EXHIBIT 10.10
ROWECOM INC.
XXXX COMMUNICATIONS LTD.
AND
THE PURCHASERS SET FORTH ON SCHEDULE 2.1
STOCK PURCHASE AGREEMENT
Dated as of December 11, 1998
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE 1 INTERPRETATION 2
1.1 Defined Terms 2
1.2 Gender and Number 7
1.3 Headings, Etc. 7
1.4 Currency 7
1.5 Severability 7
1.6 Entire Agreement 8
1.7 Amendments 8
1.8 Waiver 8
1.9 Governing Law 8
1.10 Inclusion 8
1.11 Accounting Terms 8
1.12 Incorporation of Schedules and Exhibits 8
ARTICLE 2 PURCHASED SHARES 11
2.1 Purchase and Sale 11
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY AND OF ROWECAN 11
3.1 Representations and Warranties of the
Company and of RoweCan 11
3.2 Covenants of the Company and of RoweCan 26
3.3 Conduct of Business Prior to Closing 27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 27
4.1 Representations and Warranties of the Purchasers 27
ARTICLE 5 CONDITIONS OF CLOSING 29
5.1 Conditions for the Benefit of the Purchasers 29
ARTICLE 6 MISCELLANEOUS 31
6.1 Notices 31
6.2 Time of the Essence 31
6.3 Brokers 31
6.4 Third Party Beneficiaries 32
6.5 Survival of Representations, Warranties and
Covenants 32
6.6 Expenses 32
6.7 Enurement 32
6.8 Counterparts 32
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 11, 1998, is by and
among RoweCom Inc., a corporation incorporated under the laws of Delaware (the
"Company"), Xxxx Communications Ltd., a corporation incorporated under the laws
of the Province of Ontario ("RoweCan"), and the Purchasers listed on Schedule
2.1 hereto (each of whom individually is referred to herein as a "Purchaser" and
collectively referred to as the "Purchasers"). Unless otherwise indicated
herein, capitalized terms used herein are defined in Section 1.1 hereof.
PRELIMINARY STATEMENTS:
A. The Company has agreed to issue to the Purchasers and the Purchasers, in
reliance upon the representations and warranties of the Company and of
RoweCan contained herein and subject to certain conditions contained
herein, have agreed to take up and subscribe for an aggregate of 4,586,599
shares (the "Purchased Shares") of Class C Preferred Stock, $.01 par value,
of the Company (the "Class C Preferred Shares").
B. Simultaneously with the Closing, the Amended and Restated Shareholders'
Agreement, dated May 4, 1998, among the Company, Working Ventures Canadian
Fund Inc., a corporation incorporated under the laws of Canada ("WV") and
the Company's stockholders shall be amended and restated substantially in
the form of Exhibit A attached hereto (the "Second Amended Stockholders'
Agreement") and shall be entered into among the Purchasers, WV, the Company
and its stockholders.
C. Simultaneously with the execution of this Agreement, the Amended and
Restated Registration Rights Agreement, dated as of May 4, 1998, among
Highland Capital Partners III Limited Partnership, a limited partnership
organized under the laws of Delaware ("HCP"), Highland Entrepreneurs' Fund
III Limited Partnership, a limited partnership organized under the laws of
Delaware ("HEF"), Crystal Internet Venture Fund VI, L.P., a limited
partnership organized under the laws of Delaware ("CIVF"), Pai, Wei Xxxx
Xxxxx, an individual ("Xxxxx"), Fu Kuan Investment Corp., a corporation
incorporated under the laws of Taiwan ("FKIC"), Puretech Profits Limited
(BVI), a corporation incorporated under the laws of the British Virgin
Islands ("Puretech" and together with Xxxxx, FKIC, CIVF, HEF and HCP, the
"Class B Purchasers" and each a "Class B Purchaser") WV, RoweCan and the
Company shall be amended and restated substantially in the form of Exhibit
C attached hereto (the "Second Amended Registration Rights Agreement") and
shall be among the Purchasers, the Class B Purchasers, WV, the Company and
RoweCan.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Defined Terms. As used in this Agreement, the following terms have the
following meanings:
"Accounts Payable" means all accounts payable and accrued liabilities owed
by either of the Company or RoweCan in connection with the Business;
"Accounts Receivable" means all accounts receivable, notes receivable and
other debts due or accruing due to either of the Company or RoweCan in
connection with the Business;
"Agreement" means this stock purchase agreement and all schedules and
instruments in amendment or confirmation of it; "hereof", "hereto" and
"hereunder" and similar expressions mean and refer to this Agreement and not to
any particular Article, Section, Subsection or other subdivision; "Article",
"Section", "Subsection" or other subdivision of this Agreement followed by a
number means and refers to the specified Article, Section, Subsection or other
subdivision of this Agreement;
"Amended Articles of Incorporation" means the Articles of Incorporation of
RoweCan and the Articles of Amendment thereto;
"Amended RoweCan Shareholders' Agreement" means the Amended and Restated
Shareholders' Agreement, dated May 4, 1998, among the Company, WV, RoweCan and
Xxxxxx Xxxxx;
"Ancillary Agreements" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement including, without
limitation, the Second Amended Stockholders' Agreement and the Second Amended
Registration Rights Agreement, and the Amended RoweCan Shareholders' Agreement;
and "Ancillary Agreement" means any one of such agreements, certificates or
other instruments;
"Assets" means all property and assets of each of the Company and RoweCan
of every kind and wheresoever situated;
"Authorization" means, with respect to any Person, any authorization,
order, permit, approval, grant, license, consent, right, franchise, privilege,
certificate, judgment, writ, injunction, award, determination, direction,
decree, or by-law, rule or regulation of any Governmental Entity, whether or not
having the force of law, having jurisdiction over such Person;
"Benefit Plans" means all employee benefit plans relating to the employees
of each of the Company and RoweCan, including profit sharing, pension and other
deferred compensation arrangements, phantom stock option, stock option, employee
stock purchase, bonus, severance, retirement, health or insurance plans or
arrangement (oral or written);
"Books and Records" means all technical, business and financial and
accounting records, financial books and records of account, books, data,
reports, files, lists, drawings, plans, logs, briefs, customer and supplier
lists, deeds, certificates, contracts, surveys, title opinions or any other
documentation and information in any form whatsoever (including written,
printed, electronic or computer printout form) relating to the Business;
"Business" means, collectively, the Company's Business and the RoweCan
Business;
"Business Day" means any day other than Saturday, Sunday or a day on which
chartered banks are closed for business in New York, New York;
"Claim" means any claim or liability of any nature whatsoever, including
any demand, obligation, liability, debt, cause of action, suit, proceeding,
judgment, award, assessment or reassessment;
"Class A Exchange Option" means the right of WV to exchange its RoweCan
Class A Preferred Shares for Class A-1 Preferred Shares as set forth in the
Second Amended Stockholders' Agreement;
"Class B Exchange Option" means the right of WV to exchange its RoweCan
Class B Preferred Shares for Class B Preferred Shares as set forth in the Second
Amended Stockholders' Agreement;
"Class A Preferred Shares" means the shares of Class A Preferred Stock,
$.01 par value, of the Company;
"Class A-1 Preferred Shares" means the shares of Class A-1 Preferred Stock,
$.01 par value, of the Company;
"Class B Preferred Shares" means the shares of Class B Preferred Stock,
$.01 par value, of the Company;
"Class C Preferred Shares" has the meaning ascribed thereto in the
preliminary statements;
"Closing" means the completion of the transaction of purchase and sale of
the
Purchased Shares as contemplated in this Agreement;
"Closing Date" means, with respect to the Closing, any time prior to
December 11, 1998 or such other time as may be specified by all of the
Purchasers;
"Common Shares" means the shares of Common Stock, $.01 par value, of the
Company;
"Company's Business" means the business presently and heretofore carried on
by the Company, consisting of the provision of secure electronic commerce
products and services;
"Consents" means the consents of contracting parties to any Contract or
Lease to the transactions contemplated in this Agreement, and "Consent" means
any one of such Consents;
"Contracts" means all contracts to which the Company or RoweCan is a party
including all contracts, leases of personal property, licenses, undertakings,
engagements or commitments of any nature, written or oral, to which either the
Company or RoweCan is entitled in connection with its Business including,
without limitation, unfilled purchase orders received by either the Company or
RoweCan, forward commitments by either the Company or RoweCan for supplies or
materials entered into in the ordinary course of the Business, all restrictive
agreements and negative covenant agreements which either the Company or RoweCan
may have with its employees, past or present and the Contracts listed in
Schedule 3.1(p);
"Corporate Records" means the corporate records of each of the Company and
RoweCan, including (i) all articles or similar constating documents, operating
agreements, by-laws, any stockholders' agreements and any amendments thereto;
(ii) all minutes of meetings and resolutions of stockholders, directors and any
committee thereof; and (iii) the stock certificate books, register of
stockholders, register of transfers and register of directors;
"Encumbrances" means any mortgage, lien, pledge, assignment, charge,
security interest, title retention agreement, hypothec, levy, execution,
seizure, attachment, garnishment, right of distress or other claim in respect of
property of any nature or kind whatsoever howsoever arising (whether consensual,
statutory or arising by operation of law or otherwise) and includes arrangements
known as sale and lease-back, sale and buy-back and sale with an option to buy-
back;
"Environmental Laws" means all applicable federal, provincial, state,
municipal or local laws, statutes, regulations or ordinances relating to the
environment, occupational safety, health, product liability and transportation;
"ERISA" means the Employee Retirement Income Security Act of 1974, and any
regulations issued pursuant thereto, as amended or replaced and as in effect
from time to time;
"Financial Statements" means, collectively, the balance sheets for each of
the Company and RoweCan for the fiscal years ending December 31, 1996 and
December 31, 1997 and the accompanying statements of income, retained earnings
and cash flows for the years then ended and all notes thereto as reported upon
by PricewaterhouseCoopers (or any of its predecessors);
"GAAP" means at any time, generally accepted accounting principles from
time to time approved by, in the case of RoweCan, the Canadian Institute of
Chartered Accountants, or any successor institute, and in the case of the
Company, the Financial Accounting Standards Board or any successor institute,
applicable as at the date on which a given calculation is made or required to be
made in accordance with generally accepted accounting principles;
"Governmental Entity" means (i) any multinational, federal, provincial,
state, municipal, local or other governmental or public department, court,
commission, board, bureau, agency or instrumentality, domestic or foreign; (ii)
any subdivision, agent, commission, board, or authority of any of the foregoing;
or (iii) any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing;
"Hazardous Substance" means any substance which is or is deemed to be,
alone or in any combination, hazardous, hazardous waste, toxic, radioactive, a
pollutant, a deleterious substance, a contaminant or a source of pollution or
contamination under any Environmental Law, whether or not such substance is
defined as hazardous under the Environmental Law;
"Intellectual Properties" means all right, title, interest and benefit of
each of the Company and RoweCan in and to any registered or unregistered
worldwide trademarks, trade or brand names, service marks, copyrights, copyright
applications, designs, inventions, patents, patent applications, patent rights,
licenses, sub-licenses, franchises, formulas, processes, know-how, technology,
computer rights and other intellectual or industrial property of the Company or
of RoweCan or pertaining to the Business, including the property listed in
Schedule 3.1(q);
"Interim Financial Statements" means, collectively, the unaudited balance
sheets of the Company and of RoweCan as at September 30, 1998 and the
accompanying statement of income for the nine-month period then ended;
"Laws" means all statutes, codes, ordinances, decrees, rules, regulations,
municipal by- laws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, decisions, rulings or awards,
policies, voluntary restraints, guidelines, or any provisions of the foregoing,
including general principles of common and civil law and equity, binding on or
affecting the Person referred to in the context in which such word is used; and
"Law" means any one of them;
"Leased Properties" means the real properties forming the subject matter of
the Leases at the municipal addresses listed in Schedule 3.1(o);
"Leases" means all of the leases and subleases of real property to which
either the Company or RoweCan is a party, as listed and described in Schedule
3.1(o);
"Loss" means any loss whatsoever, including expenses, costs, damages,
penalties, fines, charges, claims, demands, liabilities, interest and any and
all legal fees and disbursements;
"Owned Properties" means, collectively, the land and premises listed on
Schedule 3.1(k) and the buildings, improvements and fixtures thereon;
"Parties" means the Purchasers, the Company, RoweCan and any other person
who may become a party to this Agreement; and "Party" means any one of them;
"Permitted Encumbrances" means (i) Encumbrances for taxes, assessments or
governmental charges or levies not yet due and delinquent; (ii) easements,
rights-of-way or other minor imperfections of title which do not, individually
or in the aggregate, materially detract from the value of or impair the use or
marketability of any real property; (iii) restrictions on the transfer of shares
imposed by the Second Amended Certificate of Incorporation or the Amended
Articles of Incorporation and (iv) Encumbrances disclosed in Schedule 3.1(k);
"Person" means an individual, partnership, corporation, limited liability
company, trust, unincorporated association, joint venture or other entity or
Governmental Entity, and pronouns have a similarly extended meaning;
"Purchased Shares" has the meaning ascribed thereto in the preliminary
statements;
"Purchasers" has the meaning ascribed thereto in the preamble hereto;
"RoweCan Business" means the business presently and heretofore carried on
by RoweCan consisting of the provision of secure electronic commerce products
and services;
"RoweCan Common Shares" means the Common Shares of RoweCan;
"RoweCan Class A Preferred Shares" means the Class A Preferred Shares of
RoweCan;
"RoweCan Class B Preferred Shares" means the Class B Preferred Shares of
RoweCan;
"Second Amended Certificate of Incorporation" means the Second Restated and
Amended Certificate of Incorporation of the Company in the form attached hereto
as Exhibit B;
"Second Amended Registration Rights Agreement" has the meaning ascribed
thereto in the preliminary statements;
"Second Amended Stockholders' Agreement" has the meaning ascribed thereto
in the preliminary statements;
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholder Loans" means any indebtedness owing by RoweCan or the Company,
directly or indirectly, to any of their shareholders, or to a person controlled
individually or in concert by their shareholders;
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, association or other business entity in
respect of which that Person owns securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors, partnership
committee, board of managers or trustees or other managerial
body thereof, whether directly or indirectly through one or more of the other
Subsidiaries of that Person or a combination thereof; and
"Time of Closing" means 10:00 a.m. (Hartford, Connecticut time) on the
Closing Date or such later time as the Closing may occur.
1.2 Gender and Number. Any reference in this Agreement to gender shall include
all genders, and words importing the singular number only shall include the
plural and vice versa.
1.3 Headings, Etc. The provision of a table of contents, the division of this
Agreement into Articles, Sections, Subsections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in the construction or interpretation of this Agreement.
1.4 Currency. All references in this Agreement or any Ancillary Agreement to
dollars are expressed in United States currency.
1.5 Severability. Any Article, Section, Subsection or other subdivision of
this Agreement or any Ancillary Agreement or any other provision of this
Agreement or any Ancillary Agreement which is, or becomes, illegal, invalid or
unenforceable shall be severed from this Agreement and any Ancillary Agreement
and be ineffective to the extent of such illegality, invalidity or
unenforceability and shall not affect or impair the remaining provisions hereof
or thereof.
1.6 Entire Agreement. This Agreement together with the Ancillary Agreements
constitutes the entire agreement between the Parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties. Except as set forth
in this Agreement, the Second Amended Registration Rights Agreement and the
Second Amended Stockholders' Agreement, there are no representations,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connection with the subject matter of this
Agreement. If there is any conflict between the provisions of this Agreement
and the provisions of any Ancillary Agreement, the provisions of this Agreement
shall govern.
1.7 Amendments. This Agreement may be amended, modified or supplemented only
by a written agreement signed by the Company and Purchasers holding or
purchasing hereunder at least seventy-five percent (75%) of the Class C
Preferred Shares.
1.8 Waiver. No waiver of any of the provisions of this Agreement or any
Ancillary Agreement shall be deemed to constitute a waiver of any other
provision (whether or not similar), nor shall such waiver constitute a waiver or
continuing waiver unless otherwise expressly provided in writing duly executed
by the Party to be bound thereby; provided, however, that with respect to rights
of the holders of the Class C Preferred Shares, the written consent of the
holders of seventy-five percent (75%)of the Class C Preferred Shares shall be
binding upon all of the holders of the Class C Preferred Shares.
1.9 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to the choice of law provisions
thereof.
1.10 Inclusion. Where the word "including" or "includes" is used in this
Agreement it means including (or includes) without limitation.
1.11 Accounting Terms. All accounting terms not specifically defined in this
Agreement shall be construed in accordance with GAAP.
1.12 Incorporation of Schedules and Exhibits. The following are the schedules
and exhibits attached to and incorporated in this Agreement:
Schedules
Schedule 2.1 - Schedule of Purchasers
Schedule 3.1(c) - Jurisdictions in which RoweCan Business Carried On
Schedule 3.1(d) - Capitalization Schedule
Schedule 3.1(e) - Options
Schedule 3.1(f) - Dividends and Distributions
Schedule 3.1(k) - Owned Properties and Permitted Encumbrances
Schedule 3.1(o) - Leases and Leased Properties
Schedule 3.1(p) - Contracts
Schedule 3.1(q) - Intellectual Property Rights
Schedule 3.1(s) - Financial Statements as at December 31, 1996 and December 31,
1997 and Interim Financial Statements as at September 30, 1998
Schedule 3.1(t) - Accounts Payable and Accrued Liabilities
Schedule 3.1(u) - Cumulative Tax Losses
Schedule 3.1(z) - Environmental Compliance
Schedule 3.1(aa) - Authorizations
Schedule 3.1(ab)(iii) - Contingent Liabilities/Indebtedness
Schedule 3.1(ac)(iv) - Collective Agreements
Schedule 3.1(ac)(vii) - Employee Matters and Designated Employees
Schedule 3.1(ac)(viii)- Employment Agreements
Schedule 3.1(ac)(xi) - Benefit Plans
Schedule 3.1(ad) - Insurance Policies
Schedule 3.1(ae) - Litigation
Schedule 3.1(af) - Shareholder Loans
Schedule 3.1(ai) - Conduct of Business
Schedule 3.2 - Source and Use of Funds
Schedule 5.1(g) - Persons Entering Into Noncompetition Agreements
Exhibits
Exhibit A - Second Amended Stockholders' Agreement
Exhibit B - Second Amended Certificate of Incorporation
Exhibit C - Second Amended Registration Rights Agreement
Exhibit D - ERISA Certificate
ARTICLE 2
PURCHASED SHARES
2.1 Purchase and Sale. Subject to the terms and conditions hereof, each
Purchaser hereby subscribes for and agrees to take up the number of the
Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1 at a
price of $3.407 per Class C Preferred Share, for the aggregate subscription
price set forth opposite such Purchaser's name on Schedule 2.1.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND OF ROWECAN
3.1 Representations and Warranties of the Company and of RoweCan. Each of the
Company and RoweCan jointly and severally represents and warrants as follows to
the Purchasers and acknowledges and confirms that the Purchasers are relying
upon such representations and warranties in connection with the purchase by the
Purchasers of the Purchased Shares:
Corporate Matters Relating to the Company and RoweCan
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(a) Due Incorporation and Existence. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the
State of Delaware. RoweCan is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Ontario.
RoweCan is a "private company" within the meaning of the Securities Act
(Ontario).
(b) Corporate Power. Each of the Company and RoweCan has all requisite
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corporate power and authority to own its property and to carry on its
business as now being conducted by it and as presently proposed to be
conducted by it.
(c) Extra-Territorial Qualification. The Company is duly qualified, licensed
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or registered to carry on business in the State of Delaware and in the
Commonwealth of Massachusetts. RoweCan is duly qualified, licensed or
registered to carry on business in the Province of Ontario pursuant to its
charter and in the jurisdictions listed in Schedule 3.1(c). The
jurisdictions listed in Schedule 3.1(c) include all jurisdictions (i) in
which the nature of the Assets or the Business make such qualifications
necessary except where the failure to be so qualified would not have a
material adverse effect on the affairs, assets, liabilities, business or
prospects, operations or conditions of either the Company or RoweCan or
their respective Business, financial or otherwise, or (ii) where either the
Company or RoweCan owns or leases any material properties or assets or
conducts any material business.
(d) Authorized Capital. The authorized capital of the Company consists of
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34,000,000 Common Shares, 5,000,000 Class A Preferred Shares, 5,000,000
Class A-1 Preferred Shares,
8,000,000 Class B Preferred Shares and 5,000,000 Class C Preferred Shares,
of which at the date hereof, and after giving effect to the issue of the
Purchased Shares, 4,372,382 Common Shares (and no more), 161,289 Class A
Preferred Shares (and no more), 0 Class A-1 Preferred Shares (and no more),
5,140,370 Class B Preferred Shares (and no more), and 4,586,599 Class C
Preferred Shares (and no more) shall be owned of record and beneficially as
reflected on Schedule 3.1(d) and shall be duly authorized, validly issued,
fully paid and nonassessable, and shall be issued in conformity with all
applicable state and federal securities laws. The authorized capital of
RoweCan consists of an unlimited number of RoweCan Common Shares, an
unlimited number of RoweCan Class A Preferred Shares and an unlimited
number of RoweCan Class B Preferred Shares of which, at the date hereof,
1,611,569 RoweCan Common Shares (and no more), 1,611,568 RoweCan Class A
Preferred Shares (and no more) and 1,186,240 RoweCan Class B Preferred
Shares (and no more) shall be owned of record and beneficially as reflected
on Schedule 3.1(d) and shall be duly authorized, validly issued, fully paid
and nonassessable, and shall be issued in conformity with all applicable
provincial, state and federal securities laws.
(e) Options, etc. Except for the Purchasers' rights hereunder, and under the
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Class A Exchange Option with respect to the exchange of the RoweCan Class A
Preferred Shares into Class A-1 Preferred Shares and under the Class B
Exchange Option with respect to the exchange of the RoweCan Class B
Preferred Shares into Class B Preferred Shares, and except as disclosed in
Schedule 3.1(e), no Person has any option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement or any
right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an option, warrant, right, call, commitment, conversion right,
right of exchange or other agreement (i) for the purchase from the Company
or from RoweCan of any of the Purchased Shares; or (ii) for the purchase,
subscription, allotment or issuance of any of the unissued shares in the
capital of the Company or of RoweCan or of any securities of the Company or
of RoweCan.
(f) Dividends and Distributions. Except as disclosed on Schedule 3.1(f), since
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the date of the Financial Statements, neither the Company nor RoweCan has,
directly or indirectly, declared or paid any dividends or declared or made
any other distribution on any of its shares of any class and has not,
directly or indirectly, redeemed, purchased or otherwise acquired any of
its shares of any class or agreed to do so.
(g) Subsidiaries. The Company has no Subsidiaries other than RoweCan or
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agreements of any nature to acquire any Subsidiary or acquire or lease any
other business operations. RoweCan has no Subsidiaries and has no
agreements of any nature to acquire any Subsidiary or acquire or lease any
other business operations.
(h) Corporate Records.
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(i) The Corporate Records of the Company are complete and accurate and all
corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all Laws and with the Second
Amended Certificate of Incorporation and by-laws of the Company, and
without limiting the generality of the foregoing, (i) the minute books
contain complete and accurate minutes of all meetings of the directors
and stockholders of the Company held since the
incorporation of the Company, and all such meetings were duly called
and held; (ii) the minute books contain all written resolutions passed
by the directors and stockholders of the Company and all such
resolutions were duly passed; (iii) the stock certificate books,
register of stockholders and register of transfers of the Company are
complete and accurate, and all such transfers have been duly completed
and approved and any exigible tax payable in connection with the
transfer of any securities of the Company has been duly paid; and (iv)
the registers of directors and officers are complete and accurate and
all former and present directors and officers of the Company were duly
elected or appointed, as the case may be.
(ii) The Corporate Records of RoweCan are complete and accurate and all
corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all Laws and with the Amended
Articles of Incorporation and by-laws of RoweCan, and without limiting
the generality of the foregoing: (i) the minute books contain complete
and accurate minutes of all meetings of the directors and shareholders
of RoweCan held since the incorporation of RoweCan, and all such
meetings were duly called and held; (ii) the minute books contain all
written resolutions passed by the directors and shareholders of
RoweCan and all such resolutions were duly passed; (iii) the share
certificate books, register of shareholders and register of transfers
of RoweCan are complete and accurate, and all such transfers have been
duly completed and approved and any exigible tax payable in connection
with the transfer of any securities of RoweCan has been duly paid; and
(iv) the registers of directors and officers are complete and accurate
and all former and present directors and officers of RoweCan were duly
elected or appointed, as the case may be.
(i) Validity of Agreement. Each of the Company and RoweCan has all necessary
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corporate power to enter into and perform its obligations under this
Agreement and the Ancillary Agreements to which it is a party. The
execution and delivery and performance by each of the Company and RoweCan
of this Agreement and the Ancillary Agreements to which each is a party and
the consummation of the transactions contemplated thereby:
(i) have been duly authorized by all necessary corporate action on the
part of the Company and of RoweCan; and
(ii) do not (or would not with the giving of notice, the lapse of time or
the happening of any other event or condition) result in a violation
or a breach of, or a default under or give rise to a right of
termination, greater rights or increased costs, amendment or
cancellation or the acceleration of any obligation under (A) any
charter or by-law instruments of the Company or of RoweCan; (B) any
Contracts, instruments or other agreements to which either of the
Company or RoweCan is a party or by which either of them is bound; or
(C) any Laws applicable to either of the Company or RoweCan.
Each of this Agreement and any Ancillary Agreement to which either the Company
or RoweCan is a party constitutes legal, valid and binding obligations of the
Company or of RoweCan enforceable against each of them in accordance with its
terms, subject only to the following qualifications:
(i) an order of specific performance and an injunction are discretionary
remedies and, in particular, may not be available where damages are
considered an adequate remedy; and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally
affecting the enforceability of creditors' rights.
Except as set forth in the Second Amended Stockholders' Agreement and the
Amended RoweCan Shareholders' Agreement, no stockholder has any preemptive
rights or rights of first refusal by reason of or in connection with the
issuance of the Purchased Shares. The Purchased Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable, and will be free of any Encumbrances. The Common Shares
issuable upon conversion of the Purchased Shares have been duly and validly
reserved (and are in addition to any other shares reserved for any other
purpose) and are not subject to any preemptive rights or rights of first refusal
and, upon such issuance, will be validly issued, fully paid and nonassessable.
(j) Restrictive Documents. Neither the Company nor RoweCan is subject to, or a
---------------------
party to, any charter or by-law restriction, any Law, any Claim, any
Contract, instrument or other agreement, any Encumbrance or any other
restriction of any kind or character which would prevent the consummation
of the transactions contemplated by this Agreement or any Ancillary
Agreement or compliance by the Company or of RoweCan with the terms,
conditions and provisions hereof or thereof or the continued operation of
the Business by the Company or of RoweCan after the date hereof on
substantially the same basis as heretofore operated or which would restrict
the ability of the Purchasers to acquire any of the Purchased Shares, in
each case except for:
(i) the necessity of obtaining the Consents; and
(ii) the necessity of passing the appropriate resolutions of the directors
and shareholders of the Company to permit the transfer of the
Purchased Shares.
Matters Relating to the Assets
------------------------------
(k) Title to the Assets. Except as set forth on Schedule 3.1(k), each of the
-------------------
Company and RoweCan has good title to all of its Assets and good and
marketable title in fee simple to its Owned Properties. Each of the
Company and RoweCan has legal and beneficial ownership of its
Assets free and clear of all Encumbrances, except for Permitted
Encumbrances. Each of the Company and RoweCan has a valid leasehold title
to all of its Leases.
(l) No Options, etc. No Person has any written or oral agreement, option,
----------------
understanding or commitment, or any right or privilege capable of becoming
such for the purchase from the Company or of RoweCan of any of the Assets,
other than pursuant to purchase orders accepted by the Company or RoweCan
in the ordinary course of their Business.
(m) Accounts Receivable. All Accounts Receivable are bona fide, and, subject
-------------------
to an allowance for doubtful accounts taken in accordance with GAAP,
collectible without set-off or counterclaim.
(n) Real Property.
-------------
(i) Neither the Company nor RoweCan is the owner of, or under any
agreement or option to own, any real property or any interest therein,
other than the Leases; and
(ii) All of the buildings, improvements and fixtures on the Owned
Properties and the Leased Properties (A) were constructed in
accordance with all Laws and with all Authorizations validly issued
pursuant thereto; (B) are in good operating condition and in a state
of good maintenance and repair; and (C) are adequate and suitable for
the purposes for which they are presently being used; and with respect
to each (and to the Owned Properties and the Leased Properties), the
owner has adequate rights of ingress and egress for the operation of
the Business in the ordinary course. None of the Owned Properties,
the Leased Properties or the buildings and fixtures thereon, or the
use, operation or maintenance thereof for the purpose of carrying on
the Business, violates in any material respect, any restrictive
covenant or any provision of any Law or encroaches on any property
owned by any other Person. No condemnation or expropriation
proceeding is pending or, to the best knowledge of each of the Company
and RoweCan, threatened which would preclude or impair the use of any
such property or any part thereof for the purposes for which it is
currently used. There are no outstanding work orders with respect to
any of the Assets from or required by any municipality, police
department, fire department, sanitation, health or safety authorities
or from any other Person and there are no matters under discussion
with or by the Company or RoweCan relating to work orders.
(o) Leases. Each Lease is in good standing, creates a good and valid leasehold
------
estate in the Leased Properties thereby demised and is in full force and
effect without amendment thereto, except as disclosed in Schedule 3.1(o).
With respect to each Lease, (i) all rents and additional rents due to the
date hereof have been paid, (ii) neither the lessor, to the best of the
knowledge of the Company or RoweCan, nor the lessee is in default
thereunder, (iii) no waiver, indulgence or postponement of the lessee's
obligations thereunder has been granted by the lessor, (iv) there exists no
event of default or event, occurrence, condition or act (including the
purchase of the Purchased Shares hereunder) which, with the giving of
notice, the lapse of time or the happening
of any other event or condition, would become a default under such Lease,
(v) neither the Company nor RoweCan has violated any of the terms or
conditions under any such Lease in any material respect, and (vi) to the
best knowledge of the Company and of RoweCan, all of the covenants to be
performed by any other party under any such Lease have been fully
performed. Each of the Leased Properties is in a state of good maintenance
and repair, normal wear and tear excepted, and is adequate and suitable for
the purposes for which it is currently being used and is presently proposed
to be used. True, correct and complete copies of the Leases have been
provided to the Purchasers. Schedule 3.1(o) contains a true, correct and
complete list of all of the Leases, together with a brief and accurate
description of each Lease, including a description of the leased premises,
the term of the Lease, the rental payments under the Lease (specifying any
breakdown of base rent and additional rents), any rights of renewal and the
term thereof, and any restrictions on assignment.
(p) No Breach of Contracts. Each of the Contracts listed in Schedule 3.1(p) is
----------------------
in full force and effect, unamended, and there exists no default or event
of default or event, occurrence, condition or act (including the purchase
of the Purchased Shares hereunder) which, with the giving of notice, the
lapse of time or the happening of any other event or condition, would
become a default or event of default thereunder, except for the necessity
of obtaining the Consents, which Consents are listed in Schedule 3.1(p).
Neither the Company nor RoweCan has violated or breached, in any material
respect, any of the terms or conditions of any Contract, and to the best of
the knowledge of the Company and of RoweCan, all the covenants to be
performed by any other party thereto have been fully performed. True,
correct and complete copies of all Contracts listed in Schedule 3.1(p) have
been delivered to the Purchasers.
(q) Intellectual Property Rights. The Intellectual Properties used in whole or
----------------------------
in part in, or required for the carrying on of, the Business in the manner
heretofore carried on are set out in Schedule 3.1(q) (other than "off the
shelf" or standard products) and are owned by, or validly licensed to, the
Company or to RoweCan as indicated in Schedule 3.1(q). Except as otherwise
expressly stated in Schedule 3.1(q), the Company (i) has the exclusive
right to use such Intellectual Properties, (ii) is the owner of record of
such Intellectual Properties, and (iii) has not conveyed, assigned or
encumbered any of them. All registrations and filings necessary to
preserve the rights of the Company and of RoweCan in the Intellectual
Properties have been made and are in good standing. Except as disclosed on
Schedule 3.1(q), to the best of the knowledge of each of the Company and
RoweCan the conduct of the Business does not infringe upon the intellectual
properties of any other Person. Except as disclosed on Schedule 3.1(q),
there are no outstanding options, licenses or agreements of any kind
relating to the Intellectual Properties, nor is the Company or RoweCan
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and
processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard
products. Except as disclosed on Schedule 3.1(q), neither the Company nor
RoweCan has received any communications alleging that the Company or
RoweCan has violated or, by conducting its business as presently proposed,
would violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person
or entity. Except as disclosed on Schedule 3.1(q), neither the Company nor
RoweCan is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court of
administrative agency, that would materially interfere with their duties to
the Company or RoweCan or that would conflict with the Company's or
RoweCan's Business as presently proposed to be conducted. Except as
disclosed on Schedule 3.1(q), neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's and RoweCan's Businesses by
the employees of the Company, nor the conduct of the Company's and
RoweCan's Businesses as presently proposed, will, to the Company's or
RoweCan's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any Contract,
covenant or instrument under which any employee of the Company or RoweCan
is now obligated. Except as disclosed on Schedule 3.1(q), neither the
Company nor RoweCan believes it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or RoweCan, except
for inventions, trade secrets or proprietary information that have been
assigned to the Company or RoweCan employing such employee. Except as
disclosed on Schedule 3.1(q), each employee of the Company or RoweCan has
entered into an agreement with the Company or RoweCan, as the case may be,
assigning all of such employee's rights to Intellectual Property created in
the employ of the Company or RoweCan, as the case may be, to the Company or
RoweCan, respectively, and covenanting to maintain the confidentiality of
all Intellectual Property of the Company and RoweCan and to use the
Company's and RoweCan's Intellectual Property only as authorized by the
Company or RoweCan, respectively, and not for the benefit of employee or
any third party.
(r) Condition of Equipment. All tangible personal property forming part of the
----------------------
Assets, including furniture, and office and computer equipment, whether
owned or leased, are in good operating condition and are in a state of good
repair and maintenance having regard to the age and use thereof, reasonable
wear and tear and obsolescence excepted.
Financial Matters
-----------------
(s) Financial Statements. The Financial Statements and the Interim Financial
--------------------
Statements have been prepared in accordance with GAAP applied on a basis
consistent with those of previous fiscal years and present fairly:
(i) the Assets, liabilities (whether denied, absolute, contingent or
otherwise) and financial position of each of the Company and RoweCan
as at the respective dates of the relevant statements; and
(ii) the sales and earnings of each of the Company and RoweCan during the
periods covered thereby.
The financial statements to be provided to the Purchasers pursuant to Section
3.2(2) shall contain no material variances from the financial information
previously provided to the Purchasers.
As at the date hereof, there are no liabilities, absolute or contingent of the
Company and RoweCan save and except for liabilities set forth in the Interim
Financial Statements, liabilities set forth in the Contracts listed in Schedule
3.1(p) or in Contracts which, by the terms of Section 3.1 (ab) are not required
to be disclosed, liabilities incurred in the ordinary course since the date of
the Interim Financial Statements and liabilities set forth in the Accounts
Payable and Accrued Liabilities listed in Schedule 3.1(t).
True, correct and complete copies of the Financial Statements and the Interim
Financial Statements are attached as Schedule 3.1(s).
(t) Accounts Payable and Accrued Liabilities. The aggregate amount of Accounts
----------------------------------------
Payable for each of the Company and RoweCan as of September 30, 1998 does
not exceed the amount set out in Schedule 3.1(t).
(u) Taxes. As of the date hereof, each of RoweCan and the Company has filed or
-----
caused to be filed, within the times and within the manner prescribed by
Law, all federal, provincial, local, state and foreign tax returns and tax
reports which are required to be filed by or with respect to each of them.
The information contained in such returns and reports is correct and
complete and such returns and reports reflect accurately all liability for
taxes of the Company and of RoweCan for the periods covered thereby. As of
the date hereof, all federal, provincial, local, state and foreign income,
profits, franchise, sales, use, occupancy, excise and other taxes and
assessments (including interest and penalties) that are or may become
payable by or due from each of the Company and RoweCan have been fully paid
or fully disclosed and fully provided for in the Books and Records, the
Financial Statements and the Interim Financial Statements. The federal
income tax liability of RoweCan has been assessed for all fiscal years to
and including its fiscal year ended December 31, 1997. As of the date
hereof, no examination of any tax return of either of the Company or
RoweCan is currently in progress, there are no outstanding agreements or
waivers extending the statutory period providing for an extension of time
with respect to the assessment or re-assessment of tax or the filing of any
tax return by, or any payment of any tax by either of the Company or
RoweCan, and there are no Claims now threatened or pending against either
of the Company or RoweCan in respect of taxes or any matters under
discussion with any Governmental Entity relating to taxes. As of the date
hereof, each of the Company and RoweCan has withheld from each payment made
by it the amount of all taxes and other deductions required to be withheld
therefrom and has paid the same to the proper taxing or other authority
within the time prescribed under any Law. The cumulative tax losses set
forth on Schedule 3.1(u) are true, correct and complete for the Company as
at the date hereof. The Company and RoweCan have withheld or collected
from each payment made to each of their employees, the amount of all taxes
(including, but not limited to, state income taxes, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act
taxes, and any Canadian withholding taxes) required to be withheld or
collected therefrom, and has paid the same to the proper tax receiving
officers or authorized depositaries.
Particular Matters Relating to RoweCan's Business
-------------------------------------------------
(v) Eligibility.
-----------
(i) RoweCan is a taxable Canadian corporation within the meaning of the
Income Tax Act (Canada);
(ii) RoweCan carries on no business other than the Business;
(iii) RoweCan has been in active business (as such term is defined in the
Income Tax Act (Canada)) for at least two years or, where RoweCan
has been carrying on business for less than two years, throughout
such shorter period of time;
(iv) at least 50% of RoweCan's full-time employees are employed
in Ontario;
(v) at least 50% of the wages and salaries paid by RoweCan are
paid to employees whose ordinary place of employment is a permanent
establishment of RoweCan located in Ontario;
(vi) not less than 90% of the fair market value of the property of
RoweCan is attributable to property used in RoweCan's Business;
(vii) RoweCan and all corporations related to it (as the term "related" is
defined in the Income Tax Act (Canada)) have 500 or fewer employees;
and
(viii) the carrying value of the total assets (determined in accordance
with GAAP on a consolidated or combined basis, where applicable) of
RoweCan and all corporations related to it (determined in accordance
with the Income Tax Act (Canada)) together with the amount of the
aggregate subscription price for the Purchased Shares does not
exceed $50,000,000.
(w) Sufficiency of Assets. The Assets include all rights and property
---------------------
necessary to the conduct of the Business by the Company and RoweCan
substantially in the manner currently carried on by each of them and
presently proposed to be conducted by them.
(x) No Material Adverse Change. Since the date of the Financial Statements
--------------------------
there has been no change in the affairs, assets, liabilities, business,
prospects, operations or conditions of any of the Company or RoweCan or the
Business, financial or otherwise, whether arising as a result of any
legislative or regulatory change, revocation of any license or right to do
business, fire, explosion, accident, casualty, labor trouble, flood,
drought, riot, storm, condemnation, act of God, public force or otherwise,
which has materially adversely affected or which will materially adversely
affect any of the Company, RoweCan or the Business.
(y) Compliance with Laws. Each of the Company and RoweCan is conducting its
--------------------
Business in compliance with all applicable Laws of each jurisdiction in
which its Business is carried on, except for acts of non-compliance which
in the aggregate are not material.
(z) Environmental Disclosure.
------------------------
(i) Each of the Company and RoweCan has at all times received, handled,
generated, used, stored, deposited, labelled, treated, documented,
transported and disposed of any Hazardous Substances in compliance
with all applicable Environmental Laws, approvals or Authorizations,
except as set forth in Schedule 3.1(z).
(ii) None of the Owned Properties or Leased Properties has ever been used
by any Person as a landfill site, a waste disposal site or as a
location for the disposal of Hazardous Substance or waste and has
ever had urea formaldehyde foam insulation, asbestos, PCB waste,
radioactive substances or aboveground or underground storage
vessels, active or abandoned, located thereon.
(iii) Neither the Company nor RoweCan has been required by any
Governmental Entity to:
(A) alter its properties in a material way in order to be in
compliance with Environmental Laws;
(B) remove any material from any of the Leased Properties; or
(C) perform any remedial studies, investigations, closure,
decommissioning, rehabilitation, restoration and post-remedial
studies, investigations or monitoring on, about or in connection
with any of the Leased Properties.
(iv) The Assets of the Company and of RoweCan are capable of being
operated at maximum production levels in accordance with
Environmental Laws.
(aa) Authorizations. Each of the Company and RoweCan owns, holds, possesses or
--------------
lawfully uses in the operation of the Business all Authorizations which are
in any manner necessary for it to conduct the Business as presently or
previously conducted or for the ownership and use of the Assets, free and
clear of all Encumbrances and in compliance with all Laws applicable
thereto. All such Authorizations are listed and described in Schedule
3.1(aa) and neither the Company nor RoweCan is in default, nor has it
received any notice of any Claim in default, with respect to any such
Authorizations. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need for the Company or RoweCan
to comply with any special qualification or procedures or to pay any
amounts other than routine filing fees. None of such Authorizations will
be adversely affected by the consummation of the transactions contemplated
hereby, except as set forth in Schedule 3.1(aa). Neither the Company or
RoweCan nor any affiliate of the Company or of RoweCan owns or has any
proprietary, financial or other interests (direct or indirect) in any
Authorization which the Company or RoweCan owns, possesses or uses in the
operation of the Business as now or previously conducted.
(ab) Material Contracts. Schedule 3.1(p) contains a list of all Contracts of
------------------
the Company and of RoweCan which involve the expenditure of more than
$25,000 or which have a term left to run of more than 2 years (the
"Material Contracts"). Except for the Benefit Plans set forth in
Schedule 3.1(ac)(xi), the Leases set forth in Schedule 3.1(o), the
Intellectual Property Rights set forth in Schedule 3.1(q) and the Contracts
set forth in Schedule 3.1(p), neither the Company nor RoweCan is a party to
or bound by:
(i) any Benefit Plans or any collective agreements;
(ii) any agreement or commitment relating to the borrowing of money;
(iii) any guarantee or other contingent liability in respect of any
indebtedness or other liability or obligation of any other Person
(other than the endorsement of negotiable instruments for collection
in the ordinary course of the Business) other than those disclosed
on Schedule 3.1(ab)(iii);
(iv) any contract or commitment limiting the freedom of the Company or of
RoweCan to engage in any line of business or to compete with any
other Person;
(v) any licensing, distribution or other contract or commitment relating
to Intellectual Properties used by either the Company or of RoweCan
in the conduct of its Business;
(vi) any agreement or commitment not entered into in the ordinary course
of the Business; and
(vii) any agreement or arrangement with any Person with whom the Company
or RoweCan (or their present or former directors, officers and
employees) does not deal at arm's length within the meaning of the
Income Tax Act (Canada).
(ac) Employees.
---------
(i) Each of the Company and RoweCan is in compliance with all Laws
respecting employment and employment practices, terms and conditions
of employment, pay equity and wages and hours and has not and is not
engaged in any unfair labor practice;
(ii) No unfair labor practice, complaint or grievance against either the
Company or RoweCan is pending or, to the best of the knowledge of
the Company and RoweCan, threatened before any labor relations board
or similar Governmental Entity with respect to the Business;
(iii) There is no labor strike, dispute, slowdown or stoppage actually
pending or involving or, to the best of the knowledge of the Company
and of RoweCan, threatened against either of the Company or RoweCan
with respect to its Business;
(iv) No union representation question exists respecting the employees of
either the Company or RoweCan in connection with its Business and no
collective
bargaining agreement is in place or currently being negotiated by
the Company or by RoweCan except as disclosed in Schedule
3.1(ac)(iv);
(v) No grievance which might have an adverse effect upon either of the
Company or RoweCan or the conduct of its Business exists, no
arbitration proceeding arising out of or under any collective
agreement is pending, and no claim therefor has been asserted;
(vi) No notice has been received by the Company or RoweCan of any
complaint which has not been resolved filed by any of its employees
claiming that RoweCan or the Company has violated any applicable
employee or human rights or similar legislation, or of any
complaints or proceedings which have not been resolved of any kind
involving the Company or RoweCan or, to the Company's or RoweCan's
knowledge, after due inquiry, any of the employees of the Company or
RoweCan before any labor relations board. There are no outstanding
orders or charges against the Company or RoweCan under any
applicable health and safety legislation. All levies, assessments
and penalties made against the Company or RoweCan pursuant to any
applicable workers' compensation legislation have been paid by the
Company or RoweCan, as applicable, and the Company and RoweCan have
not been reassessed under any such legislation except such as has
been resolved;
(vii) Schedule 3.1(ac)(vii) contains a complete list of all permanent and
full time employees of each of the Company and RoweCan, their
salaries and wage rates, bonus arrangements, benefits, positions and
length of service. Schedule 3.1(ac)(vii) provides a correct and
complete list showing all amounts due or accrued due for all salary,
wages, bonuses, commissions, vacation with pay, pension benefits or
other employee benefits relating to all employees;
(viii) Except as set forth in Schedule 3.1(ac)(viii), no employee of the
Company or of RoweCan has any agreement as to length of notice
required to terminate his or her employment, other than such as
results by law from the employment of an employee without agreement
as to such notice or as to length of employment;
(ix) All vacation pay (including all banked vacation pay), bonuses,
commissions and other employee benefit payments are reflected and
have been accrued in the Books and Records of the Company and of
RoweCan, as applicable;
(x) The aggregate amount of salaries, pensions, bonuses, or other
remuneration of any nature paid or payable by each of the Company
and RoweCan to or for its present or former officers, directors,
shareholders, employees or Persons not dealing at arm's length (as
such term is defined in the Income Tax Act (Canada)) with them
during the year ended on the date of the Financial Statements, are
as set out in Schedule 3.1(ac)(vii) and, since that date, such
payments have been made at no greater rates;
(xi) The only benefit plans existing in respect of the employees of the
Company and of RoweCan are the Benefit Plans disclosed on Schedule
3.1(ac)(xi). True, correct and complete copies of all written
Benefit Plans and related documentation have been provided to the
Purchasers and any oral or written Benefit Plans are accurately
described on Schedule 3.1(ac)(xi). The Benefit Plans are duly
registered where required by, and are in good standing under, all
applicable Laws. All required employer and employee contributions
and premiums under the Benefit Plans to the date hereof have been
made, the respective fund or funds established under the Benefit
Plans are funded in accordance with applicable Laws, and no past
service funding liabilities exist thereunder;
(xii) None of the Benefit Plans, nor any trust created thereunder, nor any
trustee or administrator thereof, has engaged in any "prohibited
transaction" as defined in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code. The 401k plan of the Company (the "401k
Plan") is (A) "qualified" within the meaning of Section 401(a) of
the Internal Revenue Code; (B) no facts or circumstances exist which
would adversely affect the qualified status of the 401k Plan; and
(C) the trust established pursuant to the 401k Plan is tax exempt
under section 501(a) of the Internal Revenue Code. No matter
relating to any of the Benefit Plans is pending before any court or
government agency. Each of the Benefit Plans which is group health
plans, as defined in Section 4980(B) of the Internal Revenue Code,
is in compliance with the requirements of Internal Revenue Code
Section 4980(B) and Part 6 of Subtitle B of Title I of ERISA; and
(xiii) No payments have been made or authorized since the date of the
Financial Statements by either the Company or RoweCan to its
officers, directors, former directors, shareholders or employees or
to any Person not dealing at arm's length (as such term is defined
in the Income Tax Act (Canada)) with any of the foregoing, except in
the ordinary course of the Business and at the regular rates payable
to them of salary, pension, bonuses, rents or other remuneration of
any nature.
(ad) Insurance. Each of the Company and RoweCan maintains insurance policies
---------
with responsible insurers as are appropriate to the Business and Assets in
such amounts and against such risks as are customarily carried and insured
against by prudent owners of comparable businesses and assets. All such
policies of insurance coverage are in full force and effect. Neither the
Company nor RoweCan is in default with respect to any of the provisions
contained in any such insurance policy and has not failed to give any
notice or present any claim under any such insurance policy in due and
timely fashion. A summary of such policies is contained in Schedule
3.1(ad).
(ae) Litigation. Other than as set forth in Schedule 3.1(ae) there is no
----------
action, suit or proceeding, at law or in equity, by any Person, nor any
arbitration, administrative or other
proceeding by or before (or, to the best of the knowledge of the Company
and of RoweCan, any investigation by) any Governmental Entity pending, or,
to the best of the knowledge of the Company and of RoweCan, threatened
against or affecting either of the Company or RoweCan or any of its
properties or rights or any of the Assets, and neither the Company nor
RoweCan knows of any valid basis for any such action, suit, proceeding,
arbitration or investigation. Neither the Company nor RoweCan is subject to
any judgment, order or decree entered in any lawsuit or proceeding.
(af) Shareholder Loans. Schedule 3.1(af) contains a true, correct and complete
-----------------
list of all Shareholder Loans including the amount owing and the terms
applicable thereto.
(ag) No Insolvency Proceeding. Neither the Company nor RoweCan has made any
------------------------
assignment for the benefit of its creditors nor has any receiving order
been made against it under any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws, nor has any petition for such
an order been served upon it, nor has it attempted to take the benefit of
any legislation with respect to financially distressed debtors, nor, after
giving effect to this financing, is an insolvent person within the meaning
of the Bankruptcy and Insolvency Act (Canada) or under any applicable
bankruptcy legislation.
(ah) Full Disclosure. Neither this Agreement nor any Ancillary Agreement or any
---------------
certificate or statement in writing which has been supplied by or on behalf
of the Company or RoweCan or by any of the directors, officers or employees
of the Company or of RoweCan in connection with the transactions
contemplated hereby contains any untrue statement of a material fact, or
omits any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact
known to the Company or to RoweCan which materially and adversely affects
the affairs, businesses, prospects, operations or conditions of the Company
or of RoweCan, financial or otherwise, or the Business or the Assets, which
has not been set forth in this Agreement.
(ai) Conduct of Business. Except as disclosed on Schedule 3.1(ai), since the
-------------------
date of the Financial Statements the Business has been carried on in the
ordinary course and neither the Company nor RoweCan has, other than
disclosed in writing to the Purchasers:
(i) incurred any liability, obligation or expenditure of any nature
(whether accrued, absolute, contingent or otherwise) or committed to
make or perform any capital expenditures or maintenance or repair
projects, except for (A) liabilities, obligations or expenditures
incurred or made in the ordinary course of the Business or deferred
income taxes or income tax credits; and (B) capital expenditures or
maintenance or repair projects that do not exceed $25,000 on a per-
item basis or $100,000 in the aggregate;
(ii) made any bonus or profit sharing distribution or payment of any
kind;
(iii) drawn down on any operating line, increased its indebtedness for
borrowed money or made any loan to any Person;
(iv) written off as uncollectible any notes or Accounts Receivable
exceeding $25,000 in the aggregate;
(v) cancelled or waived any claims or rights of the Company or of
RoweCan having a value greater than $25,000;
(vi) granted any increase in the rate of wages, salaries, bonuses or
other remuneration to any executive or other employee;
(vii) entered into any transaction with a Person not dealing at arm's
length;
(viii) made any change in any method of accounting or auditing practice;
(ix) agreed, whether or not in writing, to do any of the foregoing.
(aj) Small Business Concern. The Company is a "small business concern" within
----------------------
the meaning of the federal Small Business Investment Act of 1958, as
amended, and the regulations thereunder, and Part 121 of Title 13 of the
United States Code of Federal Regulations. The information set forth on
SBA Forms 480, 652 and 1031 furnished by the Company to the Purchasers that
are Small Business Investment Companies ("SBICs") is complete and correct
in all material respects. Furthermore, as long as any SBIC is an investor
in the Company, the Company will provide the SBIC any information that is
reasonably requested by the SBA. The Company will provide SBA examiners
access to its books and records for SBA audit purposes in accordance with
normal SBA procedures.
3.2 Covenants of the Company and of RoweCan.
(1) The Company hereby covenants that in addition to the restrictions
contained in the Second Amended Stockholders' Agreement, it will not use and
does not intend to use the proceeds received from the Purchasers as the
subscription price for the purpose of investment in land (except land that is
incidental and ancillary to the Company's Business).
(2) Unless the Company shall have closed a Qualified IPO (as defined in the
Second Amended Certificate of Incorporation) within ninety days from the date
hereof, each of the Company and/or RoweCan shall provide the audited
consolidated and unconsolidated financial statements for the year ended December
31, 1998 to the Purchasers no later than ninety days from the date hereof.
(3) The Company shall use funds received from the Purchasers in
satisfaction of the subscription price substantially in the manner set forth in
Schedule 3.2.
3.3 Conduct of Business Prior to Closing. Prior to the Closing Date, each of
the Company and RoweCan shall conduct the Business in the ordinary course
thereof unless the Company or
RoweCan, as the case may be, has been given the prior written consent of all of
the Purchasers to do otherwise. Without limiting the generality of the
foregoing:
(a) Each of the Company and RoweCan will continue to maintain and service
the Assets used in the conduct of the Business in the same manner as has been
its consistent past practice.
(b) Each of the Company and RoweCan shall use its best efforts to keep
available the services of the present employees and agents of the Business and
to maintain the relations and goodwill with the suppliers, customers,
distributors and any others having business relations with the Business.
(c) Each of the Company and RoweCan shall use its best efforts to conduct
the Business in such a manner that on the Closing Date the representations and
warranties of the Corporation and of RoweCom contained in this Agreement shall
be true, correct and complete as if such representations and warranties were
made on and as of such date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
4.1 Representations and Warranties of the Purchasers. Each Purchaser
represents and warrants, severally and not jointly, as follows to the Company
and to RoweCan and acknowledges and confirms that the Company and RoweCan are
relying on such representations and warranties in connection with the sale by
the Company and by RoweCan of the Purchased Shares:
(a) Due Incorporation and Existence. Such Purchaser, if not a natural person,
-------------------------------
is duly formed or organized, validly existing and in good standing under
the laws of the jurisdiction of its organization or formation.
(b) Validity of Agreement. Such Purchaser has all requisite power and
---------------------
authority to enter into and to perform its obligations under this Agreement
and the Ancillary Agreements to which it is a party. The execution,
delivery and performance by such Purchaser of this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of such Purchaser. This Agreement and the
Ancillary Agreements to which it is a party constitute legal, valid and
binding obligations of such Purchaser enforceable against it in accordance
with their respective terms, subject only to the following qualifications:
(i) an order of specific performance and an injunction are discretionary
remedies and, in particular, may not be available where damages are
considered an adequate remedy; and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally
affecting the enforceability of creditors' rights.
Such Purchaser is an "accredited investor" within the meaning of that term as
defined in Rule 501(a) promulgated under the Securities Act.
(c) Restrictive Documents. Such Purchaser is not subject to, or a party to,
---------------------
any charter or by- law restriction, any Law, any Claim, any contract or
instrument, any Encumbrance or any other restriction of any kind or
character which would prevent consummation of the transactions contemplated
by this Agreement.
(d) Investment. The Purchased Shares purchased by such Purchaser will be
----------
acquired for investment for such Purchaser's own account and not with a
view to the distribution of any part thereof. Such Purchaser does not have
any contract, undertaking, agreement or arrangement with any Person to
sell, transfer or grant participations to such Person or to any third
person, with respect to any of the Purchased Shares.
(e) Restricted Securities. Such Purchaser understands that the Purchased
---------------------
Shares may not be sold, transferred or otherwise disposed of without
registration under the Securities Act, or an exemption therefrom, and that
in the absence of an effective registration statement covering the
Purchased Shares or an available exemption from registration under the
Securities Act, the Purchased Shares must be held indefinitely. In the
absence of an effective registration statement covering the Purchased
Shares such Purchaser will sell, transfer, or otherwise dispose of the
Purchased Shares only in a manner consistent with its representations and
agreements set forth herein.
(f) Financial Condition. Such Purchaser's financial condition is such that it
-------------------
is able to bear the risk of holding the Purchased Shares for an indefinite
period of time and can bear the loss of its entire investment in its
Purchased Shares.
(g) Experience. Such Purchaser has such knowledge and experience in financial
----------
and business matters and in making high risk investments of this type that
it is capable of evaluating the merits and risks of the purchase of its
Purchased Shares.
(h) Receipt of Information. Such Purchaser has been furnished access to the
----------------------
business records of the Company and such additional information and
documents as such Purchaser has requested and has been afforded an
opportunity to ask questions of and receive answers from representatives of
the Company concerning the terms and conditions of this Agreement, the
purchase of the Purchased Shares, the Company's business, operations,
market potential, capitalization, financial condition and prospects, and
all other matters deemed relevant by such Purchaser, without prejudice to
the representations and warranties of the Company in this Agreement.
(i) Brokerage. No broker, agent or other intermediary acted for such Purchaser
---------
in connection with the sale of the Purchased Shares and such Purchaser
shall indemnify and save harmless the Company and the other Purchasers from
and against any Claims whatsoever for any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary
who purports to act or have acted for such Purchaser.
ARTICLE 5
CONDITIONS OF CLOSING
5.1 Conditions for the Benefit of the Purchasers. The purchase and sale of the
Purchased Shares is subject to the following conditions to be fulfilled or
performed at or prior to the Closing Date, which conditions are for the
exclusive benefit of the Purchasers and may be waived in whole or in part by
agreement of all of the Purchasers:
(a) Truth of Representations and Warranties of each of RoweCan and the Company.
--------------------------------------------------------------------------
The representations and warranties of each of RoweCan and the Company
contained in this Agreement or in any Ancillary Agreement shall be true and
correct as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of such date.
(b) Performance of Covenants by each of RoweCan and the Company. RoweCan and
-----------------------------------------------------------
the Company shall have fulfilled or complied with all covenants contained
in Section 3.2 to be performed or caused to be performed by them at or
prior to the Time of Closing.
(c) Second Amended Stockholders' Agreement. Each of the Company, the
--------------------------------------
Purchasers and the other stockholders of the Company shall have entered
into the Second Amended Stockholders' Agreement.
(d) Second Amended Registration Rights Agreement. Each of the Company,
--------------------------------------------
RoweCan, the Purchasers and the other holders of registration rights from
the Company shall have entered into the Second Amended and Restated
Registration Rights Agreement.
(e) Deliveries. The Company or RoweCan, as applicable, shall have delivered or
----------
caused to be delivered to each of the Purchasers the following in form and
substance satisfactory to the Purchasers:
(i) share certificates representing the Purchased Shares duly made out
in the name of the Purchasers, together with evidence satisfactory
to the Purchasers that the Purchasers have been duly entered upon
the books of the Company as the holders of the Purchased Shares;
(ii) certified copies of (A) the charter documents and the by-laws of the
Company and of RoweCan; (B) all resolutions of the stockholders, the
board of directors or any duly authorized committee thereof, of the
Company and of RoweCan approving the entering into of this Agreement
and the Ancillary Agreements and the completion of all transactions
contemplated hereunder and thereunder; and (C) all other instruments
evidencing necessary corporate action of the Company and of RoweCan
and of Authorizations, if any, with respect to such matters;
(iii) certificates of the Secretary or an Assistant Secretary of the
Company and of RoweCan certifying the names and true signatures of
their respective officers authorized to sign this Agreement and the
other instruments to be delivered hereunder;
(iv) a certificate of status, compliance, good standing or like
certificate with respect to the Company and RoweCan, issued by
appropriate government officials of the jurisdiction of their
incorporation and of each jurisdiction in which the Company and
RoweCan carries on business as listed in Schedule 3.1(c);
(v) certificates of the President of the Company and and of RoweCan
attesting to the matters set forth in subsections 5.1(a), (b) and
(h);
(vi) an opinion of counsel to the Company and to RoweCan, in form and
substance reasonably satisfactory to the Purchasers and their
counsel, and such other documents as the Purchasers may request;
(vii) the Company's current and complete business plan; and
(viii) the certificate executed by the Company in the form of Exhibit D.
(f) Second Amended Certificate of Incorporation. The Company shall have
-------------------------------------------
obtained the requisite board of director and stockholder approval to amend
and restate its certificate of incorporation in the form of the Second
Amended Certificate of Incorporation and shall have filed the Second
Amended Certificate of Incorporation with the Secretary of State of the
State of Delaware.
(g) Noncompetition Agreements. The Company shall have entered into
-------------------------
Noncompetition Agreements, reasonably acceptable to the Purchasers, with
those Persons set forth on Schedule 5.1(g).
(h) No Material Adverse Change. Neither the Company nor RoweCan shall have
--------------------------
experienced a material adverse change since the date hereof.
ARTICLE 6
MISCELLANEOUS
6.1 Notices. Any notice, request, consent or other communication hereunder to
any party will be in writing and will be either personally delivered, or sent by
certified mail, return receipt requested, or sent by facsimile, confirmation of
receipt requested, or sent by reputable overnight courier service (charges
prepaid) to the address set forth below such party's signature on the signature
pages hereto. Notices will be deemed to have been given hereunder when
delivered personally; five business days after deposit in the mail; when
confirmation of receipt is received; and one day after deposit with a reputable
overnight courier service.
6.2 Time of the Essence. Time shall be of the essence of this Agreement.
6.3 Brokers. It is understood and agreed that no broker, agent or other
intermediary acted for the Company or for RoweCan in connection with the sale of
the Purchased Shares and the Company and RoweCan shall indemnify and save
harmless the Purchasers from and against any Claims whatsoever for any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for the Company or
for RoweCan.
6.4 Third Party Beneficiaries. Each Party hereto intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
Person, other than the Parties hereto, and no Person, other than the Parties
hereto, shall be entitled to rely on the provisions hereof in any action, suit,
proceeding, hearing or other forum.
6.5 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants contained herein or contained in any
Ancillary Agreement, or made in writing by any Person in connection herewith,
will survive the execution and delivery of this Agreement, regardless of any
investigation made by the Company or any Purchaser or on their behalf.
6.6 Expenses. All fees and expenses of legal counsel and accounting firms
engaged by the Purchasers incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Company regardless of
whether the transactions contemplated hereby are consummated; provided, however,
that the Company shall not be required to pay for any fees of legal counsel and
accounting firms engaged by the Purchasers in excess of $30,000, plus all out-
of-pocket expenses incurred by such counsel or accounting firms.
6.7 Enurement. This Agreement shall enure to the benefit of and be binding
upon the Parties, their successors and any permitted assigns.
6.8 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same agreement.
[Signature pages follow.]
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
ROWECOM INC.
By: /s/ Dr. Xxxxxxx Xxxx
-------------------------------------
Name:
Title:
By: /s/ Xxxxx Xxxxxxxxx, Xx.
-------------------------------------
Name:
Title:
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Dr. Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xx.
Facsimile: (000) 000-0000
WORKING VENTURES CANADIAN FUND INC.
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------
Name:
Title:
000 Xxxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxxx
CRYSTAL INTERNET VENTURE FUND, L.P.
By: Crystal Venture, Ltd.
Title: General Partner
By: /s/ Xxxxxx Xxxxxxx
-------------------------------
Name:
Title: Vice President
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Xxxxxxx
HIGHLAND CAPITAL PARTNERS III
LIMITED PARTNERSHIP
By: Highland Management Partners III
Limited Partnership
Title: General Partner
By: /s/ Xxxxxx Nova
---------------------------------------
Name:
Title:
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxx Nova
HIGHLAND ENTREPRENEURS' FUND III
LIMITED PARTNERSHIP
By: HEF III LLC
Title: General Partner
By: /s/ Xxxxxx Nova
---------------------------------------
Name:
Title:
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn:
AXIOM VENTURE PARTNERS II
LIMITED PARTNERSHIP
By Axiom Venture Associates II Limited Liability
Company, its General Partner
By: /s/ Xxx XxXxx
---------------------------------------
Name:
Title:
CityPlace II - 17th Floor
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxx XxXxx
ZERO STAGE CAPITAL VI, L.P.
By Zero Stage Capital Associates VI, LLC, its
General Partner
By: /s/ Xxxxxxx Xxxx
--------------------------------------
Name: Xxxxxxx Xxxx
Title: Managing Member
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxx
[ADDITIONAL INVESTORS]
