body
which has or could reasonably be expected to have, in the good faith opinion
of
Buyer, an adverse effect on the Intellectual Property or other Purchased Assets
or a Seller Material Adverse Effect.
10.6 Pay-Off
Letters.
Seller
or the Escrow Agent shall have received from each Shareholder and each Person
who holds a Lien (other than a Permitted Lien) against any of the Purchased
Assets a written commitment, in form satisfactory to Buyer and its counsel,
to
the effect that upon receipt by such party of payment in full of the obligations
owed to such party as set forth in such commitment (which in the case of the
Shareholders shall be subject to reduction by converting all or a portion of
such obligation into equity of Seller as described in Section 4.5)
such
Party will release all liens and security interests in its favor encumbering
the
Purchased Assets. In this regard, Seller or the Escrow Agent shall also have
received UCC termination statements, signed verification statements discharging
the personal property security interests from each Shareholder and Person who
holds a Lien (other than a Permitted Lien) against the Purchased Assets, as
well
as such other documents sufficient to release all other types of Liens and
security interests registered against the Purchased Assets, with authority
to
file and/or record the same in the appropriate governmental offices upon payment
of the amount set forth in such pay-off letter and shall have transmitted the
same for filing and/or recordation.
46
10.7 Non-Competition
Agreements.
Seller
and each Shareholder shall have executed and delivered to Buyer the
Non-Competition Agreements contemplated in Section 8.7.
10.8 [Intentionally
omitted.]
ARTICLE
XI
CONDITIONS
PRECEDENT TO THE OBLIGATION
OF
SELLER TO CLOSE
The
obligation of Seller to consummate the transactions contemplated herein shall
be
subject to the fulfillment, at or before the Closing Date, of all the conditions
set forth below in this ARTICLE
XI.
11.1 Representations
and Warranties.
The
representations and warranties of Buyer contained in this Agreement and in
each
other Buyer Document shall have been true and correct when made and shall be
true and correct in all material respects on and as of the Closing Date with
the
same force and effect as though made on and as of the Closing Date, other than
such representations and warranties as are made as of another specified date,
which shall be true and correct as of such date; provided, however, that if
any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section
11.1
has been
satisfied, that portion of such representation or warranty as so qualified
must
be true and correct in all respects; and provided, further, that no breach
of
Buyer’s representations or warranties shall constitute a failure of this
condition precedent unless that breach, either alone or together with all other
such breaches, is material to Seller. At the Closing Buyer shall have delivered
to Seller a certificate to such effect signed by the President and Chief
Financial Officer of Buyer and addressed to Seller.
11.2 Performance
of Covenants.
Each of
the obligations of Buyer to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement and each other Buyer Document shall
have
been duly performed in all material respects on or before the Closing Date;
provided, however, that no breach of any such obligation or covenant shall
constitute a failure of this condition precedent unless that breach, either
alone or together with all other such breaches, is material to Seller. At the
Closing Buyer shall have delivered to Seller a certificate to such effect signed
by the President and Chief Financial Officer of Buyer and addressed to
Seller.
ARTICLE
XII
COVENANTS
AND AGREEMENTS OF THE PARTIES
AFTER
CLOSING
12.1 Continuation
of Existence.
Seller
shall maintain its corporate existence, powers and authority until at least
the
second anniversary of the Closing Date and during such period shall also
maintain a net worth, determined in accordance with GAAP, of at least
$1,000,000.
12.2 Change
Seller’s Name.
Upon
the Closing, Seller shall discontinue further use of the name “Gemprint”, or any
other name or logo which is part of the Intellectual Property either alone
or in
combination with other words and all marks, trade dress, logos, monograms,
domain names and other source identifiers similar to any of the foregoing or
embodying any of the foregoing alone or in combination with other words
(collectively the “Publication
Names and Marks”).
Immediately upon the Closing, the Company, the Shareholders and their Affiliates
shall cease all use of the Publication Names and Marks on or in connection
with
all stationary, business cards, purchase orders, invoices and other similar
correspondence and other documents of a contractual nature; provided, however,
that where Seller is legally required to identify itself until its name has
been
changed, it may continue to use its corporate name. The Company and the
Shareholders agree that, upon the Closing, neither the Company, the Shareholders
nor any of their respective Affiliates shall have any rights in the Publication
Names and Marks and neither the Company, the Shareholders nor any of their
respective Affiliates shall contest the ownership or validity of any rights
being assigned to Buyer hereunder in or to the Publication Names and Marks.
Not
later then one (1) Business Day after the Closing Date, Seller shall file
articles of amendment with Industry Canada and otherwise take such corporate
action as may be necessary to change its name to another name not including
the
word “Gemprint” or any other Publication Names and Marks. Seller shall provide
Buyer, following the Closing, with a copy of the articles of amendment filed
with Industry Canada.
47
12.3 NWT
Receivable.
If the
NWT Receivable to be assigned to Buyer as part of the Purchased Assets has
not
been paid in full within six (6) months of the Closing Date, Seller shall,
upon
demand of Buyer, pay to Buyer the then outstanding balance of the NWT
Receivable. Upon receipt of such payment, Buyer shall assign to Seller the
right
to collect such outstanding NWT Receivable (which shall not include any right
to
collect any receivable generated after the Closing Date).
12.4 Refunds
and Remittances.
After
the Closing Date, if Seller or any of its Affiliates receives any refund or
other amount which is a Purchased Asset, relates to an Assumed Liability or
is
otherwise properly due and owing to Buyer in accordance with the terms of this
Agreement, Seller promptly shall remit, or shall cause to be remitted, such
amount to Buyer.
ARTICLE
XIII
INDEMNIFICATION
13.1 Indemnification
by Seller, CVF and Heptagon.
Seller,
CVF and Heptagon shall, subject to Section
13.8,
jointly
and severally, indemnify, defend and hold harmless (i) Buyer,
(ii) each of Buyer’s Affiliates, assigns and successors in interest to the
Purchased Assets, and (iii) each of their respective shareholders, members,
directors, officers, managers, employees, agents, attorneys and representatives,
from and against any and all Losses which may be incurred or suffered by any
such party and which may arise out of or result from:
(a) provided
Buyer’s claim therefor is instituted by written notice within the time period
specified in Section 13.6,
any
breach of any representation, warranty, covenant or agreement of Seller or
the
Shareholders contained in this Agreement or in any other Seller Document and
any
breach of any such representation or warranty as if such representation and
warranty were made on and as of the Closing Date, including, without limitation,
any attempt (whether or not successful) by any Person to cause or require Buyer
to pay, perform or discharge any debt, obligation, deficiency, liability or
commitment the existence of which constitutes a breach of any such
representation, warranty, covenant or agreement;
48
(b) any
litigation, arbitration, governmental investigation, suit, action or other
proceeding referred to at Section
6.8;
(c) any
severance obligation of Buyer to any of Seller’s employees that Buyer employs in
the Business following the Closing in excess of the obligation being assumed
by
Buyer pursuant to Section
3.1(c);
(d) any
Tax
Liability of Seller, any liability not disclosed in Schedule
6.5(e)
or in
the Disbursement Schedule or disclosed but in excess of $150,000 in the
aggregate, and any other Excluded Liability;
(e) any
other
debt, liability or obligation of Seller, direct or indirect, fixed, contingent
or otherwise, now or as of the Effective Time known or unknown, and whether
or
not then due or payable, which exists at or as of the Effective Time or which
arises after the Effective Time but which is based upon or arises from any
act,
omission, transaction, circumstance, sale of goods or services, state of facts
or other condition which occurred or existed on or before the Effective Time,
except to the extent the same is expressly assumed by Buyer pursuant to
Section 3.1;
(f) any
claim
that any of the patents, software or other Intellectual Property owned by Seller
and used by it infringes the rights of any other Person;
(g) any
claim
by any holder of “Class B Stock” of Seller with respect to any notice of
redemption, the redemption or attempted redemption of such stock, the payment
of
amounts due such holder or to which such holder is entitled, the approval of
Seller’s shareholders to the transactions contemplated herein, any other matter
which may relate to this Agreement or any other claim made by such holders;
and
(h) any
and
all actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses, including, without limitation, legal fees and expenses, incurred
in enforcing this indemnity.
13.2 Indemnification
by Buyer.
Provided Seller’s claim therefor is instituted by written notice within the time
period specified in Section
13.7,
Buyer
shall indemnify, defend and hold harmless Seller from and against any Losses
arising out of or due to (i) a breach of any representation, warranty,
covenant or agreement of Buyer contained in this Agreement or in any Buyer
Document and any breach of any such representation or warranty as if such
representation and warranty were made on and as of the Closing Date; and
(ii) any liability or obligation assumed by Buyer pursuant to Section
3.1.
13.3 Computation
of Losses. For
purposes of calculating any Losses suffered by an indemnified party pursuant
to
Sections
13.1,
(h),
or
under any other specific indemnification covenant contained in this Agreement,
the amount of the Losses suffered by the indemnified party shall be the net
amount of Losses so suffered after giving effect to (i) any insurance proceeds
recoverable with respect to such matter and (ii) any Tax Benefits attributable
to such Losses. Each
Loss
shall bear interest at 5% per annum from the date incurred to the date the
indemnification payment with respect thereto is made.
49
13.4 Notice
to Indemnifying Party.
Any
party (the “Indemnified
Party”)
seeking indemnification pursuant to Sections
13.1
or
1.1(h),
or
pursuant to any other indemnification covenant contained in this Agreement,
shall promptly give the party from whom such indemnification is sought (the
“Indemnifying
Party”)
written notice of the matter with respect to which such indemnification is
sought, which notice shall specify in reasonable detail, if known, the amount
or
an estimate of the amount of the liability arising therefrom and the basis
of
the claim. Such notice shall be a condition precedent to any liability of the
Indemnifying Party for indemnification hereunder, but the failure of the
Indemnified Party to give prompt notice of a claim shall not adversely affect
the Indemnified Party’s right to indemnification hereunder except
to
the extent that (but only to the extent that) the Indemnifying Party
conclusively demonstrates that (i) but for such failure, the Indemnifying Party
could have avoided all or a portion of the Losses in question through contest,
compromise, settlement or otherwise or (ii) the Indemnifying Party has suffered
a Loss it would not have suffered absent such failure.
13.5 Third
Party Claims.
(a) Defense
by Indemnifying Party.
In
connection with any claim giving rise to indemnity hereunder resulting from
or
arising out of any claim or legal proceeding by a Person who is not a party
to
this Agreement (a “Third
Party Claim”),
the
Indemnifying Party at its sole cost and expense may, upon written notice to
the
Indemnified Party, assume the defense of any such
Third Party Claim (i) if it acknowledges to the Indemnified Party in writing
its
obligations to indemnify the Indemnified Party with respect to all elements
of
such Third Party Claim (subject to any limitations on such liability contained
in this Agreement) and (ii) if it provides assurances, reasonably satisfactory
to the Indemnified Party, that it will be financially able to satisfy such
Third
Party Claim in full if the same is decided adversely. If the Indemnifying Party
assumes the defense of any Third Party Claim, it may use counsel of its choice
to prosecute such defense, subject to the approval of such counsel by the
Indemnified Party, which approval shall not be unreasonably withheld or delayed.
The Indemnified Party shall be entitled to participate in (but not control)
the
defense of any such Third Party Claim, with its counsel and at its own expense;
provided, however, that if the Indemnified Party, in its sole discretion,
determines that there exists a conflict of interest between the Indemnifying
Party (or any constituent party thereof) and the Indemnified Party (it being
understood that the mere fact that the Indemnifying Party is required to
indemnify the Indemnified Party hereunder shall not, absent any other conflict
of interest, constitute a conflict of interest for this purpose), then the
Indemnified Party (or any constituent party thereof) shall have the right to
engage separate counsel, the reasonable costs and expenses of which shall be
paid by the Indemnifying Party, but in no event shall the Indemnified Party
be
liable for the costs and expenses of more than one such separate
counsel. If
the
Indemnifying Party assumes the defense of any such Third Party Claim, the
Indemnifying Party shall take all steps necessary to pursue the resolution
thereof in a prompt and diligent manner. In the event that the Indemnifying
Party exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party
all witnesses, pertinent records, materials and information in the Indemnified
Party’s possession or under the Indemnified Party’s control relating thereto as
are reasonably required by the Indemnifying Party without cost to the
Indemnifying Party. The Indemnifying Party shall be entitled to consent to
a
settlement of, or the stipulation of any judgment arising from, any such Third
Party Claim, with the consent of the Indemnified Party, which consent shall
not
be unreasonably withheld or delayed; provided, however, that no such consent
shall be required from the Indemnified Party if (i) the Indemnifying Party
pays
or causes to be paid all Losses arising out of such settlement or judgment
concurrently with the effectiveness thereof (as well as all other Losses
theretofore incurred by the Indemnified Party which then remain unpaid or
unreimbursed), (ii) in the case of a settlement, the settlement is conditioned
upon a complete release by the claimant of the Indemnified Party and (iii)
such
settlement or judgment does not require the encumbrance of any asset of the
Indemnified Party, invalidate, subordinate or result in a license of any
Intellectual Property which is part of the Purchased Assets or impose any
restriction upon its conduct of business. Notwithstanding the foregoing,
however, Buyer, if it is the Indemnified Party, shall in all cases be entitled
to control of the defense of any such Third Party Claim if it (a) may result
in
liabilities which, taken with other then existing claims by Buyer under this
ARTICLE
XIII,
would
not be fully indemnified hereunder, (b) may have an adverse impact on the
operations or the financial condition of Buyer or the Business (including an
effect on the Tax liabilities, earnings or ongoing business relationships of
Buyer or the Business thereafter) even if the Indemnifying Party pays all
indemnification amounts in full, (c) relates to any Intellectual Property
which is part of the Purchased Assets, (d) seeks non-monetary relief
(including, but not limited to, an order or injunction) which could adversely
affect the Business, or (d) seeks criminal penalties, fines or sanctions against
Buyer.
50
(b) Defense
by Indemnified Party.
If the
Indemnifying Party does not assume the defense of any such Third Party Claim,
the Indemnified Party may defend against such Third Party Claim and settle
or
compromise the same, after giving notice thereof to the Indemnifying Party,
on
such terms as the Indemnified Party may deem appropriate, and the Indemnifying
Party shall be entitled to participate in (but not control) such defense with
its own counsel and at its own expense. The Indemnifying Party shall cooperate
with the Indemnified Party in such defense and make available to the Indemnified
Party, at the Indemnifying Party’s expense, all such witnesses, records,
materials and information in the Indemnifying Party’s possession or under the
Indemnifying Party’s control relating thereto as are reasonably required by the
Indemnified Party. If the Indemnifying Party thereafter seeks to question the
manner in which the Indemnified Party defended such Third Party Claim or the
amount or nature of any such settlement, the Indemnifying Party shall have
the
burden to prove by a preponderance of the evidence that the Indemnified Party
did not defend or settle such third-party claim in a reasonably prudent manner.
The Indemnified Party shall not settle or compromise any Third Party Claim
for
which it is entitled to indemnification hereunder, unless suit shall have been
instituted against it and the Indemnifying Party shall not have assumed the
defense of such suit after notification as provided in Section
13.4.
13.6 Survival
of Representations and Covenants of Seller and the Shareholders.
Notwithstanding any right of Buyer fully to investigate the affairs of Seller
and notwithstanding any actual knowledge of facts determined or determinable
by
Buyer pursuant to such investigation or right of investigation, Buyer shall
have
the right to rely fully upon the representations, warranties, covenants and
agreements of Seller and the Shareholders contained in this Agreement or in
any
agreement, instrument or other document delivered to Buyer by Seller, the
Shareholders or any of their representatives in connection with the transactions
contemplated by this Agreement. With the sole exception of those covenants
which
are to be performed by Seller after the Closing (which shall survive until
a
claim thereon is barred by the applicable statute of limitations (including
extensions and waivers thereof)), each representation, warranty, covenant and
agreement of Seller and the Shareholders contained herein shall survive the
execution and delivery of this Agreement and the Closing and shall thereafter
terminate and expire on the second anniversary of the Closing Date, unless,
on or before such date, Buyer has delivered to Seller and the Shareholders
a
written notice of a claim with respect to such representation, warranty,
covenant or agreement; provided, however, that (i) the representations and
warranties contained in Section
6.4
shall
continue indefinitely and shall not terminate or expire, and (ii) the
representations and warranties contained in Sections
6.6,
6.7(b)
and 6.16
shall
terminate and expire ninety (90) days after the expiration of the statute of
limitations (including extensions and waivers thereof) applicable to claims
by
third parties against Buyer in respect of the matter or matters which are the
subject of such representations and warranties unless, on or before such date,
Buyer has delivered to Seller a written notice of a claim with respect to such
representation or warranty; and provided, further, that nothing contained herein
shall terminate or limit in any manner whatsoever any rights Buyer has or may
have in respect of any knowing or intentional misrepresentation by Seller or
the
Shareholders.
51
13.7 Survival
of Representations and Covenants of Buyer.
With
the sole exception of those covenants which are to be performed by Buyer after
the Closing (which shall survive until a claim thereon is barred by the
applicable statute of limitations), each representation, warranty, covenant
and
agreement of Buyer contained herein shall survive the execution and delivery
of
this Agreement and the Closing and shall thereafter terminate and expire on
the
second anniversary of the Closing Date, unless, on or before such date, Seller
has delivered to Buyer a written notice of a claim with respect to such
representation, warranty, covenant or agreement.
13.8 Determination
of Indemnification Amounts; Limitations.
(a) Indemnity
Cap Amount.
Except
as otherwise provided herein, the aggregate liability of Seller, CVF and
Heptagon for indemnification with respect to Section 13.1(f)
or any
breach of a representation or warranty shall not exceed the Indemnity Cap Amount
and the individual liability of each Shareholder for such indemnification shall
not exceed an amount equal to the Indemnity Cap Amount multiplied by the
Indemnity Percentage set forth in Annex
I
for each
Shareholder.
(b) Liability
of Each Shareholder.
The
maximum liability of CVF or Heptagon with respect to any claim for Losses under
Section 6.7(c)
or with
respect to Section
13.1(f)
or any
breach of a representation or warranty shall be such Shareholder’s Indemnity
Percentage of the Indemnity Cap Amount; provided, that the representation’s and
warranties contained in ARTICLE
VI(A),
and any
indemnification with respect to the Non-Competition Agreement, are made
severally by each Shareholder as to himself or itself only and any Shareholder
who has breached such Non-Competition Agreement or any such representation
or
warranty as to himself or itself (but only such Shareholder) shall be liable
with respect to all Losses arising from the breach thereof without being limited
by Section 13.8(a).
(c) Order
of Payment.
Buyer
shall seek payment for any amounts due with respect to all claims for
indemnification under Section 6.7(c)
or
ARTICLE
XIII
solely
as follows: (i) first, out of the Escrow in accordance with the provisions
of
the Escrow Agreement, and (ii) second, to the extent that amounts owing by
the Seller and the Shareholders exceed the amount of the remaining funds in
the
Escrow then due to Seller, Buyer shall be entitled to seek payment from Seller
and from each Shareholder directly for such Shareholder’s Indemnity Percentage
of the amount of such excess, subject to the limitation in Section
13.8(a).
52
13.9 No
Waiver Relating to Claims for Fraud.
The
liability of any party under this ARTICLE
XIII
shall be
in addition to, and not exclusive of, any other liability that such party may
have at law or equity solely with respect to such party’s fraudulent acts or
omissions, if any. None of the provisions set forth in Section 13.8
shall be
deemed a waiver by any party to this Agreement of any right or remedy which
such
party may have at law or equity solely with respect to any other party’s
fraudulent acts or omissions, nor shall any such provisions limit, or be deemed
to limit (i) the amounts of recovery sought or awarded in any such claims for
fraud, (ii) the time period during which a claim for fraud may be brought or
(iii) the recourse which any such party may seek against another party with
respect to a claim for fraud.
13.10 Disbursements.
Twelve
(12) months from the Closing Date, Escrow Agent shall release from Escrow to
Seller an amount equal to the difference between (a) $212,500 and
(b) the sum of (i) the disbursements made from Escrow prior to such
date, and (ii) the sum of all Losses subject to then-pending
indemnification claims made under this Agreement.
ARTICLE
XIV
TERMINATION;
REMEDIES
14.1 Termination
Without Default.
Anything herein to the contrary notwithstanding, this Agreement and the
transaction contemplated by this Agreement shall terminate at the close of
business on February 28, 2006, unless extended by the mutual consent in
writing of the parties, and, except as specified in Section
14.2,
may
otherwise be terminated before the Closing only as follows (and in no other
manner):
(a) Mutual
Consent.
By the
mutual consent in writing of the parties.
(b) Conditions
to Buyer’s Performance Impossible.
By
Buyer upon written notice to Seller if any event occurs which would render
impossible the satisfaction of one or more conditions to the obligations of
Buyer set forth in ARTICLE IX
or
Sections 10.3,
10.4
or
10.5.
(c) Conditions
to Seller’s Performance Impossible.
By
Seller upon written notice to Buyer if any event occurs which would render
impossible the satisfaction of one or more conditions to the obligations of
Seller set forth in ARTICLE IX.
(d) Alternative
Proposal.
By
Buyer upon written notice to Seller and the Shareholders of a default under
Section 8.9,
or any
of Seller, CVF or Heptagon accepts an Alternative Proposal or publicly announces
that any of them are considering whether to accept an Alternative
Proposal.
53
(e) Buyer
Option.
By
Buyer
upon written notice to Seller, given at any time after December 31, 2005,
if the Closing has not occurred by December 31, 2005 other than as a result
of a default by Buyer in the performance of its obligations
hereunder.
14.2 Termination
Upon Default.
Either
party may terminate this Agreement by giving notice to the other on or prior
to
the Closing Date, without prejudice to any rights or obligations it may have,
if
(i) after written notice of the default and the passage of (A)
ten
(10)
Business Days, in the case of a default which is by its nature incapable of
being cured, or (B) thirty (30) Business Days, or such shorter period as may
end
upon the scheduled Closing Date, in the case of a default which by its nature
is
capable of being cured, the other party has failed in the due and timely
performance of any of its covenants or agreements herein contained (other than
those contained in Section 8.9
or there
shall have been a breach of the other’s warranties or representations herein
contained, and (ii) such failure or breach could reasonably be expected to
give
the
non-defaulting party grounds not to close pursuant to Sections
10.1,
10.2,
11.1
or
11.2,
as the
case may be. In any such event the party who is not guilty of the breach may,
in
addition to all of its other rights and remedies, recover all Losses incurred
by
it from the party responsible for the breach.
14.3 Specific
Performance.
The
parties acknowledge that the Purchased Assets are unique and cannot be obtained
by Buyer except from Seller and for that reason, among others, Buyer will be
irreparably damaged in the absence of the consummation of this Agreement.
Therefore, in the event of any breach by Seller or the Shareholders of this
Agreement, Buyer shall have the right, at its election, to obtain an order
for
specific performance of this Agreement, without the need to post a bond or
other
security, to prove any actual damage or to prove that money damages would not
provide an adequate remedy.
14.4 Attorneys’
Fees.
If
Seller or Buyer shall bring an action against the other by reason of any alleged
breach of any covenant, provision or condition hereof, or otherwise arising
out
of this Agreement (including, without limitation, in connection with an
arbitration proceeding brought pursuant to Section
4.2)
, the
unsuccessful party shall pay to the prevailing party all attorneys’ fees and
costs actually incurred by the prevailing party, in addition to any other relief
to which it may be entitled. As used in this Section
14.4
and
elsewhere in this Agreement, “actual attorneys’ fees” or “attorneys’ fees
actually incurred” means the full and actual cost of any legal services actually
performed in connection with the matter for which such fees are sought
calculated on the basis of the usual fees charged by the attorneys performing
such services, and shall not be limited to “reasonable attorneys’ fees” as that
term may be defined in statutory or decisional authority.
14.5 Waiver
of Immunity.
To
the
extent that Seller may be entitled, in any jurisdiction in which judicial
proceedings may at any time be commenced with respect to this Agreement or
any
other Seller Document, to claim for itself or its revenues, assets or properties
immunity (whether on grounds of sovereignty or otherwise) from suit, from the
jurisdiction of any court from attachment prior to judgment, from attachment
in
aid of execution of judgment or from execution of judgment and to the extent
that in any jurisdictions there may be attributed such an immunity (whether
or
not claimed), Seller hereby irrevocably agrees not to claim and hereby
irrevocably waives such immunity in respect of suit, jurisdiction of any court,
attachment prior to judgment, attachment in aid of execution of judgment and
execution of judgment, and consents to the giving of any relief in any legal
action, suit or proceeding by execution or any other form of process for the
enforcement of any judgment against Seller or its properties or assets. The
foregoing waiver and consent are intended to be effective to the fullest extent
now or hereafter permitted by applicable law in any jurisdiction in which any
suit, action or proceeding may be commenced with respect to this Agreement
or
any other Seller Document. Nothing expressed or implied in this Section
14.5
is
intended, nor shall be construed, to constitute an agreement respecting or
an
expressed or implied waiver by, Seller of any such claim of immunity (i) with
respect to a claim or action brought by Buyer which is not with respect to
any
of (A) this Agreement, (B) any other Seller Document or (C) the transactions
contemplated by this Agreement, regardless of what forum such claim or action
is
asserted, or (ii) with respect to any claim or action brought by a party who
is
not a party to this Agreement, regardless of what forum such
claim or action is asserted. The parties do not intend to grant, either
expressly or by implication, nor shall this Section
14.5
be
construed to confer, any rights on any parties not a party hereto.
54
ARTICLE
XV
EXPENSES;
CONFIDENTIALITY
15.1 Expenses.
Except
as otherwise expressly set forth herein, each party shall bear their own direct
and indirect expenses incurred in connection with the negotiation and
preparation of this Agreement, the other Seller Documents and Buyer Documents
and the consummation and performance of the transactions contemplated herein
and
therein.
Seller
and Buyer shall each be responsible for one-half of the Escrow
costs.
15.2 Confidentiality.
Except
in connection with any dispute between the parties and subject to any obligation
to comply with (i) any Law, (ii) any rule or regulation of any
Authority or securities exchange or (iii) any subpoena or other legal
process to make information available to the Persons entitled thereto, whether
or not the transactions contemplated herein shall be concluded, all information
obtained by Seller or any Shareholder, on the one hand, or Buyer, on the other
hand, about the other, and all of the terms and conditions of this Agreement,
shall, for a period of five (5) years after the date of this Agreement, be
kept
in confidence by each party, and each party shall cause its shareholders,
members, partners, directors, officers, managers, employees, agents and
attorneys to hold such information confidential. Such confidentiality shall
be
maintained to the same degree as such party maintains its own confidential
information and shall be maintained until such time, if any, as any such data
or
information either is, or becomes, published or a matter of public knowledge;
provided, however, that the foregoing shall not apply to any information
obtained by Buyer through its own independent investigations of Seller or
received by Buyer from a source not known by Buyer to be bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, Seller nor to any information obtained by
Buyer which is generally known to others engaged in the trade or business of
Seller; and provided, further, that from and after the Closing, Buyer shall
be
under no obligation to maintain confidential any such information concerning
Seller. In the event either party becomes legally compelled to disclose any
such
information, it shall promptly provide the other with written notice of such
requirement so that the other may seek a protective order or other remedy.
If
this Agreement shall be terminated for any reason, each party shall return
or
cause to be returned to the other all written data, information, files, records
and copies of documents, worksheets and other materials obtained by such party
in connection with this Agreement. The
provisions of this Section
15.2
shall
survive the Closing and continue indefinitely thereafter.
55
15.3 Publicity.
Up to
(and including) the Closing Date, no publicity release or announcement
concerning this Agreement or the transactions contemplated herein shall be
issued without advance written approval of the form and substance thereof by
Buyer and Seller; provided, however, that such restrictions shall not apply
to
any disclosure required by Authorities, Applicable Law or the rules of any
securities exchange which may be applicable (except
that each of Buyer and CVF shall provide to the other draft of any release
or
announcement at least one (1) calendar day prior to making such release or
announcement). For a period of ten (10) days after the Closing Date, the parties
shall consult with each other before issuing any press release or public
statement with respect to this Agreement or the transactions contemplated
herein, and, except as may be required by Applicable Law or the rules of any
securities exchange which may be applicable (except that each of Buyer and
CVF
shall provide to the other draft of any release or announcement at least one
(1)
calendar day prior to making such release or announcement), will not issue
any
such press release or public statement prior to such consultation. Neither
Seller nor any officer, employee, director, stockholder or other representative
thereof shall, at any time from and after the Closing, issue any press release
or make any public statement that is critical, disparaging or otherwise could
reasonably be interpreted as being negative with respect to Buyer or any of
its
Affiliates or their respective businesses, financial condition, directors,
officers, managers or employees.
ARTICLE
XVI
NOTICES
16.1 Notices.
All
notices, requests and other communications hereunder shall be in writing and
shall be delivered by courier or other means of personal service (including
by
means of a nationally recognized courier service or a professional messenger
service), or sent by or telecopy or mailed first class, postage prepaid, by
overnight mail by a nationally recognized service, in all cases, addressed
to:
If
to
Buyer, to: Collectors
Universe, Inc.
▇.▇.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief
Executive Officer
with
a
copy to: Loeb
& Loeb LLP
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
56
If
to
Seller, to: Gemprint
Corporation
c/o
CVF
Technologies Corporation
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
with
a
copy to: ▇▇▇▇▇▇▇▇
Grespan ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇,
▇▇▇▇▇▇
▇▇▇ 353
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If
to
CVF: CVF
Technologies Corporation
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
If
to
Heptagon: Heptagon
Investments Ltd.
c/o
MC-Patrimoine SA
▇
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Facsimile:
(▇▇) ▇▇-▇▇▇-▇▇▇▇
If
to the
Shepherd Group: 1456733
Ontario, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇
All
notices, requests and other communications shall be deemed given on the date
of
actual receipt or delivery as evidenced by written receipt, acknowledgement
or
other evidence of actual receipt or delivery to the address specified above.
In
case of service by telecopy, a copy of such notice shall be personally delivered
or sent by overnight mail, in the manner set forth above, within three
(3) Business Days thereafter. Either party hereto may from time to time by
notice in writing served as set forth above designate a different address or
a
different or additional person to which all such notices or communications
thereafter are to be given.
ARTICLE
XVII
MISCELLANEOUS
17.1 Further
Assurances.
Each of
the parties shall use its reasonable and diligent best efforts to proceed
promptly with the transactions contemplated herein, to fulfill the conditions
precedent for such party’s benefit or to cause the same to be fulfilled and to
execute such further documents and other papers and perform such further acts
as
may be reasonably required or desirable to carry out the provisions hereof
and
the transactions contemplated herein.
57
17.2 Modifications
and Amendments; Waivers and Consents.
At any
time prior to the Closing Date or termination of this Agreement, Buyer, on
the
one hand, and Seller, on the other hand, may, by written agreement:
(a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto;
(b) waive
any
inaccuracies in the representations and warranties made by the other party
contained in this Agreement or any other agreement or document delivered
pursuant to this Agreement; and
(c) waive
compliance with any of the covenants or agreements of the other party contained
in this Agreement. However, no such waiver shall operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits a waiver or consent by or on behalf of any party
hereto, such waiver or consent shall be given in writing.
17.3 Entire
Agreement.
This
Agreement (including the Exhibits hereto and Schedules) and the agreements,
documents and instruments to be executed and delivered pursuant hereto or
referred to herein are intended to embody the final, complete and exclusive
agreement among the parties with respect to the purchase of the Purchased Assets
and related transactions; are intended to supersede all prior agreements,
understandings and representations written or oral, with respect thereto; and
may not be contradicted by evidence of any such prior or contemporaneous
agreement, understanding or representation, whether written or
oral.
17.4 Governing
Law and Venue.
This
Agreement is to be governed by and construed in accordance with the laws of
the
State of Delaware applicable to contracts made and to be performed wholly within
such State, and without regard to the conflicts of laws principles thereof.
Any
suit brought hereon, whether in contract, tort, equity or otherwise, shall
be
brought in the state or federal courts sitting in New York County, New York,
the
parties hereto hereby waiving any claim or defense that such forum is not
convenient or proper. Each party hereby agrees that any such court shall have
in
personam jurisdiction over it, consents to service of process in any manner
prescribed in ARTICLE
XVI
or in
any other manner authorized by New York law, and agrees that a final judgment
in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner specified by
law.
17.5 Binding
Effect.
This
Agreement and the rights, covenants, conditions and obligations of the
respective parties hereto and any instrument or agreement executed pursuant
hereto shall be binding upon the parties and their respective successors,
assigns and legal representatives. Neither this Agreement, nor any rights or
obligations of any party hereunder, may be assigned by a party without the
prior
written consent of the other party; provided, however, that prior to or
following the Closing, this Agreement and any rights and obligations of Buyer
hereunder, and under any Buyer Documents may, without the prior written consent
of Seller, be assigned and delegated by Buyer to any Person affiliated with
Buyer or pledged or hypothecated
to any lender(s) of Buyer or any such Affiliate, and following the Closing,
this
Agreement and any rights and obligations of Buyer hereunder and under any Buyer
Documents may also be assigned and delegated by Buyer, without the prior written
consent of Seller, to any successor-in-interest of Buyer to the Business or
the
Purchased Assets or to a substantial portion thereof; provided, however, that
no
delegation by Buyer of any such obligation shall relieve Buyer of liability
therefor.
58
17.6 Counterparts/Facsimile
Signatures.
This
Agreement may be executed simultaneously in any number of counterparts and
by
facsimile signatures, each of which shall be deemed an original but all of
which
together shall constitute one and the same instrument. In making proof of this
Agreement it shall not be necessary to produce or account for more than one
counterpart.
17.7 Section
Headings.
The
section headings of this Agreement are for convenience of reference only and
shall not be deemed to alter or affect any provision hereof.
17.8 Currency.
All
payments required to be made pursuant to this Agreement, including, without
limitation, all amounts which in the aggregate comprise the Purchase Price
and
adjustments thereto made subsequent to the Closing, and amounts required to
be
paid in accordance with any indemnity provisions of this Agreement, shall be
made in United States dollars.
17.9 Severability.
In the
event that any provision or any part of any provision of this Agreement shall
be
void or unenforceable for any reason whatsoever, then such provision shall
be
stricken and of no force and effect. However, unless such stricken provision
goes to the essence of the consideration bargained for by a party, the remaining
provisions of this Agreement shall continue in full force and effect, and to
the
extent required, shall be modified to preserve their validity.
17.10 No
Third Party Rights.
Nothing
in this Agreement, whether express or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any Persons other than
the
parties to it and their respective successors and assigns, nor is anything
in
this Agreement intended to relieve or discharge the obligation or liability
of
any third Persons to any party to this Agreement, nor shall any provision give
any third Persons any right of subrogation or action over against any party
to
this Agreement.
17.11 Construction.
The
language in all parts of this Agreement shall in all cases be construed simply,
according to its fair meaning, and not strictly for or against any of the
parties hereto. Without limitation, there shall be no presumption against any
party on the ground that such party was responsible for drafting this Agreement
or any part thereof.
17.12 Time.
Time
shall be of the essence hereof.
59
17.13 No
Contra Proferentem.
The
parties acknowledge and agree that they have each had ample time and opportunity
to obtain legal and other professional advice which may deem necessary or
desirable with respect to this Agreement and the transactions contemplated
hereunder and that in continuing any provision in this Agreement or any document
contemplated hereby, the legal principle of “contra proferentem” shall not apply
or be applied.
[signatures
on following page]
60
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
COLLECTORS
UNIVERSE, INC.
a
Delaware corporation
By:
Its:
GEMPRINT
CORPORATION
a
Canadian corporation
By:
Its:
CVF
TECHNOLOGIES CORPORATION
a
Nevada
corporation
By:
Its:
HEPTAGON
INVESTMENTS LTD.
a
British
Virgin Islands corporation
By:
Its:
1456733
ONTARIO, INC.
an
Ontario, Canada corporation
By:
Its:
|
S-1
|
ANNEX
I
|
Shareholder
|
Shares
of Capital Stock
|
Indemnity
Percentage
|
|
CVF
|
31,536,066
shares of “Class A Stock”
|
93.6%
|
|
Heptagon
|
2,162,974
shares of “Class A Stock”
|
6.4%
|
|
Shepherd
Group
|
5,614,743
shares of “Class A Stock”
|
0
%
|
A-1