Exhibit 10.1
SHARE PURCHASE AGREEMENT
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(collectively, the "Vendors")
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TELEPLUS ENTERPRISES INC.
(the "Purchaser")
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TELEPLUS CONNECT CORP.
(the "Corporation")
March 28, 2005
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION....................................................1
1.01 Defined Terms..........................................................1
1.02 Gender and Number......................................................4
1.03 Headings, Etc..........................................................4
1.04 Currency...............................................................4
1.05 Severability...........................................................4
1.06 Entire Agreement.......................................................5
1.07 Amendments.............................................................5
1.08 Waiver.................................................................5
1.09 Governing Law..........................................................5
1.10 Inclusion..............................................................5
1.11 Accounting Terms.......................................................5
1.12 Incorporation of Schedules.............................................5
ARTICLE 2 - PURCHASED SHARES AND PURCHASE PRICE...............................6
2.01 Purchase and Sale......................................................6
2.02 Consideration Payable..................................................6
2.03 Allocation and Payment of Consideration................................6
2.04 Funding of Corporation.................................................7
2.05 Security for Obligations...............................................7
2.06 The Closing............................................................8
2.07 Payment of Taxes and Registration Charges on Transfer..................8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF VENDORS AND CORPORATION.........8
3.01 Due Incorporation, Existence and Corporate Power of the Corporation....8
3.02 Title to Purchased Shares..............................................9
3.03 Extra-Provincial Qualification.........................................9
3.04 Authorized Capital of the Corporation..................................9
3.05 Options, etc...........................................................9
3.06 Valid Issuance of Purchased Shares.....................................9
3.07 Corporate Records......................................................9
3.08 Validity of Agreement.................................................10
3.09 Restrictive Documents.................................................10
3.10 Residence.............................................................10
3.11 Title to Assets.......................................................10
3.12 Absence of Changes....................................................10
3.13 Compliance with Laws..................................................12
3.14 Environmental Compliance..............................................12
3.15 Authorizations........................................................12
3.16 No Options, Etc.......................................................12
3.17 Real Property.........................................................12
3.18 Material Contracts....................................................13
3.19 Subsidiaries and Investments..........................................13
3.20 Books and Records.....................................................13
3.21 Third Party Guarantees................................................14
3.22 No Undisclosed Liabilities............................................14
3.23 Financial Statements..................................................14
3.24 Indebtedness and Accounts Payable.....................................14
3.25 Capital Expenditures..................................................14
3.26 Employees.............................................................14
3.27 Litigation............................................................14
3.28 Taxes.................................................................15
3.29 No Limitations........................................................15
3.30 Bank Accounts and Powers of Attorney..................................16
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ARTICLE 4 - INTENTIONALLY DELETED............................................16
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..................16
5.01 Due Incorporation and Existence.......................................16
5.02 Validity of Agreement.................................................16
5.03 Restrictive Documents.................................................16
ARTICLE 6 - PRE-CLOSING COVENANTS OF THE PARTIES.............................16
6.01 Pre-Closing Activities................................................16
6.02 Due Diligence Investigations..........................................17
6.03 Actions to Satisfy Closing Conditions.................................17
6.04 Transfer of the Purchased Shares......................................17
6.05 Filings and Authorizations............................................17
6.06 Notice of Untrue Representation or Warranty...........................18
ARTICLE 7 - CONDITIONS OF CLOSING............................................18
7.01 Conditions for the Benefit of the Purchaser...........................18
7.02 Conditions for the Benefit of the Vendors.............................19
ARTICLE 8 - CLOSING..........................................................21
8.01 Closing Procedures....................................................21
ARTICLE 9 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES..........21
9.01 Survival of Representations and Warranties............................21
9.02 Indemnification in Favour of the Purchaser............................21
9.03 Indemnification in Favour of the Vendors..............................22
9.04 Indemnification Proceedings...........................................22
ARTICLE 10 - POST-CLOSING COVENANTS..........................................23
10.01 Access to Books and Records...........................................23
10.02 Non-Competition.......................................................23
10.03 Further Assurances....................................................23
10.04 Securities Law Compliance Certificate................................23
ARTICLE 11 - ARBITRATION.....................................................24
11.01 Best Endeavours to Settle Disputes....................................24
11.02 Arbitration...........................................................24
ARTICLE 12 - TERMINATION AND MISCELLANEOUS...................................24
12.01 Termination...........................................................24
12.02 Notices...............................................................25
12.03 Publicity.............................................................26
12.04 Time of the Essence...................................................26
12.05 Brokers...............................................................26
12.06 Enurement.............................................................26
12.07 Counterparts..........................................................26
12.08 Assignment............................................................26
12.09 Non-Merger............................................................27
12.10 Entire Agreement; No Third Party Beneficiaries........................27
MEMORANDUM OF AGREEMENT made as of the 28th of March, 2005, among ▇▇▇▇▇ ▇▇▇▇▇▇▇,
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▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ (collectively, the "Vendors"), TELEPLUS CONNECT CORP., a
corporation incorporated under the laws of the Province of Ontario (the
"Corporation"), and TELEPLUS ENTERPRISES INC., a corporation incorporated under
the laws of Nevada (the "Purchaser"), witnesses that:
WHEREAS the Vendors, in reliance upon the representations and warranties of the
Purchaser contained herein, have agreed to sell to the Purchaser and the
Purchaser, in reliance upon the representations and warranties of the Vendors
contained herein, has agreed to purchase from the Vendors all of the issued and
outstanding shares in the capital of the Corporation, in accordance with the
terms of this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by the parties), the
parties agree as follows:
ARTICLE 1 -
INTERPRETATION
1.01 Defined Terms
As used in this Agreement, the following terms have the following
meanings:
"Affiliate" has the meaning as set out in the Business Corporations Act
(Ontario);
"Agreement" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; "hereof", "hereto" and
"hereunder" and similar expressions mean and refer to this Agreement and
not to any particular Article, Section, Subsection or other subdivision;
"Article", "Section", "Subsection" or other subdivision of this Agreement
followed by a number means and refers to the specified Article, Section,
Subsection or other subdivision of this Agreement;
"Ancillary Agreements" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement; and "Ancillary
Agreement" means any one of such agreements, certificates or other
instruments;
"Articles" shall mean the certificate and Articles of incorporation (as
amended), statute, constitution, trust indenture, joint venture or
partnership agreement or Articles or other constituting document of any
Person other than an individual, each as from time to time amended or
modified;
"Authorization" means, with respect to any Person, any authorization,
order, permit, approval, grant, licence, consent, right, franchise,
privilege, certificate, judgment, writ, injunction, award, determination,
direction, decree, or by-law, rule or regulation of any Governmental
Entity, whether or not having the force of law, having jurisdiction over
such Person;
"Books and Records" means all technical, business and financial records,
financial books and records of account, books, data, reports, files,
lists, drawings, plans, logs, briefs, customer and supplier lists, deeds,
certificates, contracts, surveys, title opinions or any other
documentation and information in any form whatsoever (including written,
printed, electronic or computer printout form) relating to Corporation and
the Business;
"Business" means the business carried on by the Corporation consisting of
the offering of wireline prepaid local telecommunications services to the
residential marketplace;
"Business Day" means any day of the year, other than a Saturday, Sunday or
any day on which Canadian chartered banks are required or authorized to
close in Toronto, Ontario;
"CRA" means the Canada Revenue Agency;
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"Claim" means any claim of any nature whatsoever, including any demand,
liability, obligation, debt, cause of action, suit, proceeding, judgment,
award, assessment, and reassessment;
"Closing" means the completion of the transaction of purchase and sale
contemplated in this Agreement;
"Closing Date" means March 30, 2005, or such other date as the parties may
agree in writing;
"Corporate Records" means the corporate records of a corporation,
including (i) all articles, by-laws, any unanimous shareholders agreement
and any amendments thereto; (ii) all minutes of meetings and resolutions
of shareholders, directors and any committee thereof; (iii) the share
certificate books, register of shareholders, register of transfers and
register of directors; and (iv) all accounting records;
"Corporation" means Teleplus Connect Corp., a corporation incorporated
under the laws of the Province of Ontario;
"Distribution" means (a) the declaration or payment of any dividend in
cash or property on or in respect of any class of shares of the Person,
(b) the purchase, redemption or other retirement of any shares of the
Person, directly or indirectly or otherwise, or (c) any other distribution
on or in respect of any class of shares or trust units of the Person;
"Distributable Net Income" means: (i) eighty per cent (80%) of the sum of
net income of the Corporation plus depreciation and amortization; less
(ii) a reasonable allowance for future capital requirements of the
Corporation including payments related to acquisitions;
"EBITDA" means earnings before interest (including penalties and interest
on late payments and financial expenses), taxes, depreciation and
amortization, all in accordance with Canadian generally accepted
accounting principles;
"EBITDA Target" has the meaning ascribed thereto in Section 2.03;
"Event of Default" has the meaning ascribed thereto in Section 2.05;
"Environmental Laws" means all applicable Laws relating to the
environment, health and safety matters or conditions, Hazardous
Substances, pollution or protection of the environment;
"Financial Statements" means the balance sheet of the Corporation for the
fiscal year ended May 31, 2001 and the accompanying statements of
shareholders' equity, income and changes in financial position for the
Corporation for the year then ended;
"GAAP" means, at any time, accounting principles generally accepted in
Canada at such time;
"Governmental Entity" means (i) any multi-national, federal, provincial,
state, municipal, local or other governmental or public department, court,
commission, board, bureau, agency or instrumentality, domestic or foreign;
(ii) any subdivision, agent, commission, board, or authority of any of the
foregoing; or (iii) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"GST" means goods and services tax imposed under the GST Legislation;
"GST Legislation" means the Excise Tax Act (Canada);
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"Hazardous Substance" includes any contaminant, pollutant, dangerous
substance, liquid or solid waste, industrial waste, hauled liquid or solid
waste, toxic substance, hazardous waste, hazardous material, or hazardous
substance (including anything with any of the foregoing as a component
thereof), whether or not such substance is "hazardous" as defined under
any Laws;
"Indebtedness" shall mean all obligations, contingent (to the extent
required to be reflected in financial statements prepared in accordance
with GAAP) and otherwise, which in accordance with GAAP should be
classified on the obligor's balance sheet as liabilities, including
without limitation, in any event and whether or not so classified: (a) all
debt and similar monetary obligations, whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have been
assumed; (c) all guarantees, endorsements and other contingent obligations
whether direct or indirect in respect of Indebtedness or performance of
others, including any obligation to supply funds to or in any manner to
invest in, directly or indirectly, the debtor, to purchase Indebtedness,
or to assure the owner of Indebtedness against loss, through an agreement
to purchase goods, supplies or services for the purpose of enabling the
debtor to make payment of the Indebtedness held by such owner or
otherwise; and (d) obligations to reimburse issuers of any letters of
credit;
"Intellectual Property" means all right, title, interest and benefit of
the Corporation in and to any registered or unregistered, trade or brand
names, service marks, copyrights, copyright applications, designs,
inventions, patents, patent applications, patent rights (including any
patents issuing on such applications or rights), licences, sub-licences,
franchises, formulas, processes, know-how, technology, computer rights and
other intellectual or industrial property of the Corporation or pertaining
to the Business;
"ITA" means the Income Tax Act (Canada) and all references in this
Agreement to the Income Tax Act (Canada) and to amounts to be withheld
pursuant thereto shall be deemed to be made to the Income Tax Act
(Canada), as now enacted or as it may from time to time be amended,
re-enacted or replaced, and in the case of any such amendment,
re-enactment or replacement, any references herein to the Income Tax Act
(Canada) and to amounts to be withheld pursuant thereto shall be read as
referring to such amended, re-enacted or replaced provisions;
"Laws" means all statutes, codes, ordinances, decrees, rules, regulations,
municipal by-laws, judicial or arbitral or administrative or ministerial
or departmental or regulatory judgments, orders, decisions, rulings or
awards, or any provisions of the foregoing, including general principles
of common and civil law and equity, binding on or affecting the Person
referred to in the context in which such word is used; and "Law" means any
one of them;
"Lien" shall mean: (a) any encumbrance, mortgage, pledge, hypothec, prior
claim, lien, charge or other security interest of any kind upon any
property or assets of any character, or upon the income or profits
therefrom, of any nature whatsoever or howsoever arising and any rights or
privileges capable of becoming any of the foregoing, (b) any acquisition
of or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease), or (c) any sale, assignment, pledge or
other transfer for security of any accounts, general intangibles or
chattel paper, with or without recourse;
"Loss" means any loss whatsoever, including expenses, costs, damages,
penalties, fines, charges, claims, demands, liabilities, interest and any
and all legal fees and disbursements;
"Material Adverse Effect" with respect of a business or Person means an
effect which could reasonably be expected to be materially adverse to the
business, assets, financial condition, earnings, operations or prospects
of the business or Person on a consolidated basis or the market price or
value of any of its securities;
"Parties" means the Vendors, the Purchaser, the Corporation and any other
person who may become a party to this Agreement; and "Party" means any one
of them;
"Person" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or Governmental
Entity, and pronouns have a similarly extended meaning;
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"Purchase Price Installment Payment" has the meaning ascribed thereto in
Section 2.03;
"Purchased Shares" has the meaning ascribed thereto in Section 2.01;
"Purchaser" means TelePlus Enterprises Inc., a corporation incorporated
under the laws of Nevada;
"Security Documents" has the meaning ascribed thereto in Section 2.05;
"Security Right" means, with respect to any security, any option, warrant,
subscription right, pre-emptive right, other right, proxy, put, call,
demand, plan, commitment, agreement, understanding or arrangement of any
kind relating to such security, whether issued or unissued, or any other
security convertible into or exchangeable for any such security. "Security
Right" includes any right relating to issuance, sale, assignment,
transfer, purchase, redemption, conversion, exchange, registration or
voting and includes rights conferred by statute, by the issuer's
constituting documents or by agreement;
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies, imposts and
other assessments, including all income, sales, use, goods and services,
value added, capital, capital gains, alternative net worth, transfer,
profits, withholding, payroll, employer health, excise, immovable property
and moveable property taxes, and any other taxes, customs duties, fees,
assessments or similar charges in the nature of a tax whether direct or
indirect including Canada Pension Plan and provincial pension plan
contributions and workers compensation premiums, together with any
interest, fines and penalties imposed by any governmental authority
(including federal, provincial, municipal and foreign governmental
authorities), and whether disputed or not;
"Time of Closing" means 10:00 a.m. (Toronto time) on the Closing Date or
such other time as the Closing may occur;
"Vendors" means, collectively, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
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"Vendor's Proportion" has the meaning ascribed thereto in Article 3.
1.02 Gender and Number
Any reference in this Agreement to gender shall include all genders, and
words importing the singular number only shall include the plural and vice
versa.
1.03 Headings, Etc.
The division of this Agreement into Articles, Sections, Subsections and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.04 Currency
All references in this Agreement or any Ancillary Agreement to dollars,
unless otherwise specifically indicated, are expressed in Canadian currency.
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1.05 Severability
Any Article, Section, Subsection or other subdivision of this Agreement or
any Ancillary Agreement or any other provision of this Agreement or any
Ancillary Agreement which is, or becomes, illegal, invalid or unenforceable
shall be severed from this Agreement and any Ancillary Agreement and be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof or thereof, provided,
however, that the Parties shall use commercial reasonable best efforts to
substitute such Article, Section, Subsection or other subdivision with an
Article Section, Subsection or other subdivision of similar effect.
1.06 Entire Agreement
This Agreement together with the Ancillary Agreements constitutes the
entire agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. There are no representations,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connection with the subject matter of this
Agreement, except as specifically set forth herein and therein. If there is any
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.
1.07 Amendments
This Agreement and any Ancillary Agreement may only be amended, modified
or supplemented by a written agreement signed by all of the parties to such
agreement.
1.08 Waiver
No waiver of any of the provisions of this Agreement or any Ancillary
Agreement shall be deemed to constitute a waiver of any other provision (whether
or not similar), nor shall such waiver constitute a waiver or continuing waiver
unless otherwise expressly provided in writing duly executed by the party to be
bound thereby.
1.09 Governing Law
This Agreement and all Ancillary Agreements shall be governed by and
interpreted and enforced in accordance with the laws of the Province of Ontario
applicable therein.
1.10 Inclusion
Where the word "including" or "includes" is used in this Agreement, it
shall mean "including (or includes) without limitation".
1.11 Accounting Terms
All accounting terms not specifically defined in this Agreement shall be
construed in accordance with GAAP.
1.12 Incorporation of Schedules
The following are the schedules attached to and incorporated in this
Agreement:
Schedule 2.03 - Payment of Consideration
Schedule 2.04 - Funding of Business Plan
Schedule 3.03 - Capitalization
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ARTICLE 2 -
PURCHASED SHARES AND PURCHASE PRICE
2.01 Purchase and Sale
Subject to the terms and conditions hereof, each of the Vendors agree to
sell, assign and transfer to the Purchaser and the Purchaser agrees to purchase
from the Vendors at the Time of Closing on the Closing Date, the shares owned by
each Vendor representing, collectively, all (but not less than all) of the
issued and outstanding shares (the "Purchased Shares") in the capital of the
Corporation. The number and class of shares of the Corporation owned by all
shareholders of the Corporation as at the Time of Closing is set out in Schedule
3.03.
2.02 Consideration Payable
The consideration payable by the Purchaser to the Vendors for the
Purchased Shares shall be $20,800,000 and shall be allocated and paid as set out
forth in Section 2.03. The Vendors acknowledge and agree that the Purchaser may
pay all or a portion of the consideration for the Purchased Shares by issuing
shares of the Purchaser's common stock to the Vendors, in which event the
Vendors hereby irrevocably, jointly and severally, authorize and direct the
Purchaser to sell said shares in the public market pursuant to an effective
registration on Form SB-2 in order to fulfill this provision, and provided in
any event that said shares shall be sold as soon as possible by such means and
that, after giving effect to such sales, the Purchaser shall have paid to the
Vendors an aggregate of $20,800,000 in cash.
2.03 Allocation and Payment of Consideration
The consideration payable to the Vendors for the Purchased Shares shall be
allocated, paid and satisfied by payment to the Vendors by the Purchaser of an
amount payable upon the Corporation achieving each $25,000 increment in monthly
EBITDA (an "EBITDA Target") until the earlier of: (a) the Corporation has
achieved $400,000 in monthly EBITDA; or (b) 51 months have passed from the date
of this Agreement. The amount payable (the "Purchase Price Instalment Payment")
upon the Corporation achieving each EBITDA Target shall be an amount equal to
4.3333 times the EBITDA for the month in which the applicable EBITDA Target has
been achieved, less the amount of EBITDA for the month during which any previous
EBITDA Target has been achieved, multiplied by 12, as more particularly
illustrated in Schedule 2.03. In the event that the Purchase Price Instalment
Payment based on monthly EBITDA of $400,000 has not been paid to the Vendors
prior to the date which is 48 months from the Closing Date, the Purchaser shall
pay to the Vendors a pro rated portion of any balance of consideration payable,
if any, based on the monthly EBITDA for the 51st month following the Closing
Date.
Each Purchase Price Instalment Payment payable pursuant to this Section
2.03 shall be paid as follows:
(i) a minimum of thirty per cent (30%) of the Purchase Price Instalment
Payment shall be paid to the Vendors on or before the date which is
fifteen (15) calendar days following the end of the month in which
any EBITDA Target is satisfied; and
(ii) the balance of the applicable Purchase Price Instalment Payment
shall be paid within six (6) months from the end of the month in
which any EBITDA Target is satisfied.
The Purchaser hereby covenants and agrees to cause the Corporation to satisfy
any shortfall in the amounts due under the foregoing paragraph 2.03(ii) by
making quarterly (quarterly meaning every three months after the applicable due
date in Section 2.03(ii) until paid in full) distributions to the Vendors out of
the Distributable Net Income of the Corporation. In the event the amounts due
under the foregoing paragraphs 2.03(i) and 2.03(ii) are not paid and received by
the Vendors when due, interest shall accrue and be payable monthly at a rate of
six per cent (6%) per annum on the overdue amount(s).
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If during the first 6 months of any payment period of a Purchase Price
Instalment Payment the average EBITDA of the Corporation for such 6 months falls
below 70% of the EBITDA Target associated with such Purchase Price Instalment
Payment, the amount of consideration payable applicable to such period shall be
adjusted to be such amount multiplied by the percentage of the EBITDA Target
achieved on average.
2.04 Funding of Corporation
The Purchaser and the Vendors have agreed to the financing contribution
schedule set forth in Schedule 2.04(a). The Purchaser hereby agrees, and shall
be required, to provide financing to the Corporation following Closing in
accordance with such financing contribution schedule, to a maximum amount of
$8,343,000, to be contributed by up to $3,921,500 in shares of the Purchaser and
the balance in cash, provided that the Corporation has at all times achieved and
maintained 70% or more of the then applicable EBITDA target as set out in
Schedule 2.04(b). For greater certainty, in the event that the Corporation's
EBITDA is at any time less than 70% of the then applicable EBITDA target as set
out in Schedule 2.04(b), the Purchaser will have no obligation to provide the
Corporation with financing as required under this Agreement. The Corporation
shall have a 90 day period in which to cure any failure to achieve and maintain
70% or more of the then applicable EBITDA target and, in the event that the
Corporation cures such failure to thereafter achieve and maintain 70% or more of
the then applicable EBITDA target during such time, the Purchaser's obligation
to provide financing to the Corporation in accordance with Schedule 2.04(a)
shall be renewed.
2.05 Security for Obligations
(a) As continuing security for the Purchaser's obligation to pay the
consideration payable to the Vendors for the Purchased Shares, the Purchaser
hereby undertakes to execute and deliver and/or cause the Corporation to execute
and deliver, as applicable, in favour of the Vendors: (i) within one hundred and
eighty (180) days from the Closing Date a guarantee and general security
agreement (the "GSA") or similar security document granting the Vendors a
security interest in and to all undertakings, property and assets of the
Corporation, in form and substance satisfactory to the Vendors and their
counsel; and (ii) forthwith after the registration under the Personal Property
Security Act (Ontario) (the "PPSA") of the security interest created by the GSA
attains a first ranking priority position, as evidenced by a current public
search against the Corporation under the PPSA, a share pledge agreement pledging
all of the shares of the Corporation to the Vendors, in form and substance
satisfactory to the Vendors and their counsel (the share pledge agreement,
together with the general security agreement, being the "Security Documents")
together with the share certificate representing the pledged shares and a duly
completed share transfer power of attorney.
(b) Any of the following events shall constitute an event of default under
this Agreement and the Security Documents then in effect (an "Event of
Default"):
(i) any failure by the Purchaser in making payment when due of:
(a) the Purchase Price Instalment Payment pursuant to
paragraph 2.03(i) hereof; and/or (b) interest on any unpaid
portion of the Purchase Price Instalment Payment pursuant to
Section 2.03 hereof; and/or (c) the Distributable Net Income
payment pursuant to paragraph 2.03;
(ii) any failure by the Purchaser to provide financing to the
Corporation following Closing in accordance with the
provisions of Section 2.04; or
(iii) if the Purchaser, any creditor of the Purchaser or any other
Person institutes any proceeding or takes any corporate action
or executes any agreement in connection with the commencement
of any proceeding: (A) seeking to adjudicate the Purchaser a
bankrupt or insolvent; (B) seeking liquidation, dissolution,
winding-up, reorganization, arrangement, protection, relief or
composition of the Purchaser or any material part of its
property or debt, or making a proposal with respect to the
Purchaser under any law relating to bankruptcy, insolvency,
reorganization or compromise of debts or other similar laws;
or (C) seeking appointment of a receiver, trustee, agent,
custodian or other similar official for the Purchaser or for
any material part of its properties and assets; and such
proceeding is not contested by the Purchaser in good faith
within twenty (20) Business Days of initiation of the
proceedings or if any order sought in such proceeding (other
than a procedural order) is granted and at any time thereafter
such order is not either dismissed or contested by the
Purchaser and the effect thereof stayed.
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Upon the occurrence of an Event of Default and the continuance of
any such default for a period of fifteen (15) Business Days from the date of
default without cure by the Purchaser (other than the insolvency and/or
bankruptcy of the Purchaser as set out in paragraph 2.05(b)(iii) for which there
shall be no cure period), the Vendors may enforce upon the security provided to
them under the Security Documents, including realizing upon the pledge of the
shares of the Corporation pursuant to the share pledge agreement forming part of
the Security Documents.
(c) After the execution and delivery of the share pledge agreement in
favour of the Vendors, in the event the Vendors enforce the pledge of the shares
as set forth in (b) above and have received payments pursuant to section 2.03 in
excess of $14,400,000 and take back the shares of the Corporation, the Vendors
shall within 180 days pay back to the Purchaser the consideration paid by the
Purchaser to the Vendors prior to the Event of Default. The Vendors hereby agree
to pledge the shares of the Corporation to the Purchaser to secure the Vendors'
obligations to pay back the consideration paid by the Purchaser to the Vendors
as provided in the immediately preceding sentence and if the Vendors default in
the payment of the consideration paid by the Purchaser to the Vendors as
required in the immediately preceding sentence, then the shares of the
Corporation shall revert back to the Purchaser free and clear of all liens and
encumbrances.
2.06 The Closing
The Closing shall take place at the Time of Closing at the offices of
counsel to the Vendors, ▇▇▇▇▇▇▇▇▇ Dellelce LLP, Toronto, Ontario, or at such
other time, date or place as the parties agree. Notwithstanding any other
provision of this Agreement, the within transactions shall be effective as of
the Closing Date.
2.07 Payment of Taxes and Registration Charges on Transfer
Except as otherwise provided herein, each of the Vendors shall be liable
for and shall pay all taxes, duties, registration charges or other like charges
properly payable by a Vendor in connection with the conveyance and transfer by
each of them of their respective Purchased Shares to the Purchaser hereunder.
ARTICLE 3 -
REPRESENTATIONS AND WARRANTIES
OF VENDORS AND CORPORATION
Representations and Warranties of Vendors and Corporation. Each of the Vendors
and the Corporation represents and warrants, severally, and, in the case of the
Vendors, in proportion to the consideration paid to such Vendor in Section 2.03
(the "Vendor's Proportion"), as follows to the Purchaser and each of the Vendors
and the Corporation acknowledges and confirms that the Purchaser is relying upon
such representations and warranties in connection with the purchase by the
Purchaser of the Purchased Shares:
3.01 Due Incorporation, Existence and Corporate Power of the Corporation
The Corporation is a corporation duly incorporated, validly existing and
in good standing in its jurisdiction of incorporation. The Corporation has all
necessary corporate power and authority to own or lease its properties, to carry
on its business as now being conducted by it, to enter into this Agreement and
the other agreements to which it is or is to become a party pursuant to the
terms hereof and to perform its obligations hereunder and thereunder. The
Corporation is not a reporting issuer under applicable securities legislation,
there is not a published market for any securities of the Corporation and the
number of holders of securities of the Corporation is eight (8).
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3.02 Title to Purchased Shares
The Vendor's portion of the Purchased Shares (the "Vendor's Shares") as
set out opposite the Vendor's name on Schedule 3.03 are, or as of the Closing
Date will be, owned by the Vendor as the registered and beneficial owner thereof
with a good title thereto, free and clear of all Liens. The Vendor has the
right, power and authority to enter into this Agreement and to sell the Vendor's
Shares as contemplated herein. All rights and powers to vote the Vendor's Shares
are held exclusively by the Vendor. The Vendor's Shares held by the Vendor were
validly issued, fully paid and non-assessable, were not issued in violation of
the terms of any agreement or other understanding, and were issued in compliance
with all applicable laws and regulations. The delivery of the Vendor's Shares by
the Vendor to the Purchaser pursuant to the provisions hereof will transfer to
the Purchaser valid title thereto of such Vendor's Shares, free and clear of all
Liens.
3.03 Extra-Provincial Qualification
The Corporation is duly qualified, licensed or registered to carry on its
business as now being conducted in all jurisdictions in which the nature of the
business conducted by it or the property owned or leased by it makes such
qualification, licensing or registration necessary.
3.04 Authorized Capital of the Corporation
The authorized capital of the Corporation consists of an unlimited number
of common shares, and Schedule 3.03 sets out as at the date hereof and at the
Time of Closing, the number of issued and outstanding securities of the
Corporation each of which is and will be duly issued and outstanding as fully
paid and non-assessable. The Purchased Shares shall at Closing constitute all of
the issued and outstanding shares of the capital of the Corporation.
3.05 Options, etc.
There are, and at Closing there will be, no Security Rights issued by the
Corporation relating to any of the unissued shares of the Corporation. Except
for the Purchaser's right hereunder, no Person has any option, warrant, right,
call, commitment, conversion right, right of exchange or other agreement or any
right or privilege issued or granted by the Corporation (whether by law,
pre-emptive or contractual) capable of becoming an option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement (i) for the
purchase from the Vendors of any of the Purchased Shares; or (ii) for the
purchase, subscription, allotment or issuance of any of the unissued shares in
the capital of the Corporation or of any securities of the Corporation.
Except for the Purchaser's rights hereunder, no Person has any option,
warrant, right, call, commitment, conversion right, right of exchange or other
agreement or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an option, warrant, right, call, commitment, conversion
right, right of exchange or other agreement for the purchase from the Vendor of
any of the Vendor's Shares.
3.06 Valid Issuance of Purchased Shares
The Purchased Shares are validly issued, fully paid and non-assessable,
were not issued in violation of the terms of any agreement or other
understanding to which the Corporation is a party, and were issued in compliance
with all applicable Laws.
3.07 Corporate Records
The Corporate Records of the Corporation are materially complete and
accurate and all corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable Laws and with the articles
and by-laws of the Corporation, and without limiting the generality of the
foregoing, (i) the minute books contain materially complete and accurate minutes
of all meetings of the directors and shareholders of the Corporation held since
the incorporation thereof, and all such meetings were duly called and held; (ii)
the minute books contain all written resolutions passed by the directors and
shareholders of the Corporation and all such resolutions were duly passed; (iii)
the share certificate books, register of shareholders and register of transfers
of the Corporation are materially complete and accurate, and all such transfers
have been duly completed and approved; and (iv) the registers of directors and
officers are materially complete and accurate and all former and present
directors and officers of the Corporation were duly elected or appointed as the
case may be.
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3.08 Validity of Agreement
(1) The Corporation has all necessary corporate power and authority to
enter into and perform its obligations under this Agreement and the Ancillary
Agreements to which it is a party.
(2) The execution, delivery and performance by the Corporation of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated thereby: (a) have been duly
authorized by all necessary corporate action on the part of the Corporation; and
(b) do not (or would not with the giving of notice, the lapse of time or the
happening of any other event or condition) result in a violation or a breach of,
or a default under or give rise to a right of termination, amendment or
cancellation or the acceleration of any obligation under (i) any charter, by-law
or trust deed instruments of the Corporation; (ii) any contracts or instruments
to which the Corporation is a party or by which the Corporation is bound; or
(iii) of any Laws applicable to the Corporation.
(3) The execution, delivery and performance by the Vendor of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated thereby do not (or would not with
the giving of notice, the lapse of time or the happening of any other event or
condition) result in a violation or a breach of, or a default under or give rise
to a right of termination, amendment or cancellation or the acceleration of any
obligation under any contracts or instruments to which the each of the Vendors
is a party or by which the Vendor is bound or of any Laws applicable to the
Vendor.
(4) This Agreement and any Ancillary Agreement to which the Corporation
and Vendor are a party constitute legal, valid and binding obligations of the
Corporation and Vendors enforceable against them in accordance with their
respective terms.
3.09 Restrictive Documents
The Corporation and Vendors are not subject to, or a party to, any
charter, by-law or trust deed restriction, any Law, any Claim, any contract or
instrument, any Lien or any other restriction of any kind or character which
would prevent the consummation of the transactions contemplated by this
Agreement or compliance by the Corporation and Vendors with the terms,
conditions and provisions hereof or the continued operation of the Business
after the date hereof or the Closing Date on substantially the same basis as
heretofore operated or which would restrict the ability of the Purchaser to
acquire any of the Purchased Shares.
3.10 Residence
None of the Vendors is a non-resident of Canada within the meaning of the
ITA.
3.11 Title to Assets
The Corporation has good title to and has legal and beneficial ownership
of all of the assets and property used in connection with the Business free and
clear of all Liens.
3.12 Absence of Changes
Since the date of the Financial Statements, the Business of the
Corporation has been carried on in the ordinary course. Except as provided for
in the Financial Statements, the Corporation has not since May 31, 2001:
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(a) issued, sold, pledged, hypothecated, leased, disposed of, encumbered
or agreed to issue, sell, pledge, hypothecate, lease, dispose of or
encumber any shares or other corporate securities or any right,
option or warrant with respect thereto;
(b) amended or proposed to amend their respective Articles or by-laws;
(c) split, combined or reclassified any of their respective securities
or made any Distribution;
(d) suffered any loss relating to litigation or been threatened with
litigation which could reasonably be expected to result in a
Material Adverse Effect;
(e) entered into or amended any employment contracts with any director,
officer or senior management employee, created or amended any
employee benefit plan, profit sharing, deferred compensation,
phantom stock option, stock option, employee stock purchase, bonus,
retirement, health or insurance plan, made any increases in the base
compensation, bonuses, paid vacation time allowed or fringe benefits
for its directors, officers, employees or consultants, except for
increases in compensation pursuant to established compensation
policies of the Corporation applied on a basis consistent with that
of the prior year;
(f) suffered any change in the established business relationship of the
Corporation with any customer or distributor or supplier which has
had or could reasonably be expected to have a Material Adverse
Effect on the Corporation, taken as a whole;
(g) suffered damage, destruction or other casualty, loss, or forfeiture
of, any property or assets, whether or not covered by insurance,
which has had or could reasonably be expected to have a Material
Adverse Effect on the Corporation, taken as a whole;
(h) entered into any contract, commitment or agreement under which it
has outstanding Indebtedness for borrowed money or for the deferred
purchase price of property (other than such property acquired in the
ordinary course of business consistent with past practice), or has
the right or obligation to incur any such Indebtedness or
obligation, or made any loan or advance to any Person other than
advances to employees for business expenses or in connection with
the existing employee share purchase plans of the Corporation in the
ordinary course of business consistent with past practice;
(i) acquired or agreed to acquire (by tender offer, exchange offer,
merger, amalgamation, acquisition of shares or assets or otherwise)
any Person, corporation, partnership, joint venture or other
business organization or division or acquired or agreed to acquire
any material assets;
(j) made any capital expenditures in excess of $10,000;
(k) entered into any material contracts regarding their business
operations, including joint ventures, partnerships or other
arrangements;
(l) entered into any interest rate swap, currency swap, option or other
rate fixing agreement for a financial transaction or entered into
any forward sale agreement for commodities;
(m) created any stock option or bonus plan, paid any bonuses, deferred
or otherwise, or deferred any compensation to any of its directors,
officers or employees other than such payments made in the ordinary
course of business consistent with past practice;
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(n) made any material change in accounting procedures or practices;
(o) mortgaged, hypothecated or pledged any of their respective
properties or assets, tangible or intangible, or subjected them to
any Liens;
(p) disposed of or permitted to lapse any rights to the use of any
patent, trademark, service ▇▇▇▇, logo, trade name or copyright, or
disposed of or disclosed (without appropriate confidentiality
protection) to any Person any trade secret, formula, process, method
or know-how not theretofore a matter of public knowledge;
(q) transferred any assets to any shareholder or any of their Affiliates
or assumed any Indebtedness from any shareholder or any of their
Affiliates or participated in any other related party transaction
that has not been disclosed in writing to the Purchaser;
(r) entered into any other material transaction, or any amendment of any
contract, lease, agreement or license which is material to its
business; or
(s) entered into any agreement or understanding to do any of the
foregoing;
3.13 Compliance with Laws
The Corporation is conducting the Business in compliance with all
applicable Laws of each jurisdiction in which the Business is carried on, except
for acts of non-compliance which in the aggregate are not material.
3.14 Environmental Compliance
The Corporation has at all times received, handled, generated, used,
stored, deposited, labeled, handled, treated, documented, transported and
disposed of any Hazardous Substances in compliance with all, and there is no
circumstance or condition which would subject the Corporation to any material
liability under, any applicable Environmental Laws, health or safety Laws,
approvals or Authorizations.
3.15 Authorizations
The Corporation owns, holds, possesses or lawfully uses in the operation
of the Business, all Authorizations which are in any manner necessary to conduct
the Business as presently or previously conducted or for the ownership and use
of its assets and property, free and clear of all Liens and in compliance with
all Laws applicable thereto. The Corporation is not in default, nor has it
received any notice of any Claim in default, with respect to any such
Authorizations. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need for the Corporation to comply with
any special qualification or procedures or to pay any amounts other than routine
filing fees. None of such Authorizations will be adversely affected by the
consummation of the transactions contemplated hereby.
3.16 No Options, Etc.
No Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming such for the purchase
from the Corporation of any of its assets or property.
3.17 Real Property
The Corporation has not previously owned, nor is it currently the owner
of, or under any agreement or option to own or lease, any real property or any
interest therein..
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3.18 Material Contracts
The Corporation is not a party to or bound by:
(a) any employment agreement, bonus, deferred compensation, pension,
profit sharing, stock option, phantom stock plan, employee stock
purchase, health, insurance, retirement or other employee benefit
plan, any collective agreements or any agreement (oral or written)
providing for compensation to be paid to any employee consequent
upon the sale of any substantial portion of outstanding shares in
the capital of the Corporation;
(b) any agreement or commitment relating to the borrowing of money;
(c) any agreement or commitment relating to capital expenditures;
(d) any loan or advance to, or investment in, any other Person or any
agreement or commitment relating to the making of any such loan,
advance or investment;
(e) any bonds, debentures, mortgages, notes or other similar
indebtedness or liabilities whatsoever or any agreement to create or
issue any bonds, debentures, mortgages, notes or other similar
indebtedness;
(f) any performance bond, indemnity, guarantee or other contingent
liability in respect of any indebtedness or obligation of any
Person;
(g) any management, consulting or any other similar agreement or
commitment;
(h) any agreement or commitment limiting the freedom of the Corporation
or any successor owner of the Corporation, the Business or the
property and assets of the Corporation to engage in any line of
business or to compete with any other Person;
(i) any licensing or other agreement or commitment relating to
intellectual property used by the Corporation in the conduct of the
Business;
(j) any agreements or commitments entered into in the ordinary course of
the Business involving an aggregate amount of more than $25,000
which is not cancellable without penalty within thirty (30) days;
(k) any agreement or commitment not entered into in the ordinary course
of the Business; and
(l) any agreement or arrangement with any Person with whom either of the
Corporation or the Vendors (or their directors, officers and
employees) does not deal at arm's length within the meaning of the
Income Tax Act (Canada).
3.19 Subsidiaries and Investments
The Corporation does not have any subsidiaries and does not own or hold of
record or beneficially own or hold any shares of any class of the capital of any
corporation or any legal or beneficial ownership interest in any general or
limited partnership, business trust, limited liability company, joint venture or
any other unincorporated trade or business enterprise.
3.20 Books and Records
All Books and Records of the Corporation have been fully, properly and
accurately kept and, where required, completed in accordance with GAAP and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein. The records, systems, controls, data or information of the Corporation
are not recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Corporation.
-14-
3.21 Third Party Guarantees
The Corporation is not a party to or bound by any agreement or guarantee,
indemnification, assumption or endorsement or any other like commitment of the
obligations, liabilities (contingent or otherwise) or indebtedness of any
Person.
3.22 No Undisclosed Liabilities
The Corporation does not have any liabilities, expense, claim, deficiency,
guarantee or endorsement of any type whatsoever, contingent, contractual or
otherwise, as at the relevant dates in the Financial Statements, other than
those set out in such statements.
3.23 Financial Statements
The Financial Statements have been prepared in accordance with GAAP
applied on a basis consistent with those of previous fiscal years and the
Interim Financial Statements have been prepared in accordance with GAAP applied
on a basis consistent with those of previous fiscal years, and each present
fairly:
(a) the assets, liabilities (whether accrued, absolute, contingent or
otherwise), and the financial condition of the Corporation (as the
case may be) as at the respective dates of the relevant statements;
(b) the financial position of the Corporation (as the case may be) as at
the respective dates of the relevant statements; and
(c) the sales and earnings of the Corporation during the periods covered
thereby.
3.24 Indebtedness and Accounts Payable
Except as set forth in the Financial Statements, the Corporation has not
incurred any Indebtedness, since the date of the Financial Statements. The
Corporation is not indebted to any of its directors, officers, employees or
consultants.
3.25 Capital Expenditures
No capital expenditures exceeding in the aggregate $10,000 have been made
or authorized by the Corporation except in the ordinary course of business since
the date of the Financial Statements.
3.26 Employees
The Corporation is in compliance with all Laws respecting employment and
employment practices, terms and conditions of employment, pay equity and wages
and hours and neither has nor is engaged in any unfair labour practice.
3.27 Litigation
There is no action, suit or proceeding, at law or in equity, by any
Person, nor any arbitration, administrative or other proceeding by or before (or
to the best knowledge of the Vendors or the Corporation any investigation by)
any Governmental Entity pending, or, to the best of the knowledge of the Vendors
or the Corporation, threatened against or affecting the Corporation or any of
its properties, rights or assets. The Corporation is not subject to any
judgment, order or decree entered in any lawsuit or proceeding.
-15-
3.28 Taxes
(a) The Corporation has prepared and filed on time with all appropriate
governmental authorities all Tax returns and other material
documents that they have been required to file in respect of any
Taxes for all fiscal periods ending on or prior to the date hereof
and all such returns or other material documents are correct,
complete and up to date in all material respects.
(b) The Corporation has paid in full all Taxes due on or before the date
hereof and, in the case of such Taxes accruing on or before the date
hereof that are not due on or before the date hereof, the
Corporation has made adequate provision in its books and records and
financial statements.
(c) The Corporation has withheld from each payment made to any of its
present or former employees, officers, directors, and to all persons
who are non-residents of Canada for purposes of the ITA all material
amounts required by law to be withheld or remitted. The Corporation
has remitted, in all material respects, all Canada Pension Plan and
provincial pension plan contributions, employment insurance
premiums, employer health taxes and other Taxes payable by it in
respect of its employees. The Corporation has charged, collected and
remitted, in all material respects, all Taxes as required under
applicable legislation on any sale, supply, or delivery whatsoever,
made by the Corporation.
(d) There are no reassessments of Taxes of the Corporation that have
been issued and are outstanding. No governmental authority has
challenged or threatened to challenge the Corporation in respect of
any Taxes or of any Tax returns, filings or other reports filed
under any statute providing for such Taxes.
(e) The Corporation has paid or provided adequate accruals in its
financial statements for the year ended May 31, 2004 for Taxes
assessed, including income taxes and related deferred taxes, in
conformity with GAAP.
(f) The Corporation is not a party to any agreement, waiver or
arrangement with any taxation authority relating to any extension of
time with respect to the filing of any return, any payment or any
assessment.
(h) The Corporation is duly registered with the CRA under the GST
Legislation and its GST registration number is ?. The Corporation
has no reason to believe that any input tax credits claimed by the
Corporation pursuant to the GST Legislation are not justified or
have not been correctly calculated.
3.29 No Limitations
There is no non-competition, exclusivity or other similar agreement,
commitment or understanding in place, whether written or oral, to which the
Corporation or, to the knowledge of the Corporation and Vendors any director,
officer, employee or consultant or any Affiliate of such Persons, is a party or
is otherwise bound that would now or hereafter, in any way limit the Business or
operations of the Corporation: (a) in a particular manner or to a particular
locality or geographic region, or (b) for a limited period of time.
-16-
3.30 Bank Accounts and Powers of Attorney
The Corporation has no bank accounts or safe deposit boxes, nor do any
persons hold powers of attorney from the Corporation.
ARTICLE 4 -
INTENTIONALLY DELETED
ARTICLE 5 -
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Representations and Warranties of the Purchaser. The Purchaser represents and
warrants as follows to the Vendors and acknowledges and confirms that the
Vendors are relying on such representations and warranties in connection with
the sale by the Vendors of the Purchased Shares:
5.01 Due Incorporation and Existence
The Purchaser is a corporation incorporated, validly existing and in good
standing under the laws of the State of Nevada. The Purchaser has all necessary
corporate power and authority to own or lease its properties and to carry on its
business as now being conducted by it.
5.02 Validity of Agreement
(1) The Purchaser has all necessary corporate power and authority to enter
into and perform its obligations under this Agreement and the Ancillary
Agreements to which it is a party.
(2) The execution, delivery and performance by the Purchaser of this
Agreement and the Ancillary Agreements to which they are a party or to which
either is a party and the consummation of the transactions contemplated thereby:
have been duly authorized by all necessary corporate action on the part of the
Purchaser; and do not (or would not with the giving of notice, the lapse of time
or the happening of any other event or condition) result in a violation or a
breach of, or a default under or give rise to a right of termination, amendment
or cancellation or the acceleration of any obligation under (i) any charter,
by-law or trust deed instruments of the Purchaser as applicable; (ii) any
contracts or instruments to which the Purchaser is a party or by which the
Purchaser is bound; or (iii) of any Laws applicable to them.
(3) This Agreement and any Ancillary Agreement to which the Purchaser is a
party constitute legal, valid and binding obligations of the Purchaser,
enforceable against it in accordance with their respective terms.
5.03 Restrictive Documents
The Purchaser is not subject to, or a party to, any charter, by-law or
trust deed restriction, any Law, any Claim, any contract or instrument, any Lien
or any other restriction of any kind or character which would prevent the
consummation of the transactions contemplated by this Agreement or compliance by
the Purchaser with the terms, conditions and provisions hereof.
ARTICLE 6 -
PRE-CLOSING COVENANTS OF THE PARTIES
6.01 Pre-Closing Activities
During the period from the date hereof until the Closing Date, the Vendors
will use commercially reasonable efforts to cause the Corporation to conduct its
Business in the ordinary course thereof, unless the Corporation has obtained the
prior written consent of the Purchaser to do otherwise. Without limiting the
generality of the foregoing, the Vendors will use commercially reasonable
efforts to cause:
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(1) the Corporation to continue to maintain and service the assets used in
the conduct of the Business in the same manner as has been its consistent past
practice;
(2) the Corporation to conduct the Business in such a manner that on the
Closing Date the representation and warranties of the Vendors contained herein
shall be true, correct and complete as if such representations and warranties
were made on and as of such date; and
(3) the Corporation not to enter into any material contracts prior to the
Time of Closing, unless the Corporation has obtained the prior written consent
of the Purchaser;
except, in all cases, for the acquisition by the Corporation of Freedom
Phone Lines Inc. and any other acquisitions as agreed upon between the
Corporation and the Purchaser.
6.02 Due Diligence Investigations
(1) The Vendors and the Corporation (i) shall permit the Purchaser and its
employees, agents, counsel, accountants or other representatives, between the
date hereof and the Time of Closing, without undue interference to the ordinary
conduct of the Business, to have reasonable access during normal business hours
and upon reasonable notice to the Corporation, all of its assets and property,
the Business and any other information, including accounting records, corporate
records and tax records and returns whether retained by the Vendors, the
Corporation or otherwise; and (ii) shall furnish to the Purchaser or its
employees, agents counsel, accountants, or other representatives such financial
and operating data and other information with respect to the assets and property
of the Corporation and the Business as the Purchaser shall from time to time
reasonably request.
(2) No investigations made by or on behalf of a party hereto, whether
under Section 6.02 or any other provision of this Agreement or any Ancillary
Agreement, shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made in this Agreement or any
Ancillary Agreement.
6.03 Actions to Satisfy Closing Conditions
Each of the Parties hereby agrees to take all such actions as are within
its power to control and to use its commercially reasonable efforts to cause
other actions to be taken which are not within its power to control, so as to
ensure compliance with all of the conditions set forth in Article 7.
6.04 Transfer of the Purchased Shares
Each of the Vendors shall take all necessary and reasonable steps and
proceedings to permit good title to its respective Purchased Shares to be duly
and validly transferred and assigned to the Purchaser at the Time of Closing,
free of all Liens.
6.05 Filings and Authorizations
Each of the Vendors and the Purchaser, as promptly as practicable after
the execution hereof, (i) will make, or cause to be made, all such filings and
submissions under all Laws applicable to it, as may be required for it to
consummate the purchase and sale of the Purchased Shares in accordance with the
terms of this Agreement; (ii) will use all reasonable efforts to obtain, or
cause to be obtained, all Authorizations, approvals, consents and waivers from
all Persons and Governmental Entities necessary or advisable to be obtained by
it in order to consummate such transfer; and (iii) will use all reasonable
commercial efforts to take, or cause to be taken, all other actions necessary,
proper or advisable in order for it to fulfill its obligations hereunder. The
Vendors and the Purchaser will coordinate and cooperate with one another in
exchanging such information and supplying such assistance as may be reasonably
requested by each in connection with the foregoing.
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6.06 Notice of Untrue Representation or Warranty
The Vendors or the Corporation, as the case may be, shall promptly notify
the Purchaser upon any representation or warranty of the Vendors or the
Corporation contained in this Agreement or any Ancillary Agreement becoming
untrue or incorrect prior to the Time of Closing.
ARTICLE 7 -
CONDITIONS OF CLOSING
7.01 Conditions for the Benefit of the Purchaser
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed at or prior to the Time of Closing,
which conditions are for the exclusive benefit of the Purchaser and may be
waived in whole or in part by the Purchaser in its sole discretion:
(1) Truth of Representations and Warranties of the Vendors. The
representations and warranties of the Vendors contained in this Agreement or in
any Ancillary Agreement shall be true and correct as of the Closing Date with
the same force and effect as if such representations and warranties had been
made on and as of such date, and each of the Vendors shall also have executed
and delivered a certificate to that effect. The receipt of such evidence and the
Closing shall not be a waiver of the representations and warranties of the
Vendors which are contained in this Agreement. Upon the delivery of such
certificates, the representations and warranties of the Vendors in Articles 3
shall be deemed to have been made on and as of the Closing Date with the same
force and effect as if made on and as of such date.
(2) Performance of Covenants by the Vendors. Each of the Vendors and the
Corporation shall have fulfilled or complied with all covenants herein contained
to be performed or caused to be performed by them at or prior to the Time of
Closing, and the Vendors and the Corporation shall each have delivered a
certificate to that effect. The receipt of such certificates and the Closing
shall not be a waiver of the covenants of the Vendors and the Corporation which
are contained in this Agreement.
(3) Consents and Authorizations. All required consents and authorizations
shall have been obtained on terms acceptable to the Purchaser, acting
reasonably, in order to permit the Closing of the sale of the Purchased Shares
on the terms and conditions set out in this Agreement without adversely
affecting, or resulting in the violation or a breach of or a default under or
any termination, cancellation, amendment or acceleration of any obligation under
any licence, permit, lease or contract in connection with the Business.
(4) Legality; Governmental and Other Authorizations. The purchase of the
Purchased Shares shall not be prohibited by any law or governmental order or
regulation or by any order, decree or judgment of any court of competent
jurisdiction nor shall any Person have initiated any action or proceeding before
any court or governmental body seeking damages or other remedies against the
Purchaser for having entered into this Agreement and/or seeking to enjoin the
Purchaser from consummating the transactions contemplated by this Agreement. All
necessary material consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with any
governmental or administrative agency or any other Person, with respect to any
of the transactions contemplated by this Agreement shall have been duly obtained
or made by the Corporation or the Vendors on terms and conditions satisfactory
to the Purchaser, acting reasonably, and shall be in full force and effect.
(5) Deliveries. The Vendors shall have delivered or caused to be delivered
to the Purchaser the following in form and substance satisfactory to the
Purchaser, acting reasonably:
(a) share certificates representing the Purchased Shares duly endorsed
in blank for transfer, or accompanied by irrevocable security
transfer powers of attorney duly executed in blank, in either case
by the holders of record thereof;
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(b) certified copies of (i) the charter documents and extracts from the
by-laws of the Corporation and any corporate Vendors or Vendors that
are limited partnerships relating to the execution of documents;
(ii) all resolutions of the board of directors of the Corporation
and any corporate Vendors or Vendors that are limited partnerships
and approving the entering into of this Agreement and the completion
of all transactions contemplated hereunder; (iii) all other
instruments evidencing necessary corporate action of the Corporation
with respect to such matters; and (iv) specimen signatures of the
officers of the Corporation;
(c) a certificate of status, compliance, good standing or like
certificate with respect to the Corporation issued by appropriate
government officials of the jurisdiction of its incorporation;
(d) a favourable opinion of counsel to the Corporation in a form
acceptable to the Purchaser;
(e) all originals of the Corporate Records of the Corporation and access
to the said Corporate Records;
(f) evidence that all necessary steps and proceedings as approved by
counsel for the Purchaser, acting reasonably, to permit all of the
Purchased Shares to be fully and validly transferred to the
Purchaser or its nominee(s) have been taken;
(g) duly executed resignations effective as of the Time of Closing of
each director and officer of the Corporation as the Purchaser may
specify; and
(6) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Purchaser and the Purchaser
shall have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(7) Change in Law. Since the date hereof, no Law, proposed Law, any change
in any Law, or the interpretation or enforcement of any Law shall have been
introduced, enacted or announced (including the introduction, enactment or
announcement of any Law respecting taxes or environmental matters or any change
therein or in the interpretation or enforcement thereof), the effect of which
will be to prevent the closing of the transactions contemplated herein or to
increase materially (i) the cost to the Purchaser of the completion of the
transactions contemplated in this Agreement; or (ii) the cost of the Corporation
of operating the Business after Closing on substantially the same basis as
heretofore operated.
If any condition, obligation or covenant of the Vendors or the Corporation to be
performed hereunder or under any Ancillary Agreement at or prior to the Time of
Closing shall not have been fulfilled or performed by such time, the Purchaser
may terminate this Agreement by notice in writing to the Vendors, and in such
event the Parties shall be released from all obligations hereunder.
Notwithstanding the foregoing, the Purchaser shall be entitled to waive
compliance with any of such conditions, obligations or covenants in whole or in
part if it sees fit to do so without prejudice to any of its rights of
termination in the event of non-performance of any other condition, obligation,
or covenant in whole or in part.
7.02 Conditions for the Benefit of the Vendors
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed at or prior to the Time of Closing,
which conditions are for the exclusive benefit of the Vendors and may be waived
by the Vendors in their sole discretion:
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(1) Truth of Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser contained in this Agreement or
in any Ancillary Agreement shall be true and correct as of the Closing Date with
the same force and effect as if such representations and warranties had been
made on and as of such date, and the Purchaser shall also have executed and
delivered a certificate of a senior officer to that effect. The receipt of such
evidence and the Closing shall not be a waiver of the representations and
warranties of the Purchaser which are contained in this Agreement. Upon the
delivery of such certificates, the representations and warranties of the
Purchaser in Article 5 shall be deemed to have been made on and as of the
Closing Date with the same force and effect as if made on and as of such date.
(2) Performance of Covenants by the Purchaser. The Purchaser shall have
fulfilled or complied with all covenants herein contained to be performed or
caused to be performed by it at or prior to the Time of Closing, and the
Purchaser shall have delivered a certificate of a senior officer to that effect.
The receipt of such certificate and the Closing shall not be a waiver of the
covenants of the Purchaser which are contained in this Agreement.
(3) Deliveries. The Purchaser shall have delivered or caused to be
delivered to the Vendors the following in form and substance satisfactory to the
Vendors, acting reasonably:
(a) certified copies of (i) the charter documents and extracts from the
by-laws of the Purchaser relating to the execution of documents;
(ii) all resolutions of the board of directors of the Purchaser
approving the entering into of this Agreement and the completion of
all transactions contemplated hereunder; (iii) all other instruments
evidencing necessary corporate action of the Purchaser with respect
to such matters; and (iv) specimen signatures of certain of the
officers of the Purchaser;
(b) a certificate of status, compliance, good standing or like
certificate with respect to the Purchaser issued by appropriate
government officials of the jurisdiction of its incorporation;
(c) an undertaking with respect to the guarantee, the GSA and share
pledge agreement contemplated by Section 2.05 hereof, in form and
substance satisfactory to the Vendors;
(d) a favourable opinion of counsel to the Purchaser in a form
acceptable to the Vendors; and
(e) all necessary assurances, transfers, assignments and consents,
including all necessary consents, and any other instruments
necessary or reasonably required to effectively carry out the intent
of this Agreement and any Ancillary Agreement and to transfer the
agreed upon consideration to the Vendors, free and clear of all
Liens.
(4) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Vendors and the Vendors
shall have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(5) Change in Law. Since the date hereof, to the best knowledge of the
Purchaser, without further investigation, no Law, proposed Law, any change in
any Law, or the interpretation or enforcement of any Law shall have been
introduced, enacted or announced (including the introduction, enactment or
announcement of any Law respecting taxes or environmental matters or any change
therein or in the interpretation or enforcement thereof), the effect of which
will be to prevent the closing of the transactions contemplated herein.
If any condition, obligation or covenant of the Purchaser to be performed
hereunder or under any Ancillary Agreement at or prior to the Time of Closing
shall not have been fulfilled or performed by such time, the Vendors may
terminate this Agreement by notice in writing to the Purchaser, and in such
event the Vendors and the Purchaser shall be released from all obligations
hereunder. Notwithstanding the foregoing, the Vendors shall be entitled to waive
compliance with any of such conditions, obligations or covenants in whole or in
part if it sees fit to do so without prejudice to any of its rights of
termination in the event of non-performance of any other condition, obligation,
or covenant in whole or in part.
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ARTICLE 8 -
CLOSING
8.01 Closing Procedures
Subject to satisfaction or waiver by the relevant Party of the conditions
of Closing set forth herein, at the Time of Closing the Vendors shall deliver
actual possession of the Purchased Shares and the requisite instruments of
conveyance and upon such delivery the Purchaser shall pay or satisfy the
consideration payable in accordance with section 2.03. The transfer of
possession of the Purchased Shares shall be deemed to take effect as at the Time
of Closing.
ARTICLE 9 -
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES
9.01 Survival of Representations and Warranties
(1) The representations and warranties of the Vendors contained in this
Agreement or any Ancillary Agreement shall survive the Closing and,
notwithstanding such or any investigation made by or on behalf of the Purchaser,
shall continue in full force and effect for the benefit of the Purchaser for a
period of 36 months or such longer applicable statute of limitation period from
the Closing Date and any Claim in respect thereof (except a Claim based on tax
matters under Section 3.33 which shall continue until the expiry of seven years
from the Closing Date or a Claim based on ownership of the Purchased Shares
which shall continue indefinitely) shall be made in writing within such time
period.
(2) The representations and warranties of the Purchaser contained in this
Agreement or in any Ancillary Agreement shall survive the Closing and,
notwithstanding such Closing or any investigation made by or on behalf of any of
the Vendors, shall continue in full force and effect for the benefit of the
Vendors for a period of 36 months from the Closing Date and any Claim in respect
thereof shall be made in writing within such time period.
9.02 Indemnification in Favour of the Purchaser
(1) Subject to Section 9.05, each of the Vendors, on a several basis, in
the Vendor's Proportion, agrees to indemnify and save each of the Purchaser, and
its shareholders, directors, officers, employees, agents and representatives,
(in respect of whom the Purchaser hereby acts as agent and trustee with respect
thereto) harmless of and from any Claim or Loss suffered by, imposed upon or
asserted against the Purchaser or the Corporation as a result of, in respect of,
connected with or arising out of, under or pursuant to:
(a) any failure of the Vendors to perform or fulfill any covenant of the
Vendors under this Agreement or any Ancillary Agreement other than
in respect of matters contained in Article 3; and,
(b) subject to the limitations set forth in Section 9.01 hereof, any
breach, default or inaccuracy of any representation or warranty
contained in this Agreement other than in respect of matters
contained in Article 3 or any Ancillary Agreement given by the
Vendors or any document delivered pursuant hereto or any one of such
Vendors.
(2) With respect solely to Article 3 of this Agreement, each of the
Vendors individually, agrees to indemnify and save harmless each of the
Purchaser, and its shareholders, directors, officers, employees, agents and
representatives, (in respect of whom the Purchaser hereby acts as agent and
trustee with respect thereto) of and from any Claim or Loss suffered by, imposed
upon or asserted against the Purchaser or the Corporation as a result of, in
respect of, connected with or arising out of, under or pursuant to any failure
of that Vendor to either perform or fulfill any covenant of that Vendor or any
breach or inaccuracy of any representation or warranty of that Vendor contained
in Article 3 of this Agreement.
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9.03 Indemnification in Favour of the Vendors
Subject to Section 9.05, the Purchaser shall indemnify and save each of
the Vendors harmless of and from any Claim or Loss suffered by, imposed upon or
asserted against the Vendors as a result of, in respect of, connected with or
arising out of, under or pursuant to:
(a) any failure by the Purchaser to perform and fulfill any covenant of
the Purchaser under this Agreement or any Ancillary Agreement; or
(b) subject to the limitation period set forth in Section 9.01 hereof,
any breach or inaccuracy of any representation or warranty given by
the Purchaser or any document delivered pursuant hereto contained in
this Agreement or in any Ancillary Agreement.
9.04 Indemnification Proceedings
(1) Any Party seeking indemnification under this Article (the "indemnified
party") shall forthwith notify the Party against whom a Claim for
indemnification is sought hereunder (the "indemnifying party") in writing, which
notice shall specify, in reasonable detail, the nature and estimated amount of
the Claim. If a Claim by a third party is made against an indemnified party, and
if the indemnified party intends to seek indemnity with respect thereto under
this Article, the indemnified party shall promptly (and in any case within 30
days of such Claim being made) notify the indemnifying party of such with
reasonable particulars. The indemnifying party shall have 30 days after receipt
of such notice to undertake, conduct and control, through counsel of its own
choosing and at its expense, the settlement or defence thereof, and the
indemnified party shall cooperate with it in connection therewith; except that
with respect to settlements entered into by the indemnifying party (i) the
consent of the indemnified party shall be required if the settlement provides
for equitable relief against the indemnified party, which consent shall not be
unreasonably withheld or delayed; and (ii) the indemnifying party shall obtain
the release of the indemnified party. If the indemnifying party undertakes,
conducts and controls the settlement or defence of such Claim (i) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defence through counsel chosen by the indemnified party, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party; and (ii) the indemnifying party shall promptly reimburse the indemnified
party for the full amount of any loss resulting from any Claim and all related
expenses (other than the fees and expenses of counsel as aforesaid) incurred by
the indemnified party. The indemnified party shall not pay or settle any Claim
so long as the indemnifying party is reasonably contesting any such Claim in
good faith on a timely basis. Notwithstanding the two immediately preceding
sentences, the indemnified party shall have the right to pay or settle any such
Claim, provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party.
(2) With respect to third party Claims, if the indemnifying party does not
notify the indemnified party within 30 days after the receipt of the indemnified
party's notice of a Claim of indemnity hereunder that it elects to undertake the
defence thereof, the indemnified party shall have the right, but not the
obligation, to contest, settle or compromise the Claim in the exercise of its
reasonable judgment at the expense of the indemnifying party, provided that any
such settlement or compromise shall be subject to the prior written consent of
the indemnifying party, such consent not to be unreasonably withheld.
(3) In the event of any Claim by a third party against an indemnified
party, the defence of which is being undertaken and controlled by the
indemnifying party, the indemnified party will use all reasonable efforts to
make available to the indemnifying party those employees whose assistance,
testimony or presence is necessary to assist the indemnifying party in
evaluating and in defending any such Claims; provided that the indemnifying
party shall be responsible for the expense associated with any employees made
available by the indemnified party to the indemnifying party hereunder, which
expense shall be equal to an amount to be mutually agreed upon per person per
hour or per day for each day or portion thereof that such employees are
assisting the indemnifying party and which expenses shall not exceed the actual
cost to the indemnified party associated with such employees.
(4) With respect to third party Claims, the indemnified party shall make
available to the indemnifying party or its representatives on a timely basis all
documents, records and other materials in the possession of the indemnified
party, at the expense of the indemnifying party, reasonably required by the
indemnifying party for its use in defending any Claim and shall otherwise
cooperate on a timely basis with the indemnifying party in the defence of such
Claim.
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(5) With respect to any re-assessment for income, corporate, sales,
excise, or other tax or other liability enforceable by Lien against the property
of the indemnified party, the indemnifying party's right to so contest shall
only apply after such payment of such re-assessment or the provision of such
security as is necessary to avoid an Lien being placed on the property of the
indemnified party.
ARTICLE 10 -
POST-CLOSING COVENANTS
10.01 Access to Books and Records
For a period of six (6) years from the Closing Date or for such longer
period as may be required by applicable Law, the Purchaser covenants and agrees
to retain all original accounting books and records relating to the Corporation
for the period prior to the Closing Date. So long as any such books and records
are retained by the Purchaser pursuant to this Agreement, the Vendors shall have
the reasonable right to inspect and to make copies (at their own expense) of the
same at any time upon reasonable request during normal business hours and upon
reasonable notice for any proper purpose and without undue interference to the
business operations of the Purchaser. The Purchaser shall have the right to have
its representatives present during any such investigations.
10.02 Non-Competition
Subject to the completion of the transaction of purchase and sale
contemplated by this Agreement, and for so long as no Event of Default exists
and has not been cured within the relevant time period, each of the Vendors
hereby severally covenants and agrees with the Purchaser and the Corporation
that he will not, directly or indirectly, for a period ending on the earlier of
(i) 24 months following the Corporation reaching an EBITDA Target of $400,000 or
(ii) 48 months from the date of this Agreement, either individually or in
partnership or jointly or in conjunction with any person or persons, firm,
association, syndicate, company or corporation (except the Purchaser or the
Corporation), as principal, shareholder or employee, carry on, be engaged in, be
interested in, be concerned with or be connected in any manner with the
ownership, management or control of, any business enterprise which is
competitive with the Business of the Corporation as now carried on or as now
proposed to be carried on. Notwithstanding the foregoing, it is acknowledged and
agreed that the Vendors shall be entitled for, investment purposes, to purchase
and trade shares of public companies which are listed and posted for trading on
a recognized stock exchange, the business of which public company may be in
competition with the Business of the Corporation, provided that the Vendors
shall not, directly or indirectly, own more than 5% of the issued share capital
of such public company, or participate in its management or operation or in any
advisory capacity.
10.03 Further Assurances
From time to time subsequent to the Closing Date, each Party shall at the
request of any other Party execute and deliver such additional conveyances,
transfers and other assurances as may be reasonably required effectively to
carry out the intent of this Agreement and any Ancillary Agreement and to
transfer the Purchased Shares to the Purchaser.
10.04 Securities Law Compliance Certificate
Each Vendor agrees and covenants that, from time to time subsequent to the
Closing Date, such Vendor shall provide to the Purchaser such certificates
regarding the conduct of the business and/or financial information of the
Corporation prior to the Closing as the Purchaser may reasonably require from
such Vendor to enable the Purchaser's Chief Executive Officer and Chief
Financial Officer (and such other executive officers of the Purchaser) to
execute and deliver such certificates (the "Officers' Certificates") as they are
required to execute and file with the Securities & Exchange Commission under
▇▇▇▇▇▇▇▇-▇▇▇▇▇ of 2002 Act (or such other Acts as may be adopted) when such
Officers' Certificates include or, in part, are based upon the conduct of the
business and/or the financial information of the Corporation prior to the
Closing. The Vendors agree that this Covenant shall survive for a period of six
years from the Closing Date or for such longer period as may be required by
applicable Law.
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ARTICLE 11 -
ARBITRATION
11.01 Best Endeavours to Settle Disputes
In the event of any dispute, claim, question or difference arising out of
or relating to this Agreement or any agreement executed pursuant to this
Agreement or any breach hereof, the parties hereto shall use their best
endeavours to settle such dispute, claim, question or difference. To this
effect, they shall consult and negotiate with each other, in good faith and
understanding of their mutual interests, to reach a just and equitable solution
satisfactory to all parties.
11.02 Arbitration
Except as is expressly provided in this Agreement, if the parties do not
reach a solution pursuant to Section 11.01 within a period of 15 Business Days
following the first notification in writing by any party to another party of any
dispute, claim, question or difference, then upon written notice by any party to
the others, the dispute, claim, question or difference shall be finally settled
by arbitration in accordance with the Rules of the Arbitration and Mediation
Institute of Ontario Inc. pursuant to the provisions of the Arbitrations Act
(Ontario) and any amendments thereto, based upon the following:
(a) the arbitration tribunal shall consist of one arbitrator appointed
by mutual agreement of the parties, or in the event of failure to
agree within 10 Business Days, any party may apply to a judge of the
Superior Court of Justice to appoint an arbitrator. The arbitrator
shall be qualified by education and training to pass upon the
particular matter to be decided;
(b) the arbitrator shall be instructed that time is of the essence in
proceeding with his determination of any dispute, claim, question or
difference and, in any event, the arbitration award must be rendered
within 30 days of the submission of such dispute to arbitration;
(c) the arbitration shall take place in Toronto, Ontario;
(d) the arbitration award shall be given in writing and shall be final
and binding on the parties, and shall deal with the question of
costs of arbitration and all matters related thereto;
(e) judgment upon the award rendered may be entered in any Court having
jurisdiction, or, application may be made to such Court for a
judicial recognition of the award or an order of enforcement
thereof, as the case may be.
ARTICLE 12 -
TERMINATION AND MISCELLANEOUS
12.01 Termination
This Agreement may be terminated by written notice given by the
terminating party to the other parties hereto, at any time prior to the Time of
Closing:
(a) by mutual written consent of the Vendors and the Purchaser; or
(b) by either the Vendors or the Purchaser if the Closing has not
occurred on or before March 31, 2005 provided that the terminating
party has not willfully been the cause of the delay; or
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(c) by either the Vendors or the Purchaser if a final and non-appealable
order shall have been entered in any action or proceeding before any
governmental authority or agency either prevents or makes illegal
the consummation of the transaction or, by the Purchaser, if such
order materially affects in an adverse way the benefit of the
transaction to the Purchaser.
In the event of the termination of this Agreement as provided in Section 12.01,
this Agreement shall forthwith have no further force or effect and there shall
be no obligation on the part of the parties hereunder. In the event of such
termination, no party shall have any other liability for any breach of this
Agreement, except for a breach arising from the fraud or willful misconduct of
such party.
12.02 Notices
Any notice, direction or other instrument required or permitted to be
given hereunder shall be in writing and given by delivering or sending it by
telecopy or other similar form of communication addressed:
(1) to the Purchaser at:
TelePlus Enterprises, Inc.
▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇ ▇▇▇
▇▇▇▇▇▇
With Copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (phone)
▇▇▇-▇▇▇-▇▇▇▇ (fax)
(2) to the Vendors at:
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telephone : (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile : (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ Dellelce LLP
Suite 810, 1 First Canadian Place
Toronto, Ontario
M5X 1A9
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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(3) to the Corporation at:
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telephone : (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile : (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given, if sent by telecopier or other similar
form of telecommunications on the next Business Day following such transmission
or, if delivered, to have been received on the date of such delivery. Any Party
may change its address for service from time to time by notice given in
accordance with the foregoing and any subsequent notice shall be sent to the
party at its changed address.
12.03 Publicity
Save as required by Law or by any stock exchange, none of the Parties
shall issue any press release or make any other public statement or announcement
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior written approval of the other
Parties to the contents and the manner of presentation and publication thereof.
If disclosure is required by Law or by any stock exchange, the disclosing Party
shall consult in advance with the other Parties and attempt in good faith to
reflect such other Parties' concerns in the required disclosure.
12.04 Time of the Essence
Time shall be of the essence of this Agreement.
12.05 Brokers
The Vendors shall indemnify and save harmless the Purchaser from and
against any Claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any broker, agent or other intermediary who purports
to act or have acted for the Vendors.
12.06 Enurement
This Agreement shall enure to the benefit of and be binding upon each of
the Parties, their successors and any permitted assigns.
12.07 Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
12.08 Assignment
Except as provided in this section, none of the rights or obligations
hereunder shall be assignable or transferable by any Party without the prior
written consent of the other Parties. The Purchaser shall be entitled after the
Time of Closing, upon giving written notice to the Corporation and the Vendors,
at any time to assign all of its rights and obligations under this Agreement to
any wholly-owned subsidiary to perform the Purchaser's rights and obligations
under this Agreement. In such case, such assignee shall have and may exercise
all the rights, and shall assume or perform all of the obligations, of the
Purchaser under this Agreement, reference to the Purchaser shall be deemed also
to refer to such assignee and the Purchaser shall guarantee the obligations of
such assignee. In the event of such an assignment, (a) the Purchaser shall
execute an agreement guaranteeing such assignee's obligations and liabilities
under this Agreement in a form acceptable to the Vendors, acting reasonably, and
(b) the Vendors and such assignee or nominee shall execute an agreement
confirming such assignment or nomination and such assumptions of obligations
shall be on the basis that no such assignment or nomination shall release the
Purchaser from its obligations under this Agreement.
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12.09 Non-Merger
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties of the Parties contained in this Agreement and
the Ancillary Agreements shall not merge on and shall survive the Closing and,
notwithstanding such Closing, or any investigation made by or on behalf of any
Party, shall continue in full force and effect. Closing shall not prejudice any
right of one Party against any other Party in respect of anything done or
omitted hereunder or under any of the Ancillary Agreements or in respect of any
right to damages or other remedies.
12.10 Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Ancillary Agreements: (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof, including the share purchase agreement made as of the 8th of December,
2004 among the Parties; and (b) is not intended to confer any rights or remedies
upon any Person other than the parties hereto and thereto.
-28-
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first above written.
TELEPLUS ENTERPRISES INC.
Per: /s/ Marius Silvasan
___________________________________ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Witness: ▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇ ▇▇▇▇▇▇
Witness: ▇▇▇ ▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇ ▇▇▇▇▇▇
Witness: ▇▇▇ ▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Witness: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Witness: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Witness: ▇▇▇▇▇▇ ▇▇▇▇▇▇
___________________________________ /s/ ▇▇▇ ▇▇▇▇▇
Witness: ▇▇▇ ▇▇▇▇▇
___________________________________ /s/ ▇▇▇▇ ▇▇▇▇▇
Witness: ▇▇▇▇ ▇▇▇▇▇
TELEPLUS CONNECT CORP.
Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
SCHEDULE 2.03
PAYMENT OF CONSIDERATION
---------------- ----------------------------------- ---------------------------
EBITDA Formula Purchase Price Installment
Payment
---------------- ----------------------------------- ---------------------------
---------------- ----------------------------------- ---------------------------
$25,000 $25,000 x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$50,000 $(50,000 - 25,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$75,000 $(75,000 - 50,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$100,000 $(100,000 - 75,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$125,000 $(125,000 - 100,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$150,000 $(150,000 - 125,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$175,000 $(175,000 - 150,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$200,000 $(200,000 - 175,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$225,000 $(225,000 - 200,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$250,000 $(250,000 - 225,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$275,000 $(275,000 - 250,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$300,000 $(300,000 - 275,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$325,000 $(325,000 - 300,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$350,000 $(350,000 - 325,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$375,000 $(375,000 - 350,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
$400,000 $(400,000 - 375,000) x 12 x 4.3333 $ 1,300,000
---------------- ----------------------------------- ---------------------------
---------------- ----------------------------------- ---------------------------
TOTAL $20,800,000
---------------- ----------------------------------- ---------------------------
-30-
SCHEDULE 2.04(a)
FINANCING CONTRIBUTION
Subject to the terms and conditions of this Agreement, the Purchaser shall
provide financing to the Corporation as follows:
(i) Acquisition Funds - $7,843,000 (50% in cash and 50% in shares
of the Purchaser); Acquisition Funds shall
be issued in multiple disbursements
("Acquisition Fund Disbursements") to
allow the acquisition of target
companies. Specifically, such Acquisition
Fund Disbursements shall be paid upon
closing of each approved acquisition.
(iii) Fixed Asset Funds - $500,000 (cash)
-31-
SCHEDULE 2.04(b)
FINANCING CONTRIBUTION - EBITDA TARGETS
The EBITDA targets for the purposes of determining the Purchaser's obligations
to provide financing to the Corporation in accordance with the provisions of
this Agreement are as follows:
Month Following the EBITDA Target
Closing Date ($000's)
------------------- -------------
1 n/a
2 n/a
3 n/a
4 n/a
5 n/a
6 n/a
7 n/a
8 n/a
9 $ 35
10 $ 51
11 $ 55
12 $ 70
13 $ 71
14 $ 75
15 $ 116
16 $ 119
17 $ 121
18 $ 146
19 $ 166
20 $ 169
21 $ 172
22 $ 230
23 $ 238
24 $ 244
25 $ 302
26 $ 310
27 $ 308
28 $ 308
29 $ 293
30 $ 292
31 $ 316
32 $ 315
33 $ 316
34 $ 400
35 $ 400
36 $ 400
37 $ 400
38 $ 400
39 $ 400
-32-
40 $ 400
41 $ 400
42 $ 400
43 $ 400
44 $ 400
45 $ 400
46 $ 400
47 $ 400
48 $ 400
-33-
SCHEDULE 3.03
CAPITALIZATION
Proportionate
Share
Name of Registered Holder Certificate No. No. of Shares Percentage
------------------------- --------------- ------------- ----------
▇▇▇▇▇ ▇▇▇▇▇▇▇ C-3 45.00 45.00
▇▇▇ ▇▇▇▇▇ C-4 1.75 1.75
▇▇▇ ▇▇▇▇▇▇ C-5 2.60 2.60
▇▇▇ ▇▇▇▇▇▇ C-6 2.60 2.60
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ C-7 41.10 41.10
▇▇▇▇ ▇▇▇▇▇ C-8 1.75 1.75
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ C-9 2.60 2.60
▇▇▇▇▇▇ ▇▇▇▇▇▇ C-10 2.60 2.60