EXECUTION COPY
Exhibit 99.2
LAVALIFE INC.
and
CMS/MID-ATLANTIC BUSINESS OPPORTUNITY PARTNERS, L.P., ECP-IMG LIMITED
PARTNERSHIP, ECP-IMG GP INC., CANADIAN IMPERIAL BANK OF COMMERCE, THE VENGROWTH
INVESTMENT FUND INC., MWI NOMINEE COMPANY LTD., 1389122 ONTARIO INC., OCTENNIAL
CORPORATION, TRITRUST, XONKOR HOLDING LIMITED, MACHKOR HOLDING LIMITED, MULKOR
HOLDING LTD., HEXTA CORPORATION LTD., AND SEPTUS CORPORATION LIMITED
and
▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇
and
MEMBERWORKS INCORPORATED
--------------------------------------------------------------------------------
MASTER TRANSACTION AGREEMENT
March 3, 2004
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STIKEMAN ELLIOTT LLP
TABLE OF CONTENTS
Article 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
Section 1.1 Definitions...........................................2
Section 1.2 Certain Rules of Interpretation......................16
Section 1.3 Knowledge............................................17
Section 1.4 Entire Agreement.....................................18
Section 1.5 Schedules............................................18
Article 2
TRANSACTIONS
Section 2.1 Reorganization.......................................19
Section 2.2 Purchased Assets.....................................19
Section 2.3 Purchased Shares.....................................19
Section 2.4 Purchase for Cancellation............................20
Section 2.5 Assignment of Contracts..............................20
Section 2.6 Place of Closing.....................................21
Section 2.7 Tender...............................................21
Section 2.8 Holdco Alternative...................................21
Section 2.9 Transaction Ordering.................................22
Article 3
ASSET PURCHASE PRICE, SHARE PURCHASE PRICE
AND PURCHASE FOR CANCELLATION PRICE
Section 3.1 Asset Purchase Price.................................22
Section 3.2 Payment of Sales Tax.................................22
Section 3.3 Allocation of Asset Purchase Price...................23
Section 3.4 Satisfaction of Asset Purchase Price.................23
Section 3.5 Share Purchase Price.................................23
Section 3.6 Allocation of Share Purchase Price
among Share Vendors..................................23
Section 3.7 Satisfaction of Share Purchase Price.................24
Section 3.8 Purchase for Cancellation Price......................24
Section 3.9 Allocation of Purchase for Cancellation Price........25
Section 3.10 Satisfaction of Purchase for
Cancellation Price...................................25
Section 3.11 Certificate of Net Cash Amount and Closing
Working Capital......................................26
Section 3.12 Delivery of Closing Date Financial Statements........26
Section 3.13 Adjustments to Share Purchase Price and
Purchase for Cancellation Price......................26
Section 3.14 Objection to Closing Date Financial Statements.......27
Section 3.15 Interest.............................................28
Section 3.16 Section 116 Requirements.............................28
Section 3.17 Transferred Shares...................................31
(i)
Article 4
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS RELATING TO THE COMPANY
Section 4.1 Incorporation and Registration.......................32
Section 4.2 Subsidiaries.........................................32
Section 4.3 Capitalization.......................................32
Section 4.4 Business.............................................33
Section 4.5 Title to the Assets..................................33
Section 4.6 Absence of Conflicting Agreements....................34
Section 4.7 Regulatory Approvals.................................34
Section 4.8 Compliance with Shareholders Agreement...............34
Section 4.9 Financial Statements.................................34
Section 4.10 Unused Credits.......................................35
Section 4.11 Debt Obligations.....................................35
Section 4.12 Liabilities..........................................35
Section 4.13 Absence of Changes and Unusual Transactions..........36
Section 4.14 Condition of Fixed Assets............................36
Section 4.15 Accounts Receivable..................................36
Section 4.16 Bank Accounts and Powers of Attorney.................37
Section 4.17 Business in Compliance with Laws.....................37
Section 4.18 Intellectual Property................................37
Section 4.19 Software Materials...................................39
Section 4.20 Internet Web Site....................................40
Section 4.21 Real Property........................................41
Section 4.22 Environmental Matters................................41
Section 4.23 Employment Matters...................................41
Section 4.24 Collective Agreements................................43
Section 4.25 Related Party Contracts..............................44
Section 4.26 Benefit Plans........................................44
Section 4.27 Insurance............................................45
Section 4.28 Material Contracts...................................45
Section 4.29 Litigation...........................................45
Section 4.30 Tax Matters..........................................45
Section 4.31 Equipment Contracts..................................48
Section 4.32 Corporate Records....................................48
Section 4.33 Books and Records....................................49
Section 4.34 Personal Information.................................49
Section 4.35 No Broker............................................50
Section 4.36 Residence of the Company.............................50
Section 4.37 Private Corporation..................................50
Section 4.38 Full Disclosure......................................50
(ii)
Article 5
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
Section 5.1 Right to Sell........................................51
Section 5.2 Due Authorization....................................51
Section 5.3 Enforceability of Obligations........................51
Section 5.4 Absence of Conflicting Agreements....................51
Section 5.5 Litigation...........................................51
Section 5.6 No Broker............................................52
Section 5.7 Residence of the Shareholder.........................52
Article 6
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
Section 6.1 Due Authorization....................................52
Section 6.2 Enforceability of Obligations........................53
Section 6.3 Absence of Conflicting Agreements....................53
Section 6.4 Financial Ability....................................53
Section 6.5 Investment Canada....................................53
Section 6.6 Litigation...........................................53
Section 6.7 Personal Information.................................54
Section 6.8 No Broker............................................54
Article 7
SURVIVAL
Section 7.1 Nature and Survival..................................54
Article 8
PURCHASERS' CONDITIONS PRECEDENT
Section 8.1 Truth and Accuracy of Representations of
Shareholders at the Closing Time....................55
Section 8.2 Performance of Obligations...........................56
Section 8.3 Consents, Approvals and Waivers......................56
Section 8.4 No Proceedings.......................................56
Section 8.5 Options..............................................56
Section 8.6 Termination of Shareholders Agreement and
Voting and Deposit Agreement........................56
Section 8.7 Completion of Reorganization.........................56
Section 8.8 Asset Closing........................................57
Section 8.9 Purchase for Cancellation............................57
Section 8.10 No Material Adverse Change...........................57
Section 8.11 Employee Shareholders................................57
Section 8.12 Receipt of Closing Documentation.....................57
(iii)
Article 9
SHAREHOLDERS' CONDITIONS PRECEDENT
Section 9.1 Truth and Accuracy of Representations of
Purchasers at the Closing Time......................60
Section 9.2 Performance of Obligations...........................60
Section 9.3 Consents, Approvals and Waivers......................61
Section 9.4 No Proceedings.......................................61
Section 9.5 Completion of Reorganization.........................61
Section 9.6 Asset Closing........................................61
Section 9.7 Purchase for Cancellation............................61
Section 9.8 Employee Shareholders................................61
Section 9.9 Receipt of Closing Documentation.....................61
Article 10
OTHER COVENANTS OF THE PARTIES
Section 10.1 Conduct of Business Prior to Closing.................62
Section 10.2 Access for Investigation.............................64
Section 10.3 Actions to Satisfy Closing Conditions................65
Section 10.4 Transfer of the Purchased Assets and
Purchased Shares.....................................66
Section 10.5 Request for Consents.................................66
Section 10.6 Preservation of Records..............................66
Section 10.7 Stub Period Returns..................................67
Section 10.8 Tax Matters..........................................68
Section 10.9 Filings and Authorizations...........................68
Section 10.10 Risk of Loss.........................................68
Section 10.11 Consent to Jurisdiction..............................69
Section 10.12 Confidentiality......................................70
Section 10.13 Non-Competition......................................70
Section 10.14 Non-Solicitation of Employees........................71
Section 10.15 Non-Interference.....................................71
Section 10.16 Term.................................................71
Section 10.17 Waiver of Shareholders Agreement.....................71
Section 10.18 Capital Dividend.....................................72
Section 10.19 Employee Shareholders................................72
(iv)
Article 11
INDEMNIFICATION FOR BREACHES
OF COVENANTS AND WARRANTIES
Section 11.1 Indemnification...................................73
Section 11.2 Indemnification Procedures for
Third Party Claims...... .........................76
Section 11.3 Share Purchase Price and Purchase for
Cancellation Price Adjustment.....................77
Section 11.4 Mitigation and Exclusive Remedies.................77
Section 11.5 One Recovery......................................77
Section 11.6 Directors/Officers................................78
Article 12
GENERAL
Section 12.1 Public Notices....................................78
Section 12.2 Expenses..........................................78
Section 12.3 Notices...........................................79
Section 12.4 Assignment........................................80
Section 12.5 Amendment.........................................80
Section 12.6 Further Assurances................................80
Section 12.7 Execution and Counterparts........................81
Section 12.8 Disclosure on Schedules...........................81
Section 12.9 Independent Legal Advice..........................81
Section 12.10 Release of Shareholder Claims.....................81
Section 12.11 Withholding.......................................81
ADDENDA
SCHEDULE 1.1(43) Employee Shareholders
SCHEDULE 1.1(83) Permitted Encumbrances
SCHEDULE 1.1(87) Proportionate Share
SCHEDULE 1.1(95) Purchase for Cancellation Shareholders
SCHEDULE 1.1(118) Share Vendors
SCHEDULE 2.1 Reorganization
SCHEDULE 2.4 Purchase for Cancellation
SCHEDULE 3.2 Payment of Sales Tax
SCHEDULE 4.2 Subsidiaries
SCHEDULE 4.3 Share Capital
SCHEDULE 4.7 Consents and Approvals
SCHEDULE 4.11 Debt Obligations
SCHEDULE 4.12 Liabilities
SCHEDULE 4.13 Absence of Changes and Unusual Transactions
SCHEDULE 4.17 Compliance with Laws
SCHEDULE 4.18 Intellectual Property
SCHEDULE 4.19 Software Materials
SCHEDULE 4.20 Internet Web Site
SCHEDULE 4.21 Real Property
SCHEDULE 4.24 Collective Agreements
SCHEDULE 4.26 Benefit Plans
SCHEDULE 4.27 Insurance Policies
SCHEDULE 4.28 Material Contracts
SCHEDULE 4.29 Litigation Proceedings
SCHEDULE 4.30 Tax Matters
SCHEDULE 4.31 Equipment Contracts
SCHEDULE 5.7 Non-Resident Shareholder
(v)
MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement is made as of the 3rd day of March, ▇▇▇▇
▇ ▇ ▇ ▇ ▇ ▇ ▇:
Lavalife Inc., a corporation governed by the laws of Ontario
(the "Company")
-and-
CMS/Mid-Atlantic Business Opportunity Partners, L.P., ECP-IMG
Limited Partnership, ECP-IMG GP Inc., Canadian Imperial Bank of
Commerce, The VenGrowth Investment Fund Inc., MWI Nominee Company
Ltd., 1389122 Ontario Inc., Octennial Corporation, Tritrust,
Xonkor Holding Limited, Machkor Holding Limited, Mulkor Holding
Ltd., Hexta Corporation Ltd. and Septus Corporation Limited
(the "Investors")
-and-
▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
(the "Senior Management")
-and-
MemberWorks Incorporated, a corporation governed by the laws of
Delaware
(the "Purchaser").
RECITALS:
(A) The Investors, Senior Management and the Employee Shareholders (defined
herein) together beneficially own and control all of the issued and
outstanding shares in the capital of the Company.
(B) The Company has agreed to sell to the Purchaser and the Purchaser has
agreed to purchase from the Company certain of the assets of the
Company, on the terms and conditions set forth in this Agreement.
(C) Certain of the Shareholders have agreed to sell to a wholly-owned
subsidiary of the Purchaser (the "Share Purchaser") and the Purchaser
has agreed to cause such entity to purchase from such Shareholders all
of the issued and outstanding shares of the Company owned by them, on
the terms and conditions set forth in this Agreement.
-2-
(D) The Company has agreed to purchase for cancellation, following
completion of the transactions contemplated by recitals B and C above,
all of the issued and outstanding shares of the Company, other than
those acquired by the Share Purchaser, on the terms and conditions set
forth in this Agreement.
NOW THEREFORE, the parties agree as follows:
Article 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
Section 1.1 Definitions.
Whenever used in this Agreement, the following words and terms have the
meanings set out below:
(1) "Accounts Receivable" means accounts receivable, bills receivable, trade
accounts, book debts and insurance claims recorded as receivable in the
Books and Records and any other amount due to the Company or any of the
Subsidiaries including any refunds and rebates, and the benefit of all
security (including cash deposits), guarantees and other collateral held by
the Company or any of the Subsidiaries;
(2) "Adjusted Working Capital" means Working Capital as of September 30, 2003
less all cash on the Balance Sheet and less the Extraordinary Receivables;
(3) "Adjustment Escrow Agent" means CIBC Mellon Trust Company or any successor
or replacement escrow agent under the Adjustment Escrow Agreement;
(4) "Adjustment Escrow Agreement" means the escrow agreement to be entered into
on the Closing Date among the Adjustment Escrow Agent, the Company, the
Purchasers and the Shareholders in connection with the escrow of the
Adjustment Escrow Amount held as security for the adjustment to the Share
Purchase Price and Purchase for Cancellation Price contemplated in Section
3.7(3), Section 3.10(3) and Section 3.13;
(5) "Adjustment Escrow Amount" means the amount paid to the Adjustment Escrow
Agent pursuant to Section 3.7(3) and Section 3.10(3) plus the Income Earned
thereon;
-3-
(6) "Affiliate" has the meaning given to such term in the Business Corporations
Act (Ontario), as amended from time to time;
(7) "Agreement" means this Master Transaction Agreement, including all
schedules, and all amendments, supplements, restatements or replacements
thereof from time to time, as permitted, and references to "Article" or
"Section" mean the specified Article or Section of this Agreement;
(8) "arm's length" has the meaning given to such term for purposes of the
Income Tax Act (Canada);
(9) "Asset Closing" means the completion of the sale to and purchase by the
Purchaser of the Purchased Assets under this Agreement;
(10) "Asset Purchase Closing Time" means 9:05 a.m., Toronto time, on the Closing
Date or such other time on such date as the Purchaser and the Shareholders
may agree in writing as the time at which the Asset Closing shall take
place;
(11) "Asset Purchase Price" has the meaning given in Section 3.1;
(12) "Auditor" means Ernst & Young LLP, Chartered Accountants;
(13) "Balance Sheet" means the audited consolidated balance sheet of the Company
and the Subsidiaries as at September 30, 2003, forming part of the
Financial Statements;
(14) "Benefit Plans" means written plans, arrangements, agreements, programs or
policies, funded or unfunded, to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries
is bound or under which the Company or any of the Subsidiaries has any
liability or contingent liability, which:
(a) provide for employment benefits relating to disability or wage or
benefits continuation during periods of absence from work or
employment benefits relating to hospitalization, healthcare, medical
or dental treatments or expenses, life insurance, accidental death and
dismemberment insurance, death or survivor's benefits and
supplementary employment insurance, in each case regardless of whether
or not such benefits are insured or self- insured; or
(b) are in the nature of compensation plans, which means all employment
benefits relating to bonuses, incentive pay or compensation,
performance compensation, deferred compensation, profit sharing or
deferred profit sharing, share purchase, share option, stock
appreciation, phantom stock, vacation or vacation pay, sick pay,
severance or termination pay, employee loans or separation from
service benefits, or any other type of arrangement providing for
compensation or benefits additional to base pay or salary; with
respect to any of its Employees or former employees (or any spouses,
dependants, survivors or beneficiaries of any such Employees or former
employees), directors or officers, individuals working on contract
with the Company or any of the Subsidiaries or other individuals
providing services to any of them of a kind normally provided by
employees or eligible dependants of such Person;
but "Benefit Plans" does not include Statutory Plans;
-4-
(15) "Best Efforts" means the reasonable efforts that a prudent Person who
desires to complete the transaction would use in similar circumstances to
ensure that a closing occurs as expeditiously as possible without the
necessity of assuming any material obligations or paying any material
amounts to an unrelated third party;
(16) "Books and Records" means all books and records of the Company and the
Subsidiaries, including financial, corporate, operations and sales books,
records, books of account, sales and purchase records, tax records, lists
of suppliers and customers, formulae, business reports, plans and
projections and all other documents, surveys, plans, files, records,
correspondence, and other data and information, financial or otherwise,
including all data and information stored on computer-related or other
electronic media;
(17) "Business" means the provision of electronic personal services including,
but not limited to, the on-line business of the Company and the
Subsidiaries carried on through the ▇▇▇▇▇▇▇▇.▇▇▇ website and the IVR-based
interactive personals services in North America and the rest of the world;
(18) "Business Day" means any day, other than a Saturday or Sunday, on which the
Canadian Imperial Bank of Commerce in Toronto is open for commercial
banking business during normal banking hours;
(19) "Cash at Closing" means the amount of the cash and short term deposits of
the Company, as reflected on the consolidated balance sheet of the Company
which forms part of the Closing Date Financial Statements;
(20) "CIBC" means Canadian Imperial Bank of Commerce;
(21) "Claim(s)" includes claims, demands, actions, suits, causes of action,
assessments or reassessments, charges, judgments, debts, liabilities,
expenses, costs, damages or losses, including loss of value, professional
fees and all costs incurred in investigating or pursuing any of the
foregoing or any proceeding relating to any of the foregoing;
-5-
(22) "Closing Date" means April 1, 2004 provided that, if HSR Approval shall not
have been obtained by such date, the Closing Date shall be the third
Business Day following receipt of HSR Approval, or such other date as the
Purchaser and the Shareholders may agree in writing as the date upon which
the Closings shall take place;
(23) "Closing Date Financial Statements" means (i) the audited consolidated
balance sheet of the Company and the Subsidiaries as at the time
immediately prior to the Reorganization Closing Time, showing all of the
assets and liabilities of the Company and the Subsidiaries, and (ii) a
statement of the Closing Working Capital, together with an opinion of the
Purchaser's Auditor to the effect that the Closing Date Financial
Statements have been prepared in accordance with GAAP, consistently
applied, and a statement of any adjustments to the Share Purchase Price and
Purchase for Cancellation Price required by Section 3.13 of this Agreement;
(24) "Closing Working Capital" has the meaning given in Section 3.5(2);
(25) "Closings" means, collectively, the Reorganization Closing, the Asset
Closing, the Share Closing and the Purchase for Cancellation Closing;
(26) "Collective Agreements" means collective agreements and related documents
including benefit agreements, letters of understanding, letters of intent
and other written communications with bargaining agents or unions by which
the Company or any of the Subsidiaries is bound or which impose any
obligations upon the Company or any of the Subsidiaries or set out the
understanding of the parties with respect to the meaning of any provisions
of such collective agreements;
(27) "Commercial-off-the-Shelf" or "COTS" means any licensed software that is
contained in standard desktop applications and is available through
commercial distributors via download from the Internet or in consumer
retail stores; and the aggregate cost of which is de minimis;
(28) "Company" has the meaning given in the recitals to this Agreement and
includes any successor by amalgamation;
(29) "Company Counsel" means Osler, ▇▇▇▇▇▇ & Harcourt LLP;
(30) "Company Copyrights" means all Copyrights owned or developed by or for the
Company and the Subsidiaries whether registered or unregistered;
-6-
(31) "Company Software Materials" has the meaning given in Section 4.19(1);
(32) "Company Trade-Marks" has the meaning given in Section 4.18;
(33) "Confidentiality Agreement" has the meaning given in Section 1.4;
(34) "Consents" means the consents of the contracting parties to the assignment
of the Material Contracts, Equipment Contracts, Leased Real Property and
Licensed Software Materials if required by the terms of any of the Material
Contracts, Equipment Contracts, Leased Real Property and Licensed Software
Materials;
(35) "Continuing Period" has the meaning given in Section 10.7;
(36) "Contract" means any contract, licence, lease, agreement, commitment,
entitlement or engagement to which the Company or any of the Subsidiaries
is a party or by which any of them are bound or under which the Company or
any of the Subsidiaries has, or will have, any liability or contingent
liability, and includes any quotation, order or tender for any contract
which remains open for acceptance and any warranty, guarantee or commitment
(express or implied);
(37) "Control" has the meaning given in the Business Corporations Act (Ontario);
(38) "Counterpart" means the form of counterpart attached to this Agreement as
Schedule Error! Reference source not found.;
(39) "Current Assets" means the current assets of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP
consistently applied;
(40) "Current Liabilities" means the liabilities of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP
consistently applied, and, for greater certainty, excluding any change in
deferred revenue resulting from Emerging Issues Committee No. 141 - Revenue
Recognition and any related tax benefits;
(41) "Disabling Code" has the meaning given in Section 4.19(4);
(42) "Employees" means all individuals employed or retained by the Company or
any of the Subsidiaries on a full-time, part-time or temporary basis,
including those employees on disability leave, parental leave or other
absence;
(43) "Employee Shareholders" means the shareholders of the Company listed on
Schedule Error! Reference source not found., and each other Employee who
becomes a shareholder of the Company prior to the Share Purchase Closing,
but which for greater certainty excludes any Employee who is also a Founder
or Senior Management;
-7-
(44) "Employment Contract" means any written Contract relating to an Employee
which imposes any obligation on the Company or any of the Subsidiaries;
(45) "Encumbrance" means any pledge, lien, charge, security interest, lease,
title retention agreement, mortgage, option, statutory trust, adverse claim
or encumbrance of any kind or character whatsoever;
(46) "Environment" means the environment or natural environment as defined in
any Environmental Laws and includes air, surface water, ground water, land
surface, soil, subsurface strata but excludes air in a building, structure,
machine, chimney, stack or flue;
(47) "Environmental Approval" means any approval, permit, certificate, licence,
authorization, consent, agreement, instruction, direction, registration, or
approval required by a Governmental Authority pursuant to an Environmental
Law with respect to the operations, business or assets of the Company or
any of the Subsidiaries;
(48) "Environmental Laws" means Laws relating to the protection of the
Environment, and includes any Laws relating to the storage, generation,
use, handling, manufacture, processing, transportation, treatment, Release
and disposal of Hazardous Substances;
(49) "Equipment Contracts" means motor vehicle leases, equipment leases, leases
of computer hardware and computer systems, conditional sales contracts,
title retention agreements and other similar agreements relating to
equipment used by the Company or any of the Subsidiaries;
(50) "Escrow Agent" means CIBC Mellon Trust Company or any successor or
replacement escrow agent under the Escrow Agreement;
(51) "Escrow Agreement" means the escrow agreement to be entered into on the
Closing Date among the Escrow Agent, the Purchaser and the Shareholders in
connection with the escrow of the Escrow Amount held as security for any
potential Claims for indemnification pursuant to Article 11;
(52) "Escrow Amount" means the amount paid to the Escrow Agent pursuant to
Section 3.7(2) and Section 3.10(2) plus the Income Earned thereon;
-8-
(53) "Extraordinary Receivables" means the Moneris holdback receivable as of
September 30, 2003 in the amount of $1,410,747 and the income tax
receivable as of September 30, 2003 in the amount of $1,300,000;
(54) "Filing Entity" has the meaning given Section 10.7(1);
(55) "Financial Statements" means the audited consolidated financial statements
of the Company and the Subsidiaries for the fiscal year ended September 30,
2003, consisting of the Balance Sheet and the statements of earnings and
retained earnings and changes in financial position and all notes thereto
as reported upon by the Auditor and including the opinion of the Auditor;
(56) "Fixed Assets" means fixed assets, machinery, equipment, fixtures,
furniture, furnishings, vehicles, material handling equipment, implements,
parts, tools, tooling and spare parts owned or used or held by the Company
or any of the Subsidiaries, including any which are in storage or in
transit, and other tangible property and facilities used by the Company or
any of the Subsidiaries whether located in or on the premises of the
Company or any of the Subsidiaries or elsewhere;
(57) "Founders" means Octennial Corporation, Tritrust, Hexta Corporation Ltd.,
Septus Corporation Limited, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Machkor Holding Limited, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Mulkor Holding Ltd., ▇▇▇▇▇▇ ▇▇▇, Xonkor Holding Limited and ▇▇▇▇▇
▇▇▇▇▇▇;
(58) "GAAP" means generally accepted accounting principles as defined by the
Accounting Standards Board of the Canadian Institute of Chartered
Accountants in the Handbook of the Canadian Institute of Chartered
Accountants;
(59) "Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, bureau, official, minister,
Crown corporation, court, board, tribunal, dispute settlement panel or body
or other law, rule or regulation- making entity:
(a) having or purporting to have jurisdiction on behalf of any nation,
province, state or other geographic or political subdivision thereof;
or
(b) exercising, or entitled or purporting to exercise any administrative,
executive, judicial, legislative, policy, regulatory or taxing
authority or power;
(60) "Governmental Authorization" means any authorization, approval, licence or
permit issued to the Company or any of the Subsidiaries by or from any
Governmental Authority;
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(61) "Hazardous Substance" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance,
prohibited substance, dangerous substance or dangerous good in excess of
that permitted by Environmental Laws;
(62) "Historical Financial Statements" has the meaning given in Section 8.12(8);
(63) "HSR Approval" means the waiting period applicable to the consummation of
the transactions under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976 shall have expired or been terminated, and no Governmental Authority
shall have applied or threatened to apply for an injunction or other order
under the antitrust laws of the United States or any state thereof;
(64) "Income Earned", in respect of any amount held in escrow, means all
interest income, gains or accretions earned thereon;
(65) "Independent Auditor" means Deloitte LLP or such other national auditing
firm, which is independent from the Shareholders, Purchasers and their
Affiliates and the Company and its Subsidiaries, as is agreed upon by the
Purchaser, on the one hand, and the Shareholders, on the other hand;
(66) "Intellectual Property Rights" means all rights arising from or in respect
of the following, whether protected, created or arising under the laws of
Canada or any other jurisdiction: (i) business names, trade names,
registered and unregistered trade-marks, service marks, certification
marks, distinguishing guises, trade dress, get-up, logos and other
indications of origin (including any Internet domain names), and
applications and registrations therefor, and all renewals or extension of
such applications and registrations (collectively, "Trade-marks"); (ii)
patents, patent rights (including design patents and industrial designs)
and all applications therefor, including any and all continuation,
divisional, continuation-in-part, or reissue patent applications or patents
issuing thereon (collectively, "Patents"); (iii) writings and other
copyrightable works of authorship, including computer programs, data bases
and documentation therefor, and all registrations and applications
therefor, and all renewals or extension of such applications and
registrations (collectively, "Copyrights"); (iv) proprietary and non-public
business information including know-how, inventions, discoveries,
improvements, concepts, ideas, methods, processes, designs, formulae,
technical data, drawings, specifications, research and development
information and other proprietary and non-public information, including
customer lists, business plans and marketing plans, in each case to the
extent not included in the foregoing subparagraphs, but excluding any of
the foregoing that is generally known or available to the public
(collectively, "Trade Secrets"); and (v) any other intellectual property
and industrial property;
-10-
(67) "Interim Period" has the meaning given in Section 10.1;
(68) "Investors" has the meaning given in the recitals to this Agreement;
(69) "Laws" means applicable statutes, by-laws, rules, regulations, orders,
ordinances or judgements of any Governmental Authority having the force of
law;
(70) "Leased Real Property" means premises which are the subject of the Real
Property Leases;
(71) "Licences" means any licence, permit, approval, right, privilege, quota,
concession or franchise issued, granted, conferred or otherwise created by
a Governmental Authority;
(72) "Licensed Software Materials" has the meaning given in Section 4.19(1);
(73) "Material Adverse Change" means a change, event, fact or omission which has
or is reasonably expected to have a Material Adverse Effect in or on the
financial condition, assets, business, operations or prospects of the
Company and the Subsidiaries taken as a whole provided, for greater
certainty, that a decline in the share price of the Purchaser or the stock
market generally will not constitute a Material Adverse Change;
(74) "Material Adverse Effect" means a change or effect that is materially
adverse to the operations of the Company and the Subsidiaries taken as a
whole;
(75) "Material Contract" means any Contract involving aggregate payments to or
by the Company or any of the Subsidiaries in any fiscal year in excess of
$100,000;
(76) "Net Cash Amount" means $3,000,000;
(77) "Non-Resident Shareholder" means (i) a Shareholder that is a non-resident
of Canada for the purpose of the Income Tax Act (Canada), or (ii) a
Shareholder that is a partnership that is not a Canadian partnership for
purposes of the Income Tax Act (Canada), each of which (in the case of both
(i) and (ii)) is listed in Schedule Error! Reference source not found.;
(78) "Notice" has the meaning given in Section 12.3;
(79) "Occupational Health and Safety Laws" means all Laws relating in full or in
part to the protection of employee or worker health and safety;
(80) "Option" has the meaning given to it in Section 4.3(3);
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(81) "Parties" means the Company, the Investors, the Senior Management and the
Purchaser, collectively, and "Party" means any one of them;
(82) "Pension Plans" means all benefits relating to retirement or retirement
savings, including pension plans, pensions or supplemental pensions,
"registered retirement savings plans" (as defined in the Income Tax Act
(Canada)), "registered pension plans" (as defined in the Income Tax Act
(Canada)) and "retirement compensation arrangements" (as defined in the
Income Tax Act (Canada)), but excluding Statutory Plans;
(83) "Permitted Encumbrances" means the Encumbrances listed in Schedule Error!
Reference source not found.;
(84) "Person" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Governmental Authority,
and where the context requires any of the foregoing when they are acting as
trustee, executor, administrator or other legal representative;
(85) "Personal Information" means any information in the possession of the
Company or any of the Subsidiaries about an identifiable individual other
than the name, title or business address or telephone number of an
Employee;
(86) "PIPEDA" has the meaning given in Section 4.34(3);
(87) "Proportionate Share" means, in respect of each Shareholder, the percentage
set out opposite such Shareholder's name on Schedule Error! Reference
source not found., except that, for the purposes of Section 3.16,
"Proportionate Share" in respect of a Non-Resident Shareholder that is a
partnership means that proportion of the Proportionate Share of the
Non-Resident Shareholder otherwise determined that (A) the aggregate
interest in the Non-Resident Shareholder that are held by persons that are
non-residents of Canada for purposes of the Income Tax Act (Canada) is of
(B) all the interests in the Non-Resident Shareholder;
(88) "Proposed Offering" has the meaning given in Section 10.3(5);
(89) "Purchased Assets" means such assets of the Company as will be listed on a
schedule of assets to be delivered by the Purchaser to the Company prior to
the Closing Date, which assets shall have an aggregate fair market value
(as determined by the Purchaser prior to the Closing Date;
(90) "Purchased Shares" means all of the issued and outstanding shares in the
capital of the Company held by each of the Share Vendors (after the
Reorganization) listed opposite their name on Schedule Error! Reference
source not found.;
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(91) "Purchase for Cancellation" means the purchase for cancellation by the
Company of all of the Purchase for Cancellation Shares in accordance with
this Agreement and Schedule Error! Reference source not found.;
(92) "Purchase for Cancellation Closing" means the completion of the Purchase
for Cancellation in accordance with this Agreement;
(93) "Purchase for Cancellation Closing Time" means 9:15 a.m., Toronto time, on
the Closing Date or such other time on such date as the Company, the
Purchaser and the Shareholders may agree in writing as the time at which
the Purchase for Cancellation Closing shall take place;
(94) "Purchase for Cancellation Price" has the meaning given in Section 3.8;
(95) "Purchase for Cancellation Shareholders" means those shareholders listed on
Schedule Error! Reference source not found. and including any Transferring
Share Vendor;
(96) "Purchase for Cancellation Shares" means all of the issued and outstanding
shares in the capital of the Company (after the Reorganization Closing and
the Share Closing) that are not owned by the Share Purchaser immediately
prior to the Purchase for Cancellation Closing Time;
(97) "Purchaser" has the meaning given in the recitals to this Agreement;
(98) "Purchasers" means, collectively, the Purchaser and the Share Purchaser;
(99) "Purchaser's Auditor" means PricewaterhouseCoopers LLP;
(100) "Purchasers Indemnified Parties" has the meaning given in Section 11.1(1);
(101) "Real Property Leases" means those leases and subleases pursuant to which
the Company or any of the Subsidiaries uses or occupies the Leased Real
Property;
(102) "Release" has the meaning prescribed in any Environmental Laws and
includes any release, spill, leak, pumping, pouring, emission, emptying,
discharge, injection, escape, leaching, disposal, dumping, deposit,
spraying, burial, abandonment, incineration, seepage, placement or
introduction;
(103) "Reorganization" means the reorganization and amalgamation involving the
Company described in Schedule Error! Reference source not found.;
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(104) "Reorganization Closing" means the completion of the Reorganization in
accordance with this Agreement;
(105) "Reorganization Closing Time" means 9:00 a.m., Toronto time, on the
Closing Date or such other time on such date as the Purchaser and the
Shareholders may agree in writing as the time at which the Reorganization
Closing shall take place;
(106) "Remedial Order" means any administrative complaint, direction, order or
sanction issued, filed or imposed by any Governmental Authority pursuant to
any Environmental Laws and includes any order requiring remediation of any
site or any remediation or clean-up of any Hazardous Substance, or
requiring that any Release be reduced, modified or eliminated;
(107) "Section 116 Amount" means the Share Purchase Price in the case of a
Non-Resident Shareholder that is a Share Vendor, and means the Purchase for
Cancellation Price in the case of a Non-Resident Shareholder that is a
Purchase for Cancellation Shareholder;
(108) "Section 116 Recipient" means the Share Purchaser in the case of a
Non-Resident Shareholder that is a Share Vendor, and means the Company in
the case of a Non-Resident Shareholder that is a Purchase for Cancellation
Shareholder;
(109) "Securities Laws" means the securities laws and regulations of each of the
provinces and territories of Canada, together with the regulations,
by-laws, policies, rules, guidelines, notices, rulings, orders,
interpretation notes and comfort letters of the securities commission or
similar regulatory authority in each of the provinces and territories of
Canada, the Investment Dealers Association of Canada and the stock
exchanges located in Canada;
(110) "Senior Management" has the meaning given in the recitals to this
Agreement;
(111) "Share Closing" means the completion of the sale to and purchase by the
Purchaser of the Purchased Shares under this Agreement;
(112) "Shareholder Indemnified Parties" has the meaning given in Section
11.1(3);
(113) "Shareholders" means the Investors and Senior Management;
(114) "Shareholders Agreement" means the shareholders agreement made as of
October 20, 1997, as amended and restated on September 29, 1999, as further
amended, among the Company, each of the corporations or individuals which
has signed a counterpart and acknowledgement or which otherwise agreed to
be bound by the terms of such agreement as a shareholder of the Company and
each of the individuals which has signed a counterpart and acknowledgement
of such agreement or which otherwise agreed to be bound by the terms of the
agreement as an individual which controls a shareholder of the Company;
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(115) "Share Purchase Closing Time" means 9:10 a.m., Toronto time, on the
Closing Date or such other time on such date as the Purchaser and the
Shareholders may agree in writing as the time at which the Share Closing
shall take place;
(116) "Share Purchase Price" has the meaning given in Section 3.5;
(117) "Share Purchaser" means a Nova Scotia unlimited liability company to be
formed by the Purchaser as a wholly-owned subsidiary of the Purchaser to
acquire the Purchased Shares;
(118) "Share Vendors" means those shareholders listed on Schedule Error!
Reference source not found. but excluding any Transferring Share Vendor;
(119) "Software Materials" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the
foregoing, (iv) all documentation, including user manuals and training
software, relating to any of the foregoing, and (v) any device,
programming, documentation, media and other objects, including compilers,
workbenches, tools, and higher-level or proprietary languages, used by the
Company and the Subsidiaries for the development, maintenance and
implementation of any of the foregoing;
(120) "Statutory Plans" means statutory benefit plans which the Company or any
of the Subsidiaries are required to comply with, including the Canada and
Quebec Pension Plans, and plans administered pursuant to applicable health
tax, workers' compensation and employment insurance legislation;
(121) "Stub Period" has the meaning given in Section 10.7;
(122) "Subsidiary" means, with respect to the Company: (a) any body corporate of
which more than 50% of the outstanding shares ordinarily entitled to elect
a majority of the directors thereof, whether or not shares of any other
class or classes shall or might be entitled to vote upon the happening of
any event or contingency, are at the time owned, directly or indirectly, by
the Company, and includes a body corporate or limited liability company in
like relation to a Subsidiary; and (b) any limited liability company, of
which more than 50% of the outstanding membership interests are at the time
owned, directly or indirectly, by the Company, and includes a limited
liability company or body corporate in like relation to such Subsidiary;
-15-
(123) "Tax Returns" means all returns, reports, declarations, elections,
notices, filings, forms, statements and other documents (whether in
tangible, electronic or other form) and including any amendments,
schedules, attachments, supplements, appendices and exhibits thereto, made,
prepared, filed or required to be made, prepared or filed by Law in respect
of Taxes;
(124) "Taxes" means any taxes, duties, fees, premiums, assessments, imposts,
levies and other similar charges imposed by any Governmental Authority
under applicable Law, including all interest, penalties, fines, additions
to tax or other additional amounts imposed by any Governmental Authority in
respect thereof, and including, without limiting the generality of the
foregoing, those levied on, or measured by, or referred to as, income,
gross receipts, profits, capital, transfer, land transfer, sales, goods and
services, harmonized sales, use, value-added, excise, stamp, withholding,
business, gains, windfalls, capital stock, production, recapture, gift,
occupation, wealth, environmental, net worth, franchising, property,
development, occupancy, employer health, payroll, employment, unemployment,
workers' compensation, severance, health, social services, education and
social security taxes, all surtaxes, all customs duties and import and
export taxes, countervail and anti-dumping, all sales and use taxes and
similar taxes imposed by any U.S. state Governmental Authority, all
license, franchise and registration fees and all employment insurance,
health insurance and Canada, Quebec and other government pension plan
premiums or contributions;
(125) "Transferred Shares" means those shares of the Company owned by a Share
Vendor in respect of which a Transferring Shareholder has advised the
Purchaser, in writing, will be Purchase for Cancellation Shares for the
purposes of this Agreement;
(126) "Transferring Share Vendor" means any Share Vendor who, in its sole
discretion, has agreed with the Purchaser, in writing, to become a Purchase
for Cancellation Shareholder, but only in respect of the Transferred Shares
held by such Shareholder;
(127) "Updated Financial Statements" means the consolidated and unconsolidated
financial statements of the Company and the Subsidiaries for each calendar
month during the period commencing October 1, 2003 until and including the
calendar month ended more than 5 days prior to the Closing Date, consisting
of the consolidated balance sheet of the Company and the Subsidiaries in
respect of each such month and the statements of earnings and retained
earnings and changes in financial position and all notes thereto as
reported upon by the Auditor;
-16-
(128) "Union Plans" means Benefit Plans which are or are required to be
established and maintained pursuant to a Collective Agreement and which are
not maintained or administered by the Company, any of the Subsidiaries or
any of their Affiliates;
(129) "Unused Credits" means prepaid credits which may be applied by customers
of the Business towards the use of certain paid features provided by the
Company and the Subsidiaries in connection with the Business;
(130) "Valuation" means the valuation of the Purchased Assets to be conducted by
an independent third party valuator selected by the Purchaser and delivered
prior to the Closing Date;
(131) "Voting and Deposit Agreement" means the voting and deposit agreement
dated as of March 24, 1998, as amended, among the Employee Shareholders and
▇▇▇ ▇▇▇▇ as designated representative; and
(132) "Working Capital" means in respect of the Company and the Subsidiaries,
Current Assets less Current Liabilities, excluding any tax benefit to the
Company associated with meeting the Purchaser's condition precedent
contained in Section 8.5.
Section 1.2 Certain Rules of Interpretation.
In this Agreement:
(1) Consent - Unless otherwise specified, whenever a provision of this
Agreement requires an approval or consent and such approval or consent is
not delivered within the applicable time limit, then, unless otherwise
specified, the Party whose consent or approval is required shall be
conclusively deemed to have withheld its approval or consent.
(2) Currency - Unless otherwise specified, all references to money amounts are
to lawful currency of Canada.
(3) Governing Law - This Agreement is a contract made under and shall be
governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable in the Province of
Ontario.
-17-
(4) Headings - Headings of Articles and Sections are inserted for convenience
of reference only and shall not affect the construction or interpretation
of this Agreement.
(5) Including - Where the word "including" or "includes" is used in this
Agreement, it means "including (or includes) without limitation".
(6) No Strict Construction - The language used in this Agreement is the
language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
(7) Number and Gender - Unless the context otherwise requires, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
(8) Severability - If, in any jurisdiction, any provision of this Agreement or
its application to any Party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement and without affecting the validity or enforceability of such
provision in any other jurisdiction or without affecting its application to
other Parties or circumstances.
(9) Statutory References - A reference to a statute includes all regulations
made pursuant to such statute.
(10) Time - Time is of the essence in the performance of the Parties' respective
obligations.
(11) Time Periods - Unless otherwise specified, time periods within or following
which any payment is to be made or act is to be done shall be calculated by
excluding the day on which the period commences and including the day on
which the period ends and by extending the period to the next Business Day
following if the last day of the period is not a Business Day.
Section 1.3 Knowledge.
Any reference to the knowledge of any Party means the actual knowledge
of such Party after due investigation and inquiry and, in the case of the
knowledge of the Company, the actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, after due investigation and
inquiry.
-18-
Section 1.4 Entire Agreement.
This Agreement and the agreements and other documents required to be
delivered pursuant to this Agreement, constitutes the entire agreement between
the Parties and sets out all the covenants, promises, warranties,
representations, conditions, understandings and agreements between the Parties
and their shareholders, directors, officers, employees and agents pertaining to
the subject matter of this Agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, but
excluding the confidentiality agreement between the Purchaser and the Company
dated effective July 29, 2003 (the "Confidentiality Agreement"). There are no
covenants, promises, warranties, representations, conditions, understandings or
other agreements, oral or written, express, implied or collateral between the
Parties in connection with the subject matter of this Agreement except as
specifically set forth in this Agreement, the Confidentiality Agreement and any
document required to be delivered pursuant to this Agreement.
Section 1.5 Schedules.
The schedules to this Agreement, as listed below, are an integral part
of this Agreement:
SCHEDULE 1.1(43) Employee Shareholders
SCHEDULE 1.1(83) Permitted Encumbrances
SCHEDULE 1.1(87) Proportionate Share
SCHEDULE 1.1(95) Purchase for Cancellation Shareholders
SCHEDULE 1.1(118) Share Vendors
SCHEDULE 2.1 Reorganization
SCHEDULE 2.4 Purchase for Cancellation
SCHEDULE 3.2 Payment of Sales Tax
SCHEDULE 4.2 Subsidiaries
SCHEDULE 4.3 Share Capital
SCHEDULE 4.7 Consents and Approvals
SCHEDULE 4.11 Debt Obligations
SCHEDULE 4.12 Liabilities
SCHEDULE 4.13 Absence of Changes and Unusual Transactions
SCHEDULE 4.17 Compliance with Laws
SCHEDULE 4.18 Intellectual Property
SCHEDULE 4.19 Software Materials
SCHEDULE 4.20 Internet Web Site
SCHEDULE 4.21 Real Property
SCHEDULE 4.24 Collective Agreements
SCHEDULE 4.26 Benefit Plans
SCHEDULE 4.27 Insurance Policies
SCHEDULE 4.28 Material Contracts
SCHEDULE 4.29 Litigation Proceedings
SCHEDULE 4.30 Tax Matters
SCHEDULE 4.31 Equipment Contracts
SCHEDULE 5.7 Non-Resident Shareholder
-19-
The inclusion of any information in a Schedule shall not be deemed to
be an admission or acknowledgement, in and of itself, that such information is
required by the terms hereof to be disclosed, is material to the business of the
Company, has resulted in or would result in a Material Adverse Effect or is
outside the ordinary course of business.
Article 2
TRANSACTIONS
Section 2.1 Reorganization.
Subject to the terms and conditions of this Agreement, on or prior to
the Reorganization Closing Time, the Shareholders shall cause the Company to,
and the Company shall, effect the Reorganization on the terms set forth on
Schedule Error! Reference source not found. or on such other terms as may be
agreed to between the Parties, acting reasonably.
Section 2.2 Purchased Assets.
Subject to the terms and conditions of this Agreement, at the Asset
Purchase Closing Time:
(1) Purchase and Sale of Purchased Assets - the Company shall sell, assign and
transfer to the Purchaser and the Purchaser shall purchase from the Company
the Purchased Assets;
(2) Payment of Asset Purchase Price - the Purchaser shall pay the Asset
Purchase Price to the Company as provided in Section 3.1, Section 3.2,
Section 3.3 and Section 3.4; and
(3) Transfer and Delivery of the Purchased Assets - the Company and the
Shareholders shall deliver to the Purchaser such documents as may be
necessary to complete the Asset Closing provided for in this Agreement,
including as set out in Article 8 and Article 9.
Section 2.3 Purchased Shares.
Subject to the terms and conditions of this Agreement, at the Share
Purchase Closing Time:
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(1) Purchase and Sale of Purchased Shares - each of the Share Vendors shall
sell the Purchased Shares owned by such Share Vendor to the Share Purchaser
and the Share Purchaser shall purchase the Purchased Shares;
(2) Payment of Share Purchase Price - the Share Purchaser shall pay the Share
Purchase Price to the Share Vendors as provided in Section 3.5, Section 3.6
and Section 3.7;
(3) Transfer and Delivery of the Purchased Shares - each of the Share Vendors
shall transfer and deliver to the Share Purchaser share certificates
representing the Purchased Shares owned by such Share Vendor duly endorsed
in blank for transfer or accompanied by irrevocable security transfer
powers of attorney duly executed in blank; and
(4) Other Documents - the Share Vendors and the Share Purchaser shall deliver
such other documents as may be necessary to complete the Share Closing
provided for in this Agreement, including as set out in Article 8 and
Article 9.
Section 2.4 Purchase for Cancellation.
Subject to the terms and conditions of this Agreement, at the Purchase
for Cancellation Closing Time:
(1) Purchase for Cancellation - the Company shall effect the Purchase for
Cancellation on the terms set forth in Schedule Error! Reference source not
found.;
(2) Payment of Purchase for Cancellation Price - the Company shall pay the
Purchase for Cancellation Price to the Purchase for Cancellation
Shareholders, net of any applicable withholding taxes, as provided in
Section 3.8, Section 3.9 and Section 3.10; and
(3) Other Documents - the Company, the Shareholders and the Purchasers shall
deliver such documents as may be necessary to complete the Purchase for
Cancellation provided for in this Agreement including as set out in Article
8 and Article 9.
Section 2.5 Assignment of Contracts.
Nothing in this Agreement shall be construed as an attempt to assign
any Contract, Equipment Contracts, Real Property Lease or Licensed Software
Materials which is not assignable in whole or in part without the Consent of the
other party or parties thereto, unless such Consent has been given (and in this
Agreement, the benefits under the non-assigned Contracts, Equipment Contracts,
Real Property Lease or Licensed Software Material are referred to as the
"Contractual Rights"). In accordance with the provisions of Section 10.5, the
Company shall use its Best Efforts to obtain the Consents, and whether or not
the Consents are obtained, shall take all actions described in this Agreement to
preserve the benefit of the Contracts, Equipment Contracts, Real Property Lease,
Licensed Software Materials and the Contractual Rights for the Purchaser.
-21-
Section 2.6 Place of Closing.
The Reorganization Closing, the Asset Closing, the Share Closing, and
the Purchase for Cancellation Closing shall take place at the Reorganization
Closing Time, Asset Purchase Closing Time, Share Purchase Closing Time and
Purchase for Cancellation Closing Time, respectively, at the offices of Osler,
▇▇▇▇▇▇ & Harcourt LLP, counsel to the Company, located at ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, or at such other
place as may be agreed upon by the Shareholders and the Purchaser.
Section 2.7 Tender.
Any tender of documents or money under this Agreement may be made upon
the Parties or their respective counsel and, subject to applicable law, money
may be tendered by official bank draft drawn upon a Canadian chartered bank or
by negotiable cheque payable in Canadian funds and certified by a Canadian
chartered bank or trust company or by wire transfer of immediately available
funds to the account specified by that Party.
Section 2.8 Holdco Alternative.
Where a Shareholder is a holding company (a "Holding Company" or
collectively, "Holding Companies"), the principal(s) of such Shareholder may
elect as part of the Reorganization to continue such Holding Companies into Nova
Scotia as limited liability companies and amalgamate such Holding Company or
Holding Companies with the Company and a Nova Scotia unlimited liability company
(the "Amalgamation"), subject to the satisfaction of certain conditions
satisfactory to the Purchaser. Under this alternative (the "Holdco
Alternative"), all the shares of the Holding Company or Holding Companies will
be changed into, exchanged for, or become shares of, the amalgamated company
(after the Reorganization) upon such Amalgamation.
A Shareholder whose principal(s) wish to consider using the Holdco
Alternative must provide a written request to that effect to the Purchasers no
later than seven days following the execution of this Agreement. The Purchasers
shall determine whether the conditions to the availability of the Holdco
Alternative have or will be satisfied and shall communicate such determination
to the person making the request at or before 5:00 p.m. on the day following
receipt of the written request (the "Election Deadline"). Any principal(s) of a
Shareholder electing the Holdco Alternative shall pay or reimburse the Share
Purchaser for its reasonable expenses incurred in connection with the
preparation and review of such documentation and matters, and any relevant
financial information provided to such persons, whether or not the sale is
completed.
-22-
The availability of the Holdco Alternative is at the sole discretion of
the Share Purchaser, acting reasonably.
The principal(s) of the Shareholder shall prepare and file, at its own
cost and expense, all tax returns of the Holding Company in respect of all
periods ending on or prior to the completion of the Holdco Alternative, subject
to the Purchasers' right to approve all such returns as to form and substance.
Section 2.9 Transaction Ordering
For the avoidance of doubt, the Reorganization Closing, the Asset
Closing, the Share Closing and the Purchase for Cancellation Closing shall occur
in consecutive order with the Reorganization Closing preceding the Asset
Purchase Closing, the Asset Purchase Closing preceding the Share Purchase
Closing and the Share Purchase Closing preceding the Purchase for Cancellation
Closing and none of these transactions or the transactions contemplated by
Section 10.19 shall close and be effective unless all these transactions
(including the transactions contemplated by Section 10.19) shall close and be
effective.
Article 3
ASSET PURCHASE PRICE, SHARE PURCHASE PRICE
AND PURCHASE FOR CANCELLATION PRICE
Section 3.1 Asset Purchase Price.
The aggregate amount payable by the Purchaser for the Purchased Assets
(the "Asset Purchase Price"), exclusive of all applicable sales, transfer taxes
and adjustments shall be equal to the fair market value of the Purchased Assets
as determined by the Purchaser prior to the Closing Date based on the Valuation.
Section 3.2 Payment of Sales Tax.
(1) The Purchaser shall be liable for and shall pay all applicable federal and
provincial sales and/or goods and services taxes and all other taxes,
duties, registration charges or other like charges properly payable by a
buyer upon and in connection with the conveyance and transfer of the
Purchased Assets by the Company to the Purchaser.
(2) The Parties will use their Best Efforts in good faith to minimize (or
eliminate) any taxes payable under the Excise Tax Act (Canada) in respect
of the Asset Closing.
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Section 3.3 Allocation of Asset Purchase Price.
The Asset Purchase Price shall be allocated amongst the Purchased
Assets as determined by the Purchaser based on the Valuation. The Company and
the Purchaser shall report the purchase and sale of the Purchased Assets in any
Tax Returns in accordance with the aforesaid determination of the Purchaser.
Section 3.4 Satisfaction of Asset Purchase Price
Subject to Section 3.16 hereof, the Purchaser shall satisfy the Asset
Purchase Price as follows at the Asset Purchase Closing Time:
(1) by payment to the Company Counsel on behalf of and in trust for the Company
of an amount equal to the lesser of the Asset Purchase Price and the
Purchase for Cancellation Price; and
(2) the balance, if any, by the delivery to the Company of an unsecured,
non-interest bearing promissory note.
Section 3.5 Share Purchase Price.
The aggregate amount payable by the Purchaser for the Purchased Shares
(the "Share Purchase Price"), exclusive of all applicable sales, transfer taxes
and adjustments shall be:
(1) $121,123,555 (less an amount of $9.037425 per Transferred Share held by any
Transferring Share Vendor);
(2) plus the Share Vendors' Proportionate Share of the amount, if any, by which
Working Capital as at the time immediately prior to the Reorganization
Closing Time less all cash on the balance sheet of the Company included in
the Closing Date Financial Statements ("Closing Working Capital") is
greater than Adjusted Working Capital, or less the Share Vendors'
Proportionate Share of the amount, if any, by which Closing Working Capital
is less than Adjusted Working Capital, all as determined pursuant to this
Article 3; and
(3) less the Share Vendors' Proportionate Share of the amount, if any, by which
Cash at Closing is less than the Net Cash Amount.
Section 3.6 Allocation of Share Purchase Price among Share Vendors.
The Share Purchase Price shall be allocated among the Share Vendors
(the "Share Vendors' Allocation") in accordance with the provisions of Schedule
Error! Reference source not found. (subject to adjustment to reflect any
Transferred Shares) provided that if the Share Purchase Price shall be adjusted
pursuant to this Agreement, the amount of adjustment required shall be allocated
on a pro rata basis among the various classes of shares listed in Schedule
Error! Reference source not found.. Each of the Share Vendors and the Share
Purchaser shall report the purchase and sale of the Purchased Shares in any Tax
Returns in accordance with the provisions of Schedule Error! Reference source
not found..
-24-
Section 3.7 Satisfaction of Share Purchase Price.
Subject to Section 3.16, the Share Purchaser shall satisfy the Share
Purchase Price as follows at the Share Purchase Closing Time:
(1) by payment to Company Counsel on behalf of and in trust for each of the
Share Vendors of an aggregate amount representing each Share Vendors'
Allocation of (A) the aggregate net amount owing to the Share Vendors
pursuant to Section 3.5(1), Section 3.5(2) and Section 3.5(3) (based on the
estimate of the Chief Financial Officer pursuant to Section 3.11), minus
(B) the amounts paid to the Escrow Agent pursuant to Section 3.7(2) below
and the Adjustment Escrow Agent pursuant to Section 3.7(3) below;
(2) by payment to the Escrow Agent of the aggregate amount of $12,112,355.54
(subject to adjustment to reflect the Proportionate Share of $15,250,000
represented by any Transferred Shares) as security for the Share Vendors'
Proportionate Share of any potential Claims for indemnification pursuant to
Article 11, which aggregate amount shall be held in escrow pursuant to the
terms of the Escrow Agreement;
(3) by payment to the Adjustment Escrow Agent of the aggregate amount of
$4,177,264.50 (subject to adjustment to reflect the Proportionate Share of
$5,000,000 represented by any Transferred Shares), as security for the
Share Vendors' Proportionate Share of the adjustment to the Share Purchase
Price contemplated in Section 3.13, which aggregate amount shall be held in
escrow pursuant to the terms of the Adjustment Escrow Agreement; and
(4) the balance, if any, in accordance with Section 3.13.
Section 3.8 Purchase for Cancellation Price.
The aggregate amount payable by the Company to the Purchase for
Cancellation Shareholders pursuant to the Purchase for Cancellation (the
"Purchase for Cancellation Price") shall be:
(1) $23,855,961.12 (plus the amount required to reflect any Transferred
Shares);
(2) plus the Purchase for Cancellation Shareholders' Proportionate Share of the
amount, if any, by which the Closing Working Capital is greater than
Adjusted Working Capital, or less the Purchase for Cancellation
Shareholders' Proportionate Share of the amount, if any, by which Closing
Working Capital is less than Adjusted Working Capital, all as determined
pursuant to this Article 3; and
-25-
(3) less the Purchase for Cancellation Shareholders' Proportionate Share of the
amount, if any, by which Cash at Closing is less than the Net Cash Amount.
Section 3.9 Allocation of Purchase for Cancellation Price.
The Purchase for Cancellation Price shall be allocated among the
Purchase for Cancellation Shareholders (the "Purchase for Cancellation
Shareholders' Allocation") in accordance with the provisions of Schedule Error!
Reference source not found. (subject to adjustment to reflect any Transferred
Shares) provided that if the Purchase for Cancellation Price shall be adjusted
pursuant to this Agreement, the amount of adjustment required shall be allocated
on a pro rata basis among the various classes of shares listed in Schedule
Error! Reference source not found.. Each of the Purchase for Cancellation
Shareholders and the Company shall report the purchase and sale of the Purchase
for Cancellation Shares in any Tax Returns in accordance with the provisions of
Schedule Error! Reference source not found..
Section 3.10 Satisfaction of Purchase for Cancellation Price.
Subject to Section 3.16, the Company shall satisfy the Purchase for
Cancellation Price at the Purchase for Cancellation Closing Time:
(1) by delivery of a written direction to Company Counsel to distribute the
proceeds received upon the sale to the Purchaser of the Purchased Assets
plus the payment to the Shareholders by the Company of an amount equal to
the amount, if any, by which the Purchase for Cancellation Price (including
the amount required to reflect any Transferred Shares) exceeds the Asset
Purchase Price, representing each Purchase for Cancellation Shareholders'
Allocation of the aggregate net amount owing to the Purchase for
Cancellation Shareholders pursuant to Section 3.8(1), Section 3.8(2) and
Section 3.8(3) (based on the estimate of the Chief Financial Officer
pursuant to Section 3.11), minus (B) the amounts paid to the Escrow Agent
pursuant to Section 3.10(2) below and the Adjustment Escrow Agent pursuant
to Section 3.10(3) below, and minus (C) any applicable withholding taxes;
(2) by payment to the Escrow Agent of the aggregate amount of $3,137,644.46
(subject to adjustment to reflect the Proportionate Share of $15,250,000
represented by any Transferred Shares) as security for the Purchase for
Cancellation Shareholders' Proportionate Share of any potential Claims for
indemnification pursuant to Article 11, which aggregate amount shall be
held in escrow pursuant to the terms of the Escrow Agreement;
(3) by payment to the Adjustment Escrow Agent of the aggregate amount of
$822,735.50 (subject to adjustment to reflect the Proportionate Share of
$5,000,000 represented by any Transferred Shares), as security for the
adjustment to the Purchase for Cancellation Price contemplated in Section
3.13, which aggregate amount shall be held in escrow pursuant to the terms
of the Adjustment Escrow Agreement; and
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(4) the balance, if any, in accordance with Section 3.13.
Section 3.11 Certificate of Net Cash Amount and Closing Working Capital.
Not less than three Business Days prior to the Closing Date, the
Company will deliver to the Purchaser a certificate signed by the Chief
Financial Officer of the Company estimating the amounts of Cash at Closing and
Closing Working Capital which will be reflected on the Closing Date Financial
Statements.
Section 3.12 Delivery of Closing Date Financial Statements.
As soon as reasonably practical after the Closing Date and in any event
not later than 60 days following the Closing Date, the Company and the
Purchaser's Auditor shall cause to be prepared and delivered to the Shareholders
and the Adjustment Escrow Agent, the Closing Date Financial Statements including
a statement of the Closing Working Capital. The Parties shall cooperate fully in
the preparation of the Closing Date Financial Statements, but for greater
certainty, the costs involved in preparing such Closing Date Financial
Statements (including the costs to retain the Purchaser's Auditor) shall be
borne by the Company. The Shareholders shall be deemed to have accepted the
Closing Date Financial Statements if the Shareholders fail to object in the
manner and within the time specified in Section 3.14.
Section 3.13 Adjustments to Share Purchase Price and Purchase for
Cancellation Price.
Subject to Section 3.14 and Section 3.16, within 30 days after delivery
by the Company to the Shareholders and the Adjustment Escrow Agent of the
Closing Date Financial Statements (subject to Section 3.14), if an adjustment to
the Share Purchase Price is required by Section 3.5(2) or Section 3.5(3) or to
the Purchase for Cancellation Price by Section 3.8(2) or Section 3.8(3) because
the aggregate amount of Closing Working Capital or Cash at Closing is greater
than (or less than) the amount of Closing Working Capital or Cash at Closing
estimated in the certificate referenced in Section 3.11, the Share Purchaser (in
the event of an adjustment pursuant to Section 3.5(2) or Section 3.5(3)) and the
Company (in the event of an adjustment pursuant to Section 3.8(2) or Section
3.8(3)) shall pay to Company Counsel in trust for and on behalf of the
Shareholders, or the Shareholders shall pay to the Share Purchaser (in the event
of an adjustment pursuant to Section 3.5(2) or Section 3.5(3)) and the Company
(in the event of an adjustment pursuant to Section 3.8(2) or Section 3.8(3)), as
the case may be, the amount of the net adjustment to the Share Purchase Price
and Purchase for Cancellation Price, as applicable; provided that no amount need
be paid pursuant to this Section 3.13 unless the net aggregate adjustment to the
Share Purchase Price and Purchase for Cancellation Price determined pursuant to
this Section 3.13 exceeds $50,000. Any amounts payable by the Shareholders to
the Share Purchaser or the Company pursuant to this Section 3.13 (the "Negative
Adjustment") shall be deducted from the Adjustment Escrow Amount and paid to the
Share Purchaser and the Company, pursuant to the Adjustment Escrow Agreement.
The balance, if any, of the Adjustment Escrow Amount, after deducting the
Negative Adjustment, shall be paid to the Shareholders in accordance with the
Adjustment Escrow Agreement.
-27-
Section 3.14 Objection to Closing Date Financial Statements.
(1) Delivery of Objection Notice - In the event that the Shareholders object in
good faith to any item of the Closing Date Financial Statements, the
Shareholders shall so advise the Company, the Purchasers and the Adjustment
Escrow Agent by delivery to the Purchasers and the Adjustment Escrow Agent
of a notice (the "Objection Notice") within 15 days after the delivery to
the Shareholders and the Adjustment Escrow Agent of the Closing Date
Financial Statements. The Objection Notice shall set out the reasons and
basis for each of the Shareholders' objections as well as each amount in
dispute and reasonable details of the calculation of each such amount in
dispute. If the Closing Date Financial Statements require that the Share
Purchaser make a payment to the Shareholders as contemplated by Section
3.13, the Share Purchaser will pay to the Shareholders the amount to be
paid to the Shareholders except for the specific amount in dispute as
reflected in the Objection Notice.
(2) Resolution of Disputes - the Company shall give the Shareholders and their
accountants access to their working papers relating to the preparation of
the Closing Date Financial Statements to enable the Shareholders to
exercise their rights under this Section. The Shareholders and the
Purchasers shall attempt to resolve all of the items in dispute set out in
any Objection Notice within 15 days of receipt of any Objection Notice. Any
items in dispute not resolved within such 15 day period shall be referred
as soon as possible thereafter by the Shareholders and the Purchasers to
the Independent Auditor. The Independent Auditor shall act as expert and
not as arbitrator and shall be required to determine the items in dispute
that have been referred to it as soon as reasonably practicable but in any
event not later than 30 days after the date of referral of the dispute to
it. In making its determination, the Independent Auditor will only consider
the issues in dispute placed before it. The Shareholders, the Company and
the Purchasers shall provide or make available, all documents and
information as are reasonably required by the Independent Auditor to make
its determination. The determination of the Independent Auditor shall be
final and binding on the Parties and the Closing Date Financial Statements
shall be finalized in accordance with such determination.
-28-
(3) Audit Expenses - Any fees and expenses of the Purchaser's Auditor in acting
in accordance with this Article 3 shall be paid by the Company. The fees
and expenses of the Independent Auditor in acting in accordance with this
Section 3.14 shall be shared equally by the Share Purchaser and the
Shareholders, unless the Independent Auditor determines otherwise.
(4) Payment in Accordance with Determination - Within five days after
resolution, by agreement of the Parties, of the dispute which was the
subject of the Objection Notice or, failing such resolution, within five
days after the final determination of the Independent Auditor, the
Adjustment Escrow Agent shall pay to the Share Purchaser, or the Share
Purchaser shall pay to Company Counsel, on behalf of the Shareholders, as
the case may be, the amount owing as a result of such resolution or final
determination.
Section 3.15 Interest.
(1) Escrow Amounts - If any payment is made by the release of funds from the
Escrow Amount or the Adjustment Escrow Amount, it shall include a
proportionate share of the Income Earned thereon during the period from the
Closing Date until the date released from escrow based on the proportion of
the Escrow Amount or Adjustment Escrow Amount, as the case may be, so
released compared to the balance of the Escrow Amount or Adjustment Escrow
Amount, as applicable, net of withholding taxes. All Income Earned on the
Escrow Amount or the Adjustment Escrow Amount shall be earned on behalf of,
and for the account of, the Shareholders, regardless of whether such Income
Earned is distributed to the Shareholders, the Company or the Share
Purchaser in accordance with the Escrow Agreement or the Adjustment Escrow
Agreement, as applicable.
(2) Working Capital and Cash Adjustments - Any amount payable by the Share
Purchaser or the Company under Section 3.13 shall bear interest, calculated
and computed annually from the Closing Date to the date of payment, at the
rate per annum equal to the prime rate of the Canadian Imperial Bank of
Commerce on the Closing Date. All interest payments made pursuant to this
Section 3.15 shall be made net of applicable withholding taxes.
Section 3.16 Section 116 Requirements.
(1) On or before the Closing Date, each Non-Resident Shareholder shall take all
reasonable steps to obtain and deliver to the Section 116 Recipient a
certificate issued by the Minister of National Revenue under subsection
116(2) of the Income Tax Act (Canada).
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(2) If a certificate is so delivered to the Section 116 Recipient on or before
the Closing Date and such certificate is satisfactory to the Section 116
Recipient acting reasonably, the Section 116 Recipient shall be entitled to
withhold from any amount payable pursuant to this Article 3 to the
Non-Resident Shareholder on account of the Section 116 Amount, twenty-five
percent (25%) of the amount, if any, by which the Non-Resident
Shareholder's Proportionate Share of the total Section 116 Amount (as
determined having regard to any adjustments made to the Section 116 Amount
under this Article 3 prior to the time the amount in question becomes due
or payable) exceeds the certificate limit as defined in subsection 116(2)
of the Income Tax Act (Canada) and fixed by the Minister of National
Revenue in such certificate.
(3) If a certificate is not so delivered to the Section 116 Recipient on or
before the Closing Date (or if the certificate that is delivered is not
satisfactory to the Section 116 Recipient, acting reasonably), the Section
116 Recipient shall be entitled to withhold from the amount otherwise
payable pursuant to this Article 3 to the Non-Resident Shareholder on
account of the Section 116 Amount an amount equal to twenty-five percent
(25%) of the Non-Resident Shareholder's Proportionate Share of the Section
116 Amount (as determined having regard to any adjustments made to the
Section 116 Amount under this Article 3 prior to the time the amount in
question becomes due or payable).
(4) If the Section 116 Recipient has withheld any amount under the provisions
of Section 3.16(2) or Section 3.16(3) above and, at any time prior to the
Determination Date referred to in Section 3.16(5), a particular
Non-Resident Shareholder delivers to the Section 116 Recipient written
confirmation from the Canada Customs and Revenue Agency that, on receipt by
the Canada Customs and Revenue Agency of an amount (the "Tax Amount") not
exceeding the amount previously withheld in respect of the particular
Non-Resident Shareholder and not yet paid to the Receiver General or the
Non-Resident Shareholder pursuant to this Article 3, the Minister of
National Revenue will issue to the applicable Non-Resident Shareholder a
certificate or amended certificate under subsection 116(2) or 116(4), as
the case may be, of the Income Tax Act (Canada), the Section 116 Recipient
shall pay forthwith to the Receiver General on behalf of the applicable
Non-Resident Shareholder the Tax Amount, and for greater certainty the
amount so paid shall be credited to the Section 116 Recipient as payment on
account of the Section 116 Amount and, in any such case, the certificate
shall be delivered by the particular Non-Resident Shareholder to the
Section 116 Recipient forthwith upon receipt thereof.
(5) If the Section 116 Recipient has withheld any amount under the provisions
of Section 3.16(2) or Section 3.16(3) above and a particular Non-Resident
Shareholder delivers to the Section 116 Recipient, after the Closing Date
and no later than two Business Days before the day that is 30 days after
the end of the month in which the Closing Date occurs (the "Determination
Date"), a certificate or amended certificate issued by the Minister of
National Revenue under subsection 116(2) or 116(4), as the case may be, of
the Income Tax Act (Canada), and such certificate is satisfactory to the
Section 116 Recipient, acting reasonably, the Section 116 Recipient shall:
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(a) pay forthwith to the Receiver General an amount equal to the lesser of
(x) the amount previously withheld in respect of the particular Non-
Resident Shareholder and not previously paid out pursuant to this
Section 3.16(5)(a) or Section 3.16(4) above, and (y) twenty-five
percent (25%) of the amount, if any, by which the applicable
Non-Resident Shareholder's Proportionate Share of the Section 116
Amount (as determined having regard to any adjustments made to the
Section 116 Amount under this Article 3 prior to the time the amount
in question becomes due or payable) exceeds the certificate limit
fixed in such certificate in the case of a certificate issued under
Subsection 116(2) or the proceeds of disposition fixed on such
certificate in the case of a certificate issued under Subsection
116(4), and the amount so paid shall be credited to the Section 116
Recipient as payment on account of the Section 116 Amount; and
(b) pay forthwith to the applicable Non-Resident Shareholder any amount
that the Section 116 Recipient has withheld and is not required to pay
to the Receiver General in accordance with Section 3.16(5)(a) and, for
greater certainty, the amount so paid shall be credited to the Section
116 Recipient as payment on account of the Section 116 Amount.
(6) If the Section 116 Recipient has withheld any amount under the provisions
of Section 3.16(2) or Section 3.16(3) above and, as of the Determination
Date, no certificate has been delivered to the Section 116 Recipient by a
particular Non-Resident Shareholder in accordance with the provisions of
Section 3.16(5)(a) above (or the certificate that is delivered is not
satisfactory to the Section 116 Recipient, acting reasonably), or a
certificate has been delivered but an amount previously withheld in respect
of the particular Non-Resident Shareholder has not been required to be paid
to the Receiver General or to the Non-Resident Shareholder pursuant to
Section 3.16(4) or Section 3.16(5) above, then the Section 116 Recipient
shall:
(a) pay to the Receiver General an amount equal to the lesser of (x) the
amount previously withheld in respect of the particular Non-Resident
Shareholder and not previously required to be paid out pursuant to
pursuant to Section 3.16(4) or Section 3.16(5) above and (y)
twenty-five percent (25%) of the amount, if any, by which the
particular Non-Resident Shareholder's Proportionate Share of the
Section 116 Amount (as determined having regard to any adjustments to
the Section 116 Amount made under this Article 3 prior to the
Determination Date) exceeds the amount of the certificate limit or
proceeds of disposition fixed on the certificate (if any) last
delivered by the Non-Resident Shareholder to the Section 116
Recipient, on the day that is one Business Day before the 30th day
after the end of the month in which the Closing Date occurs on account
of the Purchaser's liability pursuant to subsection 116(5) of the
Income Tax Act (Canada), and, for greater certainty, the amount so
paid shall be credited to the Section 116 Recipient as payment on
account of the Section 116 Amount; and
-31-
(b) pay forthwith to the applicable Non-Resident Shareholder any amount
that the Section 116 Recipient has withheld and is not required to pay
to the Receiver General in accordance with Section 3.16(6)(a) above,
and, for greater certainty, the amount so paid shall be credited to
the Section 116 Recipient as payment on account of the Section 116
Amount.
(7) All amounts withheld by the Section 116 Recipient in accordance with this
Section 3.16 shall be paid to and held by Purchaser's counsel, in trust,
and invested by it in an interest bearing account until paid to the
particular Non-Resident Shareholder or the Receiver General in accordance
with this Section 3.16, and Purchaser's counsel shall be entitled to
withhold from interest earned on such amounts any and all amounts required
to be withheld and remitted from such interest by any Law and to remit same
to the appropriate Governmental Authority and Purchaser's counsel shall be
entitled to rely on a certificate delivered by the Section 116 Recipient to
the effect that any certificate delivered hereunder is satisfactory to the
Section 116 Recipient.
(8) If the Section 116 Recipient is required to pay an additional amount to a
Non-Resident Shareholder pursuant to Section 3.13 or Article 11 as
additional Section 116 Amount then, to the extent necessary to allow the
Section 116 Recipient to meet its withholding and remittance obligations
under subsection 116(5) of the Income Tax Act (Canada), such payments shall
become subject to the terms of this Section 3.16.
Section 3.17 Transferred Shares
To the extent there are any Transferred Shares, the Parties agree that
the provisions of this Agreement shall be amended, mutatis mutandis, on the
basis that the Transferred Shares were Purchase for Cancellation Shares and the
Transferring Share Vendors were Purchase for Cancellation Shareholders (only in
respect of such Transferred Shares) as of the date of this Agreement.
-32-
Article 4
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS RELATING TO THE COMPANY
Each of the Shareholders, severally and not jointly, represents and
warrants to the Purchasers the matters set out below and acknowledges that the
Purchasers are relying upon such representations and warranties in agreeing to
enter into this Agreement and complete the transactions contemplated herein:
Section 4.1 Incorporation and Registration.
(1) The Company is a corporation duly incorporated and validly existing under
the laws of Ontario. The Company has all necessary corporate power,
authority and capacity to own its property and assets and to carry on its
business as presently conducted.
(2) Each of the Subsidiaries is a corporation duly incorporated, or a limited
liability company duly formed, as applicable, and validly existing under
the laws of its jurisdiction of incorporation or formation, as applicable,
and has all necessary corporate power, authority and capacity to own its
property and assets and to carry on its business as presently conducted.
Section 4.2 Subsidiaries.
Each Subsidiary is listed on Schedule Error! Reference source not
found. and, except as otherwise disclosed in Schedule Error! Reference source
not found., neither the Company nor any Subsidiary has any interest in any
Person or any obligation, agreement, option or commitment of any nature to
acquire any shares or other securities of any Person or to acquire or lease any
business operations, real property or other property or assets whatsoever other
than in the ordinary course of business.
Section 4.3 Capitalization.
(1) The authorized and issued share capital of the Company, the registered
holders of such outstanding shares and the number of shares held by each
such registered holder is set forth in Schedule Error! Reference source not
found. as at the date hereof and as at the time immediately prior to the
Reorganization Closing Time. All of the shares of the Company and all of
the shares of each Subsidiary have been (and following the Reorganization
and as at the time immediately prior to the Share Purchase Closing Time
will be) duly and validly issued in compliance with all applicable Laws,
including Securities Laws, and are (and following the Reorganization and as
at the time immediately prior to the Share Purchase Closing Time will be)
outstanding as fully paid and non-assessable shares. At the Share Purchase
Closing Time, all the outstanding shares of each Subsidiary will be owned,
directly or indirectly, by the Company free and clear of all Encumbrances.
-33-
(2) Except as set forth in Schedule Error! Reference source not found., no
options, warrants or other rights to purchase shares or other securities of
the Company or of any of the Subsidiaries and no securities or obligations
convertible into or exchangeable for shares or other securities of the
Company or any of the Subsidiaries have been authorized or agreed to be
issued or are outstanding as of the date hereof; and no options, warrants
or other rights to purchase shares or other securities of the Company or of
any of the Subsidiaries and no securities or obligations convertible into
or exchangeable for shares or other securities of the Company or any of the
Subsidiaries will be authorized or agreed to be issued or will be
outstanding at the Reorganization Closing Time.
(3) With respect to each outstanding option and warrant to acquire shares in
the capital of the Company (an "Option"), the Purchaser has been provided,
in writing, with the following information: (i) the name of the Option
holder; (ii) the option plan, if any, under which the Option was granted;
(iii) the number and type of shares in the capital of the Company for which
such Option is exercisable; (iv) the effective exercise price; (v) the date
of grant; (vi) the applicable vesting schedule, if any; (vii) the date of
expiration; and (viii) whether and to what extent the Option will be
accelerated in any way by the transactions contemplated by this Agreement.
(4) The Shareholders and the Employee Shareholders, collectively, are the
beneficial owners and owners of record of all of the issued and outstanding
shares in the capital of the Company.
Section 4.4 Business.
Neither the Company nor any of its Subsidiaries carries on any
business other than the Business and activities ancillary thereto.
Section 4.5 Title to the Assets.
Except as otherwise expressly disclosed herein, each of the Company and
the Subsidiaries is the sole beneficial owner of all of its assets and interests
in assets (including, without limitation, third party licences used by the
Company), real and personal, with good and valid title thereto, free and clear
of all Encumbrances other than Permitted Encumbrances. Except in the ordinary
course of business, there has been no assignment, subletting or granting of any
licence of or in respect of any of the Company's or any of the Subsidiaries'
assets or any granting of any agreement or right capable of becoming an
agreement or option for the purchase of any of such assets other than pursuant
to the provisions of, or as otherwise disclosed in, this Agreement.
-34-
Section 4.6 Absence of Conflicting Agreements.
Neither the Company nor any of the Subsidiaries is a party to, bound or
affected by or subject to any indenture, mortgage, lease, agreement, obligation,
instrument, charter or by-law provision, licence, Law or Governmental
Authorization material to the Company and the Subsidiaries taken as a whole
which would be violated, contravened, breached by, or under which default would
occur or an Encumbrance would be created as a result of the execution and
delivery of this Agreement or any other agreement to be entered into under the
terms of this Agreement, or the performance by any Shareholder or the Company or
any Subsidiary of its obligations under this Agreement or any other agreement to
be entered into in connection herewith.
Section 4.7 Regulatory Approvals.
Except in connection with the Reorganization, no notice to, or any
authorization, approval, order, consent of, any Person or any declaration,
filing or recording with any Person is required to be made on the part of the
Shareholders, the Company or any of the Subsidiaries, in connection with the
execution, delivery and performance of this Agreement or any other documents and
agreements to be delivered under this Agreement or the performance of the
Shareholders' obligations under this Agreement or any other documents and
agreements to be delivered under this Agreement other than the Consents and such
notices, filings, declarations, recordings, authorizations, approvals, orders
and consents disclosed on Schedule Error! Reference source not found. to this
Agreement.
Section 4.8 Compliance with Shareholders Agreement.
The affairs of the Company have been organized and conducted in a
manner consistent with, and not in breach in any material respect of, the
provisions of the Shareholders Agreement and no Shareholder or former
shareholder of the Company has alleged that any conduct has occurred which is
inconsistent with the Shareholders Agreement.
Section 4.9 Financial Statements.
Except for the reconciliation to U.S. generally accepted accounting
principles described in Section 8.12(8), the Historical Financial Statements
shall have been prepared in accordance with GAAP applied on a basis consistent
with that of the preceding fiscal years or periods, as applicable, and:
(a) were prepared in accordance with the books of account and other
financial records of the Company and the Subsidiaries;
-35-
(b) present fairly in all material respects the consolidated financial
condition and results of operations of the Company and the
Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year end adjustments which did not
and would not have a Material Adverse Effect);
(c) have been prepared, as applicable, in accordance with GAAP applied on
a basis consistent with the past practices of the Company and such
Subsidiaries; and
(d) include all adjustments (consisting only of normal recurring accruals)
that are necessary for a fair presentation of the consolidated
financial condition of the Company and such Subsidiaries and the
results of the operations of the Company and such Subsidiaries as of
the dates thereof or for the periods covered thereby.
Section 4.10 Unused Credits.
The Company's treatment of Unused Credits and recording thereof in the
Financial Statements was in accordance with applicable revenue recognition
principles and otherwise in accordance with GAAP.
Section 4.11 Debt Obligations.
All outstanding indebtedness of the Company and each Subsidiary to any
Person, including, without limitation, all bonds, debentures, mortgages, notes
or other indebtedness or other like instruments, agreements or arrangements are
fully and accurately disclosed on Schedule Error! Reference source not found.,
and neither the Company nor any Subsidiary is a party to or bound by or
obligated under any agreement to create or issue any other indebtedness,
liability or debt obligation, or is in default under, or in breach of its
obligations pursuant to, any agreement or obligation disclosed on Schedule
Error! Reference source not found..
Section 4.12 Liabilities.
There are no outstanding liabilities, actual, contingent or otherwise,
of the Company or any Subsidiary of any kind or nature whatsoever, whether or
not accrued and whether or not determined or determinable, in respect of which
the Company or any Subsidiary may become liable on or after the consummation of
the transactions contemplated by this Agreement, other than as disclosed in the
Financial Statements or on Schedule Error! Reference source not found. or
Schedule Error! Reference source not found., except those incurred after the
last fiscal year end of the Company which are disclosed in the Books and Records
of the Company or a Subsidiary, as applicable, and which were incurred in the
ordinary and normal course of the Business consistent with past practice and
policies of the Company and its Subsidiaries.
-36-
Section 4.13 Absence of Changes and Unusual Transactions.
Except as contemplated by this Agreement or as otherwise disclosed in
Schedule Error! Reference source not found. or as shall be consented to by the
Purchaser as contemplated under Section 10.1(2), since the date of the Balance
Sheet:
(1) there has not been any change in the financial condition or operations of
the Company or the Subsidiaries other than changes which do not have a
Material Adverse Effect;
(2) neither the Company nor any of the Subsidiaries has transferred, assigned,
sold or otherwise disposed of any of the assets shown or reflected in the
Balance Sheet or cancelled any debts or entitlements except, in each case,
in the ordinary course of business;
(3) the Business has been carried on in the ordinary course;
(4) neither the Company nor any of the Subsidiaries, directly or indirectly,
has declared or paid any dividends or declared or made any other payments
or distributions on or in respect of any of its shares and has not,
directly or indirectly, purchased or otherwise acquired any of its shares,
except to effect the transactions contemplated herein and to effect a
dividend or return of capital paid or to be paid by the Company immediately
prior to the Reorganization Closing Time in an aggregate amount that will
not result in the amount of the Cash at Closing to be less than the Net
Cash Amount; and
(5) neither the Company nor any of the Subsidiaries has authorized, agreed or
otherwise become committed to do any of the foregoing (except with respect
to the dividend or return of capital otherwise permitted pursuant to
Section 4.13(4)).
Section 4.14 Condition of Fixed Assets.
All material Fixed Assets are in satisfactory operating condition and
repair having regard to normal wear and tear, their use, age and scheduled
maintenance.
Section 4.15 Accounts Receivable.
All accounts receivable and other debts due or recorded in the records
and books of accounts of the Company and its Subsidiaries as at the Closing Date
(less the amount of any provision or reserve provided for such accounts in the
records and books of account of the Company) will be good and collectible in
full in the ordinary course of business; and none of such accounts receivable or
other debts is or will at the Closing Date be subject to any counterclaim or
set-off except to the extent of any such provisions or reserves. Except for the
receipt of payment for the Extraordinary Receivables, there has been no material
adverse change since September 30, 2003 in the amount of accounts receivable or
other debts due to the Company and its Subsidiaries or the reserves with respect
thereto from that which is reflected in the Financial Statements.
-37-
Section 4.16 Bank Accounts and Powers of Attorney.
The Purchaser has been provided with an accurate and complete list
showing:
(i) the name and address of each financial institution in which the
Company and its Subsidiaries have bank or trust accounts or safe
deposit boxes and the number of any such trust account or any
such box; and
(ii) the names of all Persons, if any, holding powers of attorney from
the Company or any of the Subsidiaries.
Section 4.17 Business in Compliance with Laws.
The Business is conducted in compliance with all applicable Laws of
each jurisdiction in which the Company and the Subsidiaries carry on the
Business (including the Licences) except as otherwise disclosed in Schedule
Error! Reference source not found. and except for non-compliance which in the
aggregate does not have a Material Adverse Effect. Any Licences material for the
operation of the Business are listed in Schedule Error! Reference source not
found..
Section 4.18 Intellectual Property.
(1) Trade-marks. Schedule Error! Reference source not found. sets forth an
accurate and complete list of all material unregistered Trademarks and
registrations and applications for Trade-marks owned by the Company and the
Subsidiaries used by the Company and the Subsidiaries in the conduct of the
Business (the "Company Trade-Marks"). Except as may be set forth in
Schedule Error! Reference source not found., the Company and the
Subsidiaries have not taken any action (or failed to take any action),
conducted their businesses, or used or enforced (or failed to use or
enforce) any of the Company Trade-marks, in each case in a manner that
would result in the abandonment or unenforceability of any of the Company's
or the Subsidiaries' Trade-marks or any of the Company's and the
Subsidiaries' rights therein.
(2) Patents. The Company and the Subsidiaries do not own any Patents.
(3) Company Copyrights. There are no registered Copyrights owned by the Company
("Registered Company Copyrights"). Except as may be set forth in Schedule
Error! Reference source not found., where applicable, the Company and the
Subsidiaries have obtained all necessary waivers of moral rights in respect
of the Company Copyrights.
-38-
(4) Trade Secrets.
(a) The Company and the Subsidiaries have taken all reasonable precautions
to protect the secrecy and confidentiality of the Trade Secrets;
(b) to the Company's knowledge, the Company and the Subsidiaries have the
absolute and unrestricted right to use all of the Trade Secrets; and
(c) except under appropriate confidentiality obligations that, to the
knowledge of the Company and the Subsidiaries, have been fully
observed and performed, there has been no disclosure by the Company or
the Subsidiaries of material Trade Secrets.
(5) Rights of Third Parties. Except as set forth in Schedule Error! Reference
source not found.:
(a) there are no Claims in progress or pending or to the knowledge of the
Company threatened against the Company or a Subsidiary relating to the
Intellectual Property Rights owned or licensed by the Company and the
Subsidiaries; and to the knowledge of the Company, the operation of
the Business does not conflict with, infringe upon, violate or result
in a misappropriation of, any Intellectual Property Right of any
Person; and
(b) the Company and the Subsidiaries have the exclusive right to bring
actions against any Person that is infringing any Intellectual
Property Rights owned by the Company and the Subsidiaries.
(6) Sufficiency of Company and Licensed Intellectual Property. Except as set
forth in Schedule Error! Reference source not found., the Intellectual
Property Rights owned by the Company and the Subsidiaries and the
Intellectual Property Rights licensed to the Company and the Subsidiaries
constitute all of the Intellectual Property Rights necessary for the
conduct of the Business as presently conducted, including without
limitation the manufacture, use, sale, licensing and other commercial
exploitation of all products of the Company and the Subsidiaries including
those currently undergoing alpha or beta testing if any, and constitute all
of the Intellectual Property Rights necessary to operate such Business
after the Closing in substantially the same manner as such business
heretofore has been operated by the Company and the Subsidiaries.
-39-
Section 4.19 Software Materials.
(1) General. With the exception of COTS, Schedule Error! Reference source not
found. specifically identifies all Software Materials that are owned
exclusively by the Company and the Subsidiaries (the "Company Software
Materials") and all Software Materials that are used by the Company and the
Subsidiaries in the conduct of the Business and that are not exclusively
owned by the Company and the Subsidiaries other than COTS, (such Software
Materials that is so used by the Company and the Subsidiaries being
referred to collectively as the "Licensed Software Materials"). Except as
may be set forth in Schedule Error! Reference source not found.:
(a) to the knowledge of the Company, the Company and the Subsidiaries are
using the Licensed Software Materials, of which they are not the sole
beneficial and registered owners, in the conduct of the Business in
accordance with the terms of the consent or license from the owner or
licensor of such Licensed Software Materials;
(b) to the Company's knowledge, there are no Claims in progress or pending
or threatened against the Company or any of the Subsidiaries relating
to the Licensed Software Materials;
(c) the Company and the Subsidiaries have lawfully acquired the right to
use the Licensed Software Materials, as it is used in the conduct of
the Business as presently conducted, and have not exercised any rights
in respect of any Licensed Software Materials, including without
limitation any reproduction, distribution or derivative work rights,
outside the scope of any license expressly granted by the Person from
which the right to use such Licensed Software Materials was obtained;
and
(d) no royalties, fees, honoraria or other payments are payable by the
Company and the Subsidiaries to any Person by reason of the ownership,
use, sale, licensing, distribution or other exploitation of any
Company Software Materials.
(2) Performance of Existing Software Materials Products. Except as may be set
forth in Schedule Error! Reference source not found., all Software
Materials products that the Company and the Subsidiaries have distributed
to third parties are generally suitable for the purposes for which they are
being used and are free from known material defects or deficiencies.
(3) Software Materials Documentation. The Company and the Subsidiaries have
taken all actions customary in the software industry to document the
Company Software Materials and its operation, such that the Company
Software Materials, including the source code and documentation, have been
written in a reasonably clear and professional manner so that they may be
understood, modified and maintained in an efficient manner by reasonably
competent programmers.
-40-
(4) Disabling Codes. To the Company's knowledge, the components used in the
Company's and the Subsidiaries' products including any Company Software
Materials, are free of any undisclosed program routine, device, or other
feature, including, without limitation, a time bomb, software lock,
drop-dead device, or malicious logic or, as of the time of each delivery,
any virus, worm or trojan horse, that is designed to delete, disable,
deactivate, interfere with, or otherwise harm them (a "Disabling Code")
that may, or may be used to, access, modify, delete, damage or disable any
hardware, system or data or that may result in damage thereto. The Company
and the Subsidiaries have taken reasonable steps and implemented reasonable
procedures to ensure that its hardware, systems and data are free from
Disabling Codes. Except as may be set forth in Schedule Error! Reference
source not found., the Company and the Subsidiaries have in place disaster
recovery plans, procedures and facilities and have taken steps to safeguard
their hardware, systems and data and restrict unauthorized access thereto.
(5) Source Code. Except as set forth in Schedule Error! Reference source not
found., none of the Company Software Materials is, in whole or in part,
subject to the provisions of any open source license agreement obligating
the Company and the Subsidiaries to make source code publicly available to
third parties.
Except as disclosed in Schedule Error! Reference source not found., the
Company and the Subsidiaries have in their possession copies of source code for
all Company Software Materials used by the Company and the Subsidiaries. The
Company and the Subsidiaries have taken commercially reasonable steps to treat
such Software Materials as confidential and proprietary business information,
and have taken commercially reasonable steps to protect the same as trade
secrets of the Company and the Subsidiaries. Such source code is fully
documented in a manner that a reasonably skilled programmer could understand,
modify, compile and otherwise utilize.
Section 4.20 Internet Web Site.
Schedule Error! Reference source not found. sets forth the physical
location of the computer servers that are currently hosting the Company and the
Subsidiaries' internet web sites. Each server is owned by the Company or the
Subsidiaries. Schedule Error! Reference source not found. lists the contract
pursuant to which the Company acquires access to the bandwidth to which the
servers are connected to the internet. Schedule Error! Reference source not
found. additionally sets forth (i) the name and IP address of the internet web
homepage, when the homepage was created and the expiry date, (ii) a list of any
and all software which can be downloaded from the web site, and (iii) a list of
any license agreements displayed on the web site prior to downloading any
particular software.
-41-
Section 4.21 Real Property.
Schedule Error! Reference source not found. sets forth a complete list of the
Leased Real Property by reference to municipal address and Real Property Leases.
All interests held by the Company or any of the Subsidiaries as lessee
or occupant under the Real Property Leases are free and clear of all
Encumbrances other than Permitted Encumbrances.
All payments required to be made by the Company or any of the
Subsidiaries pursuant to the Real Property Leases have been paid and neither the
Company nor any of the Subsidiaries is in default in any of its obligations
under any of the Real Property Leases which has a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is the registered or
beneficial owner, directly or indirectly, of any real property.
Section 4.22 Environmental Matters.
(1) All operations of the Company and the Subsidiaries conducted on the Leased
Real Property are in compliance with all Environmental Laws other than
non-compliance which in the aggregate does not have a Material Adverse
Effect.
(2) All material Environmental Approvals have been obtained and are valid and
in full force and effect and are being complied with, except for such
non-compliance which would not have a Material Adverse Effect.
(3) Neither the Company nor any of the Subsidiaries or any of their respective
operations is the subject of any Remedial Order.
Section 4.23 Employment Matters.
(1) The Purchaser has been provided with a true and complete list of all
Employees, together with their titles, service dates, current wages,
salaries or hourly rate of pay, vacation entitlement, cumulative unpaid
vacation entitlements, commissions and bonus or other material compensation
paid since the beginning of the most recently completed fiscal year or
payable to each such Employee. Except as disclosed in writing to the
Purchaser, no Employee is on short-term or long-term disability leave,
parental leave, extended absence or receiving benefits pursuant to the
Workplace Safety and Insurance Act (Ontario) or similar workers'
compensation legislation in other jurisdictions.
-42-
(2) Except as disclosed in writing to the Purchaser, all Employees have signed
an Employment Contract with the Company or a Subsidiary substantially in
the form of one of the Company's Standard Form Employment Contracts, copies
of which have been provided to the Purchaser.
(3) Except for the Benefit Plans or as disclosed in writing to the Purchaser
there are no written employment policies or plans which are binding upon
the Company or any of the Subsidiaries.
(4) The Company and the Subsidiaries have been and are being operated in
material compliance with all Laws relating to employees, including
employment standards, Occupational Health and Safety Laws, workers
compensation, human rights, labour relations and pay equity. The Company
and the Subsidiaries have complied with and posted plans as required under
applicable pay equity legislation. Except as disclosed on Schedule Error!
Reference source not found. or otherwise disclosed in writing to the
Purchaser there have been no Claims nor, to the knowledge of the Company,
are there any threatened complaints under such employment-related Laws
against the Company or any of the Subsidiaries.
(5) There are no Claims nor, to the knowledge of the Company, are there any
threatened Claims, against the Company or any of the Subsidiaries pursuant
to any Laws relating to Employees, including employment standards, human
rights, labour relations, Occupational Health and Safety Laws, worker's
compensation or pay equity and, to the knowledge of the Company, nothing
has occurred which might lead to a Claim against the Company or any of the
Subsidiaries under any such Laws.
(6) All current and former Employees and consultants of the Company and the
Subsidiaries have entered into confidentiality, invention assignment and
proprietary information agreements with the Company and the Subsidiaries in
substantially the form provided to Purchaser. Except as disclosed in
writing to the Purchaser:
(a) to the knowledge of the Company, no Employee or consultant of the
Company is obligated under any agreement (including licences,
covenants or commitments of any nature) or subject to any judgment,
decree or order of any Governmental Authority, or any other
restriction that would materially conflict with the Business;
-43-
(b) the carrying on of the Business by the employees, consultants and
contractors of the Company and the Subsidiaries and the conduct of the
Company's and the Subsidiaries' business, including without limitation
the sale, licensing and other commercial exploitation of all products
of the Company and the Subsidiaries currently undergoing alpha or beta
testing, will not, to the Company's knowledge, result in a material
breach of the terms, conditions or provisions of, or constitute a
material default under, any contract, covenant or instrument under
which any of such employees or consultants or the Company and the
Subsidiaries is now obligated.
(c) the Company and the Subsidiaries do not believe it is or will be
necessary to utilize any inventions of any employees of the Company
and the Subsidiaries (or Persons the Company and the Subsidiaries
currently intends to hire) made prior to their employment by the
Company and the Subsidiaries; and
(d) to the Company's knowledge, at no time during the conception of or
reduction to practice of any of the Intellectual Property Rights owned
by the Company and the Subsidiaries, was any developer, inventor or
other contributor to such Intellectual Property Rights operating under
any grants from any Governmental Authority or private source,
performing research sponsored by any Governmental Authority private
source or subject to any employment agreement or invention assignment
or nondisclosure agreement or other similar obligation with any other
Person that could adversely affect the Company's and the Subsidiaries'
rights in such Intellectual Property Rights.
Section 4.24 Collective Agreements.
Schedule Error! Reference source not found. sets forth a complete list
of the Collective Agreements.
(1) There are no outstanding unfair labour practice complaints or applications
in respect of the Company or a Subsidiary which, in the aggregate if
determined adversely to the Company or any of the Subsidiaries, would have
a Material Adverse Effect.
(2) To the knowledge of the Company, there are no union organizing activities
involving Employees not already covered by the Collective Agreements.
(3) Neither the Company nor any of the Subsidiaries is in violation in any
material respect of any Collective Agreement.
-44-
(4) There is no strike or lock out occurring or, to the knowledge of the
Company, threatened affecting the Company or any of the Subsidiaries.
(5) Neither the Company nor any of the Subsidiaries has any grievances or
pending arbitration cases outstanding which, in the aggregate if determined
adversely to the Company or any of the Subsidiaries, would have a Material
Adverse Effect.
Section 4.25 Related Party Contracts.
Except as set forth on Schedule Error! Reference source not found.,
neither the Company nor any of the Subsidiaries is a party to any Contract with
any director, officer, Employee, agent or any Person not dealing at arm's length
with the Company or the Subsidiaries, except in the ordinary course of business.
Section 4.26 Benefit Plans.
(1) Schedule Error! Reference source not found. sets forth a complete list of
the Benefit Plans. Current and complete copies of all Benefit Plans have
been made available to the Purchaser.
(2) Except as disclosed in Schedule Error! Reference source not found., each
Benefit Plan is being administered in compliance with (i) the terms of such
Benefit Plan; and (ii) all Laws, except for such non-compliance which would
not have a Material Adverse Effect.
(3) Except as disclosed in Schedule Error! Reference source not found., there
have been no improvements, increases or changes to, or promised
improvements, increases or changes to, the benefits provided under any
Benefit Plan since the date of the Balance Sheet.
(4) All employer or employee payments, contributions or premiums required to be
remitted, paid to or in respect of each Benefit Plan have been paid or
remitted in a timely fashion in accordance with its terms and all Laws, and
no Taxes, penalties or fees are owing or exigible under any Benefit Plan.
(5) Except as disclosed in Schedule Error! Reference source not found., the
Company and the Subsidiaries have no formal plan and have made no promise
or commitment, whether legally binding or not, to create any additional
Benefit Plan or to improve or change the benefits provided under any
Benefit Plan.
(6) None of the Benefit Plans provide for benefit increases or the acceleration
of, or an increase in, funding obligations that are contingent upon or will
be triggered by the entering into of this Agreement or the completion of
the transactions contemplated herein.
-45-
(7) Neither the Company nor any of the Subsidiaries have a Pension Plan.
Section 4.27 Insurance.
Each of the Company and the Subsidiaries maintains such policies of
insurance as are appropriate to its operations, property and assets, in such
amounts and against such risks as are customarily carried and insured against by
owners of comparable businesses, properties and assets, in accordance with
applicable laws and such insurance coverage will remain in full force and effect
after the Closing Date notwithstanding the execution, delivery and performance
of this Agreement. Schedule Error! Reference source not found. fully and
accurately describes all insurance policies maintained by the Company or any
Subsidiary, specifying the insurer, the amount, type, term and extent of such
coverage, the policy number, any claims made and settled thereunder within the
previous three fiscal years and any threatened or in process Claims thereunder.
Neither the Company nor any Subsidiary is in default under any insurance policy
listed on Schedule or has failed to give notice or to present any Claim under
any such policy in a proper and timely fashion.
Section 4.28 Material Contracts.
Schedule Error! Reference source not found. sets forth a complete list
of the Material Contracts that have not been listed on any other Schedule. The
Material Contracts listed in Schedule Error! Reference source not found. are all
in full force and effect unamended and there are no outstanding material
defaults or violations under any such Material Contract on the part of the
Company or any of the Subsidiaries which in the aggregate would have a Material
Adverse Effect.
Section 4.29 Litigation.
Except as disclosed in Schedule Error! Reference source not found.,
there are no Claims, investigations, complaints, grievances or proceedings,
including appeals and applications for review, in progress, or pending or, to
the knowledge of the Company, threatened against or relating to the Company or
any of the Subsidiaries before any Governmental Authority; and the Company has
no knowledge of any existing ground on which any such action, suit, litigation
or proceeding might be commenced with any reasonable likelihood of success.
Section 4.30 Tax Matters.
Except as otherwise expressly disclosed in Schedule Error! Reference
source not found.:
(1) Each of the Company and the Subsidiaries has duly and timely made or
prepared all Tax Returns required to be made or prepared by it, has duly
and timely filed all Tax Returns required to be filed by it with the
appropriate Governmental Authority and has duly, completely and correctly
reported all income and all other amounts and information required to be
reported thereon and such Tax Returns reflect accurately all liability for
taxes of the Company, and the Subsidiaries for the periods covered thereby,
except where the failure to do so would not have a Material Adverse Effect.
-46-
(2) Each of the Company and the Subsidiaries has duly and timely paid all
Taxes, including all instalments on account of Taxes for the current year
and any prior year, that are due and payable by it, except where the
failure to do so would not have a Material Adverse Effect; and provision
has been made on the Balance Sheet for amounts at least equal to the amount
of all accrued Taxes of the Company and the Subsidiaries that are not yet
due and payable and that relate to periods ending on or prior to September
30, 2003.
(3) The liability for Taxes of each of the Company and the Subsidiaries has
been assessed by the relevant Governmental Authority for all taxation years
up to and including its taxation year ended on September 30, 2002. The only
taxation years of the Company and the Subsidiaries that remain open for the
assessment of additional Taxes are those set out in Schedule Error!
Reference source not found..
(4) None of the Company or any of the Subsidiaries has requested, offered to
enter into or entered into any agreement or other arrangement, or executed
any waiver, providing for any material extension of time within which (i)
to file any Tax Return covering any Taxes for which the Company or any of
the Subsidiaries is or may be liable; (ii) to file any elections,
designations or similar filings relating to Taxes for which the Company or
any of the Subsidiaries is or may be liable; (iii) the Company or any of
the Subsidiaries is required to pay or remit any Taxes or amounts on
account of Taxes; or (iv) any Governmental Authority may assess or collect
Taxes for which the Company or any of the Subsidiaries is or may be liable.
(5) None of the Company or any of the Subsidiaries has made, prepared and/or
filed any material elections, designations or similar filings relating to
Taxes or entered into any material agreement or other arrangement in
respect of Taxes or Tax Returns that has effect for any period after the
Closing Date except as disclosed in the Company's or the relevant
Subsidiary's Tax Returns.
(6) There are no proceedings, investigations, audits or Claims now pending or
threatened against the Company or any of the Subsidiaries in respect of any
Taxes or matters under discussion, audit or appeal with any Governmental
Authority relating to Taxes which, in the aggregate if determined adversely
to the Company or any of the Subsidiaries, would have a Material Adverse
Effect.
-47-
(7) Each of the Company and the Subsidiaries has duly and timely withheld all
Taxes and other amounts required by Law to be withheld by it (including
Taxes and other amounts required to be withheld by it in respect of any
amount paid or credited or deemed to be paid or credited by it to or for
the account or benefit of any Person, including any Employees, officers or
directors and any non-resident Person), and has duly and timely remitted to
the appropriate Governmental Authority such Taxes and other amounts
required by Law to be remitted by it, except where failure to do so would
not have a Material Adverse Effect.
(8) Except in connection with the Asset Closing, each of the Company and the
Subsidiaries has duly and timely collected and remitted to the appropriate
Governmental Authority all amounts on account of any sales, use or transfer
taxes, including goods and services, harmonized sales and provincial and
state sales and use taxes, required by Law to be collected and remitted by
it, except where failure to do so would not have a Material Adverse Effect.
(9) None of section 17, section 78, section 79, or sections 80 to 80.04 of the
Income Tax Act (Canada), or any equivalent provision under applicable
provincial Law have applied or will apply to the Company or any of the
Subsidiaries. For any taxation years ending on or before the Share Purchase
Closing Time, neither the Company nor any of the Subsidiaries has claimed
any reserve under any provision of the Income Tax Act (Canada) or any
equivalent provision of provincial income tax laws, other than for reserves
claimed under Section 20(1)(m) of the Income Tax Act (Canada) in a manner
consistent with the past practice of the Company, if any such amount could
be included in the income of the Company or any of the Subsidiaries for any
period ending after the Closing Date. Neither the Company nor any of the
Subsidiaries has, either directly or indirectly, transferred property to or
supplied services to, or acquired or received property or services from, a
Person with whom it does not deal at arm's length for consideration other
than consideration equal to the fair market value of such property or
services at the time of such transfer, supply, acquisition or receipt of
the property or services. Neither the Company nor any of the Subsidiaries
has entered into any transfer pricing or advance pricing agreement with any
Governmental Authority.
(10) Except in connection with the Asset Closing, for all transactions between
the Company or any of the Subsidiaries that is a resident of Canada for
purposes of the Income Tax Act (Canada), on the one hand, and any
non-resident Person with whom the Company or any such Subsidiary was not
dealing at arm's length, for the purposes of the Income Tax Act (Canada),
on the other hand, during a taxation year commencing after 1998 and ending
on or before the Closing Date, the Company and any such Subsidiary have
made or obtained records or documents that satisfy the requirements of
paragraphs 247(4)(a) and (b) of the Income Tax Act (Canada). Neither the
Company nor any of the Subsidiaries have entered into an agreement
contemplated by Section 191.3 of the Income Tax Act (Canada).
-48-
(11) Neither the Company nor any of the Subsidiaries is subject to any joint
venture, partnership or other arrangement or contract that is treated as a
partnership for income tax purposes in any jurisdiction.
(12) Neither the Company nor any of its Subsidiaries has made any payments or is
obligated to make any payments or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not
be deductible under United States Internal Revenue Code Section 280G.
Neither the Company nor any its subsidiaries has been a United States real
property holding corporation within the meaning of United States Internal
Revenue Code Section 897(c)(2) during the applicable period specified in
United States Internal Revenue Code Section 897(c)(1)(A)(ii). Each of the
Company and its Subsidiaries has disclosed on its United States Tax Returns
all positions taken therein that could give rise to a substantial
understatement of United States federal taxable income Tax within the
meaning of United States Internal Revenue Code Section 6662. None of the
Company or its Subsidiaries is a party to any Tax allocation or sharing
agreement. None of the Company and its Subsidiaries (i) has been a member
of an affiliated group filing a consolidated United States Tax Return
(other than a group the common parent of which is Interactive Media Group
(USA) Ltd.) or (ii) has any liability for the Taxes of any other Person
under United States Treasury Regulation Section 1. 1052-6 (or any similar
provision of state, local or foreign law) as a transferee or successor, by
contract or otherwise.
Section 4.31 Equipment Contracts.
Schedule Error! Reference source not found. sets forth a complete list
of all Equipment Contracts together with a description of the equipment and
other assets to which the Equipment Contracts relate. All of the Equipment
Contracts are in full force and effect and no default exists on the part of the
Company or any of the Subsidiaries, or, to the knowledge of the Company, on the
part of any of the other parties thereto.
Section 4.32 Corporate Records.
A true and complete copy of the Articles and by-laws of the Company and
each of the Subsidiaries, including any and all amendments, have been made
available to the Purchaser and such Articles and by-laws, including any
amendments, as applicable, are in full force and effect and no further
amendments will be made thereto without the prior written consent of the
Purchaser, except as contemplated by the Reorganization.
-49-
Section 4.33 Books and Records.
All Books and Records have been delivered or made available to the
Purchaser. Such Books and Records fairly and correctly set out and disclose in
all material respects the financial position of the Company and the Subsidiaries
and all material financial transactions relating to each of their businesses
have been accurately recorded in such Books and Records.
The Books and Records and other financial records of the Company and
its Subsidiaries:
(a) reflect in all material respects all items of income and expense and
all assets and liabilities required to be reflected therein in
accordance with GAAP applied on a basis consistent with the past
practices of the Company and its Subsidiaries, respectively;
(b) are in all material respects complete and correct, and do not contain
or reflect any material inaccuracies or discrepancies; and
(c) have been maintained in accordance with good business and accounting
practices.
Section 4.34 Personal Information.
Except as disclosed in writing to the Purchaser,
(1) the Company and each of the Subsidiaries, to the extent required by Law,
have a written privacy policy which governs the collection, use and
disclosure of Personal Information and which complies with the applicable
industry privacy code, and the Company and each of the Subsidiaries are in
compliance in all material respects with their respective privacy policy;
(2) all Personal Information provided to the Purchaser in connection with the
transactions contemplated by this Agreement has been provided in compliance
with all Laws and with the Company's and each Subsidiary's respective
privacy policies, and all consents required by applicable Laws have been
obtained to allow the Company and the Subsidiaries to collect, use and
disclose Personal Information in connection with the Business; and
(3) without limiting the foregoing, to the knowledge of the Company, the
Company and each of the Subsidiaries is, and has been, conducting the
Business in compliance with all applicable Laws governing privacy and the
protection of personal information, including the Personal Information
Protection and Electronic Documents Act ("PIPEDA"), other than acts of
non-compliance which individually or in the aggregate do not have a
Material Adverse Effect.
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Section 4.35 No Broker.
Other than with respect to the engagement of Broadview International
LLC pursuant to an agreement dated May 14, 2003 providing for the engagement
fee, retainer and work fee which will be paid by the Shareholders at or prior to
Closing or provided for on the Closing Date Financial Statements, the Company
has carried on all negotiations relating to this Agreement and the transactions
contemplated in this Agreement directly and without intervention on its behalf
of any other Party in such manner as to give rise to any valid claim for a
brokerage commission, finder's fee or other like payment against the Purchaser,
the Company or any of the Subsidiaries.
Section 4.36 Residence of the Company.
The Company is not a non-resident of Canada for the purposes of the
Income Tax Act (Canada).
Section 4.37 Private Corporation.
The Company is a "private corporation" within the meaning of subsection
89(1) of the Income Tax Act (Canada).
Section 4.38 Full Disclosure.
None of the representations and warranties made in this Article 4
(including any written information or documents delivered to the Purchaser as
contemplated in this Article 4) contains any untrue statement of a material fact
or omits to state any material fact, necessary to make such representation or
warranty not misleading to a potential arm's length purchaser of the Purchased
Shares.
Article 5
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, represents and warrants to
the Purchasers, on its own behalf with respect to itself only, the matters set
out below and acknowledges that the Purchasers and the Company are relying upon
such representations and warranties in agreeing to enter into this Agreement and
complete the transactions contemplated herein:
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Section 5.1 Right to Sell.
The Shareholder is the sole registered and beneficial owner of the
shares set out opposite its name in Schedule Error! Reference source not found.,
with good and valid title thereto, free and clear of all Encumbrances. As at the
time immediately prior to the Reorganization Closing Time, the Shareholder will
be the sole registered and beneficial owner of the shares set out opposite its
name in Schedule Error! Reference source not found., with good and valid title
thereto, free and clear of all Encumbrances and, upon completion of the Share
Closing and the Purchase for Cancellation Closing, the Purchaser and the
Company, respectively, will acquire good and marketable title to such shares
free and clear of all Encumbrances. The Shareholders have the exclusive right to
dispose of the Shareholder's shares as provided in this Agreement (including
pursuant to the Purchase for Cancellation) and such disposition will not
violate, contravene, breach or result in any default under any material
indenture, mortgage, lease, agreement, obligation, instrument, charter or by-law
provision, order, judgment, decree, licence, permit or Laws, to which the
Shareholder is a party or subject or by which the Shareholder is bound or
affected. If the Shareholder is a corporation, it is duly incorporated and
validly existing under the laws of its governing jurisdiction.
Section 5.2 Due Authorization.
The Shareholder has all necessary power, authority and capacity to
enter into this Agreement and to carry out such Shareholder's obligations under
this Agreement. If the Shareholder is a corporation, the execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of such Shareholder.
Section 5.3 Enforceability of Obligations.
This Agreement constitutes a valid and binding obligation of the
Shareholder enforceable against the Shareholder in accordance with its terms
subject to any limitations imposed by Law.
Section 5.4 Absence of Conflicting Agreements.
The Shareholder is not a party to, bound or affected by or subject to
any indenture, mortgage, lease, agreement, obligation, instrument, charter or
by-law provision, order, judgment, decree, licence, Law which would be violated,
contravened or breached by, or under which any default would occur or an
Encumbrance would be created as a result of the execution and delivery by it of
this Agreement or the performance by it of any of the terms of this Agreement.
Section 5.5 Litigation.
There are no Claims, investigations, complaints or proceedings in
progress or, to the knowledge of the Shareholder, pending or threatened against
or relating to such Shareholder, before any Governmental Authority, which, if
determined adversely against such Shareholder, would,
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(1) enjoin, restrict or prohibit the transfer of all or any part of its
Purchased Shares as contemplated by this Agreement; or
(2) prevent the Shareholder from fulfilling any of its obligations set out in
this Agreement or arising from this Agreement,
and the Shareholder has no knowledge of any existing ground on which any
such action, suit, litigation or proceeding might be commenced with any
reasonable likelihood of success.
Section 5.6 No Broker.
The Shareholder has carried on all negotiations relating to this
Agreement and the transactions contemplated in this Agreement directly and
without intervention on its behalf of any other party in such manner as to give
rise to any valid claim for a brokerage commission, finder's fee or other like
payment against the Purchaser, the Company or any of the Subsidiaries.
Section 5.7 Residence of the Shareholder.
Unless the Shareholder is a Non-Resident Shareholder listed in Schedule
Error! Reference source not found., the Shareholder is not a non-resident of
Canada for the purposes of the Income Tax Act (Canada). Where the Shareholder is
a partnership and is a Non-Resident Shareholder listed in Schedule Error!
Reference source not found., each partner having an interest in the Shareholder
is a non-resident of Canada for the purposes of the Income Tax Act (Canada).
Article 6
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company and the
Shareholders the matters set out below and acknowledges that the Company and the
Shareholders are relying upon such representations and warranties in agreeing to
enter into this Agreement and complete the transactions contemplated herein:
Section 6.1 Due Authorization.
The Purchaser is a corporation duly incorporated and validly existing
under the laws of Delaware and the Share Purchaser will be on the Closing Date a
duly incorporated and validly existing company under the laws of Nova Scotia.
The Purchaser has all necessary corporate power, authority and capacity to enter
into this Agreement and to carry out its obligations under this Agreement. The
Share Purchaser will, on the Closing Date, have all necessary corporate power,
authority and capacity to carry out its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the transaction
contemplated under this Agreement have been duly authorized by all necessary
corporate action of the Purchaser.
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Section 6.2 Enforceability of Obligations.
This Agreement constitutes a valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms subject to any
limitations imposed by Law.
Section 6.3 Absence of Conflicting Agreements.
The Purchaser is not a Party to, bound or affected by or subject to any
material indenture, mortgage, lease, agreement, obligation, instrument, charter
or by-law provision, statute, regulation, order, judgment, decree, license,
permit or law which would be violated, contravened or breached by, or under
which any default would occur or a Claim, restriction or Encumbrance would be
created as a result of the execution and delivery by it of this Agreement or the
performance by it of any of the terms of this Agreement.
Section 6.4 Financial Ability.
The Purchaser has cash on hand and/or availability under its existing
credit facilities in amounts sufficient to allow it to pay the Share Purchase
Price and Asset Purchase Price including any adjustments, and to consummate the
transactions contemplated by this Agreement.
Section 6.5 Investment Canada.
The Purchaser is, and on the Closing Date the Share Purchaser will be,
a WTO Investor within the meaning of the Investment Canada Act (Canada).
Section 6.6 Litigation.
There are no Claims, investigations, complaints or proceedings in
progress or, to the knowledge of the Purchaser, pending or threatened against or
relating to the Purchasers, which, if determined adversely to the Purchasers,
would,
(1) prevent the Purchasers from paying the Share Purchase Price or Asset
Purchase Price to the Shareholders or the Company;
(2) enjoin, restrict or prohibit the transfer of all or any part of the
Purchased Shares as contemplated by this Agreement; or
(3) prevent the Purchasers from fulfilling any of their respective obligations
set out in this Agreement or arising from this Agreement.
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Section 6.7 Personal Information.
The Purchasers' use and disclosure of Personal Information in
connection with the Business after the Closing Date will be carried on in
compliance with all applicable Laws.
Section 6.8 No Broker.
The Purchaser has carried on all negotiations relating to this
Agreement and the transactions contemplated in this Agreement directly and
without the intervention on its behalf by any other party in such manner as to
give rise to any valid claim for a brokerage commission, finder's fee or other
like payment.
Article 7
SURVIVAL
Section 7.1 Nature and Survival.
(1) All representations and warranties contained in this Agreement on the part
of each of the Parties shall survive the Closings, the execution and
delivery under this Agreement of any share or security transfer instruments
or other documents of title to any of the Purchased Shares or Purchased
Assets and the payment of the consideration for the Purchased Shares and
Purchased Assets, and shall continue in full force and effect for a period
of 18 months after the Closing Date, except that:
(a) the representations and warranties set out in Section 4.1
(Incorporation and Registration), Section 4.2 (Subsidiaries), Section
4.3 (Capitalization), Section 4.5 (Title to Assets), Section 5.1
(Right to Sell), Section 5.2 (Due Authorization), Section 5.3
(Enforceability of Obligations), Section 6.1 (Due Authorization) and
Section 6.2 (Enforceability of Obligations) will survive and continue
in full force and effect without limitation of time;
(b) the representations and warranties set out in Section 4.30 relating to
Tax matters arising in or in respect of a particular period ending on,
before or including the Closing Date will survive and continue in full
force and effect until 90 days after the expiration of the period (the
"Tax Assessment Period") during which an assessment, reassessment or
other form of document assessing liability for Taxes may be issued by
a Governmental Authority in respect of that particular period,
provided that the Tax Assessment Period shall be determined without
regard to any consent, waiver, agreement, or other document, made or
filed after the Closing Date that extends the period during which a
Governmental Authority may issue an assessment, reassessment or other
form of document assessing liability for Taxes; and
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(c) any representation and warranty involving fraud or fraudulent
misrepresentation will survive and continue in full force and effect
without limitation of time.
(2) No Party has any obligation with respect to any representation or warranty
made by such Party in this Agreement after the end of the applicable time
period specified in Section 7.1(1) and thereafter such Party shall have no
obligation to any other Party and the other Parties shall have no rights
against such Party with respect to the applicable representations and
warranties, except for Claims that arise prior to the end of the applicable
time period that the Party has been notified of in writing prior to the end
of the time period.
(3) Where a Party has a right to make a Claim for breach of representation or
warranty under this Agreement, the right to enforce that Claim in court
proceedings remains subject to applicable limitations periods imposed by
applicable Laws.
Article 8
PURCHASERS' CONDITIONS PRECEDENT
The obligation of the Purchasers to complete the purchase of the
Purchased Shares and the Purchased Assets and of the Company to complete the
Purchase for Cancellation under this Agreement shall be subject to the
satisfaction of, or compliance with, at or before the Asset Purchase Closing
Time and Share Purchase Closing Time, respectively, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
exclusive benefit of the Purchasers and may be waived by it in whole or in part
at any time and from time to time prior to the Asset Purchase Closing Time and
Share Purchase Closing Time, as applicable).
Section 8.1 Truth and Accuracy of Representations of Shareholders
at the Closing Time.
All of the representations and warranties of the Shareholders made in
or pursuant to this Agreement shall be true and correct in all material respects
as at each of the Asset Purchase Closing Time and the Share Purchase Closing
Time (conformed, as applicable, to give effect to the Reorganization) and with
the same effect as if made at and as of the Asset Purchase Closing Time and the
Share Purchase Closing Time, respectively, (except as such representations and
warranties may be affected by the occurrence of events or transactions expressly
contemplated and permitted by this Agreement) and the Purchasers shall have
received a certificate of the Shareholders confirming the truth and correctness
of representations and warranties set forth in Article 4 and Article 5 in all
material respects.
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Section 8.2 Performance of Obligations.
The Shareholders shall have performed or complied with all their
obligations and covenants under this Agreement to be performed at or prior to
each of the Asset Purchase Closing Time and Share Purchase Closing Time.
Section 8.3 Consents, Approvals and Waivers.
All consents, approvals, orders and authorizations of any Person (and
registrations, declarations, filings or recordings with any Governmental
Authority), required in connection with the completion of any of the
transactions contemplated by this Agreement (other than with respect to the
Pension Plans or Benefit Plans), the execution of this Agreement, the Closings
or the performance of any of the terms and conditions of this Agreement,
including HSR Approval, any consents required under Material Contracts and all
other consents, approvals, orders, authorizations, filings and notices listed on
Schedule Error! Reference source not found., shall have been obtained at or
before the Asset Purchase Closing Time on terms acceptable to the Purchaser,
acting reasonably.
Section 8.4 No Proceedings.
There shall be no injunction or restraining order issued preventing,
and no pending proceeding, judicial or administrative, against any Party by any
Governmental Authority, for the purpose of enjoining or preventing the
consummation of the transactions contemplated by this Agreement or otherwise
claiming that this Agreement or the consummation of such transactions is
improper or would give rise to proceedings under any Laws.
Section 8.5 Options.
All of the Options shall have been exercised, purchased for
cancellation or terminated prior to the Reorganization Closing Time.
Section 8.6 Termination of Shareholders Agreement and Voting and Deposit
Agreement.
The Shareholders Agreement and the Voting and Deposit Agreement shall
have been terminated prior to the Asset Purchase Closing Time.
Section 8.7 Completion of Reorganization.
The Reorganization shall have been completed prior to the Asset
Purchase Closing Time.
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Section 8.8 Asset Closing.
The Asset Closing shall have been completed prior to the Share Purchase
Closing Time and the Purchase for Cancellation Closing Time.
Section 8.9 Purchase for Cancellation.
The Share Closing shall have been completed prior to the Purchase for
Cancellation Closing Time.
Section 8.10 No Material Adverse Change.
Since the date of this Agreement, there shall not have been any
Material Adverse Change and no event shall have occurred or circumstance come
into existence which may result in such a Material Adverse Change provided that
this Section 8.10 shall not apply and shall be of no further force and effect on
the later of April 1, 2004 and the third Business Day following receipt of HSR
Approval.
Section 8.11 Employee Shareholders
Prior to the Asset Purchase Closing Time, the Purchaser shall have
received the written consent of the Employee Shareholders to the transactions
contemplated hereby and to the purchase for cancellation of their shares in the
capital of the Company in accordance with Section 10.19 and on or prior to the
Purchase for Cancellation Closing Time, but following the Share Purchase Closing
Time, the Company shall have acquired for cancellation all of the shares in the
capital of the Company held by the Employee Shareholders in accordance with
Section 10.19.
Section 8.12 Receipt of Closing Documentation.
The Purchasers shall have received copies of all certificates,
documents and agreements, duly executed by all parties thereto (other than the
Purchasers), that are required to be delivered by the Shareholders or the
Company pursuant hereto or in connection herewith, in form and content
satisfactory to the Purchasers, acting reasonably, including, without
limitation, the following:
(1) the Escrow Agreement;
(2) the Adjustment Escrow Agreement;
(3) certified copies of the incorporating documents and by-laws (or the
equivalent thereof) in respect of the Company and each Subsidiary;
(4) certified copies of all resolutions of the directors and shareholders of
the Company authorizing the execution and delivery of this Agreement and
all other documents contemplated herein and the completion of the
transactions contemplated herein, including the transfer of the Purchased
Shares from the Share Vendors to the Share Purchaser and the transfer of
the Purchased Assets from the Company to the Purchaser;
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(5) certified copies of all resolutions of directors and shareholders and
related documentation evidencing the duly authorized completion of the
Reorganization Closing;
(6) the Updated Financial Statements;
(7) signed certificate of the Chief Financial Officer of the Company pursuant
to the provision of Section 3.11;
(8) true and complete copies of:
(a) the audited consolidated balance sheet of the Company and its
Subsidiaries as of September 30, 2002 and September 30, 2003, and the
audited consolidated statements of income and cash flows of the
Company and its Subsidiaries for the two fiscal years ended September
30, 2002 and September 30, 2003 and for the quarter ended September
30, 2002 and September 30, 2003, together with all related notes and
schedules thereto, accompanied by the reports thereon of the Auditor;
and
(b) the consolidated statements of income and cash flows of the Company
and its Subsidiaries for the quarters ended December 31, 2002 and
2003, together with all related notes and schedules thereto and the
consolidated balance sheet of the Company and its Subsidiaries as of
December 31, 2003;
(collectively, the "Historical Financial Statements") in each case,
reconciled to generally accepted accounting principal in the United States
and prepared in compliance with Regulation S-X under the U.S. Securities
Act of 1933, as amended ("Regulation S-X"). For greater certainty, the
costs related to the preparation of such reconciliation and compliance with
Regulation S-X shall be borne by the Purchaser;
(9) employment agreements and other related arrangements between the Company
and each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇;
(10) an opinion of Company Counsel dated the Closing Date in form and substance
acceptable to the Purchasers, acting reasonably;
(11) resignations, effective as of the Share Purchase Closing Time, from each
director and officer of the Company and of each director and officer, or
management board member, as applicable, of each Subsidiary, and a release
from each such director, officer or management board member, as applicable
(other than for Claims for current unpaid remuneration or Claims under
indemnities provided to such individual by the Company or a Subsidiary);
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(12) share certificates representing all of the Purchased Shares duly endorsed
in blank for transfer or accompanied by a duly executed stock transfer and
power of attorney;
(13) a duly executed general conveyance and assignment transferring all of the
Purchased Assets to the Purchaser in accordance with the terms of this
Agreement;
(14) Counterparts executed by each Shareholder;
(15) evidence satisfactory to the Purchasers, acting reasonably, that all
Options have been exercised or terminated;
(16) evidence satisfactory to the Purchasers, acting reasonably, that all loans
from the Company or any Subsidiary to Employees and Shareholders have been
repaid in full;
(17) evidence satisfactory to the Purchasers, acting reasonably, that the
Reorganization has been completed in accordance with the terms set forth
herein and on such other terms as are acceptable to the Purchaser, acting
reasonably;
(18) a true and complete list of all taxation years of the Company and the
Subsidiaries that remain open for the reassessment of additional Taxes as
at the date of this Agreement;
(19) evidence satisfactory to the Purchasers, acting reasonably, that the
Shareholders Agreement has been terminated and all required consents and
waivers related thereto have been obtained from the Shareholders;
(20) releases from each Shareholder releasing the Company and the Purchaser from
any liability arising prior to the Share Purchase Closing Time, or
otherwise in connection with the transactions contemplated herein, except
in respect of any Claim made pursuant to and in accordance with this
Agreement or in respect of or incidental to their employment by the Company
or any Subsidiary (provided such Claims arise in connection with activities
that are necessary or required in respect of or incidental to their
employment and the performance of their duties and arise in the ordinary
course of business); and
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(21) such other documents, certificates and instruments as may be reasonably
required by the Purchaser to complete the transactions contemplated herein.
If any of the foregoing conditions in this Article has not been
fulfilled by the Asset Purchase Closing Time or the Share Purchase Closing Time,
as applicable, the Purchasers may terminate this Agreement by notice in writing
to the Shareholders, without prejudice to their rights to recover damages for
the breach of this Agreement. In addition, the Purchasers may waive compliance
with any condition in whole or in part if they see fit to do so, without
prejudice to their rights of termination in the event of non- fulfilment of any
other condition, in whole or in part, or to their rights to recover damages for
the breach of any representation, warranty, covenant or condition contained in
this Agreement.
Article 9
SHAREHOLDERS' CONDITIONS PRECEDENT
The obligation of each Shareholder to complete the sale of the
Purchased Shares under this Agreement and of the Company to complete the sale of
the Purchased Assets under this Agreement shall be subject to the satisfaction
of, or compliance with, at or before the Share Purchase Closing Time and Asset
Purchase Closing Time, respectively, each of the following conditions precedent
(each of which is acknowledged to be inserted for the exclusive benefit of the
Shareholders and the Company as the case may be, and may be waived by it in
whole or in part at any time and from time to time prior to the Share Purchase
Closing Time or Asset Purchase Closing Time, as applicable).
Section 9.1 Truth and Accuracy of Representations of Purchasers at the
Closing Time.
All of the representations and warranties of the Purchasers made in or
pursuant to this Agreement shall be true and correct in all material respects as
at each of the Asset Purchase Closing Time and Share Purchase Closing Time and
with the same effect as if made at and as of the Asset Purchase Closing Time and
Share Purchase Closing Time, respectively (except as such representations and
warranties may be affected by the occurrence of events or transactions expressly
contemplated and permitted by this Agreement) and the Shareholders shall have
received a certificate of the Purchasers confirming the truth and correctness of
representations and warranties set forth in Article 6 in all material respects.
Section 9.2 Performance of Obligations.
The Purchasers shall have performed or complied with all their
obligations and covenants under this Agreement to be performed at or prior to
each of the Asset Purchase Closing Time and Share Purchase Closing Time.
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Section 9.3 Consents, Approvals and Waivers.
All consents, approvals, orders and authorizations of any Person (and
registrations, declarations, filings or recordings with any Governmental
Authority), required in connection with the completion of any of the
transactions contemplated by this Agreement, shall have been obtained at or
before the Asset Purchase Closing Time.
Section 9.4 No Proceedings.
There shall be no injunction or restraining order issued preventing,
and no pending proceeding, judicial or administrative, against any Party by any
Governmental Authority, for the purpose of enjoining or preventing the
consummation of the transactions contemplated by this Agreement or otherwise
claiming that this Agreement or the consummation of such transactions is
improper or would give rise to proceedings under any Laws.
Section 9.5 Completion of Reorganization.
The Reorganization shall have been completed prior to the Asset
Purchase Closing Time.
Section 9.6 Asset Closing.
The Asset Closing shall have been completed prior to the Share Purchase
Closing Time and the Purchase for Cancellation Closing Time.
Section 9.7 Purchase for Cancellation.
The Share Closing shall have been completed prior to the Purchase for
Cancellation Closing Time.
Section 9.8 Employee Shareholders
On or prior to the Purchase for Cancellation Closing Time, but
following the Share Purchase Closing Time, the Company shall have acquired for
cancellation all of the shares in the capital of the Company held by the
Employee Shareholders in accordance with Section 10.19.
Section 9.9 Receipt of Closing Documentation.
The Shareholders shall have received copies of all certificates,
documents and agreements, duly executed by the Purchasers, that are required to
be delivered by the Purchasers pursuant hereto or in connection herewith, in
form and content satisfactory to the Shareholders, acting reasonably, including,
without limitation, the following:
(1) the Escrow Agreement;
(2) the Adjustment Escrow Agreement;
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(3) certified copies of the incorporating documents and by-laws (or the
equivalent thereof) in respect of the Purchasers;
(4) certified copies of all resolutions of the directors and shareholders, as
applicable, of the Purchasers, authorizing the execution and delivery of
this Agreement and all other documents contemplated herein, and the
completion of the transactions contemplated herein, including the purchase
of the Purchased Shares and the Purchased Assets;
(5) an opinion of counsel to the Purchasers, Stikeman Elliott LLP, dated the
Closing Date in form and substance satisfactory to the Shareholders, acting
reasonably;
(6) payment of the Share Purchase Price, Asset Purchase Price and the Purchase
for Cancellation Price payable at the Closings in accordance with Article
3; and
(7) such other documents, certificates and instruments as may be reasonably
required by the Shareholders to complete the transactions contemplated
herein.
If any of the foregoing conditions in this Article has not been
fulfilled by the Asset Closing, the Share Closing or the Purchase for
Cancellation Closing, as applicable, the Shareholders may terminate this
Agreement by notice in writing to the Purchaser, without prejudice to their
respective rights to recover damages for breach of this Agreement. In addition,
the Shareholders may waive compliance with any condition in whole or in part if
they see fit to do so, without prejudice to their respective rights of
termination in the event of non- fulfilment of any other condition, in whole or
in part, or to their respective rights to recover damages for the breach of any
representation, warranty, covenant or condition contained in this Agreement.
Article 10
OTHER COVENANTS OF THE PARTIES
Section 10.1 Conduct of Business Prior to Closing.
(1) During the period from the date of this Agreement to the Asset Purchase
Closing Time (the "Interim Period"), the Shareholders shall cause the
Company, and the Company shall, and shall cause each of the Subsidiaries,
to do the following:
(a) Conduct Business in the Ordinary Course - except as otherwise
contemplated or permitted by this Agreement or consented to in writing
by the Purchaser, conduct the Business in the ordinary course,
consistent with past practice and regular customer service and
business policies;
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(b) Continue Insurance - continue in force all policies of insurance
listed on Schedule Error! Reference source not found. maintained by or
for the benefit of the Company or any of the Subsidiaries and give all
notices, pay all premiums and present all Claims under all such
insurance policies in a timely fashion; and
(c) Approvals - co-operate with the Purchaser with respect to obtaining
HSR Approval and all other approvals required by the Purchaser in
connection herewith.
(2) During the Interim Period, without the prior written consent of the
Purchaser, the Shareholders shall ensure that the Company shall not and the
Company shall not and shall ensure that its Subsidiaries shall not:
(a) No Additional Debt - incur any senior or subordinate debt, guarantee
or become contingently liable for any indebtedness whatsoever, other
than indebtedness existing as of the date hereof as described on the
Financial Statements or disclosed in Schedule Error! Reference source
not found., other than trade credit in the ordinary course of
business;
(b) Amendments to Agreements - amend, supplement, surrender, terminate,
cancel, assign, transfer or encumber (i) any Material Contract,
including, without limitation, the indebtedness described on Schedule
Error! Reference source not found. and (ii) any Employment Contract or
other arrangements with Employees, directors, officers and agents of
the Company or any Subsidiary from that disclosed in writing to the
Purchaser other than in the ordinary course of business or as
disclosed to the Purchaser in writing;
(c) No Encumbrances - grant, create, assume or suffer to exist any
Encumbrances on the shares of any Subsidiary or on any property or
assets now owned or hereafter acquired by the Company or any of its
Subsidiaries other than Permitted Encumbrances; or
(d) No Sales of Assets - sell, exchange, lease, release or abandon or
otherwise dispose of, all or any part of the assets or properties of
the Company or any of its Subsidiaries, other than bona fide
transactions in the ordinary course of the Business for the purpose of
carrying on the same in accordance with past practice.
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(3) The Updated Financial Statements have been or will be prepared, as
applicable, on a basis consistent with that of the preceding periods and
will present fairly:
(a) all of the assets, liabilities and financial position of the Company
and the Subsidiaries on a consolidated basis as at the month end for
each month included therein; and
(b) the sales, earnings, results of operation and changes in financial
position of the Company and the Subsidiaries on a consolidated basis
for the periods covered.
(4) The Shareholders hereby waive and agree not to exercise any dissent rights
or similar rights they may have under the Business Corporations Act
(Ontario) or other applicable Laws in connection with the transactions
contemplated by this Agreement.
Section 10.2 Access for Investigation.
(1) During the Interim Period, the Company shall ensure that the Purchaser and
its representatives, without interference to the ordinary conduct of the
Business, are permitted to have reasonable access during normal business
hours, upon prior reasonable written notice to the Company, to (i) the
Leased Real Property, (ii) all the Books and Records and (iii) the
properties and assets of the Company and its Subsidiaries.
(2) Notwithstanding Section 10.2(1) and Section 10.2(3), the Company shall not
be required to disclose any information, records, files or other data to
the Purchaser where prohibited by any Law.
(3) During the Interim Period, the Company shall provide to the Purchaser and
its authorized representatives copies of all Material Contracts and
financial information and all other information, documents and agreements
relating to the Company and its Subsidiaries. In addition, at the request
of the Purchaser at any time and from time to time during the Interim
Period, the Company will cause the senior officers of the Company and its
Subsidiaries and, where applicable, other relevant parties, to discuss with
the Purchaser and its officers, directors and agents, all matters relating
to the Company and its Subsidiaries and the transactions contemplated
herein; provided that the Purchaser may not interview any Employees other
than ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ without the Company's prior consent. Notwithstanding any
investigation by the Purchaser as referred to herein, the Purchaser shall
be entitled to rely upon the representations, warranties and covenants of
the Company and the Shareholders contained in this Agreement and all other
documents and agreements delivered in connection with the transactions
contemplated herein.
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(4) During the Interim Period, the Shareholders and the Company will take all
necessary steps and actions to comply with the provisions of applicable
Laws in connection with the completion of the transactions contemplated
herein.
Section 10.3 Actions to Satisfy Closing Conditions.
(1) Each of the Parties shall take all such actions as are within its power to
control, and use Best Efforts to cause other actions to be taken which are
not within its power to control, so as to ensure compliance with each of
the conditions and covenants set forth in Article 8, Article 9 or Article
10 which are for the benefit of any other Party.
(2) The Purchasers shall keep the Shareholders informed as to the status of the
proceedings related to the application, notification and filings, relating
to HSR Approval and provide the Company and the Shareholders with copies of
such applications, notifications and filings in draft form, containing
information relating to the Shareholders in order for the Shareholders to
confirm that such information is correct.
(3) The Purchasers shall provide any undertakings and abide by any conditions
required to obtain HSR Approval or in order that officials not oppose or
threaten to oppose the purchase of the Purchased Shares or the Purchased
Assets which are not materially adverse to the Purchaser or the Company or
the Subsidiaries taken as a whole.
(4) The Purchasers and the Shareholders shall cooperate with each other, and
shall use Best Efforts to cause their respective officers, employees,
agents, auditors and representatives to cooperate with each other, prior to
the Closing to ensure the orderly acquisition of the Company and its
Subsidiaries by the Purchaser and to minimize any disruption to the
respective businesses of the Purchaser and its Subsidiaries and the Company
and its Subsidiaries that might result from the transactions contemplated
hereby.
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(5) The Shareholders and the Company shall cooperate with and take reasonable
commercial steps to assist (in good faith) the Purchasers in the proposed
offering by the Purchaser of its debt securities to occur on or after the
Closing Date (the "Proposed Offering"), including preparation of an
offering memorandum (the "Offering Memorandum") relating to the Proposed
Offering disclosing information regarding the Company's business, financial
condition, results from operations or otherwise, including management's
discussion and analysis of financial condition and results of operations
(the "Company Information"), provided that neither the Shareholders nor the
Company shall incur any out of pocket expense (other than in respect of
which they shall have been reimbursed) in connection with the Proposed
Offering or the Offering Memorandum, and that the Offering Memorandum shall
not include any Company Information or other disclosure related to the
Company, including for greater certainty, the Financial Statements or
Historical Financial Statements, which has not been reviewed and approved
for inclusion in the Offering Memorandum by ▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Reviewers"), which review shall be completed on a timely basis, and in any
event within two Business Days of receipt by the Reviewers of the Offering
Memorandum, and which approval shall not be unreasonably withheld. For
greater certainty, if no comments or objections are received from the
Reviewers by the end of such two Business Day period, then the Reviewers
shall be deemed to have consented to the disclosure. In addition, the
Shareholders and the Company shall instruct the Auditors and use
commercially reasonable efforts to otherwise cause the Auditors to
cooperate with the Purchaser in connection with the Proposed Offering and
to deliver, at the Purchaser's expense, "comfort letters", dated and
delivered by no later than the date on which the Proposed Offering is
priced and on which it is closed, in form and substance typically delivered
in connection with offerings such as the Proposed Offering and the Offering
Memorandum. Furthermore, the Shareholders and the Company shall cooperate
with the Purchaser, and shall use commercially reasonable efforts to cause
the Auditors to provide to the Purchaser, at the Purchaser's expense, the
requisite consents required to enable the Purchaser to fulfill any
requirements imposed on it by the United States Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended.
Section 10.4 Transfer of the Purchased Assets and Purchased Shares.
The Shareholders and the Company shall take all necessary steps and
proceedings to permit good title to the Purchased Assets and the Purchased
Shares to be duly and validly transferred and assigned to the Purchaser and the
Share Purchaser, respectively, at the Asset Closing and Share Closing,
respectively, free of all Encumbrances, other than Permitted Encumbrances.
Section 10.5 Request for Consents.
The Shareholders and the Company shall use Best Efforts to obtain,
prior to the Closing Date, all Consents. Such Consents shall be upon such terms
as are acceptable to the Purchaser, acting reasonably. The Purchasers will
co-operate in obtaining such Consents.
Section 10.6 Preservation of Records.
The Purchasers shall take all reasonable steps to preserve and keep the
records of the Company and each of the Subsidiaries delivered to them in
connection with the completion of the transactions contemplated by this
Agreement for a period of six (6) years from the Closing Date, or for any longer
period as may be required by any Laws or Governmental Authority, and shall make
such records available to the Shareholders on a timely basis, as may be
reasonably requested by them.
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Section 10.7 Stub Period Returns.
(1) The Share Purchaser shall cause each of the Company and the Subsidiaries
(each a "Filing Entity") to duly and timely make or prepare all Tax Returns
required to be made or prepared by them and to duly and timely file all Tax
Returns required to be filed by them for any period (a "Stub Period") which
ends on or before the Share Purchase Closing Time and for which Tax Returns
have not been filed as of such date. The Share Purchaser shall also cause
each of the Filing Entities to duly and timely make or prepare all Tax
Returns required to be made or prepared by them and to duly and timely file
all Tax Returns required to be filed by them for periods (each, a
"Continuing Period") beginning before and ending after the Share Purchase
Closing Time. If income taxes would be payable by a Filing Entity for a
Stub Period or a Continuing Period in the absence of the Filing Entity
claiming the maximum amount of any discretionary deductions available to
it, the Tax Return of the Filing Entity for that Stub Period or Continuing
Period, as the case may be, shall be prepared on the basis that the Filing
Entity will claim such portion of the maximum amount of any discretionary
deductions available to it for that Stub Period or Continuing Period, as
the case may be, that would result in either the least amount of income
taxes or in no income taxes being payable by the Filing Entity for that
Stub Period or Continuing Period, as the case may be.
(2) The Shareholders, on the one hand, and the Share Purchaser, on the other
hand, shall cooperate fully with each other and make available to each
other in a timely fashion such data and other information as may reasonably
be required for the preparation of any Tax Return of the applicable Filing
Entity for a Stub Period or Continuing Period and shall preserve such data
and other information until the expiration of any applicable limitation
period under any applicable Law with respect to Taxes.
(3) Tax Returns required to be prepared by the Share Purchaser for Stub Periods
or Continuing Periods shall be submitted in draft form to the Shareholders
(in respect of the Company), at least 30 days before the date on which such
Tax Returns are required by Law to be filed with the relevant Governmental
Authority. The Shareholders shall, subject to Law, have the right to
require the Share Purchaser to cause reasonable changes to be made to any
such Tax Return by communicating such changes in writing to the Share
Purchaser at least 15 days before the date on which such Tax Return is
required by Law to be filed with the relevant Governmental Authority. The
Share Purchaser shall make, or cause to be made, such changes required by
the Shareholders and file only such Tax Return on or before the date on
which it is required by Law to be filed with the relevant Governmental
Authority.
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Section 10.8 Tax Matters.
If, at any time after the Closings, the Company or any Subsidiary receives an
assessment, a reassessment, an indication in writing that an assessment or
reassessment is being considered or proposed or any other notice in writing
relating to an amount to which the representations and warranties in Section
4.30 may relate and which in turn could give rise to a Claim against the
Shareholders under this Agreement, the provisions of Section 11.2 shall apply.
Section 10.9 Filings and Authorizations.
Each of the Parties, as promptly as practicable after the execution of
this Agreement, will (i) 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 the Purchased Shares and the Purchased Assets
in accordance with the terms of this Agreement, including the filing of any
notice pursuant to the Investment Canada Act, (ii) use its Best Efforts to
obtain, or cause to be obtained, all authorizations necessary or advisable to be
obtained by it in order to consummate such transfers, and (iii) use its Best
Efforts to take, or cause to be taken, all other actions which are necessary or
advisable in order for it to fulfil its obligations under this Agreement. The
Parties 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 including, without limitation, providing each
other with all notices and information supplied to or filed with any
Governmental Authority (except for notices and information which the
Shareholders or the Purchaser, in each case acting reasonably, considers highly
confidential and sensitive which may be filed on a confidential basis), and all
notices and correspondence received from any Governmental Authority.
Section 10.10 Risk of Loss.
If the assets of the Company or any of the Subsidiaries, are damaged or
destroyed or appropriated, expropriated or seized by any Person, on or prior to
the Closing Date, which act or acts in the aggregate constitutes a Material
Adverse Change, then the Purchasers may, in their sole and unfettered discretion
elect one of the following options;
(1) The Purchasers may elect to complete the purchase of the Purchased Shares
and the Purchased Assets and to reduce the Share Purchase Price and/or
Asset Purchase Price (and Purchase for Cancellation Price) by an aggregate
amount equal to the fair market value of the assets that have been damaged,
destroyed, expropriated or seized, as the case may be, in which event to
the extent that the representations and warranties of the Shareholders are
not true and correct in all material respects as of the Closing Date solely
as a result of such damage, destruction, expropriation or seizure, such
representations and warranties shall be deemed to be true and correct in
all material respects as of the Closing Date for all purposes under this
Agreement and all proceeds of any insurance or compensation for
expropriation or seizure in respect thereof will be payable to the
Shareholders in accordance with their Proportionate Share and all right and
claim of the Purchasers to any such amounts will be assigned to the
Shareholders; or
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(2) The Purchasers may elect to complete the purchase of the Purchased Shares
and the Purchased Assets without any reduction in the Share Purchase Price,
Asset Purchase Price or Purchase for Cancellation Price, in which event to
the extent that the representations and warranties of the Shareholders are
not true and correct in all material respects as of the Closing Date solely
as a result of such damage, destruction, expropriation or seizure, such
representations and warranties shall be deemed to be true and correct in
all material respects as of the Closing Date for all purposes under this
Agreement and all proceeds of any insurance or compensation for
expropriation or seizure in respect thereof will be payable to the
Purchasers, and all right and claim of the Shareholders to any such amounts
will be assigned to the Purchasers.
Section 10.11 Consent to Jurisdiction.
(1) Each of the Parties irrevocably attorns and submits to the exclusive
jurisdiction of any Ontario court sitting in Toronto in any action or
proceeding arising out of or related to this Agreement and irrevocably
agrees that all claims in respect of any such action or proceeding shall be
heard and determined in such Ontario court. Each of the Parties irrevocably
waives, to the fullest extent it may effectively do so, the defence of an
inconvenient forum to the maintenance of such action or proceeding. Each
Shareholder not resident in Ontario irrevocably appoints Osler, ▇▇▇▇▇▇ &
Harcourt LLP (the "Shareholders' Agent for Service"), with an office as of
the date of this Agreement at ▇▇▇▇▇ ▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ for the attention of ▇▇▇▇ ▇▇▇▇▇▇▇, as its agent to receive
on behalf of it and its property service of copies of the statement of
claim and any other process which may be served in any such action or
proceeding. Such service may be made by delivering a copy of such process
to the Shareholders in care of the Shareholders' Agent for Service at the
Shareholders' Agent for Service's above address, and the Shareholder
irrevocably authorizes and directs the Shareholders' Agent for Service to
accept such service on its behalf. The Purchasers irrevocably appoint
Stikeman Elliott LLP (the "Purchasers' Agent for Service"), with an office
as of the date of this Agreement at ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, for the attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇ as its
agent to receive on behalf of it and its property service of copies of the
statement of claim and any other process which may be served in any such
action or proceeding. Such service may be made by delivering a copy of such
process to the Purchasers in care of the Purchaser's Agent, at the
Purchasers' Agent's above address, and the Purchasers irrevocably authorize
and directs the Purchasers' Agent to accept such service on their behalf. A
final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
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(2) Nothing in this section shall affect the right of the Shareholders or
Purchasers to serve legal process in any other manner permitted by law or
affect the right of Shareholders or Purchasers to serve legal process in
any other manner permitted by law or affect the right of Shareholders or
the Purchasers to bring any action or proceeding against a Shareholders or
the Purchasers, as the case may be, or their respective property in the
courts of any other jurisdiction.
Section 10.12 Confidentiality.
After the Closing, the Shareholders will keep confidential all
information in their possession or under their control relating to the Company
and the Business unless such information is or becomes generally available to
the public other than as a result of a disclosure by the Shareholders in
violation of this Agreement or is required to be disclosed by a Governmental
Authority or pursuant to applicable Laws.
Section 10.13 Non-Competition.
The Senior Management and Founders shall not, on their own behalf or on
behalf of or in connection with any Person in any capacity whatsoever, including
as an employer, employee, principal, agent, joint venturer, partner, shareholder
or other equity holder, independent contractor, licensor, licensee, franchiser,
franchisee, distributor, consultant, supplier or trustee or by and through any
corporation, cooperative, partnership, trust, unincorporated association or
otherwise carry on, be engaged in, have any financial or other interest in or be
otherwise commercially involved in any endeavour, activity or business which is
in competition with the Business (except for an equity share investment in a
public company whose shares are listed on a stock exchange in North America in
an over-the-counter market where that share investment does not in the aggregate
exceed 2% of the issued equity shares of such company).
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Section 10.14 Non-Solicitation of Employees.
The Senior Management and Founders shall not, on their own behalf or on
behalf of or in connection with any other Person, directly or indirectly, in any
capacity whatsoever including as an employer, employee, principal, agent, joint
venturer, partner, shareholder or other equity holder, independent contractor,
licensor, licensee, franchiser, franchisee, distributor, consultant, supplier or
trustee or by and through any corporation, cooperative, partnership, trust,
unincorporated association or otherwise:
(i) Employ, offer employment to or solicit the employment or
engagement of or otherwise entice away from the employment of the
Company any individual who is employed by the Company whether or
not such individual would commit any breach of his contract or
terms of employment by leaving the employ of the Company; or
(ii) Procure or assist any Person to employ, offer employment or
solicit the employment or engagement of or otherwise entice away
from the employment of the Company any such individual.
Section 10.15 Non-Interference.
The Shareholders (except CIBC) shall not on their own behalf or on
behalf of or in connection with any other Person, in any capacity whatsoever,
including as an employer, employee, principal, agent, joint venturer, partner,
independent contractor, licensor, licensee, franchiser, franchisee, distributor,
consultant, supplier or trustee or by and through any corporation, cooperative,
partnership, trust, unincorporated association or otherwise, interfere or
attempt to interfere with the Business or persuade or attempt to persuade any
client, employee or supplier of the Company to discontinue or alter such
Person's relationship with the Company.
Section 10.16 Term
The covenants contained in Section 10.13, Section 10.14, and Section
10.15 above, shall continue in full force and effect for a period of three years
after the Closing Date, except for the covenant contained in Section 10.12,
which shall survive and continue in full force and effect without limitation of
time.
Section 10.17 Waiver of Shareholders Agreement.
Each of the Shareholders hereby waives any and all rights it may have
under Articles 7, 8, 13 and 16 of the Shareholders Agreement in respect of the
transactions contemplated by this Agreement and agrees that no further action is
required under the Shareholders Agreement to effect the transactions
contemplated in this Agreement and further agrees upon completion of the
transactions contemplated by this Agreement that the Shareholders Agreement
shall have no further force and effect.
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Section 10.18 Capital Dividend.
The Purchasers shall cause the Company to ensure that, and the Company
shall ensure that, the amount, if any, by which (i) the amount paid by the
Company to each Purchase for Cancellation Shareholder in respect of the Purchase
for Cancellation Price payable hereunder to such Purchase for Cancellation
Shareholder or to each of the Employee Shareholders as contemplated under
Section 10.19 exceeds (ii) the "paid-up capital" (within the meaning of
subsection 89(1) of the Income Tax Act (Canada)) of the Purchase for
Cancellation Shares held by such Purchase for Cancellation Shareholder or of the
shares of the Company held by such Employee Shareholders, as the case may be,
will be a "capital dividend" (within the meaning of subsection 83(2) of the
Income Tax Act (Canada)). To the extent that the Company files any election
under section 184 of the Income Tax Act (Canada) after the Share Purchaser
Closing Time such that all or part of any dividend or deemed dividend (for
purposes of the Income Tax Act (Canada)), received by a Purchase for
Cancellation Shareholder or an Employee Shareholder in connection with the
Purchase for Cancellation or purchase of such Employee Shareholders' shares of
the Company under Section 10.19, as the case may be, is treated as a "taxable
dividend" (for purposes of the Income Tax Act (Canada)), as a result of such
election, then the Purchasers agree to cause the Company to pay to such Purchase
for Cancellation Shareholder or Employee Shareholder, as the case may be, the
amount necessary so that such Purchaser for Cancellation Shareholder or an
Employee Shareholder, as the case may be, is put in the same after -tax position
as it would have been in if no such election under section 184 of the Income Tax
Act (Canada) had been made by the Company.
The Purchasers shall cause the Company to ensure that, and the Company
shall ensure that, an election pursuant to subsection 256(9) of the Income Tax
Act (Canada) will be filed with the Company's income tax return for its taxation
year ending immediately before the Share Purchase Closing Time.
Section 10.19 Employee Shareholders.
The Company shall acquire for cancellation all of the shares in the
capital of the Company held by the Employee Shareholders on or prior to the
Purchase for Cancellation Closing Time but following the Share Purchase Closing
Time in accordance with Schedule 1.1(43).
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Article 11
INDEMNIFICATION FOR BREACHES
OF COVENANTS AND WARRANTIES
Section 11.1 Indemnification.
(1) The Shareholders - Each of the Shareholders, severally and not jointly,
shall indemnify and save harmless the Purchasers, the Company and its
Subsidiaries, and, to the extent applicable, each of their respective
directors, officers, employees, agents and shareholders (the "Purchasers
Indemnified Parties"), from and against all Claims which may be made or
brought against any of the Purchasers Indemnified Parties, or which any of
them may suffer or incur, directly or indirectly, as a result of, in
connection with, or in respect of:
(a) any incorrectness in or breach of any representation or warranty of
the Shareholder contained in Article 4 or Article 5 or a breach of
covenant of any such Shareholder or the Company contained in Article
10 of this Agreement which the Shareholder has been notified of in
writing within the applicable time period specified in Section 7.1;
(b) any failure of any of the Shareholders to perform or fulfil any of
their covenants or obligations under this Agreement;
(c) any failure of the Shareholders or the Company to transfer, as
applicable, good and valid title to the Purchased Shares, the Purchase
for Cancellation Shares and the Purchased Assets to the Purchaser and
the Company (pursuant to the Purchase for Cancellation), free and
clear of all Encumbrances other than Permitted Encumbrances;
(d) any third party claim that the conduct of the Business as conducted on
or prior to the Closing Date, including the use of the Intellectual
Property Rights owned by, licensed to or used by the Company,
infringes the Intellectual Property Rights of any Person;
(e) any liability resulting from events, conditions or occurrences in
existence on or prior to the Closing Date, relating directly or
indirectly to the Company or the Business, except to the extent that
the liability in respect thereof (i) is reflected on the Financial
Statements or Updated Financial Statements, (ii) has been incurred by
the Company in the ordinary course since September 30, 2003, or (iii)
is specifically disclosed (A) in this Agreement, (B) in any of the
Schedules, or (C) any information disclosed in writing to the
Purchaser or any of its representatives during its due diligence;
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(f) except for the Claims disclosed in Schedule Error! Reference source
not found., any Claims, investigations, complaints, grievances or
proceedings against or relating to the Company or any of the
Subsidiaries before any Governmental Authority arising in respect of
matters occurring before the Reorganization Closing Time;
(g) any and all Taxes (including, without limitation, any sales and use
taxes and similar taxes imposed by any U.S. state Governmental
Authority) payable by the Company (other than Taxes of the Company
that arise as a result of the Closings) or any Subsidiary in respect
of (i) any taxation year or period ending on or prior to the Share
Purchase Closing Time, and (ii) in the case of any taxation year or
period beginning before and ending after the Share Purchase Closing
Time, the portion of such period ending on and including the Share
Purchase Closing Time; provided however that (x) the Shareholders are
obligated to make an indemnity payment under this Section 11.1(1)(g)
only to the extent that the aggregate amount of all Taxes described in
both clause (i) and clause (ii) exceeds the amount accrued as a
liability for Taxes on the Closing Date Financial Statements, and (y)
the obligation to indemnify for Taxes under this Section 11.1(1)(g)
arises only at such time as the Company or any Subsidiary receives an
assessment, reassessment or other form of recognized document
assessing liability for such Taxes under applicable Laws.
(2) The right to indemnification under Section 11.1(1)(c) and Section
11.1(1)(g) exists notwithstanding Section 7.1 and notwithstanding any
representation and warranty in Article 4 or Article 5.
(3) The Purchasers - the Purchasers shall jointly and severally indemnify and
save harmless the Shareholders and to the extent applicable, each of their
respective directors, officers, employees, agents and shareholders (the
"Shareholder Indemnified Parties") from and against all Claims which may be
made or brought against a Shareholder Indemnified Party, or which it may
suffer or incur, directly or indirectly as a result of or in connection or
in respect of:
(a) any incorrectness in or breach of any representation or warranty of
the Purchasers contained in Article 6 or a breach of covenant of the
Purchasers contained in Article 10 of this Agreement which the
Purchasers has been notified of in writing within the applicable time
period specified in Section 7.1; and
(b) any failure of any of the Purchasers to perform or fulfil any of their
respective covenants or obligations under this Agreement.
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(4) Limitations - The obligations of indemnification under this Article 11 in
respect of such Claims shall be subject to:
(a) the limitations contained in Section 7.1 respecting the survival of
the representations and warranties of the Parties.
(b) the requirement that the Party or Parties from whom indemnification is
being sought (in this Section, the "Indemnifying Party") shall, in
respect of any Claim made by any third Person, be afforded an
opportunity at its sole expense to resist, defend and compromise such
Claim in the manner specified in Section 11.2;
(c) the limitation that, for Claims made in connection with any
representation or warranty, the Indemnifying Party shall not be
required to pay any amount until the aggregate of such Claims exceeds
$500,000 and upon the aggregate of such Claims exceeding $500,000 the
Indemnifying Party shall be required to pay amounts owing in respect
of all Claims;
(d) the limitation that no Indemnifying Party shall be required to pay any
amount in respect of a Claim pursuant to which the amount payable
would be less than $50,000;
(e) the limitation that, for a Claim made in connection with a
misrepresentation or breach of a representation, warranty, or covenant
hereunder (other than in Article 5), no Indemnifying Party shall be
required to pay an amount in excess of the Indemnifying Party's
Proportionate Share of the Claim;
(f) multiple Claims for breaches of representations and warranties arising
from one event or series of related events, or from one set of factual
circumstances, shall be considered to be one Claim for purposes of
Section 11.1(4)(d);
(g) the limitation that no Indemnifying Party shall be required to pay an
amount in respect of Claims in excess of the Indemnifying Party's
Proportionate Share of the aggregate of the Share Purchase Price and
the Purchase for Cancellation Price paid to the Shareholders at the
Closings; and
(h) the limitation that the Indemnifying Party shall not be liable for any
special, indirect, consequential, punitive or aggravated damages,
including damages for loss of profit.
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Section 11.2 Indemnification Procedures for Third Party Claims.
(1) In the case of Claims made by a third party with respect to which
indemnification is sought, the Party or Parties seeking indemnification (in
this Section, the "Indemnified Party") shall give prompt notice, and in any
event within 20 days, to the Party from whom indemnification is being
sought (in this Section, the "Indemnifying Party") of any such Claims made
upon it. If the Indemnified Party fails to give such notice, such failure
shall not preclude the Indemnified Party from obtaining such
indemnification but the Indemnified Party's right to indemnification may be
reduced to the extent that such delay prejudiced the defence of the Claim
or increased the amount of liability or cost of defence and provided that
no claim for indemnity in respect of the breach of any representation or
warranty contained in this Agreement may be made unless notice of such
Claim has been given prior to the expiry of the survival period applicable
to such representation and warranty pursuant to Article 7.
(2) The Indemnifying Party shall have the right, by notice to the Indemnified
Party given not later than 30 days after receipt of the notice described in
Section 11.2(1), to assume the control of the defence, compromise or
settlement of the Claim, provided that (i) such assumption shall, by its
terms, be without cost to the Indemnified Party, and (ii) the Indemnifying
Party acknowledges in writing its obligation to indemnify the Indemnified
Party in accordance with the terms contained in this Section in respect of
that Claim.; and (iii) where the Claim is in respect of or relating to
Taxes, the Indemnifying Party's right to so contest shall only apply after
the Indemnifying Party has paid such Taxes to the Governmental Authority or
has otherwise provided security for the payment of such Taxes in a manner
that is satisfactory to the Indemnified Party acting reasonably.
(3) Upon the assumption of control of any Claim by the Indemnifying Party as
set out in Section 11.2(1), the Indemnifying Party shall diligently proceed
with the defence, compromise or settlement of the Claim at its sole
expense, including if necessary, employment of counsel reasonably
satisfactory to the Indemnified Party and, in connection therewith, the
Indemnified Party shall cooperate fully, but at the expense of the
Indemnifying Party with respect to any out-of-pocket expenses incurred, to
make available to the Indemnifying Party all pertinent information and
witnesses under the Indemnified Party's control, make such assignments and
take such other steps as in the opinion of counsel for the Indemnifying
Party are reasonably necessary to enable the Indemnifying Party to conduct
such defence. The Indemnified Party shall also have the right to
participate in the negotiation, settlement or defence of any Claim at its
own expense.
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(4) The final determination of any Claim pursuant to this Section 11.2,
including all related costs and expenses, shall be binding and conclusive
upon the Parties as to the validity or invalidity, as the case may be of
such Claim against the Indemnifying Party.
(5) If the Indemnifying Party does not assume control of a Claim as permitted
in Section 11.2(1), the Indemnified Party shall be entitled to make such
settlement of the Claim as in its sole discretion may appear advisable, and
such settlement or any other final determination of the Claim shall be
binding upon the Indemnifying Party.
(6) If there is more than one Indemnifying Party, the Indemnifying Parties
which face the greatest share of any liability for indemnification in
connection with the Claim shall be entitled to act on behalf of the
remaining Indemnifying Parties and all Indemnifying Parties in respect of
such Claim agree to be bound by their actions in connection therewith.
Section 11.3 Share Purchase Price and Purchase for Cancellation Price
Adjustment.
For greater certainty, the Shareholders and Purchasers agree that the
Share Vendors' Proportionate Share of any payment made pursuant to this Article
11 shall constitute and shall be treated by such parties as an adjustment to the
Share Purchase Price payable by Purchaser hereunder in respect of the Purchased
Shares and that the Purchase for Cancellation Shareholders' Proportionate Share
of any payment made pursuant to this Article 11 shall constitute and be treated
by such parties as an adjustment to the Purchase for Cancellation Price payable
by the Company pursuant to the Purchase for Cancellation contemplated hereby.
Section 11.4 Mitigation and Exclusive Remedies.
Nothing contained in this Agreement shall affect the obligation of a
Party seeking indemnification to take commercially reasonable steps to mitigate
its losses. The provisions of this Article 11 shall apply to any Claim for
breach of covenant, representation, warranty or other provision of this
Agreement (other than a Claim for specific performance or injunctive relief) and
all such Claims and recourses shall be subject to the limitations and other
provisions applicable thereto under this Article 11.
Section 11.5 One Recovery.
Any Indemnified Party shall not be entitled to double recovery for any
Claims even though they may have resulted from the breach of more than one of
the representations, warranties, agreements and covenants made by the
Indemnifying Party in this Agreement.
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Section 11.6 Directors/Officers.
Except in respect of any Claims arising hereunder or in connection with
the transactions contemplated hereby, effective the Share Purchase Closing Time,
each of the Company and the Purchaser hereby jointly and severally indemnifies
and saves harmless each Person who is then a current officer or director of the
Company or any Subsidiary from and against all Claims which may be made or
brought against any such Person arising out of or pertaining to acts or
omissions occurring at or prior to the Share Purchase Closing Time, other than
any Claims arising from the negligence, fraud, wilful misconduct, failure to act
honestly and in good faith with a view to the best interests of the Company or
failure to exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
Article 12
GENERAL
Section 12.1 Public Notices.
All public notices to third parties and all other publicity concerning
the transactions contemplated by this Agreement shall be jointly planned and
coordinated by the Company, the Shareholders and the Purchaser and no Party
shall act unilaterally in this regard without the prior approval of the other
Parties, such approval not to be unreasonably withheld, except:
(1) where required to do so by law or by the applicable regulations or policies
of any provincial or Canadian or other regulatory agency of competent
jurisdiction or any stock exchange in circumstances where prior
consultation with the other Parties is not practicable; and
(2) in the case of the Company's communication made to the Company's employees
affected by such transactions.
Section 12.2 Expenses.
The Shareholders and the Purchasers shall pay their respective legal,
accounting, and other professional advisory fees, costs and expenses incurred in
connection with the transactions contemplated herein and the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant to this Agreement and any other costs and expenses incurred
and, except as otherwise contemplated hereby, the Shareholders shall pay all
expenses relating to the Company and its Subsidiaries.
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Section 12.3 Notices.
Any notice, consent or approval required or permitted to be given in
connection with this Agreement (in this Section referred to as a "Notice") shall
be in writing and shall be sufficiently given if delivered (whether in person,
by courier service or other personal method of delivery), or if transmitted by
facsimile or e- mail:
(1) in the case of a Notice to any of the Shareholders, to the address
indicated on such Shareholder's Counterpart:
(2) in the case of a Notice to the Company to:
Lavalife Inc.
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: Chief Financial Officer
Attention: Secretary
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E- mail: ▇▇▇.▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇; ▇▇▇▇▇.▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(3) with a copy to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇, 1 First Canadian Place
Toronto ON M5X 1B8
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E- mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
(4) in the case of a Notice to the Purchasers to:
MemberWorks Incorporation
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E- mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
(5) with a copy to:
Stikeman Elliott LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E- mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Any Notice delivered or transmitted to a Party as provided above shall
be deemed to have been given and received on the day it is delivered or
transmitted, provided that it is delivered or transmitted on a Business Day
prior to 5:00 p.m. local time in the place of delivery or receipt. However, if
the Notice is delivered or transmitted after 5:00 p.m. local time or if such day
is not a Business Day then the Notice shall be deemed to have been given and
received on the next Business Day. Any Party may, from time to time, change its
address by giving Notice to the other Parties in accordance with the provisions
of this Section.
Section 12.4 Assignment.
The Purchaser shall be entitled, upon giving written notice to the
Shareholders at any time not less than five Business Days prior to the Closing
Time, to assign some or all of its rights and obligations under this Agreement
to any Affiliate of the Purchaser. To the extent of such assignment, such
assignee shall have and may exercise all the rights of the Purchaser under this
Agreement. Such assignment shall be on the basis that no assignment shall
release the Purchaser from liability for its obligations as Purchaser under this
Agreement and the Purchaser shall be and remain jointly and severally liable
with the assignee for all of the obligations of the Purchaser hereunder. In the
event of such an assignment, the Shareholders, the Company and such assignee
shall execute an agreement confirming such assignment and the assumption of
obligations contemplated in this Section and, upon execution and delivery of
such agreement to the Shareholders and the Company, any reference to the
Purchaser in this Agreement shall be deemed to refer to such assignee, to the
extent of such assignment. Except as hereinbefore provided, neither this
Agreement nor any benefits or burdens under this Agreement shall be assignable
by any Party without the prior written consent of the other Parties. Subject to
the foregoing, this Agreement shall enure to the benefit of and be binding upon
the Parties and their respective successors (including any successor by reason
of amalgamation of any Party) and permitted assigns.
Section 12.5 Amendment.
No amendment, supplement, modification or waiver or termination of this
Agreement and, unless otherwise specified, no consent or approval by any Party,
shall be binding unless executed in writing by the Party to be bound thereby.
Section 12.6 Further Assurances.
The Parties shall, with reasonable diligence, do all such things and
provide all such reasonable assurances as may be required to consummate the
transactions contemplated by this Agreement, and each Party shall provide such
further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closings provided that the
costs and expenses of any actions taken after the Closings at the request of a
Party shall be the responsibility of the requesting Party. For greater
certainty, the Purchaser shall cause the Share Purchaser to comply with all of
its obligations under this Agreement.
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Section 12.7 Execution and Counterparts.
This Agreement may be executed by the Parties in counterparts and may
be executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
Section 12.8 Disclosure on Schedules.
The Parties agree that disclosure of a fact or matter by the Purchaser
or the Shareholders in any Schedule attached hereto shall be sufficient
disclosure for purposes of all other Schedules attached hereto.
Section 12.9 Independent Legal Advice.
Each Shareholder acknowledges that he or it has been advised to obtain,
and that he or it has obtained or has been afforded the opportunity to obtain,
independent legal advice with respect to this Agreement and understands the
nature and consequences of this Agreement, including without limitation any tax
consequences.
Section 12.10 Release of Shareholder Claims.
Effective as of the Share Purchase Closing Time, each Shareholder
hereby remises, releases and forever discharges the Company and its employees,
officers, directors and shareholders from any and all actions, causes of action,
suits, covenants, contracts, claims and demands whatsoever, whether contingent
or otherwise, which as at the Share Purchase Closing Time he or it had, has or
thereafter can, shall or may have solely in his or its capacity as a shareholder
of the Company.
Section 12.11 Withholding.
Notwithstanding any provision in this Agreement but, for greater
certainty, subject to Section 3.16, the Purchasers and the Company are entitled
to withhold from any payment required to be made hereunder any and all Taxes or
other amounts required to be withheld by any Law and the Purchaser, Share
Purchaser and the Company, as the case may be, agree to remit such withheld
amounts to the appropriate Governmental Authority within the time required by
Law.
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IN WITNESS WHEREOF the Parties have executed this Agreement.
LAVALIFE INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇ ▇▇▇▇
Title: Chief Financial Officer
MEMBERWORKS INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President &
Chief Financial Officer
SHAREHOLDERS BY COUNTERPART