EXHIBIT 2.1
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DISPOSITION AGREEMENT
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BETWEEN
AMT ENVIRONMENTAL PRODUCTS INC.
- AND -
ALTERNATIVE MATERIALS TECHNOLOGY
- AND -
POLYMER SOLUTIONS, INC.
(FOR THE PURPOSES OF ARTICLES 10 AND 11, SUBSECTION 6.4(h) AND SECTION 6.11)
- AND -
PSI ACQUISITIONS CORP.
(FOR THE PURPOSES OF ARTICLES 10 AND 11)
- AND -
CHEMCRAFT HOLDINGS CORPORATION
Dated the 29th day of October, 2003
EXHIBIT 2.1
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
ARTICLE 1 INTERPRETATION......................................................2
1.1 Defined Terms...............................................2
1.2 Currency....................................................7
1.3 Sections and Headings.......................................7
1.4 Number, Gender and Persons..................................7
1.5 Accounting Principles.......................................8
1.6 Entire Agreement............................................8
1.7 Time of Essence.............................................8
1.8 Construction................................................8
1.9 Applicable Law..............................................8
1.10 Successors and Assigns......................................8
1.11 Amendments and Waivers......................................8
1.12 Disclosure..................................................9
1.13 Schedules...................................................9
ARTICLE 2 PURCHASE AND SALE OF PURCHASED SHARES...............................9
2.1 Purchase and Sale of Purchased Shares.......................9
2.2 Purchase Price..............................................9
2.3 Closing Financial Statements................................9
2.4 Disputes Concerning Closing Financial Statements...........10
2.5 Purchase Price Adjustment..................................10
2.6 Escrow.....................................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE VENDOR.......................11
3.1 Organization...............................................11
3.2 Authorization..............................................12
3.3 No Other Agreements to Purchase............................12
3.4 Authorized and Issued Capital..............................12
3.5 Options....................................................12
3.6 Ownership of Purchased Shares..............................12
3.7 No Subsidiaries............................................12
3.8 No Violation...............................................13
3.9 Business of the Corporation................................13
3.10 Title to Personal and Other Property.......................14
3.11 Location of Real Property..................................14
3.12 Title to Real Property.....................................14
3.13 Real Property Leases.......................................16
3.14 Accounts Receivable........................................16
3.15 Intellectual Property......................................16
3.16 Insurance..................................................17
3.17 No Expropriation...........................................17
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SECTION DESCRIPTION PAGE
3.18 Agreements and Commitments.................................17
3.19 Compliance with Laws; Governmental Authorization...........19
3.20 Consents and Approvals.....................................19
3.21 Financial Statements.......................................19
3.22 Books and Records..........................................20
3.23 Absence of Changes.........................................20
3.24 Taxes......................................................21
3.25 Litigation.................................................21
3.26 Residency..................................................21
3.27 Accounts and Attorneys.....................................22
3.28 Directors and Officers.....................................22
3.29 Dividends..................................................22
3.30 Non-Arm's Length Transactions..............................22
3.31 Environmental..............................................23
3.32 Employee Plans.............................................24
3.33 Collective Agreements......................................28
3.34 Employees..................................................28
3.35 Employee Accruals..........................................29
3.36 Customers and Suppliers....................................29
3.37 Product Warranties.........................................29
3.38 No Predecessors............................................29
3.39 Full Disclosure............................................29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................30
4.1 Organization...............................................30
4.2 No Violation...............................................30
4.3 Authorization..............................................30
4.4 Consents and Approvals.....................................30
ARTICLE 5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................31
5.1 Survival of Representations and Warranties of the Vendor...31
5.2 Expiration of the Representations and Warranties
of the Purchaser...........................................31
ARTICLE 6 COVENANTS..........................................................31
6.1 Access to the Corporation..................................31
6.2 Delivery of Books and Records..............................32
6.3 Change and Use of Name.....................................32
6.4 Conduct Prior to Closing - Vendor and Corporation..........32
6.5 Conduct Prior to Closing - Purchaser.......................34
6.6 Delivery of Documents......................................34
6.7 Delivery of Vendor's and Corporation's Corporate
and Closing Documentation..................................34
6.8 Delivery of Purchaser's Closing Documentation..............34
6.9 Intercorporate Indebtedness................................34
6.10 Maligie Payment............................................35
6.11 Shareholder Approval.......................................35
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SECTION DESCRIPTION PAGE
ARTICLE 7 CONDITIONS OF CLOSING..............................................35
7.1 Conditions of Closing in Favour of the Purchaser...........35
7.2 Conditions of Closing in Favour of the Vendor..............37
ARTICLE 8 CLOSING ARRANGEMENTS...............................................39
8.1 Place of Closing...........................................39
8.2 Transfer...................................................39
8.3 Further Assurances.........................................40
ARTICLE 9 INDEMNIFICATION....................................................40
9.1 Indemnification by the Vendor..............................40
9.2 Indemnification by the Purchaser...........................41
9.3 Notice of Claim............................................41
9.4 Dispute of Claims..........................................41
9.5 Exclusivity................................................42
9.6 Limitation on Indemnification - Vendor.....................42
9.7 Limitations and Indemnification - Purchaser................43
ARTICLE 10 SUPERIOR PROPOSALS................................................43
10.1 Right to Match.............................................43
ARTICLE 11 AGREEMENT AS TO COMPENSATION AND OTHER ARRANGEMENTS...............43
11.1 Purchaser Compensation.....................................43
11.2 Vendor Compensation........................................44
11.3 Liquidated Damages.........................................44
11.4 Limited Remedy.............................................44
ARTICLE 12 TERMINATION.......................................................44
12.1 Termination................................................44
ARTICLE 13 MISCELLANEOUS.....................................................45
13.1 Confidentiality of Information.............................45
13.2 Non-Solicitation of Employees..............................46
13.3 Notices....................................................46
13.4 Consultation...............................................47
13.5 Disclosure.................................................48
13.6 Assignment by Purchaser....................................48
13.7 Commercially Reasonable Effort.............................48
13.8 Vendor Parent and PAC Limitation...........................48
13.9 Counterparts...............................................49
EXHIBIT 2.1
DISPOSITION AGREEMENT
THIS AGREEMENT made the 29th day of October, 2003,
BETWEEN:
AMT ENVIRONMENTAL PRODUCTS INC.,
a company incorporated under the laws of the Province of
British Columbia, Canada,
(the "Vendor"),
AND:
ALTERNATIVE MATERIALS TECHNOLOGY,
a corporation incorporated under the laws of the State of
Nevada, United States of America,
(the "Corporation"),
AND:
POLYMER SOLUTIONS, INC.,
a corporation incorporated under the laws of the State of
Nevada, United States of America,
(the "Vendor Parent"),
AND:
PSI ACQUISITIONS CORP.,
a company incorporated under the laws of the Province of
British Columbia, Canada,
("PAC"),
AND:
CHEMCRAFT HOLDINGS CORPORATION,
a corporation incorporated under the laws of the State of
North Carolina, United States of America,
(the "Purchaser").
THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants, agreements, representations, warranties and indemnities herein
contained and for other good and valuable consideration (the receipt and
sufficiency of which are acknowledged by each party), the parties covenant and
agree as follows:
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ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS
For the purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the respective meanings specified or
referred to below and grammatical variations of such terms shall have
corresponding meanings:
(a) "Act" means the Company Act (British Columbia) as in effect on
the date hereof;
(b) "Accounts Receivable Adjustment" means the amount, if any, by
which all of the Corporation's accounts receivable at the Time
of Closing that are in excess of 90 days outstanding exceeds
the reserve for doubtful accounts in the Corporation's
Financial Statements. For greater certainty, where an amount
is due to the Corporation from a customer, only the portion of
that amount that is more than 90 days outstanding is to be
used in calculating the amount, if any, by which all of the
Corporation's accounts receivable at the Time of Closing are
in excess of 90 days outstanding, and no inclusion shall be
made for the portion of that amount which is outstanding for
90 days or less;
(c) "Affiliate" has the meaning attributed to that term in the
Act;
(d) "Agreement" means this Disposition Agreement and all
amendments hereto made by written agreement between the
parties hereto, herein and similar expressions mean and refer
to this Agreement and not to any particular Article, Section,
Subsection or Schedule;
(e) "Arbitrator" has the meaning set out in Section 2.4;
(f) "Associate" has the meaning attributed to that term in the
Act;
(g) "Audited Financial Statements" means the audited financial
statements of the Vendor Parent as at and for the financial
years ended March 31, 2001, 2002 and 2003, including the notes
thereto and the report of the Vendor Parent's auditors
thereon, a copy of which is annexed hereto as Schedule 1;
(h) "B of A Loan Agreement" means the Business Loan Agreement,
dated October 26, 2001, among Bank of America, N.A., Vendor
Parent, the Corporation, PAC and the Vendor, as amended by
amendments #1 and #2, together with security agreements in
connection therewith;
(i) "Business" means the business currently and heretofore carried
on by the Corporation consisting of the research, development,
manufacturing and distribution of technology-based proprietary
paint coatings and adhesives;
(j) "Business Day" means any day (other than a Saturday or a
Sunday) on which the main
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branch of the Central Carolina Bank in North Carolina, U.S.A.
and the main branch of the Bank of Montreal in ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ are open for business;
(k) "Code" means the Internal Revenue Code of 1986, as amended;
(l) "Claim" has the meaning set out in Section 9.3;
(m) "Claim's Arbitrator" has the meaning set out in Section 9.4;
(n) "Closing Balance Sheet" has the meaning set out in Section
2.3;
(o) "Closing Date" means the third Business Day following
Shareholder Approval;
(p) "Closing Financial Statements" has the meaning set out in
Section 2.3;
(q) "Closing Income Statement" has the meaning set out in Section
2.3;
(r) "Common Stock" means the shares without par value in the
capital of the Corporation;
(s) "Contract" means any agreement, indenture, contract, lease,
deed of trust, licence, option, instrument or other
commitment, whether written or oral;
(t) "Corporation's Financial Statements" means the balance sheet
of the Corporation dated March 31, 2003 and the statement of
operations of the Corporation for the year ending March 31,
2003, copies of which are annexed hereto as Schedule 3;
(u) "▇▇▇▇▇ ▇▇▇▇" means the Purchaser's auditors, ▇▇▇▇▇ ▇▇▇▇ PLLC,
Certified Public Accountants;
(v) "Eligible Expenses" means amounts (other than amounts on
account of repayment of Intercorporate Indebtedness) paid or
credited to the Vendor, PAC or Vendor Parent by the
Corporation for the expenses thereof which (i) in the
aggregate do not exceed $175,000, and (ii) are of a type that
was paid or credited to the Vendor, PAC or the Vendor Parent
by the Corporation during the fiscal year ended March 31,
2003;
(w) "Employee Plans" has the meaning set out in Section 3.32;
(x) "Encumbrance" means any encumbrance, lien, charge, hypothec,
pledge, mortgage, title retention agreement, security interest
of any nature, adverse claim, exception, reservation,
easement, right of occupation, any matter capable of
registration against title, option, right of pre-emption,
privilege or any Contract to create any of the foregoing;
(y) "Environmental Laws" has the meaning set out in Subsection
3.31(a);
(z) "Environmental Permits" has the meaning set out in Subsection
3.31(b);
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(aa) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the United States Department of Labor
regulations promulgated thereunder;
(bb) "Escrow Agent" means Farris, Vaughan, ▇▇▇▇▇ & ▇▇▇▇▇▇ or such
other escrow agent as may be mutually acceptable to the Vendor
and the Purchaser;
(cc) "Escrow Amount" means $750,000 plus all interest accrued
thereon;
(dd) "Escrow Release Date" means the first Business Day which is on
or immediately following the day which is the later of (i) 16
days after the delivery of the Closing Financial Statements by
the Vendor to the Purchaser, and (ii) 46 days following the
Closing Date, at which time the Escrow Agent may release the
Escrow Amount subject to and in accordance with this
Agreement;
(ee) "Exclusivity Period" means the period from the date hereof to
11:59 pm on the date which is 125 days from the date hereof;
(ff) "Financial Statements" means the Audited Financial Statements,
the Interim Financial Statements and the Corporation's
Financial Statements;
(gg) "Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official
or other instrumentality of the United States, Canada or other
country, any state, county, city or other political
subdivision;
(hh) "Hazardous Substances" has the meaning set out in Subsection
3.31(a);
(ii) "Indemnified Party" has the meaning set out in Section 9.3;
(jj) "Indemnifying Party" has the meaning set out in Section 9.3;
(kk) "Information" has the meaning set out in Section 13.1;
(ll) "Intellectual Property" has the meaning set out in Section
3.14;
(mm) "Intercorporate Indebtedness" means the amount of $2,088,811
owed by the Corporation to the Vendor Parent;
(nn) "Interim Financial Statements" means the unaudited financial
statements of the Vendor Parent as at and for the three (3)
month periods ending June 30th, 2002 and June 30th, 2003,
copies of which financial statements are annexed hereto as
Schedule 2;
(oo) "Inventory Adjustment" means the amount, if any, by which the
Corporation's "adjusted inventory" at the Time of Closing is
less than the inventory in the Corporation's Financial
Statements. The Corporation's "adjusted inventory" shall equal
the inventory in the Corporation's Financial Statements except
that: (i) all
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raw material inventory for which no portion thereof has been
consumed in the manufacture of the Corporation's products in
the six preceding months will have a nil value; (ii) all raw
material inventory which have an expiry date (as stated in the
supplier's product data sheet for such inventory) which
precedes the date upon which such inventory is expected to be
used (calculated based upon the average monthly usage of such
inventory during the preceding 6 months) will have a nil
value; (iii) all finished inventory which exceeds expected
sales for such inventory for the following six months
(calculated based upon the average monthly sales of such
inventory during the preceding 6 months, as adjusted to
reflect sales to new customers of the Corporation who have
less than 6 months of sales history) will have a nil value;
(iv) all raw material, work in progress and finished inventory
that is not in compliance with the Corporation's formulation
specifications will have a nil value; and (v) any finished
inventory which has been manufactured prior to the preceding
twelve (12) months will have a nil value;
(pp) "IRS" means the United States Internal Revenue Service;
(qq) "Leased Property" has the meaning set out in Section 3.11;
(rr) "Leases" has the meaning set out in Section 3.13;
(ss) "Licences" has the meaning set out in Section 3.19;
(tt) "Losses", in respect of any matter, means all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs
and expenses (including, without limitation, all legal and
other professional fees and disbursements, interest, penalties
and amounts paid in settlement) arising directly or indirectly
as a consequence of such matter;
(uu) "Maligie Payment" means the employment payment obligations of
the Corporation to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ which arise in connection
with the closing of the transactions contemplated hereby;
(vv) "Material Adverse Change" or "Material Adverse Effect" means,
in respect of the person referred to, any change, effect,
event, occurrence or change in state of facts that is, or
would reasonably be expected to be, material and adverse to
the business, operations or financial condition of such person
other than any change, effect, event, occurrence or change in
state of facts relating to (i) the Canadian or California
economies or securities markets in general, (ii) any change in
the trading price of the Vendor Parent's common shares in the
case of a member of the Vendor Group, (iii) the paint coatings
and adhesives industry in general, and not specifically
relating to such person, or (iv) arising from the transactions
contemplated by this Agreement;
(ww) "Permitted Encumbrances" means:
(i) servitudes, easements, restrictions, rights-of-way
and other similar rights in real property or any
interest therein, provided the same are not of such
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nature as to materially adversely affect the use of
the property subject thereto by the Corporation;
(ii) undetermined or inchoate liens, charges and
privileges incidental to current construction or
current operations;
(iii) statutory liens, charges, adverse claims, security
interests or encumbrances of any nature whatsoever
claimed or held by any Governmental or Regulatory
Authority that have not at the time been filed or
registered against the title to the asset or served
upon the Vendor pursuant to law or that relate to
obligations not due or delinquent;
(iv) assignments of insurance provided to landlords (or
their mortgagees) pursuant to the terms of any lease
and liens or rights reserved in any lease for rent or
for compliance with the terms of such lease;
(v) security given in the ordinary course of the Business
to any public utility, municipality or government or
to any statutory or public authority in connection
with the operations of the Business, other than
security for borrowed money; and
(vi) the Permitted Encumbrances disclosed in writing by
the Vendor to the Purchaser;
(xx) "Personnel" has the meaning set out in Section 13.1;
(yy) "PSI Advances" means amounts advanced to the Vendor, PAC or
Vendor Parent by the Corporation other than amounts advanced
on account of Eligible Expenses and other than on account of
repayment of the Intercorporate Indebtedness;
(zz) "Purchase Price" has the meaning set out in Section 2.2;
(aaa) "Purchase Price Adjustment" has the meaning set out in Section
2.5;
(bbb) "Purchased Shares" has the meaning set out in Section 2.1;
(ccc) "PWC" means the Vendor Parent's auditors,
PricewaterhouseCoopers LLP, Chartered Accountants;
(ddd) "Shareholder Approval" has the meaning set out in Section
7.1(g);
(eee) "Superior Proposal" means any bona fide proposal with respect
to any merger, amalgamation, arrangement, take-over bid, sale
of all or substantially all of the assets or similar
transaction involving the Vendor Group, other than the
transaction contemplated hereby, made during the Exclusivity
Period, that the board of directors of Vendor Parent
determines in good faith, if consummated in accordance with
its terms, would result in a transaction having a value to
shareholders and optionholders of the Vendor Parent of not
less than $8.0 million;
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(fff) "Tax" (and, with correlative meaning, "Taxes," "Taxable" and
"Taxing") means (i) any federal, state, local or foreign
income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental
or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any
Governmental or Regulatory Authority responsible for the
imposition of any such tax (domestic or foreign), (ii) any
liability for payment of any amounts of the type described in
(i) as a result of being a member of an affiliated,
consolidated, combined, unitary or other group for any Taxable
period and (iii) any liability for the payment of any amounts
of the type described in (i) or (ii) as a result of any
obligation to indemnify any other Person;
(ggg) "Tax Act" means the Income Tax Act (Canada), as amended from
time to time;
(hhh) "Tax Return" means any return, report, information return,
schedule or other document (including any related or
supporting information) filed or required to be filed with
respect to any taxing authority with respect to Taxes;
(iii) "Time of Closing" means 9:00 am (Vancouver, Canada time) on
the Closing Date; and
(jjj) "Vendor Group" means the Corporation, Vendor, PAC and the
Vendor Parent.
1.2 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are expressed in lawful money of the United States of America.
1.3 SECTIONS AND HEADINGS
The division of this Agreement into Sections and the insertion of
headings are for convenience of reference only and shall not affect the
interpretation of this Agreement. Unless otherwise indicated, any reference in
this Agreement to a Section or a Schedule refers to the specified Section of or
Schedule to this Agreement.
1.4 NUMBER, GENDER AND PERSONS
In this Agreement, words importing the singular number only shall
include the plural and vice versa, words importing gender shall include all
genders and words importing persons shall include individuals, corporations,
partnerships, associations, trusts, unincorporated organizations, Governmental
or Regulatory Authority and other legal or business entities.
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1.5 ACCOUNTING PRINCIPLES
Any reference in this Agreement to generally accepted accounting
principles refers to generally accepted accounting principles as approved from
time to time by the Financial Accounting Standards Board or any successor
thereto.
1.6 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties or other
provisions, express or implied, collateral, statutory or otherwise, relating to
the subject matter hereof except as herein provided.
1.7 TIME OF ESSENCE
Time shall be of the essence of this Agreement.
1.8 CONSTRUCTION
The parties agree that each party and its counsel have reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments, schedules or
exhibits thereto.
1.9 APPLICABLE LAW
This Agreement shall be construed, interpreted and enforced in
accordance with, and the respective rights and obligations of the parties shall
be governed by, the laws of the Province of British Columbia and each party
hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction
of the courts of such province and all courts competent to hear appeals
therefrom.
1.10 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and shall be binding on
and enforceable by the parties and their respective successors and permitted
assigns. Subject to Section 13.6, no party may assign any of its rights or
obligations hereunder without the prior written consent of the other parties.
1.11 AMENDMENTS AND WAIVERS
No amendment or waiver of any provision of this Agreement shall be
binding on any party unless consented to in writing by such party. No waiver of
any provision of this Agreement shall constitute a waiver of any other
provision, nor shall any waiver constitute a continuing waiver unless otherwise
expressly provided.
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1.12 DISCLOSURE
Where in this Agreement reference is made to disclosure in writing,
such disclosure has been made in writing in a memorandum, dated the date hereof,
signed by an officer of the disclosing party and delivered to the appropriate
party. Such memorandum shall refer to the applicable Articles, Sections and
Subsections of this Agreement, but disclosure in relation to one Article,
Section or Subsection shall constitute disclosure for all other applicable
Articles, Sections and Subsections.
1.13 SCHEDULES
The following Schedules are attached to and form part of this
Agreement:
Schedule 1 - Audited Financial Statements
Schedule 2 - Interim Financial Statements
Schedule 3 - Corporation's Financial Statements
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
2.1 PURCHASE AND SALE OF PURCHASED SHARES
Subject to the terms and conditions hereof, the Vendor covenants and
agrees to sell, assign and transfer to the Purchaser and the Purchaser covenants
and agrees to purchase from the Vendor all but not less than all the issued and
outstanding Common Stock (the "Purchased Shares").
2.2 PURCHASE PRICE
Subject to Section 2.5, the purchase price payable by the Purchaser to
the Vendor for the Purchased Shares (the "Purchase Price") shall be the sum of
$6,264,250, less an amount equal to the PSI Advances, payable by certified
cheque or bankers' draft in immediately available funds to or to the order of
the Escrow Agent, in trust, at the Time of Closing. Upon payment of the Purchase
Price, the PSI Advances shall be deemed to have been repaid.
2.3 CLOSING FINANCIAL STATEMENTS
As soon is practicable, and in any event not later than 30 calendar
days following the Closing Date, the Vendor shall deliver to the Purchaser a
balance sheet for the Corporation as of the close of business on the Closing
Date (the "Closing Balance Sheet") and statement of operations for the
Corporation for the period from April 1, 2003 to the Closing Date (the "Closing
Income Statement"). The Closing Balance Sheet and the Closing Income Statement
(collectively, the "Closing Financial Statements") shall be unaudited and
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the Audited Financial
Statements and shall present fairly the financial position of the Corporation as
at the Closing Date and the sales, earnings and results of operations for the
period between April 1, 2003 and the Closing Date. The Purchaser agrees, from
the Closing Date, to cause the Corporation to make available to the Vendor all
documents, information and
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employees of the Corporation, reasonably requested by the Vendor, necessary to
prepare the Closing Financial Statements in accordance with this Section 2.3.
2.4 DISPUTES CONCERNING CLOSING FINANCIAL STATEMENTS
The Purchaser or its auditors, ▇▇▇▇▇ ▇▇▇▇, may dispute any aspect of
the Closing Financial Statements, or the calculations contemplated by Section
2.5 by notice in writing given to the Vendor within two (2) weeks following the
delivery of the Closing Financial Statements to the Purchaser. Unless such
dispute is resolved promptly by agreement, the Vendor and the Purchaser shall
select jointly one of PWC or KPMG LLP to arbitrate the dispute. If Vendor and
Purchaser are unable to agree as to the firm that will arbitrate the dispute,
one of the two firms proposed above shall be chosen by lot by counsel for the
Purchaser. The firm chosen shall designate a partner (the "Arbitrator") to
determine the matter in dispute as a single arbitrator in accordance with the
Commercial Arbitration Act of British Columbia based upon the following:
(a) the Arbitrator shall be instructed that time is of the essence
in proceeding with his or her determination of the dispute
and, in any event, the award of the Arbitrator must be
rendered within 30 days of the day in which the submission of
such dispute to arbitration was made;
(b) the arbitration shall take place in Vancouver, British
Columbia;
(c) the arbitration award shall be given in writing and shall be
final and binding on the parties, not subject to any appeal,
and shall deal with all matters related thereto;
(d) the prevailing party in the arbitration proceedings shall be
awarded reasonable legal fees, expert witness costs and
expenses and all other costs and expenses incurred directly or
indirectly in connection with the proceedings, unless the
Arbitrator shall for good cause determine otherwise; and
(e) judgement upon the award rendered may be entered in any court
having jurisdiction, or application may be made to such court
for a judicial recognition of the award or an order of
enforcement thereof, as the case may be.
Upon agreement or arbitration with respect to all such matters in dispute, such
amendments shall be made to the Closing Financial Statements as may be necessary
to reflect such agreement or such decision, as the case may be. In such event,
references in this Agreement to the Closing Financial Statements, Closing
Balance Sheet and Closing Income Statement shall refer to the Closing Financial
Statements, as so amended.
2.5 PURCHASE PRICE ADJUSTMENT
The Purchase Price payable for the Purchased Shares shall be decreased
(the "Purchase Price Adjustment") by the amount, if any, by which the Adjusted
Shareholders' Equity is less than the Baseline (the "Purchase Price
Adjustment"). For the purposes of this Section 2.5, the "Baseline" shall be
$3,580,901 (the shareholders' equity of the Corporation as of March 31, 2003),
plus $425,000 (target net income before taxes), less any of the Maligie Payment
expensed
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by the Corporation from April 1, 2003 to the Closing Date. For the purposes of
this Section 2.5, "Adjusted Shareholders' Equity" will be $3,580,901 (the
shareholders' equity of the Corporation as of March 31, 2003), plus the
Corporation's net income before income taxes from April 1, 2003 to the Closing
Date determined in accordance with generally accepted accounting principles,
less the Accounts Receivable Adjustment and less the Inventory Adjustment. For
greater certainty, any amount of the Maligie Payment which have been expensed by
the Corporation between April 1, 2003 and the Closing Date shall have been
included in the Corporation's calculation of net income before income taxes for
the same period. Notwithstanding any other provision of this Section 2.5, in no
event shall the Purchase Price be reduced by more that $750,000 pursuant to this
Section 2.5 and the aggregate amount of payments contemplated by this Section
2.5 and Section 9.6 shall in no event exceed $750,000.
2.6 ESCROW
The Escrow Agent shall hold the Escrow Amount in trust until the Escrow
Release Date for the purpose of securing payment of the Purchase Price
Adjustment, if any, to the Purchaser and for the purpose of satisfying any Claim
made by the Purchaser pursuant to Article 9. For greater certainty, at the
Closing Time, the Escrow Agent shall be entitled to pay all amounts received on
account of the Purchase Price, other than the Escrow Amount, to the Vendor. In
the event that the Purchaser wishes to assert a Claim or a Purchase Price
Adjustment, the Purchaser shall provide written notice thereof to the Escrow
Agent prior to the Escrow Release Date that sets forth the amount (a "Claim
Amount") of the Claim (which amount must, together with other Claims, exceed
$50,000) or Purchase Price Adjustment. On the Escrow Release Date, the Escrow
Agent shall release the Escrow Amount less all Claim Amounts to the Vendor.
Unless the Vendor and Purchaser otherwise jointly direct the Escrow Agent in
writing, the Escrow Agent shall, on or after the Escrow Release Date, release
the balance of the Escrow Amount held in respect of Claim Amounts pursuant to
the written directions of the Arbitrator, in the case of Purchase Price
Adjustments, and of the Claim's Arbitrator, in the case of Claims.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser and acknowledges
that the Purchaser is relying on such representations and warranties in
connection with its purchase of the Purchased Shares:
3.1 ORGANIZATION
The Vendor is duly incorporated, organized and validly existing under
the laws of the Province of British Columbia, Canada and has the corporate power
to own or lease its property, to own the Purchased Shares, to enter into this
Agreement and to perform its obligations hereunder. The Corporation is duly
incorporated, organized and validly existing under the laws of the State of
Nevada, United States of America, and has the corporate power to own or lease
its property, to carry on the Business as now being conducted by it, to enter
into this Agreement and to perform its obligations hereunder. The Corporation is
duly qualified as a corporation to do business in each jurisdiction in which the
nature of the Business or the property and assets owned
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or leased by it makes such qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect on the Corporation.
3.2 AUTHORIZATION
This Agreement has been duly authorized, executed and delivered by each
of the Vendor Parent, PAC, the Vendor and the Corporation and is a legal, valid
and binding obligation of each of the Vendor Parent, PAC, the Vendor and the
Corporation, enforceable against the Vendor Parent, PAC, the Vendor or the
Corporation, as the case may be, by the Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable remedies
may be granted only in the discretion of a court of competent jurisdiction.
3.3 NO OTHER AGREEMENTS TO PURCHASE
No person other than the Purchaser has any written or oral agreement or
option or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or acquisition from
the Vendor of any of the Purchased Shares.
3.4 AUTHORIZED AND ISSUED CAPITAL
The authorized capital of the Corporation consists of 2,500 shares of
Common Stock, of which 100 shares of Common Stock (and no more) have been duly
issued and are outstanding as fully paid and non-assessable. The Purchased
Shares represent all of the issued and outstanding capital stock of the
Corporation.
3.5 OPTIONS
No person, firm or corporation has any agreement or option or any right
or privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, including convertible securities, warrants or convertible obligations
of any nature, for the purchase, subscription, allotment or issuance of any
unissued shares or other securities of the Corporation.
3.6 OWNERSHIP OF PURCHASED SHARES
The Vendor is the sole, beneficial and legal owner of the Purchased
Shares, with good and marketable title thereto, which at the Time of Closing
will be free and clear of all Encumbrances and, without limiting the generality
of the foregoing, none of the Purchased Shares is subject to any voting trust,
shareholder agreement or voting agreement. Upon completion of the transaction
contemplated by this Agreement, all of the Purchased Shares will be solely owned
by the Purchaser with a good and marketable title thereto (except for such
Encumbrances as may have been granted by the Purchaser).
3.7 NO SUBSIDIARIES
The Corporation does not own and does not have any agreements of any
nature to acquire, directly or indirectly, any shares in the capital of or other
equity or proprietary interests
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in any person, firm or corporation, and the Corporation does not have any
agreements to acquire or lease any other business operations.
3.8 NO VIOLATION
Except as described in writing by the Vendor to the Purchaser, the
execution and delivery of this Agreement by the Vendor and the Corporation and
the consummation of the transactions herein provided for will not result in
either:
(a) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of the Vendor or the
Corporation under:
(i) any Contract to which the Vendor or the Corporation
is a party or by which any of them is, or either of
their properties are, bound;
(ii) any provision of the constating documents,
certificate of incorporation, by-laws or resolutions
of the board of directors (or any committee thereof)
or shareholders of the Vendor or the Corporation;
(iii) any judgment, decree, order or award of any court,
Governmental or Regulatory Authority or arbitrator
having jurisdiction over the Vendor or the
Corporation;
(iv) any licence, permit, approval, consent or
authorization held by the Vendor or the Corporation
or necessary to the ownership of the Purchased Shares
or the operation of the Business; or
(v) any applicable law, statute, ordinance, regulation or
rule;
(b) the creation or imposition of any Encumbrance on any of the
Purchased Shares or any of the property or assets of the
Corporation; or
(c) the creation of any liability of the Corporation or the
Purchaser to pay any amount, other than as contemplated by
this Agreement,
which individually or in the aggregate would have a Material Adverse Effect on
the Vendor or Corporation, as applicable.
3.9 BUSINESS OF THE CORPORATION
The Business is the only business operation carried on by the
Corporation, and the property and assets owned or leased by the Corporation are,
together with the material agreements to be assigned to the Corporation pursuant
to Section 7.1(l), sufficient to carry on the Business. All of the material
property and assets owned and used by the Corporation are in good operating
condition and are in a state of good repair and maintenance. During the two (2)
years preceding the date of this Agreement, there has not been any significant
interruption of operations (being an interruption of more than one (1) day) of
the Business due to inadequate
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maintenance of any of the property and assets owned and used by the Corporation.
With the exception of inventory in transit, all the material tangible assets of
the Corporation are situate at the locations disclosed in writing by the Vendor
to the Purchaser.
3.10 TITLE TO PERSONAL AND OTHER PROPERTY
The material property and assets of the Corporation (other than the
Leased Property, Intellectual Property licensed from a third party pursuant to a
Contract disclosed in writing by the Vendor to the Purchaser and equipment
leased from a third party pursuant to a Contract disclosed in writing by the
Vendor to the Purchaser) are owned by the Corporation with a good and marketable
title thereto, free and clear of all Encumbrances other than the Permitted
Encumbrances.
3.11 LOCATION OF REAL PROPERTY
The Vendor has disclosed in writing to the Purchaser the municipal
address of all the real property leased by the Corporation (the "Leased
Property"). The Corporation does not own or lease and has not agreed to acquire
or lease any real property or interest in real property other than the Leased
Property.
3.12 TITLE TO REAL PROPERTY
The Corporation is not the beneficial or registered owner of and has
not agreed to acquire any real property or any interest in any real property
(other than the interest of a tenant in the Leased Property). The Corporation
has the exclusive right to possess, use and occupy all the Leased Property, free
and clear of all Encumbrances or other restrictions of any kind other than
Permitted Encumbrances. All buildings, structures, improvements and
appurtenances situated on the Leased Property are in good operating condition
and in a state of good maintenance and repair, are adequate and suitable for the
purposes for which they are currently being used and the Corporation has
adequate rights of ingress and egress for the operation of the Business in the
ordinary course, except where the failure to satisfy any of the foregoing would
not have a Material Adverse Effect on the Corporation. Except as disclosed in
writing by the Vendor to the Purchaser, none of such buildings, structures,
improvements or appurtenances (or any equipment therein), nor the operation or
maintenance thereof, violates any restrictive covenant or any provision of any
federal, state or municipal law, ordinance, rule or regulation, or encroaches on
any property owned by others where such violation would have a Material Adverse
Effect on the Corporation. Without limiting the generality of the foregoing,
except as disclosed in writing by the Vendor to the Purchaser:
(a) the Leased Property, the current uses thereof and the conduct
of the Business comply with all regulations, statutes,
enactments, laws and by-laws, including, without limitation,
those dealing with zoning, parking, access, loading
facilities, landscaped areas, building construction, fire and
public health and safety and Environmental Laws, where failure
to so comply would have a Material Adverse Effect on the
Corporation;
(b) no material alteration, repair, improvement or other work has
been ordered, directed or requested in writing to be done or
performed to or in respect of the
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Leased Property or to any of the plumbing, heating, elevating,
water, drainage or electrical systems, fixtures or works by
any municipal, state or other competent authority, which
alteration, repair, improvement or other work has not been
completed, and neither the Vendor nor the Corporation knows of
any written notification having been given to it of any such
outstanding work being ordered, directed or requested, other
than those that have been complied with;
(c) to the knowledge of the Corporation, all material accounts for
work and services performed and materials placed or furnished
upon or in respect of the Leased Property at the request of
the Corporation have been fully paid and satisfied, and no
person is entitled to claim a mechanics lien or similar claim
against the Leased Property or any part thereof, other than
current accounts in respect of which the payment due date has
not yet passed, that would have a Material Adverse Effect on
the Corporation;
(d) there is nothing owing in respect of the Leased Property by
the Corporation to any municipality or agency thereof, to any
other public authority, or to any other corporation or
commission owning or operating a public utility for water,
gas, electrical power or energy, steam or hot water, or for
the use thereof, other than current accounts in respect of
which the payment due date has not yet passed, which
individually or in the aggregate would have a Material Adverse
Effect on the Corporation;
(e) no part of the Leased Property has been taken or expropriated
or condemned by any federal, state, municipal or other
competent authority nor has any notice or proceeding in
respect thereof been given or commenced;
(f) the Permitted Encumbrances constitute all of the Encumbrances
that affect the Leased Property;
(g) each of the Leased Properties (including all buildings,
improvements and fixtures) is fit for its present use, and
there are no material or structural repairs or replacements
that are necessary or advisable which individually or in the
aggregate would have a Material Adverse Effect on the
Corporation and, without limiting the foregoing, there are no
repairs to, or replacements of, the roof or the mechanical,
electrical, heating, ventilating, air-conditioning, plumbing
or drainage equipment or systems that are necessary or
advisable which individually or in the aggregate would have a
Material Adverse Effect on the Corporation, and none of the
Leased Properties is currently undergoing any alteration or
renovation, that would have a Material Adverse Effect on the
Corporation nor is any such alteration or renovation
contemplated; and
(h) each of the Leased Properties is fully serviced and has
suitable access to public roads, and there are no outstanding
levies, charges or fees assessed against the Leased Property
by any public authority (including development or improvement
levies, charges or fees).
- 16 -
3.13 REAL PROPERTY LEASES
The Corporation is not a party to any lease or agreement in the nature
of a lease in respect of any real property, whether as lessor or lessee, other
than the leases (the "Leases") disclosed in writing by the Vendor to the
Purchaser relating to the Leased Property. The Vendor has disclosed in writing
to the Purchaser the parties to each of the Leases, their dates of execution and
expiry dates, any options to renew, the locations of the leased lands and
premises and the rent payable thereunder. Except as disclosed in writing by the
Vendor to the Purchaser and except for Permitted Encumbrances, the Corporation
occupies the Leased Property and has the exclusive right to occupy and use the
Leased Property. Each of the Leases is in good standing and in full force and
effect and neither the Corporation nor any other party thereto is in breach of
any material covenants, conditions or obligations contained therein. The Vendor
has provided a true copy of each Lease, together with any amendments thereto, to
the Purchaser.
3.14 ACCOUNTS RECEIVABLE
All accounts receivable, book debts and other debts due or accruing to
the Corporation are bona fide and the allowance for doubtful accounts that has
been reflected on the books of the Corporation has been calculated in accordance
with GAAP.
3.15 INTELLECTUAL PROPERTY
The Vendor has disclosed in writing to the Purchaser a complete and
accurate list of all material trade marks, trade names, business names, patents,
inventions, know-how, copyrights, service marks, brand names, industrial designs
and all other industrial or intellectual property owned or used by the
Corporation in carrying on the Business in the United States of America or
elsewhere and all applications therefor and all goodwill connected therewith,
including, without limitation, all licences and all like rights used by or
granted to the Corporation in connection with the Business and all right to
register or otherwise apply for the protection on any of the foregoing
(collectively, the "Intellectual Property"). The Vendor has disclosed in writing
to the Purchaser a complete and accurate particulars of all registrations or
applications for registration of the Intellectual Property. The Intellectual
Property comprises all material trade marks, trade names, business names,
patents, inventions, know-how, copyrights, service marks, brand marks,
industrial designs and all other industrial or intellectual property necessary
to conduct the Business. The Corporation is the sole owner of the Intellectual
Property (other than Intellectual Property licensed from third parties that is
disclosed in writing by the Vendor to the Purchaser, free and clear of all
Encumbrances, and is not a party to or bound by any Contract or other obligation
whatsoever that limits or impairs its ability to sell, transfer, assign or
convey, or that otherwise affects, the Intellectual Property (other than
Intellectual Property licensed from third parties that is disclosed in writing
by the Vendor to the Purchaser). No person has been granted any interest in or
right to use all or any portion of the Intellectual Property. Neither the Vendor
nor the Corporation is aware of a claim of any infringement or breach of any
industrial or intellectual property rights of any other person by the
Corporation, nor has the Vendor of the Corporation received any notice that the
conduct of the Business, including the use of the Intellectual Property,
infringes upon or breaches any industrial or intellectual property rights of any
other person, and neither the Vendor nor the Corporation, after due inquiry, has
any knowledge of any infringement or violation of any of their rights or the
rights of the Corporation
- 17 -
in the Intellectual Property. To the knowledge of the Corporation, the conduct
of the Business does not infringe upon the patents, trade marks, licences, trade
names, business names, copyright or other industrial or intellectual property
rights, domestic or foreign, of any other person where such infringement would
have a Material Adverse Effect on the Corporation. Neither the Vendor nor the
Corporation is aware of any state of facts that casts doubt on the validity or
enforceability of any of the Intellectual Property. The Vendor has provided to
the Purchaser a true and complete copy of all Contracts and amendments thereto
that comprise or relate to the Intellectual Property.
3.16 INSURANCE
The Corporation has (i) all of its material property and assets insured
against loss or damage (ii) product liability insurance, and (iii) commercial
general liability insurance, and such insurance coverage will be continued in
full force and effect to and including the Time of Closing. The Vendor has
disclosed in writing to the Purchaser all insurance policies (specifying the
insurer, the amount of the coverage, the type of insurance, the policy number
and any pending claims thereunder) maintained by the Corporation on its property
and assets or personnel as of the date hereof sets out the most recent
inspection reports, if any, received from insurance underwriters or others as to
the condition of the property and assets of the Corporation. The Corporation is
not in default with respect to any of the provisions contained in any such
insurance policy, and has not failed to give any notice or present any claim
under any such insurance policy in a due and timely fashion, where such default
or failure would have a Material Adverse Effect on the Corporation. The Vendor
has provided to the Purchaser a true copy of each insurance policy and report
disclosed in writing by the Vendor to the Purchaser.
3.17 NO EXPROPRIATION
No material property or asset of the Corporation has been taken or
expropriated or condemned by any federal, state, municipal or other authority
nor has any notice or proceeding in respect thereof been given or commenced nor
is the Vendor or the Corporation aware of any intent or proposal to give any
such notice or commence any such proceeding.
3.18 AGREEMENTS AND COMMITMENTS
Except as disclosed in writing by the Vendor to the Purchaser, the
Corporation is not a party to or bound by any material Contract relating to the
property, assets, Business or operations of the Corporation, including, without
limiting the generality of the foregoing:
(a) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
(b) any collective bargaining agreement or other Contract with any
labour union;
(c) any continuing Contract for the purchase of materials,
supplies, equipment or services involving more than $10,000 in
respect of all such Contracts;
- 18 -
(d) any employment or consulting Contract or any other written
Contract with any officer, employee or consultant other than
oral Contracts of indefinite hire terminable by the employer
without cause on reasonable notice;
(e) any profit sharing, bonus, stock option, pension, retirement,
disability, stock purchase, medical, dental, hospitalization,
insurance or similar plan or agreement providing benefits to
any current or former director, officer, employee or
consultant;
(f) any trust indenture, mortgage, promissory note, loan
agreement, guarantee or other Contract for the borrowing of
money or a leasing transaction of the type required to be
capitalized in accordance with generally accepted accounting
principles;
(g) any commitment for charitable contributions;
(h) any Contract for capital expenditures in excess of $10,000 in
the aggregate;
(i) any Contract for the sale of any assets, other than sales of
inventory to customers in the ordinary course of the Business;
(j) any Contract pursuant to which the Corporation is a lessor of
any material machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property;
(k) any confidentiality, secrecy or non-disclosure Contract
(whether the Corporation is a beneficiary or obligor
thereunder) relating to any proprietary or confidential
information or any non-competition or similar Contract;
(l) any licence, franchise or other agreement that relates in
whole or in part to any Intellectual Property;
(m) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any other similar commitment
with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of
any other person (except for cheques endorsed for collection);
(n) any Contract that expires, or may expire if the same is not
renewed or extended at the option of any person other than the
Corporation, more than one year after the date of this
Agreement; or
(o) any Contract entered into by the Corporation other than in the
ordinary course of Business;
The Corporation has performed all of the obligations required to be performed by
it and is entitled to all benefits under, and is not in default or alleged to be
in default in respect of, any Contract relating to the property, assets,
Business or operations of the Corporation, to which it is a party or by which it
is bound where such default or alleged default would have a Material
- 19 -
Adverse Effect on the Corporation; all such Contracts are in good standing and
in full force and effect where the failure to be in good standing or in full
force and effect would have a Material Adverse Effect on the Corporation, and no
event, condition or occurrence exists that, after notice or lapse of time or
both, would constitute a default under any of the foregoing that would have a
Material Adverse Effect on the Corporation. The Vendor has provided to the
Purchaser a true and complete copy of each Contract disclosed in writing by the
Vendor to the Purchaser and all amendments thereto.
3.19 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATION
The Corporation has complied with all laws, statutes, ordinances,
regulations, rules, judgments, decrees or orders applicable to the Business or
the Corporation where the failure to comply would have a Material Adverse Effect
on the Corporation. The Vendor has disclosed in writing to the Purchaser a
complete and accurate list of all material licences, permits, approvals,
consents, certificates, registrations and authorizations (whether governmental,
regulatory or otherwise) (the "Licences") held by or granted to the Corporation,
and there are no other material licences, permits, approvals, consents,
certificates, registrations or authorizations necessary to carry on the Business
or to own or lease any of the property or assets utilized by the Corporation.
Each Licence is valid, existing and in good standing where the failure to be
valid, subsisting or in good standing would have a Material Adverse Effect on
the Corporation and the Corporation is not in default or breach of any License
where the default or breach would have a Material Adverse Effect on the
Corporation and, to the knowledge of the Vendor, no proceeding is pending or
threatened to revoke or limit any Licence. The Vendor has to provide a true and
complete copy of each Licence and all amendments thereto to the Purchaser.
3.20 CONSENTS AND APPROVALS
There is no requirement to make any filing with, give any notice to or
obtain any licence, permit, certificate, registration, authorization, consent or
approval of, any Governmental or Regulatory Authority as a condition to the
lawful consummation of the transactions contemplated by this Agreement, except
for the filings, notifications, licences, permits, certificates, registrations,
consents and approvals disclosed in writing by the Vendor to the Purchaser or
that relate solely to the identity of the Purchaser or the nature of any
business carried on by the Purchaser. There is no requirement under any Contract
relating to the Business or the Corporation to which the Vendor Parent, the
Vendor or the Corporation is a party or by which it is bound to give any notice
to, or to obtain the consent or approval of, any party to such agreement,
instrument or commitment relating to the consummation of the transactions
contemplated by this Agreement except for the notifications, consents and
approvals disclosed in writing by the Vendor to the Purchaser.
3.21 FINANCIAL STATEMENTS
The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods, are correct and complete and present fairly the assets,
liabilities (whether accrued, absolute, contingent or otherwise) and financial
condition of the Vendor Parent, in the case of the Audited Financial Statements
and Interim Financial Statements, and the Corporation, in the case of the
Corporation's Financial
- 20 -
Statements, and as at the respective dates of the Financial Statements and the
sales, earnings and results of operations of the Corporation for the respective
periods covered by the Financial Statements. When prepared, the Closing
Financial Statements will be unaudited and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the Audited Financial Statements and will present fairly the
financial position and results of operations of the Corporation as at the close
of business on the Closing Date.
3.22 BOOKS AND RECORDS
The books and records of the Corporation fairly and correctly set out
and disclose in accordance with generally accepted accounting principles the
financial position of the Corporation as at the date hereof in all material
respects and all financial transactions of the Corporation have been accurately
recorded in such books and records in all material respects.
The minute books of the Corporation contain accurate and complete
records of all meetings, resolutions and corporate actions taken by the
shareholders, boards of directors and all committees thereof in all material
respects. No meeting of shareholders, directors or any committee of either of
them has been held for which minutes have not been prepared and are not
contained in such minute books.
3.23 ABSENCE OF CHANGES
Except as disclosed in writing by the Vendor to the Purchaser and other
than as contemplated by this Agreement, since March 31, 2003, the Corporation
has carried on the Business and conducted its operations and affairs only in the
ordinary and normal course consistent with past practice and there has not been:
(a) any Material Adverse Change in the condition (financial or
otherwise), assets, liabilities, operations, earnings,
business or prospects of the Corporation;
(b) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due)
incurred by the Corporation which would have a Material
Adverse Effect on the Corporation, other than those incurred
in the ordinary and normal course and consistent with past
practice;
(c) any labour trouble Materially Adversely Affecting the
Corporation;
(d) any general increase in the compensation of employees of the
Corporation (including, without limitation, any increase
pursuant to any Employee Plan or commitment), or any increase
in any such compensation or bonus payable to any officer,
employee, consultant or agent thereof (having an annual salary
or remuneration in excess of $75,000) or the execution of any
employment contract with any officer or employee (having an
annual salary or remuneration in excess of $75,000), or the
making of any loan to, or engagement in any transaction with,
any employee, officer or director of the Corporation;
- 21 -
(e) any capital expenditures or commitments of the Corporation in
excess of $100,000 in the aggregate;
(f) any material forward purchase commitments in excess of the
requirements of the Corporation for normal operating
inventories or at prices materially higher than the current
market prices;
(g) any material change in the accounting or tax practices
followed by the Corporation; or
(h) any material change adopted by the Corporation in its
depreciation or amortization policies or rates.
3.24 TAXES
The Corporation has duly filed on a timely basis all Tax Returns,
elections and reports required to be filed by it and such are true complete and
correct and has paid all Taxes assessments, reassessments, governmental charges,
penalties, interest and fines due and payable by it. The Corporation has made
adequate provision for Taxes payable by it for the current period and any
previous period for which Tax Returns are not yet required to be filed. There
are no audits, actions, assessments suits, proceedings, investigations or claims
pending or, to the knowledge of the Corporation and the Vendor, likely, that
would have a Material Adverse Effect on the Corporation, due to any grounds
including aggressive treatment of income, expenses, credits or other amounts in
filing its tax returns, or threatened against, the Corporation in respect of
Taxes, governmental charges or assessments, nor are there any material matters
under discussion with any Governmental or Regulatory Authority relating to
taxes, governmental charges or assessments asserted by any such authority. The
Corporation is not party to any agreement or undertaking with respect to taxes
including without limitation undertakings with respect to deferrals of land
transfer tax or with respect to debt forgiveness under any tax legislation. The
Corporation has never been required to file any Tax Return with, and has never
been liable to pay any Taxes to, any Governmental or Regulatory Authority
outside the United States of America.
3.25 LITIGATION
Except as disclosed in writing by the Vendor to the Purchaser, there
are no actions, suits or proceedings (whether or not purportedly on behalf of
the Corporation) pending or, to the knowledge of the Vendor or the Corporation
threatened against or affecting, the Corporation at law or in equity, or before
or by any federal, state, municipal or other Governmental or Regulatory
Authority, court, commission, board, bureau, agency or instrumentality, domestic
or foreign, or by or before an arbitrator or arbitration board that, if
adversely determined, would have a Material Adverse Effect on the Corporation.
Neither the Vendor nor the Corporation is aware of any ground on which any such
action, suit or proceeding might be commenced with any reasonable likelihood of
success.
3.26 RESIDENCY
The Vendor is a resident of Canada for the purposes of the Tax Act.
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3.27 ACCOUNTS AND ATTORNEYS
The Vendor has disclosed in writing to the Purchaser:
(a) the name of each bank, trust company or similar institution in
which the Corporation has accounts or safe deposit boxes, the
number or designation of each such account and safe deposit
box and the names of all persons authorized to draw thereon or
to have access thereto; and
(b) the name of each person, firm, corporation or business
organization holding a general or special power of attorney
from the Corporation and a summary of the terms thereof.
3.28 DIRECTORS AND OFFICERS
The Vendor has disclosed in writing to the Purchaser the names and
titles of all the officers and directors of the Corporation.
3.29 DIVIDENDS
Since March 31, 2003, the Corporation has not, directly or indirectly,
declared or paid any dividends or declared or made any other distribution on any
of its shares of any class and has not, directly or indirectly, redeemed,
purchased or otherwise acquired any of its outstanding shares of any class or
agreed to do so.
3.30 NON-ARM'S LENGTH TRANSACTIONS
The Corporation has not since March 31, 2003 made any payment or loan
to, or borrowed any moneys from or is otherwise indebted to, any officer,
director, employee, shareholder or any other person not dealing at arm's length
with the Corporation (within the meaning of the Code), except as disclosed in
writing by the Vendor to the Purchaser or in the Audited Financial Statements,
and except for usual employee reimbursements and compensation paid in the
ordinary and normal course of the Business. Except for Contracts of employment,
the Corporation is not a party to any Contract with any officer, director,
employee, shareholder or any other person not dealing at arm's length with the
Corporation (within the meaning of the Code). Other than the Vendor Parent, PAC
and the Vendor, to the knowledge of the Corporation, no officer, director or
shareholder of the Corporation and no entity that is an Affiliate or Associate
of one or more of such individuals:
(a) owns, directly or indirectly, any interest in (except for
interests in the Vendor Parent and shares representing less
than one per cent of the outstanding shares of any class or
series of any other publicly traded company), or is an
officer, director, employee or consultant of, any person,
other than a member of the Vendor Group, which is, or is
engaged in business as, a competitor of the Business or the
Corporation or a lessor, lessee, supplier, distributor, sales
agent or customer of the Business or the Corporation;
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(b) owns, directly or indirectly, in whole or in part, any
property that the Corporation uses in the operation of the
Business; or
(c) has any cause of action or other claim whatsoever against, or
owes any amount to, the Corporation in connection with the
Business, except for any liabilities reflected in the Audited
Financial Statements and claims in the ordinary and normal
course of business, such as for accrued vacation pay and
accrued benefits under the Employee Plans.
3.31 ENVIRONMENTAL
Except as disclosed in writing by the Vendor to the Purchaser:
(a) the Corporation has been and is in compliance with all
applicable federal, provincial, state, municipal and local
laws, statutes, ordinances, by-laws and regulations and
orders, directives and decisions rendered by any ministry,
department or administrative or regulatory agency relating to
the protection of the environment, occupational health and
safety or the manufacture, processing, distribution, use,
treatment, storage, recycling, release, disposal, discharge,
transport or handling of Hazardous Substances (collectively,
the "Environmental Laws") where the failure to so comply would
have a Material Adverse Effect on the Corporation. "Hazardous
Substances" means any pollutants, contaminants, chemicals or
industrial, toxic or hazardous wastes or substances;
(b) the Corporation has obtained all licences, permits, approvals,
consents, certificates, registrations and other authorizations
required under Environmental Laws for the operation of the
Business (the "Environmental Permits") where the failure to so
obtain would have a Material Adverse Effect on the
Corporation, all of which have been disclosed in writing by
the Vendor to the Purchaser. Each Environmental Permit is
valid, subsisting and in good standing where the failure to be
valid, subsisting or in good standing would have a Material
Adverse Effect on the Corporation and the Corporation is not
in default or breach of any Environmental Permit where the
default or breach would have a Material Adverse Effect on the
Corporation and no proceeding is pending, or threatened, to
revoke, suspend or limit any Environmental Permit;
(c) the Corporation has not used or permitted to be used, except
in compliance with all Environmental Laws where the failure to
so comply would have a Material Adverse Effect on the
Corporation, any of its property (including the Leased
Property) or facilities or any property or facility that it
previously owned or leased, to generate, manufacture, process,
distribute, use, treat, store, dispose of, transport or handle
any Hazardous Substance;
(d) the Corporation has never received any notice (whether written
or oral) of, nor been prosecuted for an offence alleging,
non-compliance with any Environmental Laws, and neither the
Vendor nor the Corporation has settled any allegation of
noncompliance short of prosecution. The Corporation does not
have any
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knowledge of any events, circumstances or conditions that
could result in the assertion of a claim that the Corporation,
or the Business as conducted by the Corporation, is not in
compliance with any Environmental Laws. There are no orders or
directives of any Governmental or Regulatory Authority
relating to environmental matters requiring any work,
remediation, repairs, construction or capital expenditures
with respect to the Business or any property of the
Corporation, nor has the Corporation received notice that any
such orders or directives are either pending or threatened;
(e) there are, to the knowledge of the Corporation, no pending or
proposed changes to Environmental Laws that would render
illegal or restrict the manufacture or sale of any product
manufactured or sold or service provided by the Corporation,
that would have a Material Adverse Effect on the Corporation;
(f) the Corporation has not caused or permitted or arranged for,
nor does it have any knowledge of, the release, in any manner
whatsoever, of any Hazardous Substance on or from any of its
properties (including any of the Leased Property) or assets or
any property or facility that it previously owned or leased,
or any such release on or from a facility owned or operated by
third parties but with respect to which the Corporation is or
may reasonably be alleged to have liability that would have a
Material Adverse Effect on the Corporation. All Hazardous
Substances and all other wastes and other materials and
substances used in whole or in part by the Corporation or
resulting from the Business have been disposed of, treated and
stored in compliance with all Environmental Laws where the
failure to so comply would have a Material Adverse Effect on
the Corporation. The Vendor has disclosed in writing to the
Purchaser all locations where Hazardous Substances used in
whole or in part by the Corporation have been or are being
stored or disposed of;
(g) the Corporation has not received any notice that it is
potentially responsible for a federal, state, municipal or
local clean-up site or corrective action at any location,
whether or not currently or formerly owned or operated by the
Corporation, under any Environmental Laws, that would have a
Material Adverse Effect on the Corporation. The Corporation
has not received any request for information in connection
with any federal, state, municipal or local inquiries as to
the release of Hazardous Substances at any disposal site or
other location; and
(h) the Vendor has delivered to the Purchaser true and complete
copies of all material environmental audits, evaluations,
assessments, studies or tests relating to the Corporation in
the possession or control of the Corporation or the Vendor.
3.32 EMPLOYEE PLANS
(a) The Vendor has disclosed in writing to the Purchaser each
deferred compensation, bonus or incentive compensation, share
option or purchase, severance, termination pay,
hospitalization or other medical benefit, life or other
insurance, vision, dental, drug, sick leave, disability,
salary continuation, vacation,
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supplemental unemployment benefits, profit sharing, incentive
or other compensation, mortgage assistance, pension or
supplemental pension plan, retirement compensation
arrangement, group registered retirement savings plan,
deferred profit sharing plan, employee profit sharing plan,
savings, retirement or supplemental retirement plan, program
or arrangement, whether funded or unfunded, formal or
informal, that is maintained, contributed to or required to be
contributed to, by the Corporation, or to which the
Corporation is a party, or bound by, or under which the
Corporation has any liability or contingent liability for the
benefit of employees or former employees of the Corporation
and their dependants, including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of
ERISA (the "Employee Plans").
(b) A true, current and complete copy of each Employee Plan (as
amended to date) has been provided to the Purchaser together
with current and complete copies of all documents relating to
each Employee Plan, including, as applicable: (i) all
documents establishing, creating or amending each Employee
Plan, including but not limited to all prior versions of such
documents and amendments thereto; (ii) all trust agreements
and funding agreements; (iii) all contracts relating to each
Employee Plan, including all insurance contracts, investment
management agreements, subscription agreements and
participation agreements; (iv) all statements of investment
policies and procedures; (v) all financial statements,
accounting statements and reports, annual returns and
investment reports for each of the last three (3) years and
the three (3) most recent actuarial reports and cost
certificates (where applicable); (vi) all reports, returns,
filings (including tax reports, returns and filings) and
material correspondence with any Governmental or Regulatory
Authority in the last three (3) years; (vii) all literature,
booklets, summaries or manuals prepared for or circulated to
employees generally concerning each Employee Plan; and (viii)
all employee data and personnel records relating to the
Employee Plans.
(c) Each of the Employee Plans is, and has been, established,
registered, qualified, administered and invested in compliance
with (i) the terms thereof, (ii) all applicable laws,
including, without limiting the generality of the foregoing,
the ERISA or any other applicable pension and tax legislation,
and (iii) the administrative practices of the applicable
pension regulator and tax authorities, where the failure to so
comply would have a Material Adverse Effect on the
Corporation; and the Corporation has not received, in the last
three (3) years, any notice from any person questioning or
challenging such compliance (other than in respect of any
claim related solely to that person), and the Vendor has no
knowledge of any such notice from any person questioning or
challenging such compliance beyond the last three (3) years.
(d) No Employee Plan is registered, or required to be registered,
under the Tax Act or any other law of Canada.
- 26 -
(e) None of the Corporation and any of its agents are in breach of
their fiduciary duty with respect to the Employee Plans where
such breach would have a Material Adverse Effect on the
Corporation.
(f) All obligations due under the Employee Plans (whether pursuant
to the terms thereof or any applicable laws) have been
satisfied where the failure to so satisfy would have a
Material Adverse Effect on the Corporation, and there are no
outstanding defaults or violations thereunder by the
Corporation that would have a Material Adverse Effect on the
Corporation nor does the Vendor have any knowledge of any
default or violation by any other person to the Employee Plans
that would have a Material Adverse Effect on the Corporation.
(g) Except as disclosed in writing by the Vendor to the Purchaser,
there are no improvements, increases or changes to the
benefits provided under the Employee Plans nor is there any
pattern of ad hoc benefit increases and the Employee Plans do
not provide for benefit increases or the acceleration of
funding obligations that are contingent upon or will be
triggered by the entering into of this Agreement or the
completion of the transactions contemplated herein.
(h) All employer and employee payments, contributions and premiums
required to be remitted, paid to or in respect of the Employee
Plans have been paid in a timely fashion in accordance with
the terms thereof where the failure to so pay would have a
Material Adverse Effect on the Corporation and all applicable
laws, and no taxes, interest, penalties or fees are owing or
exigible under any of the Employee Plans that would have a
Material Adverse Effect on the Corporation.
(i) Each Employee Plan (i) has, where applicable, received a
determination letter from the IRS confirming that it qualifies
under Section 401(a) of the Code and, to the knowledge of
Vendor, nothing has occurred since the issuance of that letter
which would adversely affect such qualified status or the plan
sponsor's ability to rely on such determination letter, (ii)
still has, where applicable, a remaining period of time under
applicable treasury regulations or IRS pronouncements in which
to apply for such letter and to make any amendments necessary
to obtain a favorable determination, or (iii) has, where
applicable, been established under a standardized prototype
plan document for which an IRS opinion letter has been
obtained by the plan sponsor and is valid as to Vendor.
(j) There is no proceeding, action, investigation by any
applicable Governmental or Regulatory Authority, including but
not limited to the applicable pension regulator, the IRS or
the United States Department of Labor, or any suit or claim of
any person (other than routine claims for payment of benefits)
pending or threatened in respect of any of the Employee Plans
or their assets that would have a Material Adverse Effect on
the Corporation, and, to the knowledge of the Vendors, no
facts exist which could reasonably be expected to give rise to
any such proceeding, action, investigation, suit or claim
(other than routine claims for benefits).
- 27 -
(k) With respect to any Employee Plan which is registered under
pension legislation, ERISA or any other applicable laws, no
event has occurred respecting the Employee Plan which would
result in the revocation of such registration or entitle any
person (without the consent of the Corporation) to wind-up or
terminate the Employee Plan in whole or in part, or which
could otherwise reasonably be expected to adversely affect the
tax status thereof that would have a Material Adverse Effect
on the Corporation.
(l) The Corporation's pension plan is fully funded, on an ongoing
basis, in accordance with the material terms thereof and
taking into consideration all promised amendments thereto, the
applicable pension legislation, the administrative
requirements of the applicable pension regulator and commonly
accepted actuarial principles, and there are no solvency
deficiencies respecting the Corporation's pension plan.
(m) No material changes have occurred in respect of each of the
Employee Plans since the date of the most recent financial,
accounting or actuarial report, as applicable, filed with the
applicable pension regulator including, the IRS, the United
States Department of Labor or any other applicable
Governmental or Regulatory Authority (where applicable) in
connection with such Employee Plan, nor have there been any
events occurring prior to the most recent financial,
accounting or actuarial or other report which are not
disclosed in such report which could reasonably be expected to
adversely affect the relevant report (including rendering it
misleading in any material respect) or to have materially
affected the financial status of such Employee Plan.
(n) There has not been any withdrawal of, application for, or
payment of any surplus or other funds out of, the
Corporation's pension plan by any person including the Vendor
and the Corporation. There is no actuarial surplus under the
Corporation's pension plan as a continuing plan as at the date
hereof.
(o) If the Corporation has taken any contribution or premium
holidays under the Corporation's pension plan, such holidays
have been permitted by the applicable pension regulator, ERISA
and all other applicable laws and have been permitted by the
valid terms of the Corporation's pension plan.
(p) All employee data necessary to administer the Employee Plans
is in the possession of the Corporation and is complete,
correct and in a form which is sufficient for the proper
administration of the Employee Plans and will be provided to
the Purchaser on Closing and, other than as disclosed in
writing by the Vendor to the Purchaser, the Employee Plans do
not provide benefits beyond retirement or other termination of
service to employees or former employees or to the
beneficiaries or dependants of such employees.
(q) Each of the Employee Plans which has or purports to have
tax-favoured treatment at the date hereof meets all
requirements for tax-favoured treatment in effect as of
- 28 -
the date hereof and has complied with the ERISA, the Code (and
the regulations promulgated thereunder), to the extent it
purports to qualify for such treatment.
(r) Each of the Employee Plans which purports to qualify as a
particular type of plan under the ERISA at the date hereof
meets all requirements for such qualification in effect as of
the date hereof and has complied with the provisions of the
ERISA and the administrative practices of the IRS or the
Department of Labor applicable to such plan.
3.33 COLLECTIVE AGREEMENTS
Except as disclosed in writing by the Vendor to the Purchaser, the
Corporation has not made any Contracts with any labour union or employee
association nor made commitments to or conducted negotiations with any labour
union or employee association with respect to any future agreements and, except
as disclosed in writing by the Vendor to the Purchaser, neither the Vendor nor
the Corporation is aware of any current attempts to organize or establish any
labour union or employee association with respect to any employees of the
Corporation, nor is there any certification of any such union with regard to a
bargaining unit.
3.34 EMPLOYEES
The Vendor has disclosed in writing to the Purchaser a complete and
accurate list of the names of all individuals who are employees or sales or
other agents or representatives of the Corporation specifying:
(a) with respect to the unionized employees, the rate of hourly
pay, whether or not such employee is absent for any reason
such as lay off, leave of absence or workers' compensation;
and
(b) with respect to salaried employees and sales or other agents
or representatives, the hire date, title, rate of salary and
commission structure for each such employee, agent or
representative.
The Company is not engaged, and has never been engaged, in any unfair labor
practice of any nature. No notice has been received by the Corporation of any
complaint filed with any Governmental or Regulatory Authority by any of the
employees against the Corporation claiming that the Corporation has violated
unfair business practices or any applicable employee or human rights or similar
legislation in the jurisdictions in which the Business is conducted or the
Corporation operates or of any complaints or proceedings of any kind involving
the Corporation or, to the Vendor's and the Corporation's knowledge, any of the
employees of the Corporation before any labour relations board, that would have
a Material Adverse Effect on the Corporation, except as disclosed in writing by
the Vendor to the Purchaser. There are no outstanding orders or charges against
the Corporation under any applicable health and safety legislation in the
jurisdictions in which the Business is conducted that would have a Material
Adverse Effect on the Corporation. All levies, assessments and penalties made
against the Corporation pursuant to any applicable workers' compensation
legislation in the jurisdictions in which the Business is conducted that are due
and payable have been paid by the Corporation and
- 29 -
the Corporation has not been reassessed under any such legislation during the
past two (2) years except where the failure to so pay would not have a Material
Adverse Effect on the Corporation.
3.35 EMPLOYEE ACCRUALS
All material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, employee related Taxes accrued wages,
salaries and commissions and employee benefit plan payments have been reflected
in the books and records of the Corporation.
3.36 CUSTOMERS AND SUPPLIERS
The Vendor has disclosed in writing to the Purchaser the major
customers of the Corporation (being those customers of the Corporation
accounting for more than 5% of sales for the period April 1, 2002 to March 31,
2003) and since March 31, 2003, except as disclosed in writing by the Vendor to
the Purchaser, there has been no termination or cancellation of, and no material
modification or change in, the Corporation's business relationship with any
major customer or group of major customers. Except as disclosed in writing by
the Vendor to the Purchaser, the Corporation has no reason to believe that the
benefits of any relationship with any of the major customers or suppliers of the
Corporation will not continue after the Closing Date in substantially the same
manner as prior to the date of the Agreement.
3.37 PRODUCT WARRANTIES
The Vendor has disclosed in writing to the Purchaser a complete list of
all express, written warranties given to purchasers of products supplied by the
Corporation.
3.38 NO PREDECESSORS
Except for the merger effective November 24, 1999 with U.S. Cellulose
Co., no corporation has been merged with the Corporation, by amalgamation,
dissolution, arrangement or otherwise, in such a manner that the Corporation is
or may become liable for any liabilities (contingent or otherwise) of any kind
whatsoever of such corporation.
3.39 FULL DISCLOSURE
Neither this Agreement nor any document to be delivered pursuant to
this Agreement by the Vendor or the Corporation nor any certificate, report,
statement or other document furnished by the Vendor or the Corporation in
connection with the negotiation of this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading. There has been no event, transaction or information that has come to
the attention of the Vendor or the Corporation that has not been disclosed to
the Purchaser in writing that could reasonably be expected to have a Material
Adverse Effect on the Corporation.
- 30 -
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor and acknowledges
and confirms that the Vendor is relying on such representations and warranties
in connection with the sale by the Vendor of the Purchased Shares:
4.1 ORGANIZATION
The Purchaser is a corporation validly existing under the laws of the
State of North Carolina, United States of America, and it has the corporate
power to enter into and perform its obligations pursuant to this Agreement.
4.2 NO VIOLATION
The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions provided for herein will not result in the
violation of, or constitute a default under, or conflict with or cause the
acceleration of any obligation of the Purchaser under:
(a) any Contract to which the Purchaser is a party or by which it
is bound;
(b) any provision of the constating documents or by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of the Purchaser;
(c) any judgment, decree, order or award of any court,
Governmental or Regulatory Authority or arbitrator having
jurisdiction over the Purchaser; or
(d) any applicable, law, statute, ordinance, regulation or rule,
which individually or in the aggregate would have a Material Adverse Effect on
the Purchaser.
4.3 AUTHORIZATION
This Agreement has been duly authorized, executed and delivered by the
Purchaser and is a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser by the Vendor in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the enforcement of rights of creditors generally and except that
equitable remedies may only be granted in the discretion of a court of competent
jurisdiction.
4.4 CONSENTS AND APPROVALS
There is no requirement for the Purchaser to make any filing with, give
any notice to or obtain any licence, permit, certificate, registration,
authorization, consent or approval of, any government or Governmental or
Regulatory Authority as a condition to the lawful consummation of the
transactions contemplated by this Agreement.
- 31 -
ARTICLE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The representations and warranties of the Vendor contained in this
Agreement or in any document, certificate or undertaking given pursuant hereto
shall terminate on the 45th day after the Closing Date.
5.2 EXPIRATION OF THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The representations and warranties of the Purchaser contained in this
Agreement or in any document, certificate or undertaking given pursuant hereto
shall terminate on the 45th day after the Closing Date.
ARTICLE 6
COVENANTS
6.1 ACCESS TO THE CORPORATION
The Vendor shall forthwith make available to the Purchaser and its
authorized representatives and, if requested by the Purchaser, provide a copy to
the Purchaser of, all title documents, Contracts, financial statements, minute
books, share certificate books, share registers, plans, reports, licences,
orders, permits, books of account, accounting records, constating documents and
all other documents, information or data relating to the Corporation and the
Business, but nothing in this Article 6 requires the Corporation to provide to
the Purchaser formulas relating to its Intellectual Property. The Vendor and the
Corporation shall afford the Purchaser and its authorized representatives every
reasonable opportunity to have free and unrestricted access to the Business and
the property, assets, undertaking, records and documents of the Corporation and,
to facilitate the foregoing, the Corporation will permit a representative of the
Purchaser with such free and unrestricted access to be present at the offices of
the Corporation from the date hereof to the Time of Closing. At the request of
the Purchaser, the Vendor shall execute or cause to be executed such consents,
authorizations and directions as may be necessary to permit any inspection of
the Business and any property of the Corporation or to enable the Purchaser or
its authorized representatives to obtain full access to all files and records
relating to the Corporation and any of the assets of the Corporation maintained
by Governmental or Regulatory Authorities. At the Purchaser's request, the
Vendor shall co-operate with the Purchaser in arranging any such meetings as the
Purchaser should reasonably request with:
(a) employees of the Corporation;
(b) customers, suppliers, distributors or others who have or have
had a business relationship with the Corporation; and
(c) auditors, solicitors or any other persons engaged or
previously engaged to provide services to the Corporation who
have knowledge of matters relating to the Corporation and the
Business.
- 32 -
In particular, without limitation, the Vendor shall permit the Purchaser's
representatives or consultants to conduct all such testing and inspection in
respect of environmental matters at such locations of the Business as the
Purchaser may determine, in its sole discretion, as may be required to satisfy
the Purchaser in respect of such matters, and the Vendor shall cause the
Corporation to conduct, and the Corporation shall conduct, in co-operation with
the representatives or consultants of the Purchaser, such physical review of the
equipment of the Business as is necessary so as to enable the confirmation of
the values carried on the respective balance sheets of the Corporation in
respect of such assets, to the reasonable satisfaction of the Purchaser. The
exercise of any rights of inspection by or on behalf of the Purchaser under this
Section 6.1 shall not mitigate or otherwise affect the representations and
warranties of the Vendor hereunder, which shall continue in full force and
effect as provided in Section 5.1.
6.2 DELIVERY OF BOOKS AND RECORDS
At the Time of Closing there shall be delivered to the Purchaser, by
the Vendor, all of the books and records of and relating to the Corporation and
the Business. The Purchaser agrees that it will preserve the books and records
so delivered to it for a period of six years from the Closing Date, or for such
longer period as is required by any applicable law, and will permit the Vendor
or its authorized representatives reasonable access thereto in connection with
the affairs of the Vendor relating to its matters, but the Purchaser shall not
be responsible or liable to the Vendor for or as a result of any accidental loss
or destruction of or damage to any such books or records.
6.3 CHANGE AND USE OF NAME
The Vendor agrees that, within forty-five (45) days from the Closing
Date, it will change its name and the name of any of its Associates or
Affiliates that bear the name Alternative Materials Technology to a name that
does not include the words Alternative Materials Technology or any part thereof
or any similar words. The Vendor agrees that from and after the Closing Date
neither the Vendor nor any of its Associates or Affiliates will use the name
Alternative Materials Technology or any part thereof or any similar words,
including without limitation AMT or Alternative Materials (except for the use of
the name AMT Environmental Products Inc. until forty-five (45) days from the
Closing Date).
6.4 CONDUCT PRIOR TO CLOSING - VENDOR AND CORPORATION
Without in any way limiting any other obligations of the Vendor and the
Corporation hereunder, during the period from the date hereof to the Time of
Closing:
(a) Conduct Business in the Ordinary Course. Except as otherwise
contemplated by this Agreement, the Vendor shall cause the
Corporation to conduct, and the Corporation shall conduct, the
Business and the operations and affairs of the Corporation
only in the ordinary and normal course of business consistent
with past practice, and the Corporation shall not, without the
prior written consent of the Purchaser, enter into any
transaction or refrain from doing any action that, if effected
before the date of this Agreement, would constitute a Material
Adverse Change, and provided further that the Vendor shall not
enter into any material supply arrangements relating to the
Corporation or make any material decisions or
- 33 -
enter into any material Contracts with respect to the
Corporation without the consent of the Purchaser, which
consent shall not be unreasonably withheld;
(b) Continue Insurance. The Vendor shall cause the Corporation to
continue, and the Corporation shall continue, to maintain in
full force and effect all policies of insurance or renewals
thereof now in effect, shall take out, at the expense of the
Purchaser, such additional insurance as may be reasonably
requested by the Purchaser and shall give all notices and
present all claims under all policies of insurance in a due
and timely fashion;
(c) Regulatory Consents. The Vendor shall use commercially
reasonable efforts to obtain or cause the Corporation to
obtain, and the Corporation shall use commercially reasonable
efforts to obtain, at or prior to the Time of Closing, from
all material federal, provincial, state, municipal or other
Governmental or Regulatory Authority, the licences, permits,
consents, approval, certificates, registrations and
authorizations described in Schedule 10;
(d) Contractual Consents. The Vendor shall use commercially
reasonable efforts to give or obtain or cause the Corporation
to give or obtain, and the Corporation shall use commercially
reasonable efforts to obtain, the notices, consents and
approvals described in Schedule 11;
(e) Preserve Goodwill. The Vendor shall use commercially
reasonable efforts to preserve, and cause the Corporation to
preserve intact, and the Corporation shall use commercially
reasonable efforts to preserve intact, the Business and the
property, assets, operations and affairs of the Corporation
and to carry on the Business and the affairs of the
Corporation as currently conducted, and to promote and
preserve for the Purchaser the goodwill of suppliers,
customers and others having business relations with the
Corporation;
(f) Discharge Liabilities. The Vendor shall cause the Corporation
to pay and discharge, and the Corporation shall pay and
discharge, the liabilities of the Corporation in the ordinary
course in accordance and consistent with the previous practice
of the Corporation, except those contested in good faith by
the Corporation;
(g) Corporate Action. The Vendor shall use commercially reasonable
efforts to take and cause the Corporation to take, and the
Corporation shall use its commercially reasonable efforts to
take, all necessary corporate action, steps and proceedings to
approve or authorize, validly and effectively, the execution
and delivery of this Agreement and the other agreements and
documents contemplated hereby and to complete the transfer of
the Purchased Shares to the Purchaser and to cause all
necessary meetings of directors and shareholders of the Vendor
and the Corporation to be held for such purpose; and
(h) Commercial Reasonable Efforts. The Vendor Group shall use
commercially reasonable efforts to satisfy the conditions
contained in Section 7.1.
- 34 -
Notwithstanding any other provision of this Agreement or this Section 6.4 the
Corporation is expressly permitted to repay the Intercorporate Indebtedness, to
pay the Eligible Expenses and to assume and pay the Maligie Payment.
6.5 CONDUCT PRIOR TO CLOSING - PURCHASER
The Purchaser shall use commercially reasonable efforts to satisfy the
conditions contained in Section 7.2.
6.6 DELIVERY OF DOCUMENTS
The Vendor shall deliver to the Purchaser all necessary transfers,
assignments and other documentation reasonably required to transfer the
Purchased Shares to the Purchaser with a good and marketable title, free and
clear of all Encumbrances, except for Permitted Encumbrances.
6.7 DELIVERY OF VENDOR'S AND CORPORATION'S CORPORATE AND CLOSING
DOCUMENTATION
The Vendor shall deliver to the Purchaser a certificate of status and
two copies, certified by a senior officer of the Vendor and the Corporation,
respectively, dated as of the Closing Date, of the constating documents and
by-laws of each of the Vendor and the Corporation and of the resolutions of each
of the Vendor and the Corporation authorizing the execution, delivery and
performance by the Vendor and the Corporation of this Agreement and any
documents to be provided by either of them pursuant to the provisions hereof.
The Vendor shall also execute and deliver or cause to be executed and delivered
to the Purchaser two copies of such other documents relevant to the closing of
the transaction contemplated hereby as the Purchaser, acting reasonably, may
request.
6.8 DELIVERY OF PURCHASER'S CLOSING DOCUMENTATION
The Purchaser shall deliver to the Vendor a certificate of status and
two copies, certified by a senior officer of the Purchaser, dated as of the
Closing Date, of its constating documents and by-laws and of the resolution
authorizing the execution, delivery and performance by the Purchaser of this
Agreement and any documents to be provided by it pursuant to the provisions
hereof. The Purchaser shall also execute and deliver or cause to be executed and
delivered two copies of each of such other documents relevant to the closing of
the transaction contemplated hereby as the Vendor, acting reasonably, may
request.
6.9 INTERCORPORATE INDEBTEDNESS
If so requested by the Corporation, the Purchaser will make available
to the Corporation sufficient funds to repay the Intercorporate Indebtedness at
the Closing Time, however, the Corporation will use commercially reasonable
efforts to first repay such Intercorporate Indebtedness from cash reserves and
existing credit facilities.
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6.10 MALIGIE PAYMENT
At or prior to the Time of Closing, the Corporation shall assume and
pay the Maligie Payment and obtain releases from the beneficiaries in form and
content acceptable to Purchaser, acting reasonably.
6.11 SHAREHOLDER APPROVAL
The Vendor Parent covenants in favour of the Purchaser to use
commercially reasonable efforts to, in a timely and expeditious manner, prepare
a management information circular for the purpose of, inter alia, obtaining
Shareholder Approval and to file and mail same in compliance with applicable
laws. The Vendor Parent covenants in favour of the Purchaser to use commercially
reasonable efforts to, in a timely and expeditious manner, obtain the approval
of the TSX Venture Exchange to the transaction contemplated by this Agreement.
ARTICLE 7
CONDITIONS OF CLOSING
7.1 CONDITIONS OF CLOSING IN FAVOUR OF THE PURCHASER
The sale and purchase of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the Purchaser, to be
fulfilled or performed, unless otherwise indicated, at or prior to the Time of
Closing:
(a) Representations and Warranties. The representations and
warranties of the Vendor contained in this Agreement shall be
true and correct at the Time of Closing, with the same force
and effect as if such representations and warranties were made
at and as of such time (except to the extent such
representations and warranties speak as of an earlier date or
except as affected by transactions contemplated by this
Agreement (including for greater certainty, the Corporation's
repayment of the Intercorporate Indebtedness, payment of the
Eligible Expenses and assumption and payment of the Maligie
Payment) or except for any failure or breaches of
representations and warranties which individually or in the
aggregate do not have, or would not reasonably be expected to
have, a Material Adverse Effect on the Corporation or
materially impede the transaction contemplated by this
Agreement), and certificates of the President of the Vendor
and of the President of the Corporation dated the Closing Date
to that effect shall have been delivered to the Purchaser,
such certificates to be in form and substance satisfactory to
the Purchaser, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendor Group
at or before the Time of Closing shall have been complied with
or performed, except to the extent that the failure to comply
with such terms, covenants and conditions has not had, or
would not reasonably be expected to have, individually or in
the aggregate a Material Adverse Effect on the Corporation or
materially impede the completion of the transactions
contemplated by this Agreement, and certificates of the
President of the Vendor and the President of the Corporation
dated the Closing Date to that
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effect shall have been delivered to the Purchaser, such
certificates to be in form and substance satisfactory to the
Purchaser, acting reasonably;
(c) Regulatory Consents. There shall have been obtained from all
federal, provincial, municipal or other Governmental or
Regulatory Authority, such material licences, permits,
consents, approvals, certificates, registrations and
authorizations as are required to be obtained by the Vendor or
its affiliates to permit the change of ownership of the
Purchased Shares contemplated hereby including, without
limitation, those disclosed in writing by the Vendor to the
Purchaser;
(d) Contractual Consents. The Vendor shall have given or obtained
the material notices, consents and approvals disclosed in
writing by the Vendor to the Purchaser, in each case in form
and substance satisfactory to the Purchaser, acting
reasonably;
(e) Material Adverse Change. Except for transactions contemplated
by this Agreement and except as disclosed in writing by the
Vendor to the Purchaser, there shall have been no Material
Adverse Change in the condition (financial or otherwise),
assets, liabilities, operations, earnings, business or
prospects of the Corporation since the date of the Financial
Statements;
(f) No Action or Proceeding. No material legal or regulatory
action or proceeding shall be pending or threatened by any
person to enjoin, restrict or prohibit the purchase and sale
of the Purchased Shares contemplated hereby;
(g) Shareholder Approval. The resolution of the Vendor Parent's
shareholders shall have been obtained to complete the
transactions contemplated by this Agreement (the "Shareholder
Approval");
(h) Employment Contract. On or before November 15, 2003, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall have executed and delivered to the
Corporation an employment agreement in a form acceptable to
the Purchaser acting reasonably;
(i) Non-Competition Agreement. The Vendor, PAC, the Vendor Parent,
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ shall have executed and
delivered to the Purchaser a non-competition agreement in a
form acceptable to the Purchaser, acting reasonably;
(j) Resignation of Directors and Officers. Such directors and
officers of the Corporation as the Purchaser may specify shall
have resigned as of the Time of Closing;
(k) Release by Directors and Officers. Such directors and officers
of the Corporation as the Purchaser may specify shall have
executed and delivered, at the Time of Closing, releases in
favour of the Corporation and the Purchaser in the form
acceptable to the Purchaser, acting reasonably;
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(l) EVA Release. Vendor Parent shall have paid an aggregate of
$298,772 to the, and obtained a release (in the form
acceptable to the Purchaser, acting reasonably) from all,
employees of the Vendor Group in respect of obligations due to
such employees pursuant to the Vendor Parent's 1998 Directors,
Consultants and Employee Economic Value Added Incentive
Compensation Method Plan;
(m) Vendor Re-Organisation. The Vendor: (i) shall have caused all
material agreements, plans and permits from which the
Corporation or its employees enjoy a benefit (other than the
Vendor Parent's 1998 Stock Option Plan, the Vendor Parent's
1998 Directors, Consultants and Employee Economic Value Added
Incentive Compensation Method Plan, the Vendor Parent's
Directors' and Officers' Liability Insurance, and the B of A
Loan Agreement) to be assigned to the Corporation to be so
assigned to the Corporation from its Affiliates without any
Material Adverse Effect on the Business or the interests of
the Corporation's employees, (ii) shall have obtained a full
release of the Corporation in respect of any joint obligations
of the Corporation and its Affiliates (other than those
obligations assigned to the Corporation), (iii) shall have
obtained a full release of the Corporation from guarantees of
the Corporation in respect of obligations of the Vendor
Parent, PAC and the Vendor, and (iv) shall have obtained all
necessary consents of third parties in connection with the
foregoing, all as requested by and with a result that is
satisfactory to the Purchaser, acting reasonably;
(n) Minimum Net Income. The net income of the Corporation before
taxes for the three fiscal quarters ended December 31, 2003 is
not less than $425,000; and
(o) B of A Loan Agreement. The B of A Loan Agreement shall have
been terminated.
The foregoing conditions are for the benefit of the Purchaser and may be waived
in whole or in part by the Purchaser at any time. If any of these conditions
cannot be complied with or are not capable of being complied with by the Vendor
or waived by the Purchaser on or before the date required for their performance
and provided such non-compliance did not arise from the acts or omissions of the
Purchaser, then the Purchaser may rescind and terminate this Agreement by
written notice to the Vendor and the Corporation and shall have no other right
or remedy against the Vendor, except as set forth in Article 11; provided,
however, where a condition is required to be complied with by a date other than
the Time of Closing, in order to rescind and terminate this Agreement pursuant
to such condition written notice of such termination must be provided by the
Purchaser to the Vendor within five Business Days of such Date.
7.2 CONDITIONS OF CLOSING IN FAVOUR OF THE VENDOR
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the Vendor, to be
fulfilled or performed, unless otherwise indicated, at or prior to the Time of
Closing:
(a) Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall
be true and correct at the Time of
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Closing, with the same force and effect as if such
representations and warranties were made at and as of such
time (except to the extent such representations and warranties
speak as of an earlier date or except as affected by
transactions contemplated by this Agreement or except for any
failure or breaches of representations and warranties which
individually or in the aggregate do not have, or would not
reasonably be expected to have, a Material Adverse Effect on
the Purchaser or materially impede the transactions
contemplated by this Agreement), and a certificate of the
President of the Purchaser dated the Closing Date to the
effect shall have been delivered to the Vendor, such
certificate to be in form and substance satisfactory to the
Vendor, acting reasonably;
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser at
or before the Time of Closing shall have been complied with or
performed, except to the extent that the failure to comply
with such terms, covenants and conditions has not had, or
would not reasonably be expected to have individually or in
the aggregate a Material Adverse Effect on the Corporation or
materially impede the completion of the transactions
contemplated by this Agreement, and a certificate of the
President of the Purchaser dated the Closing Date to that
effect shall have been delivered to the Vendor, such
certificate to be in form and substance satisfactory to the
Vendor, acting reasonably;
(c) Regulatory Consents. There shall have been obtained, from all
material federal, provincial, municipal or other Governmental
or Regulatory Authority, such material licences, permits,
consents, approvals, certificates, registrations and
authorizations as are required by law to be obtained by the
Purchaser to permit the change of ownership of the Purchased
Shares contemplated hereby including those disclosed in
writing by the Vendor to the Purchaser, in each case in form
and substance satisfactory to the Vendor, acting reasonably;
(d) Contractual Consents. The Vendor shall have given or obtained
the material notices, consents and approvals disclosed in
writing by the Vendor to the Purchaser, in each case in form
and substance satisfactory to the Vendor, acting reasonably;
(e) No Action or Proceeding. No material legal or regulatory
action or proceeding shall be pending or threatened by any
person to enjoin, restrict or prohibit the purchase and sale
of the Purchased Shares contemplated hereby;
(f) Shareholder Approval. Shareholder Approval shall have been
obtained;
(g) Employment Contract. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have executed
and delivered to the Corporation an employment agreement in a
form acceptable to the Vendor, acting reasonably;
(h) Tax Opinion. On or before the date which is five Business Days
from the date hereof, Vendor Parent shall have received
favourable opinions from its tax
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advisors with respect to the distribution of funds to
shareholders of Vendor Parent in connection with the
winding-up of the Vendor Parent;
(i) Intercorporate Indebtedness. The Intercorporate Indebtedness
shall have been repaid or arrangements shall have been made
for repayment satisfactory to the Vendor Group;
(j) EVA Release. Vendor Parent shall have paid an aggregate of
$298,772 to the, and obtained a release (in the form
acceptable to the Purchaser, acting reasonably) from all,
employees of the Vendor Group in respect of obligations due to
such employees pursuant to the Vendor Parent's 1998 Directors,
Consultants and Employee Economic Value Added Incentive
Compensation Method Plan;
(k) Vendor Re-Organization. Vendor Parent, PAC and the Vendor
shall have been released from all obligations in material
agreements and permits assigned to the Corporation from its
Affiliates and shall have received an indemnity in respect
thereof from the Corporation in a form suitable to the Vendor,
acting reasonably; and
(l) Maligie Payment. Vendor Parent shall have been released from
its obligations in respect of the Maligie Payment and shall
have received an indemnity in respect thereof from the
Corporation in a form suitable to the Vendor, acting
reasonably.
The foregoing conditions are for the benefit of the Vendor and may be waived in
whole or in part by the Vendor at any time. If any of these conditions cannot be
complied with or are not capable of being complied with by the Purchaser or
waived by the Vendor on or before the date required for their performance and
provided such non-compliance did not arise from the acts or omissions of the
Vendor, then the Vendor may rescind and terminate this Agreement by written
notice to the Purchaser and shall have no other right or remedy against the
Purchaser, except as set forth in Article 11; provided, however, where a
condition is required to be complied with by a date other than the Time of
Closing, in order to rescind and terminate this Agreement pursuant to such
condition written notice of such termination must be provided by the Vendor to
the Purchaser within five Business Days of such date.
ARTICLE 8
CLOSING ARRANGEMENTS
8.1 PLACE OF CLOSING
The closing shall take place at the Time of Closing at the offices of
Farris, Vaughan, ▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Vendor, in Vancouver, British
Columbia.
8.2 TRANSFER
At the Time of Closing, upon fulfilment of all the conditions set out
in Article 7 that have not been waived in writing by the Purchaser or the
Vendor, the Vendor shall deliver to the Purchaser certificates representing all
the Purchased Shares, duly endorsed in blank for transfer, with all exigible
security transfer taxes paid, and will cause transfers of such shares to be duly
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and regularly recorded in the name of the Purchaser, or its nominee(s), and will
cause a meeting of the board of directors of the Corporation to be held, at
which the directors and officers of the Corporation specified by the Purchaser
will resign in favour of nominees of the Purchaser whereupon, subject to all
other terms and conditions hereof being complied with, payment of the Purchase
Price shall be paid and satisfied in the manner provided in Article 2.
8.3 FURTHER ASSURANCES
Each party to this Agreement covenants and agrees that, from time to
time subsequent to the Closing Date, it will, at the request and expense of the
requesting party, execute and deliver all such documents, including, without
limitation, all such additional conveyances, transfers, consents and other
assurances and do all such other acts and things as any other party hereto,
acting reasonably, may from time to time request be executed or done in order to
better evidence or perfect or effectuate any provision of this Agreement or of
any agreement or other document executed pursuant to this Agreement or any of
the respective obligations intended to be created hereby or thereby.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE VENDOR
Subject to this Article 9, the Vendor agrees to indemnify and save
harmless the Purchaser from all Losses suffered or incurred by the Purchaser as
a result of or arising directly or indirectly out of or in connection with:
(a) any material breach by the Vendor or the Corporation of or any
inaccuracy of any representation or warranty of the Vendor or
the Corporation contained in this Agreement or in any
agreement, certificate or other document delivered pursuant
hereto (provided that the Vendor shall not be required to
indemnify or save harmless the Purchaser in respect of any
breach or inaccuracy of any representation or warranty unless
the Purchaser shall have provided notice to the Vendor in
accordance with Section 9.3 on or prior to the expiration of
the applicable time period related to such representation and
warranty set out in Section 5.1);
(b) any material breach or non-performance by the Vendor or the
Corporation of any covenant to be performed by it that is
contained in this Agreement or in any agreement, certificate
or other document delivered pursuant hereto; and
(c) all debts, liabilities or contracts whatsoever (whether
accrued, absolute, contingent or otherwise) of the Corporation
existing at the Time of Closing, including any liabilities for
federal, state, provincial, sales, excise, income, corporate
or any other taxes of the Corporation for any period up to and
including the Time of Closing, and not disclosed on, provided
for or included in the balance sheets forming part of the
Financial Statements, except those liabilities:
(i) disclosed in this Agreement or any Schedule hereto;
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(ii) accruing or incurred subsequent to March 31, 2003 in
the ordinary course of the Business; or
(iii) incurred pursuant to this Agreement.
9.2 INDEMNIFICATION BY THE PURCHASER
Subject to this Article 9, the Purchaser agrees to indemnify and save
harmless the Vendor from all Losses suffered or incurred by the Vendor as a
result of or arising directly or indirectly out of or in connection with:
(a) any material breach by the Purchaser of or any inaccuracy of
any representation or warranty of the Purchaser contained in
this agreement or in any agreement, instrument, certificate or
other document delivered pursuant hereto; and
(b) any material breach or non-performance by the Purchaser of any
covenant to be performed by it that is contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto.
9.3 NOTICE OF CLAIM
In the event that a party (the "Indemnified Party") shall become aware
of any claim, proceeding or other matter (a "Claim") in respect of which another
party (the "Indemnifying Party") agreed to indemnify the Indemnified Party
pursuant to this Agreement, the Indemnified Party shall promptly give written
notice thereof to the Indemnifying Party. Such notice shall specify with
reasonable particularity (to the extent that the information is available) the
factual basis for the Claim and the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party
does not receive notice of any Claim in time to contest effectively the
determination of any liability susceptible of being contested, the Indemnifying
Party shall be entitled to set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the Indemnifying Party resulting from
the Indemnified Party's failure to give such notice on a timely basis.
9.4 DISPUTE OF CLAIMS
With respect to any Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have 10 Business
Days to make such investigation of the Claim as is considered necessary or
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such 10 Business Day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim, failing which the matter shall be
submitted to arbitration pursuant to the Commercial Arbitration Act (British
Columbia) based upon the following:
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(a) the tribunal shall consist of one arbitrator (the "Claim's
Arbitrator") appointed by mutual agreement of the parties
acting in good faith; the Claim's Arbitrator shall be a person
reasonably knowledgeable with respect to the matters involved
in the arbitration. If the parties fail to agree on the
arbitrator, one shall be appointed in accordance with the
Commercial Arbitration Act (British Columbia);
(b) the Claim's Arbitrator shall be instructed that time is of the
essence in proceeding with his or her determination of the
dispute and, in any event, the award of the Claim's Arbitrator
must be rendered within 30 days of the day in which the
submission of such dispute to arbitration was made;
(c) the arbitration shall take place in Vancouver, British
Columbia;
(d) the arbitration award shall be given in writing and shall be
final and binding on the parties, not subject to any appeal,
and shall deal with all matters related thereto;
(e) the prevailing party in the arbitration proceedings shall be
awarded reasonable legal fees, expert witness costs and
expenses and all other costs and expenses incurred directly or
indirectly in connection with the proceedings, unless the
Arbitrator shall for good cause determine otherwise; and
(f) judgement upon the award rendered may be entered in any court
having jurisdiction, or application may be made to such court
for a judicial recognition of the award or an order of
enforcement thereof, as the case may be.
9.5 EXCLUSIVITY
The provisions of this Article 9 shall apply to any Claim for breach of
any covenant, representation, warranty or other provision of this Agreement or
any agreement, certificate or other document delivered pursuant hereto (other
than a claim for specific performance or injunctive relief) with the intent that
all such Claims shall be subject to the limitations and other provisions
contained in this Article 9 with the exception of these Claims contemplated by
Sections 11.1 and 11.2.
9.6 LIMITATION ON INDEMNIFICATION - VENDOR
The indemnity obligations of the Vendor pursuant to Section 9.1 shall
be limited in the following respects:
(a) in no event shall the Vendor be responsible to indemnify the
Purchaser for Purchaser's Losses in excess of $750,000 less
the amount of payments made or to be made, if any, pursuant to
Section 2.5; and
(b) in no event shall the Vendor be responsible to indemnify the
Purchaser for Purchaser's Losses which, in the aggregate, do
not exceed $50,000.
- 43 -
9.7 LIMITATIONS AND INDEMNIFICATION - PURCHASER
The Indemnity obligations of the Purchaser pursuant to Section 9.2 in
respect of any material breach by the Purchaser of or an inaccuracy of any
representation or warranty of the Purchaser contained in this agreement or in
any agreement, instrument, certificate or other document delivered pursuant
hereto shall be limited in the following respects:
(a) in no event shall the Purchaser be responsible to indemnify
the Vendor for Vendor's Losses in excess of $750,000; and
(b) in no event shall the Purchaser be responsible to indemnify
the Vendor for Vendor's Losses which, in the aggregate, do not
exceed $50,000.
ARTICLE 10
SUPERIOR PROPOSALS
10.1 RIGHT TO MATCH
Each of the Vendor Group may, upon receipt of an opinion of legal counsel
specifying they are required to do so to comply with their fiduciary duties,
solicit additional information and/or proposals related to the sale or value of
each of the Vendor Group during the Exclusivity Period. Each member of the
Vendor Group covenants that, during the Exclusivity Period, they will not enter
into any agreement, arrangement or understanding regarding a Superior Proposal
(the "Proposed Agreement") without providing the Purchaser with an opportunity
to amend this Agreement to provide for terms at least as favourable as those
contained in the Proposed Agreement (as determined by such member of the Vendor
Group, in good faith), with the result that the Superior Proposal would cease to
be a Superior Proposal. In particular each member of the Vendor Group covenants
to provide the Purchaser with a complete copy of any Proposed Agreement as
executed by the person making the proposal as soon as possible, following which
the Purchaser has until the close of business in Vancouver, British Columbia on
the third Business Day following receipt of such copy to consider matching or
bettering the terms of the Proposed Agreement and during which time each member
of the Vendor Group covenants to not enter into the Proposed Agreement. If the
Purchaser agrees to amend this Agreement in the manner described above, each
member of the Vendor Group covenants to not enter into the Proposed Agreement
and shall agree to the amendments to this Agreement, and no fee shall be payable
under Article 11 in respect of this Agreement. If the Purchaser does not agree
to amend this Agreement in the manner described above, each member of the Vendor
Group may enter into the Proposed Agreement and the fee contemplated by Article
11 shall be payable.
ARTICLE 11
AGREEMENT AS TO COMPENSATION AND OTHER ARRANGEMENTS
11.1 PURCHASER COMPENSATION
If at any time after the execution of this Agreement:
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(a) a member of the Vendor Group completes the transactions
contemplated by a Proposed Agreement with respect to a
Superior Proposal whether or not such completion occurs during
the Exclusivity Period; or
(b) this Agreement is terminated by the Purchaser pursuant to
Section 12.1(b) as a result of the non-fulfillment of any of
the conditions in Sections 7.1(a) or (b) or pursuant to
Section 12.1(c);
(each of the above being a "Vendor Payment Event"), then the Vendor Group shall
pay to the Purchaser $250,000 in immediately available funds to an account
designated by the Purchaser within one business day after the first to occur of
the events described above.
11.2 VENDOR COMPENSATION
If at any time after execution of this Agreement, the Purchaser
terminates this Agreement pursuant to Section 12.1(f), then the Purchaser shall
pay the Vendor Group, as directed by the Vendor Group, $200,000 in immediately
available funds to an account designated by the Vendor Group within one business
day after such termination.
11.3 LIQUIDATED DAMAGES
Each party acknowledges that the payments provided for in Sections 11.1
and 11.2 represent liquidated damages and are a genuine pre-estimate of the
damages, including opportunity costs, which the party entitled to such payment
will suffer or incur as a result of the event giving rise to such payment and
resultant termination of this Agreement, and are not penalties. Each party
irrevocably waives any right it may have to raise as a defence that any such
liquidated damages are excessive or punitive.
11.4 LIMITED REMEDY
For greater certainty, each party agrees that the payment to which it
is entitled pursuant to this Article 11 is the sole remedy in compensation or
damages of such party for the events or circumstances giving rise to such
payment. Nothing herein shall preclude a party from seeking injunctive relief to
restrain any breach or threatened breach of the covenants or agreements set
forth in this Agreement or the Confidentiality Agreement or otherwise to obtain
specific performance of any of such act, covenants or agreements, without the
necessity of posting bond or security in connection therewith.
ARTICLE 12
TERMINATION
12.1 TERMINATION
This Agreement shall be terminated at the expiry of the Exclusivity
Period if the transactions contemplated by this Agreement have not been
completed. This Agreement may be terminated at any time prior to the expiry of
the Exclusivity Period:
(a) by the mutual written consent of the parties hereto;
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(b) by the Purchaser as provided in Section 7.1;
(c) by the Purchaser upon the acceptance by a member of the Vendor
Group of a Proposed Agreement with respect to a Superior
Proposal;
(d) by the Vendor as provided in Section 7.2;
(e) by the Vendor upon the acceptance by a member of the Vendor
Group of a Proposed Agreement with respect to a Superior
Proposal provided the payment contemplated by Section 11.1 has
been made in full; and
(f) by the Purchaser upon written notice to the Vendor where the
circumstances contemplated by Sections 12.1(a), (b) or (c) do
not apply.
In the event of the termination of this Agreement in the circumstances
set out in this Section 12.1, this Agreement shall forthwith become void and no
party shall have any liability or further obligation to the other parties
hereunder, except with respect to the obligations set forth in Article 11 and
Article 13 and in the immediately following sentence, which shall survive such
termination. Nothing contained in this Section 12.1, including the payment of an
amount under Article 11, shall, however, relieve or have the effect of resulting
in relieving any party in any way from liability for damages incurred or
suffered by a party as a result of a breach of this Agreement by a party acting
in bad faith intended and designed to prevent the conditions precedent to this
Agreement's completion from being satisfied.
ARTICLE 13
MISCELLANEOUS
13.1 CONFIDENTIALITY OF INFORMATION
Both the Vendor and the Purchaser shall maintain the confidentiality of
any information (the "Information") received from the other, directly or
indirectly, in connection with the transactions contemplated by this Agreement,
whether received before or after the date of this Agreement and not disclose
such Information to any third party, directly or indirectly, in whole or in
part, except as provided herein. The receiving party agrees to restrict
disclosure of the disclosing party's Information to its employees, directors,
legal advisors and accounting advisors (collectively, the "Personnel") who have
a "need to know". The receiving party agrees to take precautions necessary and
appropriate to guard the confidentiality of the disclosing party's Information,
including informing Personnel who handle such Information that it is
confidential and not to be disclosed to third parties. The receiving party
agrees to only use the disclosing party's Information for the purpose of
evaluating the transactions contemplated by this Agreement and, without limiting
the generality of the foregoing, the receiving party will not use the disclosing
party's information to solicit the disclosing party's customers. If the
transactions contemplated herein are not consummated, the receiving party shall
return to the disclosing party all copies of disclosing party's Information and
destroy all memoranda, notes and other writings prepared by the receiving party
or its Personnel based upon the disclosing party's Information.
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The provisions of this Section 13.1 shall not apply to any Information
which:
(a) the receiving party can establish by its records was known to
the receiving party prior to disclosure by the disclosing
party;
(b) the receiving party can establish by its records was
independently developed by the receiving party without breach
of this Agreement;
(c) now or hereafter comes into the public domain through no act
or failure to act on the part of the receiving party;
(d) is disclosed to the receiving party without restriction on
disclosure by a third party who has the lawful right to make
such disclosure to the receiving party;
(e) is required to be disclosed by any law, rule or regulation of
any court, stock exchange or other regulatory organization of
competent jurisdiction, provided that the receiving party
provides prompt prior written notice to the disclosing party
of such required disclosure and of the action which is
proposed to be taken in response. In such an event, and only
after the receiving party shall have made a reasonable effort
to obtain a protective order or other reliable assurance
affording such information confidential treatment, the
receiving party will only furnish that portion of the
Information which it is required to disclose; or
(f) the disclosing party has given its prior written permission to
the receiving party to disclose, provided that the receiving
party only disclose such information to those persons
identified in such written permission.
The burden of establishing that any Information falls within one of the
foregoing exceptions shall be the responsibility of the receiving party.
13.2 NON-SOLICITATION OF EMPLOYEES
Each of the Vendor and the Purchaser hereby covenants and agrees that
it will not, nor will it cause or allow any of its representatives or Affiliates
to, from the date hereof to a date which is the earlier of (i) the Closing Date
and (ii) 18 months from the date hereof, initiate, solicit, invite any
discussions or negotiations for employment, or enter into any agreement for
employment, with any person who is an employee of the other (or an employee of
an Affiliate of the other) or was an employee of the other (or an employee of an
Affiliate of the other) at any time from the date hereof to the earlier of (i)
the Closing Date and (ii) the date upon which this Agreement is terminated
pursuant to Section 12.1; provided, however, this restriction will not apply to
any general advertising or general recruiting in the ordinary course of
business.
13.3 NOTICES
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered in
person, transmitted by telecopy or similar means of recorded
electronic communication or sent by registered mail, charges
prepaid, addressed as follows:
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(i) if to the Vendor:
(address) AMT Environmental Products Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
with copy to: Farris, Vaughan, ▇▇▇▇▇ & ▇▇▇▇▇▇
(address) 2600 - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to the Purchaser:
(address) Chemcraft Holdings Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
with copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Gervais LLP
(address) Scotia Plaza
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) Any such notice or other communication shall be deemed to have
been given and received on the day on which it was delivered
or transmitted (or, if such day is not a Business Day, on the
next following Business Day) or, if mailed, on the third
Business Day following the date of mailing; provided, however,
that if at the time of mailing or within three Business Days
thereafter there is or occurs a labour dispute or other event
that might reasonably be expected to disrupt the delivery of
documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by means of recorded
electronic communication as aforesaid.
(c) Any party may at any time change its address for service from
time to time by giving notice to the other parties in
accordance with this Section 13.3.
13.4 CONSULTATION
The parties shall consult with each other before issuing any press
release or making any other public announcement with respect to this Agreement
or the transactions contemplated hereby and, except as required by any
applicable law or regulatory requirement, neither the Vendor nor the Purchaser
shall issue any such press release or make any such public
- 48 -
announcement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
13.5 DISCLOSURE
Prior to any public announcement of the transaction contemplated hereby
pursuant to Section 13.4, neither party shall disclose this Agreement or any
aspect of such transaction except to its board of directors, its senior
management, its legal, accounting, financial or other professional advisors, any
financial institution contacted by it with respect to any financing required in
connection with such transaction and counsel to such institution, or as may be
required by any applicable law or any Governmental or Regulatory Authority or
stock exchange having jurisdiction.
13.6 ASSIGNMENT BY PURCHASER
The Purchaser may assign its rights under this Agreement in whole or in
part to any other person; provided, however, that any such assignment shall not
relieve the Purchaser from any of its obligations hereunder.
13.7 COMMERCIALLY REASONABLE EFFORT
The parties acknowledge and agree that, for all purposes of this
Agreement, an obligation on the part of any party to use commercially reasonable
efforts to obtain any waiver, consent, approval, permit, licence or other
document shall not require such party to make any payment to any person for the
purpose of procuring the same, other than payments for amounts due and payable
to such person, payments for incidental expenses incurred by such person and
payments required by any applicable law or regulation.
13.8 VENDOR PARENT AND PAC LIMITATION
Vendor Parent and PAC are only a party to this Agreement for the
purposes of Articles 10 and 11, Subsection 6.4(h) and Section 6.11.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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13.9 COUNTERPARTS
This Agreement may be executed in counterparts and delivered by
facsimile, each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties.
AMT ENVIRONMENTAL PRODUCTS INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
ALTERNATIVE MATERIALS TECHNOLOGY
BY: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
POLYMER SOLUTIONS, INC.
BY: /s/ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer & President
PSI ACQUISITIONS CORP.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
CHEMCRAFT HOLDINGS CORPORATION
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
SCHEDULE 1
AUDITED FINANCIAL STATEMENTS
SCHEDULE 2
INTERIM FINANCIAL STATEMENTS
SCHEDULE 3
CORPORATION'S FINANCIAL STATEMENTS