EXHIBIT 4.1
SHARE PURCHASE AGREEMENT
DATED AS OF MARCH 5, 2001,
AMONG
EXFO ELECTRO-OPTICAL ENGINEERING, INC.,
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
AND
EFOS CORPORATION
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT (this "AGREEMENT") dated as of ▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇: EXFO ELECTRO-OPTICAL ENGINEERING INC., a corporation
governed by the laws of Canada;
(the "PURCHASER")
AND: ▇▇▇▇ ▇▇▇▇▇▇▇, domiciled and resident at _________
-----------------------------------------------;
AND: ▇▇▇▇▇ ▇▇▇▇▇▇, domiciled and resident at _________
-----------------------------------------------;
AND: EFOS CORPORATION, a corporation governed under the
laws of Ontario;
(the "VENDOR")
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Vendor desires to sell to the Purchaser, and Purchaser desires to
purchase from the Vendor, all of the issued and outstanding shares of Efos Inc.
("OPCO") (the "OPCO SHARES").
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS.
Whenever used in this Agreement, the following words and terms shall
have the meanings set out below:
(a) "ACCOUNTS PAYABLE" means all amounts due and owing by Opco to
traders, suppliers and other persons in the ordinary course of
business;
(b) "ACCOUNTS RECEIVABLE" means any and all 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 Opco including any refunds and rebates,
and the benefit of all security (including cash deposits),
guarantees and other collateral held by Opco;
3
(c) "ACCRUED LIABILITIES" means any and all accrued liabilities of
Opco incurred in the ordinary course of business, including
accruals for vacation pay and customer rebates;
(d) "AFFILIATE" and "ASSOCIATE" have the respective meaning given
to such terms in the CBCA;
(e) "AGREEMENT" means this Share Purchase Agreement, including all
schedules, and all instruments supplementing or amending or
confirming this Agreement and references to "ARTICLE" or
"SECTION" mean and refer to the specified Article or Section
of this Agreement;
(f) "ARM'S LENGTH" means arm's length as defined in the INCOME TAX
ACT (Canada);
(g) "ASSET CONSIDERATION" has the meaning ascribed to it in
Section 1.1(hhh) (a);
(h) "AUDITED FINANCIAL STATEMENTS" has the meaning ascribed to it
in Section 3.8;
(i) "BENEFIT PLANS" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or
unregistered to which Opco is a party or by which it is bound
or under which Opco has, or will have, any liability or
contingent liability, relating to Pension Plans, Insurance
Plans or Compensation Plans, with respect to any of its
Employees or former employees (or any dependents or
beneficiaries of any such Employees or former employees),
individuals working on contract with Opco or other individuals
providing services to it of a kind normally provided by
employees or eligible dependents of such persons;
(j) "BOOKS AND RECORDS" means all books and records of Opco
including financial, corporate, operations and sales books,
records, books of account, sales and purchase 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;
(k) "BUSINESS" means the research, development, manufacturing,
marketing and servicing of light-based systems used to
photopolymerize or photoactivate materials such as adhesives
coatings, sealants and drugs used in industry and medicine;
(l) "BUSINESS DAY" means a day, other than a Saturday or Sunday,
on which the principal commercial banks located in the City of
Toronto, Ontario are open for business during normal banking
hours;
4
(m) "CANADIAN DOCUMENTS" has the meaning ascribed to it in Section
5.8;
(n) "CASH CONSIDERATION" has the meaning ascribed to it in Section
2.2;
(o) "CBCA" means the CANADA BUSINESS CORPORATIONS ACT;
(p) "CLAIMS" means any claim, demand, action, cause of action,
damage, loss, cost, liability or expense, including reasonable
professional fees and all costs incurred in investigating or
pursuing any of the foregoing or any proceeding relating to
any of the foregoing;
(q) "CLOSING" means the completion of the sale to and purchase by
the Purchaser of the Opco Shares under this Agreement;
(r) "CLOSING BALANCE SHEET" means the audited financial statements
of Opco at the Closing Date prepared in accordance with GAAP
except as otherwise provided for in this Agreement;
(s) "CLOSING DATE" has the meaning ascribed to it in Section 2.3;
(t) "COMPENSATION PLANS" means any and all employment benefits of
Opco relating to bonus, 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;
(u) "CONTAMINANT" means any substance or material that is
prohibited, controlled or regulated under any Environmental
Laws;
(v) "CONTRACTS" means all contracts, licences, leases, agreements,
commitments, undertakings, letters of intent, entitlements and
engagements of Opco, as the case may be, and includes all
quotations, orders or tenders for contracts which remain open
for acceptance and any manufacturers' or suppliers' warranty,
guarantee or commitment (express or implied);
(w) "DUE DILIGENCE INVESTIGATION" has the meaning ascribed to it
in Section 7.4;
(x) "EMPLOYEE BENEFIT PLAN" means any plan, program, agreement or
arrangement of Opco involving direct or indirect compensation,
including without limitation, insurance coverage, severance
benefits, disability, life or health benefits, pension,
deferred compensation, bonuses, stock options, stock or other
forms of incentive compensation or post-retirement
compensation covering employees of Opco;
5
(y) "EMPLOYEES" means all persons employed or retained by Opco, as
the case may be, including those employees on long-term
disability leave or other absence;
(z) "ENCUMBRANCES" means any pledge, lien, charge, security
interest, lease, title retention agreement, mortgage,
restriction, development or similar agreement, easement,
right-of-way, title defect, option or adverse claim, hypothec,
privilege, transfer of property in stock, servitude,
conditional sales contract or encumbrance of any kind or
character whatsoever;
(aa) "ENVIRONMENTAL LAWS" means all common, civil, federal,
provincial, territorial, regional, municipal or local laws
applicable in Canada which relate to the protection of the
environment, health and safety, or Hazardous Substances
contained in statutes or regulations or in written policies,
guidelines, orders, directives or notices which have the force
of law or permits, approvals or court or other tribunal orders
having jurisdiction in Canada over Opco, its assets and the
Business;
(bb) "ESCROW AGREEMENT" has the meaning ascribed to it in Section
2.6;
(cc) "ESCROW FUND" has the meaning ascribed to it in Section 2.6;
(dd) "FINANCIAL STATEMENTS" has the meaning ascribed to it in
Section 3.8;
(ee) "GAAP" means Canadian generally accepted accounting principles
as recommended from time to time in the Handbook of the
Canadian Institute of Chartered Accountants;
(ff) "GUARANTORS" means ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇;
(gg) "GOODWILL" means the goodwill of Opco, and information and
documents relevant thereto including lists of customers and
suppliers, credit information and research materials;
(hh) "GOVERNMENTAL AUTHORITY" means any governmental or regulatory
authority, body, agency or department, whether foreign or
domestic federal, provincial or municipal;
(ii) "HAZARDOUS SUBSTANCES" means any Contaminant or pollutant or
any substance that when released to the natural environment is
likely to cause at some immediate or future time, material
harm or degradation to the natural environment or material
risk to human health and, without restricting the generality
of the foregoing, Hazardous Substances includes any pollutant,
contaminant, hazardous waste or dangerous goods as defined by
the Environmental Laws;
(jj) "INDEMNITEE" has the meaning ascribed to it in Section 6.4(a);
6
(kk) "INDEMNITOR" has the meaning ascribed to it in Section 6.4(a);
(ll) "INSURANCE PLANS" means any and all employment benefits
relating to disability or wage continuation during periods of
absence from work (including short term disability, long term
disability and workers compensation), hospitalization, health,
medical or dental treatments or expenses, life 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;
(mm) "INTERIM FINANCIAL STATEMENTS" has the meaning ascribed to it
in Section 3.8;
(nn) "INVENTORIES" means all inventories of goods of every kind and
nature and wheresoever situated owned by Opco on the Closing
Date relating to the Business including without limitation,
raw materials, work in process, finished goods and all other
materials and supplies on hand or in transit to be used or
consumed in the production of goods or services by the
Business.
(oo) "INTELLECTUAL PROPERTY RIGHTS" shall mean all proprietary
rights in and to (a) trademarks, service marks, brand names,
certification marks, trade dress, assumed names, trade names
and other indications of origin; (b) patents and invention
disclosures; (c) trade secrets and other confidential or
non-public business information, including ideas, formulas,
compositions, discoveries and improvements, know-how,
manufacturing and production processes and techniques, and
research and development information (whether patentable or
not); drawings, specifications, designs, plans, proposals and
technical data; business and marketing plans and customers and
supplier lists and information; (d) writings and other
copyrightable works of authorship, including computer
programs, data bases and documentation therefor, and all
copyrights to any of the foregoing; (e) mask works; (f) moral
rights; (g) any similar intellectual property or proprietary
rights; (h) registrations of, and applications to register,
any of the foregoing with any governmental authority and any
renewals or extensions thereof; and (i) any claims or causes
of action arising out of or related to any infringement or
misappropriation of any of the foregoing, in each case in any
jurisdiction;
(pp) "IRS" has the meaning ascribed to it in Section 6.6(c);
(qq) "KNOWLEDGE" has the meaning ascribed to it in Section 11.11;
(rr) "LAWS" means all applicable laws, by-laws, rules, regulations,
orders, ordinances, protocols, codes, guidelines, policies,
notices, directions and judgments or other requirements of any
Governmental Authorities;
(ss) "LOCK-UP AGREEMENT" means the lock-up agreement annexed hereto
as Schedule 8.2(j);
7
(tt) "MATERIAL ADVERSE EFFECT" means the effect of a Material
Adverse Change;
(uu) "MATERIAL ADVERSE CHANGE" in respect of any Person means any
change, effect, event, occurrence or state of facts (or any
development that has had or is reasonably likely to have any
change or effect) that is materially adverse to the business,
financial condition or results of operations of the Person and
its Subsidiaries, taken as a whole, PROVIDED, HOWEVER, any
adverse change, effect or circumstance (i) primarily arising
out of or resulting primarily from actions contemplated by the
parties hereto in connection with this Agreement, (ii)
resulting from economic factors affecting the economy as a
whole or (iii) resulting from factors generally affecting the
specific markets in which the Person and its Subsidiaries
compete shall not be deemed in themselves, either alone or in
combination, to constitute, and shall not be taken into
account in determining whether there has been, a Material
Adverse Effect of the Person;
(vv) "MATERIAL CLIENTS" means those clients identified by the
Purchaser as important clients of Opco, as set forth in
Schedule 1.1(vv);
(ww) "NEWCO" has the meaning ascribed to in Schedule 1.1(iii);
(xx) "NET WORTH OF THE BUSINESS" means shareholders' equity of Opco
as set forth in the Closing Balance Sheet;
(yy) "NON-COMPETE PERIOD" has the meaning ascribed to it in Section
9.3;
(zz) "OPCO" means Efos Inc., the company currently carrying on the
Business and any predecessor and successor thereof;
(aaa) "OPCO CONTRACTS" has the meaning ascribed to it in Section
3.16;
(bbb) "OPCO INTELLECTUAL PROPERTY" has the meaning ascribed to it in
Section 3.12;
(ccc) "OPCO SHARES" means collectively 100% of the issued and
outstanding shares of Efos Inc.;
(ddd) "PENSION PLANS" means any and all benefits relating to
retirement or retirement savings including, without
limitation, pension plans, pensions or supplemental pensions,
registered retirement savings plans, "registered pension
plans" (as defined in the Tax Act) and "retirement
compensation arrangements" (as defined in the Tax Act);
(eee) "PERMITS" means all permits, licenses, certificates,
approvals, authorizations, registrations or the like
attainable from or required by any Governmental Authorities
which are material and are, under applicable law, necessary
for the conduct of the Business or the utilization by Opco of
its assets;
8
(fff) "PERMITTED ENCUMBRANCES" means the Encumbrances listed in
Schedule 1.1(fff);
(ggg) "PERSON" means any individual, sole proprietorship,
corporation, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust,
body corporate, Governmental Authorities, and a natural person
in such person's capacity as trustee, executor, administrator
or other legal representative;
(hhh) "PRIOR ASSET TRANSACTIONS" means collectively the transactions
which shall occur prior to the Closing:
(a) the execution of an asset purchase agreement pursuant
to which the Purchaser will purchase some or all of
the Opco Intellectual Property for a total amount to
be agreed to by the Purchaser and the Vendor not
exceeding US$25,000,000 (the "ASSET CONSIDERATION")
payable in cash by Purchaser to Opco. Such agreement
shall be satisfactory to the Purchaser and the Vendor
and shall contain the usual representations and
warranties found in agreements to acquire
intellectual property; and
(b) the declaration and payment of dividends (regular
dividends and capital dividends) by Opco to the
Vendor in the amount equal to the after tax amount of
the Asset Consideration. For the purposes hereof "the
after tax amount" shall be equal to the Asset
Consideration multiplied by one (1) minus the
effective corporate combined federal and Ontario tax
rate in respect of the non-refundable taxes
applicable to the Prior Asset Transactions. The Asset
Consideration shall not be reduced by any
depreciation, losses or any other deduction. The
taxable dividend paid will include an amount equal to
any refundable dividend tax on-hand (as defined in
the INCOME TAX ACT (Canada)) refundable to Opco
resulting from such dividend (which taxable dividend
should be equal to the after tax amount less the
capital dividend paid out of the proceeds of the
Prior Asset Transactions).
(iii) "PRIOR CORPORATE TRANSACTIONS" means the transactions which
shall occur prior to the Closing as described in Schedule
1.1(iii);
(jjj) "PUBLIC OFFERING" has the meaning ascribed to it in Section
9.4;
(kkk) "PURCHASE PRICE" has the meaning ascribed to it in Section
2.1;
(lll) "PURCHASER AUDITED FINANCIAL STATEMENTS" has the meaning
ascribed to it in Section 5.8;
(mmm) "PURCHASER DISCLOSURE" has the meaning ascribed to it in
ARTICLE 5;
9
(nnn) "PURCHASER FINANCIAL STATEMENTS" has the meaning ascribed to
it in Section 5.8;
(ooo) "PURCHASER INDEMNIFIED PERSONS" has the meaning ascribed to it
in Section 6.2;
(ppp) "PURCHASER INTERIM FINANCIAL STATEMENTS" has the meaning
ascribed to it in Section 5.8;
(qqq) "PURCHASER SHARES" has the meaning ascribed to it in Section
2.2;
(rrr) "PURCHASER'S SOLICITORS" means Fasken ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP;
(sss) "REGULATORY APPROVALS" means all necessary approvals, permits,
sanctions, rulings, orders or consents form any Governmental
Authority or self-regulatory organization within or outside of
Canada with respect to the transactions contemplated in this
Agreement;
(ttt) "SECURITIES ACT" has the meaning ascribed to it in Section
3.37;
(uuu) "SENIOR EXECUTIVES" means ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Firhoj, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(vvv) "SHARE CONSIDERATION" has the meaning ascribed to it in
Section 2.2;
(www) "STOCK OPTION PLAN" has the meaning ascribed to it in Section
5.2;
(xxx) "SUBSIDIARIES" has the meaning ascribed in the CBCA;
(yyy) "TAX ACT" means the INCOME TAX ACT (Canada);
(zzz) "TAXES" means all taxes, duties, fees, premiums, assessments,
imposts, levies, (including US sales and use taxes) and other
charges of any kind whatsoever imposed by any Governmental
Authorities, together with all interest, penalties, fines,
additions to tax or other additional amounts imposed in
respect thereof, including 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,
franchising, property, employer health, payroll, employment,
health, social services, education and social security taxes,
all surtaxes, all customs duties and import and export taxes,
all license, franchise and registration fees and all
employment insurance, health insurance and Canada, Quebec and
other government pension plan premiums or contributions;
(aaaa) "TAX RETURNS" means all returns, reports, declarations,
elections, notices, filings, information returns and
statements filed or required to be filed in
10
respect of Taxes including without limiting the foregoing all
of the foregoing required to be filed with any Government
Authority in the United States;
(bbbb) "THIRD PARTY CLAIM" has the meaning ascribed to it in Section
6.4(a);
(cccc) "TIME OF CLOSING" means 10:00 o'clock in the forenoon on the
Closing Date;
(dddd) "U.S. GAAP" has the meaning ascribed to it in Section 3.8;
(eeee) "VENDOR" means Efos Corporation;
(ffff) "VENDOR INDEMNIFIED PERSON(S)" has the meaning ascribed to it
in Section 6.3;
(gggg) "VENDOR PARTIES" means collectively the Vendor and the
Guarantors and all other Subsidiaries who hold or may hold
Opco Shares resulting from Prior Corporate Transactions;
(hhhh) "WITHDRAWN SHARES" has the meaning ascribed to it in Section
2.6.
1.2 CERTAIN RULES OF INTERPRETATION.
In this Agreement and the Schedules:
(a) TIME - time is of the essence in the performance of the
Parties' respective obligations;
(b) CURRENCY - unless otherwise specified, all references to
dollar amounts are to Canadian dollars;
(c) HEADINGS - descriptive headings of Articles and Sections are
inserted solely for convenience of reference and are not
intended as complete or accurate descriptions of the content
of such Articles or Sections;
(d) SINGULAR, ETC. - use of words in the singular or plural, or
with a particular gender, shall not limit the scope or exclude
the application of any provision of this Agreement to such
person or persons or circumstances as the context otherwise
permits;
(e) CONSENT - whenever a provision of this Agreement requires an
approval or consent by a Party to this Agreement and
notification of 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;
(f) CALCULATION OF TIME - unless otherwise specified, time periods
within or following which any payment is to be made or act is
to be done shall be
11
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;
(g) BUSINESS DAY - whenever any payment is to be made or action to
be taken under this Agreement is required to be made or taken
on a day other than a Business Day, such payment shall be made
or action taken on the next Business Day following such day;
(h) INCLUSION - where the words "including" or "includes" appear
in this Agreement, they mean "including (or includes) without
limitation".
1.3 ENTIRE AGREEMENT. This Agreement together with the agreements and other
documents to be delivered pursuant to this Agreement, constitutes the
entire agreement between the Parties, pertaining to the subject matter
of this Agreement and supersedes all prior agreements, understandings,
negotiations and discussions, whether verbal or written, of the
Parties. There are no warranties, representations or other agreements,
express or implied, between the Parties in connection with the subject
matter of this Agreement except as specifically set forth in this
Agreement and any document delivered pursuant to this Agreement. No
supplement, modification or waiver or termination of this Agreement
shall be binding unless executed in writing by the Party to be bound
thereby.
1.4 ACCOUNTING PRINCIPLES. Unless otherwise specified, all references to
generally accepted accounting principles means the principles
recommended, from time to time, in the Handbook of the Canadian
Institute of Chartered Accountants and all accounting terms not
otherwise defined in this Agreement have the meanings assigned to them
in accordance with Canadian generally accepted accounting principles.
1.5 SCHEDULES.
The Schedules to this Agreement, as listed below, are an integral part
of this Agreement:
SCHEDULE DESCRIPTION
-------- -----------
Schedule 1.1(vv) Material Clients
Schedule 1.1(fff) Permitted Encumbrances
Schedule 1.1(iii) Prior Corporate Transactions
Schedule 3.4 Articles and By-Laws of Opco and Opco Shares
Schedule 3.6 Consents and Approvals
Schedule 3.8 Financial Statements
Schedule 3.9 Undisclosed Liabilities
Schedule 3.12(a) Taxes Due
12
SCHEDULE DESCRIPTION
-------- -----------
Schedule 3.12(b) Tax Returns Filed Outside of Canada
Schedule 3.13 Opco Intellectual Property
Schedule 3.15 Inventories
Schedule 3.16 Opco Contracts
Schedule 3.17 Non-Arm's Length Transactions
Schedule 3.18 Insurance
Schedule 3.19 Employment Matters
Schedule 3.20 Benefit Plans
Schedule 3.22 Joint Venture Interests
Schedule 3.25 Third Party Consents
Schedule 3.26 Bank Accounts
Schedule 3.27 Guarantees
Schedule 3.28 Collectibility of Accounts Receivable
Schedule 3.35 Distributions
Schedule 3.38 Capital Expenditures
Schedule 4.1 Articles and By-laws of Vendor
Schedule 8.2(h) Term sheet for employment agreements
Schedule 8.2(i) Escrow Agreement
Schedule 8.2(j) Lock-Up Agreement
Schedule 9.3 Non-Competition
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1 PURCHASE AND SALE. Subject to the terms and conditions set forth in
this Agreement, the Vendor agrees to sell to Purchaser all of the
outstanding shares of Opco. The total purchase price of the Opco Shares
shall be US$25,000,000 less the Asset Consideration to be paid by the
Purchaser to Opco pursuant to the Prior Asset Transactions and
3,700,000 subordinate voting shares of the Purchaser as set out below
(collectively the "PURCHASE PRICE").
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable at
Closing by way of a cash consideration in the amount of US$25,000,000
less the Asset Consideration to be
13
paid by the Purchaser to Opco pursuant to the Prior Asset Transactions
(the "CASH CONSIDERATION") by wire transfer or certified cheque to the
Vendor and, subject to Section 2.6, by way of issue by Purchaser to the
Vendor of 3,700,000 subordinate voting shares (the "SHARE
CONSIDERATION") of Purchaser (the "PURCHASER SHARES"). If, prior to the
Closing, there is any stock dividend, stock split or other change in
the character or amount of the outstanding shares of Purchaser, then in
such event any and all new, substituted or additional securities to
which the Vendor would have been entitled by reason of their ownership
of the Opco Shares had the Closing occurred prior to such event shall
be considered Opco Shares for purposes of this Agreement and the
consideration to be received by the Vendor shall be amended
accordingly.
The Share Consideration shall be payable as follows: (i) 2,000,000 Opco
Shares shall be delivered at Closing to the Vendor and (ii) 1,700,000
shall be subject to the terms of a Lock-Up Agreement (as defined
herein), including an amount of 283,325 Purchaser Shares to be placed
into escrow in accordance with terms of the Escrow Agreement. The
Lock-Up Agreement shall provide for, among others, covenants by the
Vendor not to sell, transfer or assign the Opco Shares during the
period they are subject to the Lock-Up Agreement. The Lock-Up Agreement
shall also provide for the release of the Opco Shares in equal tranches
every six months during the three-year period of the Lock-Up Agreement.
2.3 CLOSING. The Closing of the purchase and sale of the Opco Shares shall
take place on the third business day after satisfaction or waiver
(subject to applicable law) of the conditions set forth in ARTICLE 8
hereof (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions) at the offices of Fasken ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, Tour
de la Bourse, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, or on such other
date as the parties may agree in writing, but no later than March 30,
2001. The date of the Closing is hereinafter referred to as the
"CLOSING DATE". The Purchaser shall send a notice to Vendor Parties as
to the satisfaction or waiver of the conditions set forth in ARTICLE 8
at least three business days prior to proposed Closing.
2.4 CLOSING DELIVERIES. At the Closing, the parties shall deliver or shall
cause to be delivered such items as are required to be delivered by
them in accordance with the terms of this Agreement, including the
following:
(a) The Purchaser shall deliver to Vendor, subject to Section 2.6
(1) share certificates representing the Purchaser Shares
registered in the Vendor's name (2) the Cash Consideration by
way of certified cheque or wire transfer, and (3) all
documents, instruments and writings required to have been
delivered at or prior to the Closing Date by the Purchaser
pursuant to this Agreement;
(b) The Vendor shall deliver to the Purchaser (1) certificates
representing the Opco Shares endorsed in blank or together
with a power of attorney or on such form as to permit the
transfer of the Opco Shares, and (2) all other
14
documents, instruments and writings required to have been
delivered at or prior to the Closing Date by the Vendor
pursuant to this Agreement; and
(c) The Vendor and Opco shall deliver or cause to be delivered to
the Purchaser all other documents, instruments and writings
required to have been delivered at or prior to the Closing
Date by Opco pursuant to this Agreement.
2.5 ROLLOVER. After the Closing, the Purchaser, the Vendor and the Newcos
shall, within the prescribed time periods, separately execute and
deliver joint elections in the prescribed forms to have the provisions
of Section 85 of the INCOME TAX ACT (Canada) and any other relevant
provisions thereof and the provisions of Section 518 of the TAXATION
ACT (Quebec) and any other relevant provisions thereof apply to the
sale and transfer of all the Opco Shares to the Purchaser.
For the purposes of such elections:
(a) the parties shall elect each of the Vendor's and the Newco's
adjusted cost base of the Opco Shares for tax purposes as the
Vendor's and the Newco's proceeds of disposition and the
Purchaser's cost of acquisition of the Opco Shares for each of
the Vendor and the Newcos that have not sold by February 22,
2002 all the Purchaser Shares received as consideration for
the Opco Shares purchased pursuant to this Agreement;
(b) for each of the Vendor and the Newcos that have sold prior to
February 22, 2002 all the Purchaser Shares received as
consideration for the Opco Shares purchased pursuant to this
Agreement, the parties shall elect the fair market value of
the Opco Shares at the Closing Date as the Vendor's or, as
applicable, each Newco's proceeds of disposition and the
Purchaser's cost of acquisition of the Opco Shares.
2.6 ESCROW ARRANGEMENTS. Simultaneously with the Closing, an aggregate
283,325 Purchaser Shares of the Share Consideration will be delivered
to the Escrow Agent (as such term is defined in the Escrow Agreement
attached hereto as Schedule 2.6 (the "ESCROW AGREEMENT") in order to
ensure indemnification by the Vendor Parties in accordance with this
Agreement. Such shares of Purchaser shall constitute an escrow fund
(the "ESCROW FUND") to be governed by the terms set forth in the Escrow
Agreement. The Escrow Fund shall terminate in accordance with the terms
of the Escrow Agreement. The provisions of the Escrow Agreement shall
govern in the event of any conflict between the Escrow Agreement and
this Section 2.6. The Vendor may withdraw Opco Shares (the "WITHDRAWN
SHARES") and substitute cash in lieu thereof at any time, provided that
the amount deposited in substitution for the Withdrawn Shares is equal
to the Closing Price of the Opco Shares on The Toronto Stock Exchange
on the date prior to such withdrawal.
15
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND ▇▇▇▇ ▇▇▇▇▇▇▇
AND ▇▇▇▇▇ ▇▇▇▇▇▇ (THE "GUARANTORS")
ON A JOINT AND SEVERAL BASIS REGARDING OPCO
In order to induce the Purchaser to enter into this Agreement, the Vendor and
the Guarantors, on a joint and several basis, represent and warrant to Purchaser
the matters set forth below, which shall be true on the date of execution hereof
and on the Closing Date. Disclosure of any information in one schedule shall be
deemed to be disclosed in other schedules to the extent that such disclosure is
consistent in subject matter and the context of such other schedule.
3.1 ORGANISATION AND AUTHORITY RELATIVE TO THIS AGREEMENT. Opco is a
corporation duly organised and validly existing under the laws of
Ontario. Opco has the requisite corporate power and authority (i) to
carry on the Business as currently conducted, and (ii) to own and use
the properties owned and used by it. Opco is duly qualified to do
business and is in good standing in each jurisdiction where the nature
of its business or the ownership or leasing of its properties makes
such qualification necessary and where the failure to be so qualified
would not have a Material Adverse Effect on Opco. Opco is not in
violation of any of the provisions of its articles, bylaws or other
organisational documents or laws applicable to it.
3.2 SUBSIDIARIES. Opco has no Subsidiaries.
3.3 OWNERSHIP OF OPCO SHARES. The Vendor has the right, power and authority
to sell, transfer, assign and deliver the Opco Shares being sold by the
Vendor hereunder. Immediately prior to the delivery of the Opco Shares,
the Vendor will be the sole registered and beneficial owner of the Opco
Shares and had good and valid title to such Opco Shares, free and clear
of all Encumbrances and restrictions on transfer other than those in
the articles of Opco and which shall have been complied with at
Closing. There are no outstanding options, warrants, convertible
securities, calls, rights, commitments, preemptive rights or agreements
or instruments or understandings of any character to which the Vendor
is a party, obligating the Vendor to deliver or sell, or cause to be
delivered or sold, contingently or otherwise, such Opco Shares. There
are no voting trust agreements or other contracts, agreements,
arrangements, commitments, plans or understandings to which the Vendor
is a party restricting or otherwise relating to voting, dividend or
other rights with respect to the Opco Shares.
3.4 CAPITALISATION AND RECORDS. The Vendor is the registered and beneficial
owner of 49 common shares of Opco, representing 100% of the issued and
outstanding share capital of Opco. As a result of the Prior Corporate
Transactions, the issued and outstanding share capital of Opco will be
held as set forth in Schedule 3.4 on the Closing Date. The outstanding
shares of Opco are duly and validly authorised and issued as fully paid
and non-assessable and are owned of record by Vendor as set forth on
Schedule 3.4 and represent 100% of the issued and outstanding share
capital of Opco. Other than outstanding options to purchase shares of
Opco granted to employees, directors and/or
16
consultants, as set forth in Schedule 3.4, of which none shall be
outstanding as at the Closing, Opco does not have outstanding any
options, warrants or other rights to acquire, directly or indirectly,
capital stock from Opco, and Opco does not have any obligation to
repurchase or redeem any capital stock of Opco. Opco is not party to
any agreement, and, to the Vendor Parties' Knowledge, there is no
agreement between any Persons, which grants any rights of first refusal
or preemptive rights or relates to the voting or giving of written
consents with respect to any security of Opco.
The corporate records and minute books of Opco contain complete and
accurate minutes in all material respects of all meetings of the
directors and any committees thereof and shareholders, and all written
consents in lieu of meetings, of Opco held since its date of
incorporation, all such meetings were duly called and held, all such
written consents in lieu of meeting were duly executed and the share
certificate books, registers of shareholders, registers of transfers
and registers of the directors of Opco are complete and accurate in all
material respects.
3.5 NON-CONTRAVENTION. Subject to any regulatory approval under applicable
securities laws and regulations, including those of any stock exchanges
and of any other Governmental Authority, the execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of
this Agreement will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any Encumbrance upon any of the properties or assets of
Opco pursuant to, any provision of (i) the articles or By-laws of Opco,
(ii) except as disclosed in Schedule 3.6, any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
Permit, concession, franchise or license applicable to Opco or its
properties or assets or (iii) subject to the governmental filings and
other matters referred to in Section 3.6 below, any statute, law, rule,
regulation, judgment, order or decree applicable to Opco or its
properties or assets.
3.6 CONSENTS AND APPROVALS. No consent, approval, order or authorisation
of, or registration, declaration or filing with, any Governmental
Authority, is required by or with respect to Opco in connection with
the execution and delivery of this Agreement by the Vendor Parties or
the consummation by them of the transactions contemplated by this
Agreement, except for (i) such filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
foreign country in which Opco conducts any business or owns any assets
and (ii) such other consents, approvals, orders, authorisations,
registrations, declarations and filings the failure of which to be
obtained or made would not, individually or in the aggregate,
reasonably be expected to have an Opco Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. The consents and approvals required are
set forth in Schedule 3.6 hereof.
3.7 LITIGATION; PROCEEDINGS. There is no action, suit or proceeding,
governmental or otherwise, pending or, to the Vendor Parties Knowledge,
threatened against Opco or any
17
of its properties or business. There is no judgment, decree,
injunction, rule or order of any Governmental Authority threatened or
outstanding against Opco having, or which, insofar as reasonably can be
foreseen, in the future would question the validity of this Agreement
or the consummation of the transactions contemplated hereby.
3.8 FINANCIAL STATEMENTS. The Vendor has delivered to the Purchaser (i)
complete and correct copies of Opco's audited balance sheets as of
October 31, 2000, October 31, 1999 and October 1998 and the related
statements of operations, shareholders' equity and cash flows (together
with the auditors' report thereon) for the years then ended together
with notes to such financial statements (the "AUDITED FINANCIAL
STATEMENTS"), and (ii) complete and correct copies of Opco's unaudited
balance sheet as at month-end and the related statements of operations,
shareholders' equity and cash flows for each month period following
October 31, 2000, up to and including January 31, 2001 (the "INTERIM
FINANCIAL STATEMENTS"). The Audited Financial Statements, and Interim
Financial Statements are herein collectively referred to as the
"FINANCIAL STATEMENTS". The Financial Statements are in accordance with
the books and records of Opco and have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby. In
addition, such Financial Statements contain written discussion of the
material variations in the accounting principles, practices and methods
used in preparing the Financial Statements from the principles,
practices and methods accepted in Canada and in the United States
("U.S. GAAP"). Each material variation is described and reconciled to
U.S. GAAP, as required by the Securities and Exchange Commission (U.S.)
and the Canadian securities authorities. The balance sheets included in
the Financial Statements present fairly in all material respects as of
their respective dates the financial condition of Opco (subject, in the
case of Interim Financial Statements, to normal, recurring year-end
adjustments that may be required upon audit). All material liabilities
and obligations, whether absolute, accrued or contingent, whether
direct or indirect, and whether due or to become due, which existed at
the date of such Financial Statements have been disclosed in the
balance sheets included in the Financial Statements or in notes to the
Financial Statements to the extent such liabilities were required,
under GAAP, to be so disclosed. The statements of operations,
shareholders' equity and cash flows included in the Financial
Statements present fairly in all material respects the results of
operations, shareholders' equity and cash flows of Opco for the periods
indicated (subject, in the case of Interim Financial Statements, to
normal, recurring year-end adjustments that may be required upon
audit), and the notes included in the Financial Statements present
fairly in all material respects the information purported to be shown
thereby. The Financial Statements are attached hereto as Schedule 3.8.
No information has become available to Opco that would render the
Financial Statements materially and adversely incomplete or inaccurate.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Opco is not now subject to any
material liabilities or obligations, direct or indirect, absolute or,
to the Vendor Parties' Knowledge, contingent, other than the
liabilities or obligations set forth in the Financial Statements and
Schedule 3.9, and those arising since the date of the Financial
Statements in the ordinary course of business, none of which is
materially adverse to Opco and all of which in the aggregate are not
materially adverse to Opco. To the Vendor Parties' Knowledge, there
18
are no facts or circumstances which might reasonably serve as the basis
for, or give rise to, any material liabilities or obligations on the
part of Opco other than liabilities or obligations disclosed in the
Financial Statements and Schedule 3.9, or arising thereafter in the
ordinary course of business (none of which is materially adverse to
Opco).
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 31, 2000, Opco has
conducted its business only in the ordinary course and has used its
best efforts to preserve its business and assets and (a) there has not
occurred any event or change that had, or would reasonably be expected
to have, individually or in the aggregate, an Opco Material Adverse
Effect and (b) there has not been any change in the accounting
principles, policies, practices or procedures of Opco or their
application to Opco and (c) Opco has not taken any action that would
have been prohibited (without the Purchaser's consent) under Section
7.1 hereof.
3.11 COMPLIANCE WITH LAWS. Opco is in compliance in all material respects
with all applicable Laws applicable to it and its businesses or
operations. Opco has in effect all Permits necessary for it to own,
lease or operate its properties and assets and to carry on its business
as now conducted, and there has occurred no default under any such
Permit.
3.12 TAXES.
(a) Save and except as set forth in Schedule 3.12(a) or the
Financial Statements, Opco has paid all Taxes due and payable
or has made adequate provision in the Financial Statements for
any Taxes due and unpaid at the date of the Financial
Statements or for the payment of any Tax installments due in
respect of the current taxation year of Opco. Except to the
extent reflected or reserved against in the Financial
Statements, Opco is not liable for any Taxes. No Canadian,
foreign, federal and provincial income tax assessments or
reassessments have been received by Opco. There are no notices
of objection or appeals outstanding with respect to any
assessment, reassessment or determination of Opco, by any tax
Authority. There are no actions, suits, audits,
investigations, claims or other proceedings pending or, to the
Vendor Parties' Knowledge, threatened against Opco, in respect
of any Taxes and there are no facts or circumstances known to
the Vendor Parties, or acts, omissions, events, transactions
or series of transactions (including the entering into of this
Agreement or the consummation of the transactions contemplated
hereby) occurring wholly or partly on or before the Closing,
which could give rise to any such actions, suits, proceedings,
investigations or claims. There are no agreements, waivers or
other arrangements providing for an extension of time with
respect to the filing of any Tax return or the payment of any
Taxes by Opco.
(b) Opco has, or will have prior to the Closing Date, filed all
Tax returns, information returns, elections or designations in
respect of any Taxes required to be filed by it in respect of
any Tax legislation as of the date of this Agreement. To the
Vendor Parties Knowledge, no such filing has contained
19
any material misstatement or omitted any statement of any
material fact that should have been included therein. Except
as set forth in Schedule 3.12(b), Opco has never been required
to file any Tax returns, information returns, or designations
in any jurisdiction outside Canada. True copies of all such
returns have been provided to Purchaser.
(c) Opco has withheld and remitted to the proper Authority or,
where permitted by law, provided security for, on a timely
basis and in a form required under the appropriate Tax
legislation, all amounts in respect of all Taxes, including
Canadian Pension Plan contributions and Employment Insurance
premiums and any other deductions required to be withheld and
remitted by it. Opco has charged, collected and remitted on a
timely basis all Taxes required by law on any sale, supply or
delivery made by Opco.
(d) There is no deductible outlay or expense owing by Opco to a
Person with whom it was not dealing at arm's length at the
time the outlay or expense was incurred which is unpaid and
which will be included in the income of Opco for any taxation
year ending on or after the Closing Date.
(e) Opco has not, either directly or indirectly, transferred
property or assets to or acquired property or assets from a
Person with which it was not dealing at Arm's length for
consideration other than consideration equal to the fair
market value of the property or assets at the time of the
disposition or acquisition thereof (unless pursuant to and in
accordance with a so called rollover provision of the Tax
Act), except for transfers that are not material in amount.
(f) There are no Encumbrances for Taxes upon any of the assets of
Opco.
(g) All research and development tax credits which have duly
arisen out of the activities of Opco have been claimed for the
period up to October 31, 2000 and to the Vendors Parties'
knowledge, none have been or will be reduced or refused by the
appropriate tax Authority.
(h) The Vendor is not a non-resident of Canada, as defined in the
Tax Act. Opco is a Canadian-controlled private corporation, as
defined in the Tax Act, and has been one since February 28,
1984. Opco is a registrant for the purposes of the goods and
services tax provided for under the EXCISE TAX ACT and its
registration number is 10158 7582 RT001.
3.13 INTELLECTUAL PROPERTY. Schedule 3.13 lists all Intellectual Property
Rights that are currently used in the Business of Opco and which are
material to the Business of Opco (collectively, the "OPCO INTELLECTUAL
PROPERTY"). Opco owns, or is licensed or otherwise possesses valid
rights to use, the Opco Intellectual Property, to enable it to operate
its Business, and Opco has not granted any licence, permit or right to
use the Opco Intellectual Property other than as listed in Schedule
3.13. The Opco Intellectual
20
Property are held by Opco and all rights thereto have been assigned to
Opco by all developers who had been involved in the creation or
development of such Opco Intellectual Property. Neither the Vendor
Parties nor Opco has knowledge of any material infringement of,
material passing-off related to, or other material interference with
the Opco Intellectual Property by third parties or any claim by any
Person that any of the Opco Intellectual Property are, or may be,
invalid or unenforceable. Opco is not a party to any claim, or subject
to any liability, contingent or otherwise, for trademark, trade name,
industrial design, patent or copyright infringements as to any product
manufactured, produced, used or sold by Opco either as plaintiff or as
defendant or any other claim or liability relating to Opco Intellectual
Property owned or licensed by Opco. To the Vendor Parties' Knowledge,
Opco has not infringed or misappropriated the rights of third parties
with respect to the Opco Intellectual Property. All rights or fees due
and payable to maintain the validity or existence of the Opco
Intellectual Property have been duly paid. To the Vendor Parties'
Knowledge, there are no facts or circumstances (including past or
current disclosure) that could affect or result in the cancellation of
any rights in respect of such Opco Intellectual Property, including
pending patents in any jurisdiction. There has been continuous use of
the trademarks which are included in the Opco Intellectual Property.
Neither the Vendor nor Opco has knowledge of any facts or
circumstances, situation or problems, of any nature that could
interfere with the development, the manufacture, the marketing or the
sale of the products or services of Opco in the operation of its
Business.
3.14 TITLE AND CONDITION OF PROPERTIES. Except for the encumbrances
described in Schedule 1.1(fff), the Company has: (a) good and
marketable title to all assets recorded on Opco's balance sheet as of
December 31, 2000, free and clear of all Encumbrances, except for (i)
assets no longer used or useful in the conduct of the Business or
disposed of in the ordinary course of business since such date, (ii)
Encumbrances disclosed in the Financial Statements, (iii) Encumbrances
or imperfections of title which are not, individually or in the
aggregate, material in character, amount or extent and which do not
materially detract from the value or materially interfere with the
present or presently contemplated use of the assets subject thereto or
affected thereby, and (iv) Encumbrances for current Taxes not yet due
and payable and (b) a valid leasehold or other interest in all other
assets used by it in its Business. All of the machinery, equipment and
other tangible personal property and assets owned or used by Opco are
in good condition and repair, except for ordinary wear and tear not
caused by neglect, and are fit for their present use and usable in the
ordinary course of Business. Opco owns no real property.
3.15 INVENTORIES. As of the Closing Date, the Inventories at Closing Date
will consist of items of a quantity usable or saleable in the normal
course of the Business. Except for the Inventories described on
Schedule 3.15 hereto, the value of obsolete materials and of materials
of below standard quality will have been written down to net realizable
value, or adequate reserves have been provided, all in accordance with
GAAP. The inventory level of the Business has been maintained at the
level required for the operation of the Business as currently conducted
and such level is adequate thereto.
21
3.16 CONTRACTS AND AGREEMENTS. Schedule 3.16 contains a list of:
(a) each contract, agreement or commitment of Opco which requires
total payments to or by Opco of at least $50,000 annually
other than Accounts Receivable or Accounts Payable occurring
in the ordinary course of business;
(b) each contract, agreement or commitment of Opco which has a
remaining term longer than one hundred and eighty (180) days,
which requires total payments to or by the Company of at least
$100,000 during the remaining term and which is not terminable
by Opco on thirty (30) or fewer days' notice without penalty;
(c) each contract, agreement or commitment to which Opco is a
party or by which any of its assets are bound relating to
indebtedness for borrowed money, including capital leases,
security agreements relating thereto and any amendment or
waiver thereof;
(d) each lease of real property by Opco;
(e) any collective bargaining agreement, union agreement,
employment agreement, consulting agreement, management service
agreement or any other similar type of contract or agreement
to which Opco is a party;
(f) any consent, decree and other judgment, decree or order,
settlement agreement or other agreement limiting the freedom
of Opco to compete in any line of Business or with any Person
in any geographical areas;
(g) any joint venture agreement or other contract, agreement or
commitment to which Opco is a party involving a sharing of
profits or expenses; and
(h) any outstanding loan or advance by Opco to, or investment by
Opco in, any Person, or any agreement, contract, commitment or
understanding relating to the making of any such loan, advance
or investment (excluding trade receivables).
All of the contracts, agreements, leases, licenses, plans,
arrangements, commitments and documents listed in Schedule 3.16
(collectively, the "OPCO CONTRACTS") are valid obligations of Opco and,
to the Vendor Parties' Knowledge, are binding and in full force and
effect in accordance with their terms and conditions on all parties
thereto. To the Vendor Parties' Knowledge, there is no existing default
thereunder or breach thereof by Opco or by any other party to an Opco
Contract, or any conditions which, with the passage of time or the
giving of notice or both, might reasonably constitute such a default by
Opco or by any other party to an Opco Contract, and none of the Opco
Contracts will be breached by or give any other party a right of
termination as a result of the transactions contemplated by this
Agreement. There are no pending or, to the Vendor Parties' Knowledge,
threatened disputes with respect to the Opco Contracts. None of the
Material Clients has indicated or expressed an intent or desire to
terminate its relationship
22
with or reduce the level of business it conducts with Opco, nor do the
Vendor Parties' have any reason to believe that any such client intends
to terminate its relationship with Opco or reduce the level of business
it conducts with Opco, whether as a result of the consummation of the
transactions set forth in this Agreement or for any other reason.
Opco, pursuant to any contract, agreement, franchise, licence or
permit, does not hold, possess, use or have access to, or have the
right to hold, possess, use or have access to, any property or right of
any nature belonging to any other person upon which the conduct of the
business of Opco as it is being customarily conducted is dependent.
Other than as disclosed in Schedule 3.16, Opco is not bound by any
contract or agreement purporting to materially constrain or limit Opco
in the conduct of its business or affairs. Opco is not bound by any
non-competition, affirmative or restrictive covenant limiting the
nature of the business that any such corporation can carry on, or the
time or territory in which the business of Opco can be operated. Opco
knows of no bid or contract proposal made by Opco that, if accepted and
entered into, might result in a material loss to Opco. To the Vendor
Parties' Knowledge, neither Opco nor any of the Vendor Parties,
officers, directors or employees, on behalf of Opco, has ever offered
or given a bribe (whether of money or property or any other benefit) to
any official of a Governmental Entity or committed any other offence
pursuant to the laws of Canada in attempting to secure or securing an
Opco Contract.
3.17 NON-ARM'S LENGTH TRANSACTIONS. Since October 31, 2000 and except as
disclosed in Schedule 3.17 or in the Financial Statements, no payments
have been made or authorized by Opco to, and Opco has not entered into
any transactions with, its officers, directors, shareholders or
employees, any of the Associates or Affiliates of such Persons, except
to employees in the ordinary course of business and at the regular
rates of salary or remuneration, including bonuses payable to such
Persons.
3.18 INSURANCE. Schedule 3.18 sets forth a list of all policies of fire,
extended coverage, liability, directors and officers and all other
kinds of insurance held by Opco in connection with the conduct of the
Business and its operations (other than policies relating to Employee
Benefit Plans). Such policies are in full force and effect and Opco is
not in default with respect to its obligations under any of such
insurance policies. Opco maintains the type and amount of insurance
which Opco believes is adequate in coverage and amount to insure fully
against the risks to which Opco and its employees, directors, business,
properties and other assets would reasonably be expected to be exposed
in the operation of their respective business and as customarily
carried and insured against by owners of comparable businesses.
3.19 EMPLOYMENT MATTERS.
(a) Schedule 3.19 sets forth the names, date of hire, position,
rate of compensation and vacation pay or rate they are
expected to receive (and the portions thereof attributable to
salary and bonuses, respectively), amounts payable to former
employees, and location of all current officers, employees
23
and consultants of Opco for the year ended October 31, 2000
and during the year ending October 31, 2000.
(b) No key employee or group of employees has given notice to
terminate or has any plans to terminate employment with Opco.
Opco has not experienced any strikes, grievances, claims of
unfair labour practices or other labour disputes.
(c) The Vendor Parties have no Knowledge of any organisational
effort made or threatened, either currently or within the past
two years, by or on behalf of any labour union with respect to
employees of Opco.
(d) The employees of Opco are not unionized and there is no
collective bargaining agreement relating to Opco, or its
employees.
(e) All salaries, commissions, bonuses, other payments and
repayments and payment of expenses and generally all sums due
to all employees of Opco have been duly and fully paid or a
provision has been duly made in respect thereof. Opco is not
liable for any notice of termination, severance pay or other
payments to any Employee or former employee arising from the
termination of employment, nor in respect of any right of
reinstatement.
(f) Opco has at all times, up to and including the Closing Date,
complied with all Canada Pension Plan and unemployment
insurance contributions. Opco is up to date in the payment of
their contributions relating to health and security in the
workplace (workmen's compensation), and the various
organisations dealing with retirement and unemployment and,
more generally, with all other contributions, instalments
and/or payments connected therewith and any applicable default
interest. Opco is not a party to or otherwise bound by, any
consent decree with, a citation by, any Governmental Authority
relating to Employees or employment practices, wages, hours
and terms and conditions of employment. As of the date hereof,
no claim, investigation or dispute exists with any such
organisation that has not been fully resolved.
(g) Opco has complied with all of its obligations under applicable
"pay equity" legislation and is not required to and has not
filed or published any "pay equity" with any governmental or
regulatory authorities or with its employees.
3.20 EMPLOYEE BENEFITS.
(a) Schedule 3.20 contains a complete and accurate list of all
Employee Benefit Plans maintained, or contributed to, by Opco.
Complete and accurate copies of (i) all Employee Benefit Plans
and amendments thereto and (ii) all related trust agreements,
insurance contracts and summary plan descriptions have been
provided to the Purchaser. Each Employee Benefit Plan has been
administered in accordance with its terms, and Opco and the
Employee Benefit Plans are in compliance with the current
applicable laws, in all material respects.
24
(b) There are no claims (except claims for benefits payable in the
normal operation of the Employee Benefit Plans), suits or
proceedings against or involving any Employee Benefit Plan,
or, to the Vendor Parties' Knowledge, investigations by any
Governmental Authority.
(c) With respect to each Employee Benefit Plan contributed to, or
maintained by Opco, (a) all payments due from Opco have been
made when due and all amounts properly accrued as liabilities
of Opco which have not been paid have been properly recorded
on the books of Opco and, as of the most recent valuation
date, the fair value of the assets of each Employee Benefit
Plan equals or exceeds the liabilities of such Employee
Benefit Plan on a termination basis (i.e. on an accumulated
benefit obligation basis) and on an ongoing basis (i.e. on a
projected benefit obligation basis) based on the assumptions
used to fund such Employee Benefit Plan, which assumptions are
reasonable.
(d) There are no non-current unfunded obligations under any
Employee Benefit Plan, providing benefits after termination of
employment to any employee of Opco (or to any beneficiary of
any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under
applicable law and obligations.
(e) The execution and delivery of this Agreement, and the
performance of the transactions contemplated hereby, will not
constitute an event under any Employee Benefit Plan that would
reasonably be expected to result in any payment (whether of
severance pay or otherwise), acceleration of, forgiveness of
indebtedness owing from, vesting of, or increase in any
benefits with respect to any current or former employee of
Opco.
(f) There is no announced plan or legally binding commitment to
create any additional Employee Benefit Plans or to amend or
modify any existing Employee Benefit Plan, except as required
by existing law.
(g) Opco does not maintain a Pension Plan in favour of its
Employees.
3.21 BOOKS AND RECORDS. All Books and Records material to the operation of
the Business 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 Opco and all material
financial transactions relating to its Business have been accurately
recorded in such Books and Records. All transactions involving Opco
have been accurately recorded in such Books and Records. All vacation
pay, bonuses, commissions and other emoluments relating to each of the
employees of Opco have been accrued (on a basis consistent with prior
practice) to date in such books.
25
3.22 NO JOINT VENTURE INTERESTS, ETC.: Except as disclosed in Schedule 3.22,
Opco is not a partner, beneficiary, trustee, co-tenant, joint-venturer
or otherwise a participant in any partnership, trust, joint venture,
co-tenancy or similar jointly owned business undertaking and Opco has
no significant investment interests in any business owned or controlled
by any third party.
3.23 RESERVES AND ACCRUALS. The reserves and Accrued Liabilities disclosed
on or reflected in the Financial Statements are sufficient in all
material respects to provide for the liabilities in respect of which
they have been established.
3.24 ARTICLES AND BY-LAWS. The articles and by-laws of Opco, including any
and all amendments have been delivered or made available to the
Purchaser and such articles and by-laws as so amended are in full force
and effect and no amendments are being made to same.
3.25 THIRD PARTY CONSENTS. Schedule 3.25 sets out a complete list of all
notifications, approvals and consents required to be obtained by Opco
in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered under
this Agreement.
3.26 BANK ACCOUNTS, ETC. Schedule 3.26 sets forth a complete list of every
financial institution in which Opco maintains any depository account,
trust account or safety deposit box and the names of all persons
authorized to draw on or who have access to such accounts or safety
deposit box as well as a complete list and brief description of any
powers of attorney currently in force and given by Opco.
3.27 ABSENCE OF GUARANTEES. Except as disclosed in Schedule 3.27, Opco has
not given or agreed to give, nor is it a party to or bound by, any
guarantee or indemnity in respect of indebtedness, or other
obligations, of any Person, or any other commitment by which Opco is,
or is contingently, liable for such indebtedness or other obligations.
3.28 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. The Accounts Receivable
reflected in the Financial Statements and all Accounts Receivable
arising thereafter up to and until the date hereof have arisen from
bona fide transactions in the ordinary course of the Business. Schedule
3.28 includes a true and complete schedule of the Accounts Receivable
of Opco as at Closing Date including the aging thereof and any
allowances made for doubtful accounts and any claims of set-off in
connection therewith. Except as disclosed in Schedule 3.28, since
October 31, 2000, Opco has not increased the allowance for doubtful
accounts. The Accounts Receivable as shown in the Closing Balance Sheet
shall be collectible in full in 90 days, other than those Accounts
Receivable which are doubtful accounts and in respect of which an
adequate allowance has been made and are not subject to any set-off or
counter-claim.
3.29 NO BROKER. The Vendor Parties have carried on all negotiations relating
to this Agreement and the transactions contemplated in this Agreement
directly and without intervention on their behalf of any other party in
such manner so as to give rise to any
26
valid claim for a brokerage commission, finder's fee or other like
payment against the Purchaser or Opco.
3.30 NO BANKRUPTCY/INSOLVENCY. Opco is not insolvent, has not committed an
act of bankruptcy, has not proposed a compromise or arrangement to its
creditors generally, has not had any petition for a receiving order in
bankruptcy filed against it, has not taken any proceeding with respect
to a compromise or arrangement, has not taken any proceeding to have
itself declared bankrupt or wound-up, has not taken any proceeding to
have a receiver appointed on any part of its assets, has not had any
encumbrancer take possession of any of its property, nor has it had any
execution or distress become enforceable or become levied upon any of
its property.
3.31 SOLICITATION OF EMPLOYEES. Neither Opco nor Vendor has entered into any
agreement or made any arrangements with any of the Employees of Opco
which would have the effect of depriving the Purchaser or Opco of the
continued services of any such employees following the Closing.
3.32 FORWARD COMMITMENTS. All forward commitments by or to Opco for
inventories, supplies or services for use in connection with the
Business (whether or not there are any contracts in writing with
respect thereto) which are in existence as of the date of this
Agreement have been entered into by it in the ordinary course of
business and upon terms and conditions consistent with the Opco's usual
past practices.
3.33 ENVIRONMENTAL.
(a) Opco and its Business are currently in compliance, in all
material respects, with all Environmental Laws. Further, Opco
has not received any notice of non-compliance which has not
been fully complied with or satisfied.
(b) There are no Permits required under Environmental Laws for the
operation of the Business as it is presently being conducted.
(c) Opco has not received a notice that has not been fully
resolved that Opco is a party potentially responsible to
commence clean-up or remedial action or to prepare studies,
action plans or clean-up strategies in respect to the
environmental condition of its Business facilities or
properties. Opco has not received any request for information
in connection with any inquiry or investigation by any
Authority concerning environmental matters that had not been
fully resolved.
3.34 CLIENT RELATIONS. There has not been any Material Adverse Change in
relations with clients or suppliers of the Business since October 31,
2000 and, to Vendor Parties' Knowledge, no such change is anticipated
including, without limitation, as a result of the transactions
contemplated herein. Opco has not had a significant problem in
obtaining in a timely manner and at reasonable cost any and all
services used or to be used in the Business, nor do the Vendor Parties
have any reason to believe Opco will have any significant problem in
obtaining such services in the future. Opco has not received
27
written notice of intent to terminate any Opco Contracts or agreements
for the purchase of the products or services of Opco, nor do they have
actual knowledge without enquiry of any circumstances which are likely
to result in the five largest customers of Opco (based upon sales in
the fiscal year ending October 31, 2000), materially decreasing their
purchases of products or services during the 12 months immediately
after the Closing.
3.35 DISTRIBUTIONS. Except as disclosed in Schedule 3.35 and as permitted
under this Agreement, no directors fees and no dividends or other
distributions (in cash or other property) on any of the Shares of Opco
have been authorized, declared, paid or proposed since October 31,
2000.
3.36 COMPUTER SYSTEMS. To the Vendor Parties' Knowledge, the computer
systems of Opco, including but not limited to, mainframes,
mini-computers, personal computers and special purpose systems are
fully operational and have adequate documentation describing, among
other things, the operation of the hardware, required maintenance,
daily/weekly/monthly/quarterly/annual "run books" or other operational
procedures, all operating systems, applications and utilities. The
documentation matches the implementation of the hardware and software
in use as of the date thereof. To the best of its knowledge, Opco is in
material compliance with all legal obligations with respect to all
software used by it and has license to use all software currently used
by it which it does not own. Further, Opco has a copy of all source
codes, fully annotated, for all custom software and all other software
not generally available to the public, used by Opco in connection with
the Business.
3.37 SECURITIES MATTERS.
(a) Vendor alone, or through its personal representative, has such
knowledge and experience in financial and business matters and
such experience in evaluating and investing in companies such
as the Purchaser as to be capable of evaluating the merits and
risks of an investment in the Purchaser Shares. Vendor has the
financial ability to bear the economic risk of its investment
in the Purchaser Shares being acquired hereunder, has adequate
means for providing for its current needs and contingencies
and has no need for liquidity with respect to its investment
in the Purchaser Shares.
(b) Vendor is acquiring the Purchaser Shares for its own account,
for investment purposes only, and not with the view to, or for
resale in connection with, any distribution thereof except in
compliance with applicable securities laws. Vendor understands
that the Purchaser Shares have not been registered under the
UNITED STATES SECURITIES ACT OF 1933, as amended (the
"SECURITIES ACT") or under the securities laws of various
states, by reason of a specified exemption from the
registration or prospectus provisions thereunder which depends
upon, among other things, the bona fide nature of the Vendor's
investment intent as expressed herein. Vendor acknowledges
that its representations and warranties contained herein are
being relied upon by the Purchaser as a basis
28
for the exemption of the issuance of the Purchaser Shares
hereunder from the registration requirements of the Securities
Act.
(c) Vendor acknowledges that the Purchaser Shares must be held
indefinitely unless they are subsequently registered under the
Securities Act or unless an exemption is available under the
Securities Act, Vendor has been advised or is aware of: (A)
the provisions of Rule 144 promulgated under the Securities
Act which permits limited resale of the securities purchased
in a private placement subject to the satisfaction of certain
conditions including, among other things, the availability of
certain current public information about Purchaser and
compliance with applicable requirements regarding the holding
period and the amount of securities to be sold and the manner
of sale and (B) Regulation S promulgated under the Securities
Act or other applicable legislation which permits resale of
the purchased securities in the United States or Canada
subject to certain restrictions. Vendor understands that only
the Purchaser can take action to register the Purchaser
Shares.
(d) Vendor acknowledges that the Purchaser Shares must also be
held in accordance with applicable securities laws in Canada
and the Vendor undertakes not to sell, transfer or assign the
Purchaser Shares in contravention of the applicable laws in
force in Canada.
(e) Vendor has, among other things, carefully reviewed each
Canadian Document provided to it prior to the date hereof, and
will carefully review each Canadian Document (as defined in
this Agreement) provided to it between the date hereof and the
Closing Date. Vendor acknowledges that in connection with the
transactions contemplated hereby, neither Purchaser nor anyone
acting on its behalf or any other person has made, and such
Vendor is not relying upon, any representations, statements or
projections concerning Purchaser, its present or projected
results of operations, financial condition, prospects, present
or future plans, acquisition plans, products and services, or
the value of the Purchaser Shares, Purchaser's business or any
other matter in relation to Purchaser's business or affairs,
except as otherwise set forth in ARTICLE 5 hereof and as
disclosed in this Agreement and the Canadian Documents. Vendor
or its representative has had an opportunity to discuss
Purchaser's business, management, financial affairs and
acquisition plans with its management, to review Purchaser's
facilities, and to obtain such additional information
concerning the Vendor's investment in the Purchaser Shares in
order for such Shareholder to evaluate its merits and risks,
and the Vendor has determined that the Purchaser Shares are a
suitable investment for such Vendor and that at this time such
Vendor could bear a complete loss of his or her investment.
(f) Vendor is aware that no US or Canada federal, state,
provincial or other agency has passed upon or made any finding
or determination concerning the fairness of the transactions
contemplated by this Agreement or the adequacy
29
of the disclosure of the exhibits and schedules hereto or
thereto and such Vendor must forego the security, if any, that
such a review would provide.
(g) Vendor understands that all certificates for the Purchaser
Shares issued to Vendor shall bear a legend in substantially
the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF WITHOUT SUCH REGISTRATION OR THE DELIVERY
TO THE ISSUER OF AN OPINION OF COUNSEL, OR SUCH OTHER
DOCUMENTATION REASONABLY SATISFACTORY TO THE ISSUER,
THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION
OF SUCH SECURITIES UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS."
3.38 CAPITAL EXPENDITURES. Except as disclosed in Schedule 3.38, no capital
expenditures or leasehold improvements have been made by Opco in excess
of $1,000 or in connection with the Business since October 31, 2000 and
there are no commitments for same.
3.39 ASSETS AND REVENUES. The Vendor, together with its Affiliates, does not
have gross assets in Canada or gross revenues from sales in or from
Canada, for the 12 month period ending October 31, 2000, in excess of
Cdn$35,000,000.
3.40 FULL DISCLOSURE. The Vendor Parties have made available to the
Purchaser, all information, including the financial, marketing, sales
and operational information on a historical basis relating to Opco
which would be material to a purchaser of Opco. All information
contained in this Agreement, or in any Schedule hereto or which has
been provided to the Purchaser is true and correct in all material
respects and no material fact or facts have been omitted therefrom
which would make such information, taken as a whole, false or
misleading in light of the circumstances in which such statement was
made. Without limiting the generality of the foregoing, the Vendor
Parties have not failed to disclose to the Purchaser any fact or
information which would reasonably be considered to be material to a
purchaser of Opco or which might reasonably be expected to deter the
Purchaser from completing the transactions contemplated herein.
30
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE VENDOR AND THE GUARANTORS
The Vendor and the Guarantors, on a several basis, represent and warrant to the
Purchaser as follows, which representations and warranties shall be true on the
date of execution hereof and on the Closing Date (and acknowledges that the
Purchaser is relying on such representations and warranties in completing the
transactions contemplated hereby) that:
4.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Each Vendor Party has full power,
capacity and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Each Vendor Party has duly executed
this Agreement and, assuming this Agreement constitutes a valid and
binding obligation of the Purchaser, this Agreement constitutes a
legal, valid and binding obligation of such Vendor Party, enforceable
against such Vendor Party in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, moratorium
and similar laws of general applicability relating to or affecting
creditor's rights and to general principles of equity, regardless of
whether such enforceability is considered in equity or at law.
4.2 NON-CONTRAVENTION; CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement by such Vendor Party nor the consummation of
the transactions contemplated hereby by such Vendor Party will (1)
conflict with, result in a breach or violation of or constitute (or
with notice or lapse of time or both constitute) a default under any
law, statute, regulation, order, judgment or decree or any instrument,
contract or other agreement to which Vendor Party is a party or by
which such Vendor Party (or the Opco Shares held by the Vendor) is
bound, or, if such Vendor Party is not an individual, its
organisational documents, or (2) require such Vendor Party to obtain
any authorisation, consent, approval or waiver from, give notification
to, or make any filing with, any Governmental Authority, or to obtain
the approval or consent of any other Person, except for such conflicts,
breaches, violations or defaults, or any authorisation, consent,
approval, waiver, notification or filing the failure of which to obtain
or make, will not (a) impair in any material respect the ability of
such Vendor Party to perform such Vendor Party's obligations under this
Agreement or (b) prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
4.3 EXCLUSIVITY OF REPRESENTATIONS. The representations and warranties made
by the Vendor Parties in this Agreement are in lieu of and are
exclusive of all other representations and warranties, including
without limitation any implied warranties. The Vendor Parties hereby
disclaim any such other or implied representations or warranties,
notwithstanding the delivery or disclosure to the Purchaser or its
officers, directors, employees, agents or representatives of any
documentation or other information (including any financial projections
or other supplemental data).
31
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth on the disclosure memorandum (the "PURCHASER DISCLOSURE
MEMORANDUM"), Purchaser represents and warrants to the Vendor and the
Shareholders as follows:
5.1 ORGANISATION AND QUALIFICATIONS. Purchaser is a corporation duly
organised, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with the requisite corporate power and
authority (i) to own and use its properties and assets and (ii) to
carry on its business as currently conducted. Purchaser is duly
qualified to do business and is in good standing in each jurisdiction
in which the nature of the Business conducted or property owned or
leased by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be,
would not reasonably be expected to have a Material Adverse Effect.
5.2 CAPITALISATION. The authorised, issued and outstanding capital stock of
Purchaser is as set forth in the Purchaser Disclosure Memorandum. The
Purchaser Disclosure Memorandum sets forth the number of shares
reserved for issuance pursuant to the duly approved stock option plans
(collectively, the "STOCK OPTION PLANS"), and the number of options
outstanding. All of the issued and outstanding shares of Common Stock
have been duly authorised and validly issued and are fully paid and
non-assessable. Except as provided in this Agreement and pursuant to
the Stock Option Plans and in the Purchaser Disclosure Memorandum: (i)
no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital
stock of Purchaser is authorised or outstanding; (ii) Purchaser has no
obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right or to issue
or distribute to holders of any shares of its capital stock any
evidences of indebtedness or assets of Purchaser; and (iii) Purchaser
has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of capital
stock of Purchaser have been offered, issued and sold by Purchaser in
compliance with applicable US and Canadian federal, provincial and
state securities laws or pursuant to valid exemptions therefrom.
Purchaser is not a party to any Agreement, and, to the Purchaser's
Knowledge, there is no agreement between any Persons, which grants any
rights of first refusal or pre-emptive rights or relates to the voting
or giving of written consents with respect to any written security of
Opco.
5.3 AUTHORISATION. Purchaser has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated
by this Agreement and otherwise to carry out its obligations hereunder.
The execution and delivery of this Agreement by the Purchaser and the
consummation by it of the transactions contemplated hereby have been
duly authorised by all necessary action on the part of the Purchaser,
and no further action is required by the Purchaser. This Agreement has
been duly executed by the Purchaser
32
and, assuming this Agreement constitutes a valid and binding obligation
of the Vendor and the Vendor Parties, this Agreement constitutes a
valid and binding agreement of the Purchaser enforceable against the
Purchaser in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganisation, moratorium
and similar laws of general applicability relating to or affecting
creditor's rights and to general principles of equity, regardless of
whether such enforceability is considered in equity or at law. The
Purchaser is not in violation of any of the provisions of its
certificate of incorporation, bylaws or other organisational documents.
5.4 NON-CONTRAVENTION. Subject to any regulatory approval under applicable
securities laws and regulations, including those of any stock exchanges
and of any other Governmental Authority, the execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of
this Agreement will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any Encumbrance upon any of the properties or assets of
Purchaser or any of its Subsidiaries pursuant to, any provision of (i)
the Certificate of Incorporation or By-laws of the Purchaser or any
provision of the comparable organisational documents of any of its
Subsidiaries, or (ii) subject to the governmental filings and other
matters referred to in Section 5.5 below, any statute, law, rule,
regulation, judgment, order or decree applicable to the Purchaser or
any of its Subsidiaries or their respective properties or assets, other
than any such conflicts, violations, defaults, rights or Encumbrances
that individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect of the Purchaser or prevent or
materially delay the consummation of any of the transactions
contemplated by this Agreement.
5.5 CONSENTS AND APPROVALS. No consent, approval, order or authorisation
of, or registration, declaration or filing with, any Governmental
Authority is required by or with respect to the Purchaser or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated by this Agreement, except for (i) approvals
for listing of the Purchaser Shares on The Toronto Stock Exchange and
for quotation on NASDAQ and any shareholder's approval, and (ii) such
other consents, approvals, orders, authorisations, registrations,
declarations and filings the failure of which to be obtained or made
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect of the Purchaser or prevent or
materially delay the consummation of any of the transactions
contemplated by this Agreement.
5.6 LITIGATION; PROCEEDINGS. There is no action, suit or proceeding,
governmental or otherwise, pending or, to the Purchaser's Knowledge,
threatened against the Purchaser, any of its Subsidiaries or any of
their respective properties or business that questions the validity of
this Agreement, the right of the Purchaser to enter into this Agreement
or to consummate the transactions contemplated hereby, or that,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect. There is no
33
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against the Purchaser or any of its Subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would have,
any such effect.
5.7 AUTHORISATION FOR PURCHASER SHARES. Purchaser shall have taken all
necessary action to issue the Purchaser Shares on the Closing Date. The
Purchaser Shares shall have been duly authorised and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and free and clear of all
Encumbrances (other than restrictions on transfer imposed by applicable
securities laws) and will not be issued in violation of any preemptive
rights, rights of first refusal or similar rights. On the Closing Date,
the Purchaser Shares will be listed for trading on The Toronto Stock
Exchange and on the NASDAQ.
5.8 CANADIAN DOCUMENTS. Purchaser has provided to the Vendor documents, as
may be required under Canadian securities laws to have been filed by
the date hereof (the "CANADIAN DOCUMENTS"). As of their respective
filing dates, the Canadian Documents complied in all material respects
with the requirements of the securities laws in force in Canada, and
none of the Canadian Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading, except to
the extent corrected by a subsequently filed Canadian Document. The
Purchaser has delivered to the Vendor complete and correct copies of
the financial statements of Purchaser being the consolidated audited
balance sheets of the Purchaser as at August 31, 2000 and 1999
(together with the auditors' report thereon) and the statements of
earnings, retained earnings and cash flows for each of the years in the
three years ended August 31, 2000, including the notes thereto (the
"PURCHASER AUDITED FINANCIAL STATEMENTS") and the interim unaudited
consolidated balance sheets as at November 30, 2000 and the related
interim unaudited consolidated statements of earnings, the interim
unaudited consolidated statements of retained earnings and contributed
surplus and the interim unaudited consolidated statements of cash flows
(the "PURCHASER'S INTERIM FINANCIAL STATEMENTS"). The Purchaser's
Audited Financial Statements and the Purchaser's Interim Financial
Statements, collectively referred to as the "PURCHASER FINANCIAL
STATEMENTS". The Purchaser Financial Statements were complete and
correct in all material respects as of their respective dates, complied
as to form in all material respects with applicable accounting
requirements with respect thereto as of their respective dates, and
have been prepared in accordance with Canadian GAAP applied on a basis
consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto or, in the case
of unaudited statements included in the Purchaser's interim reports.
The balance sheets included in the Purchaser Financial Statements
present fairly in all material respects as of their respective dates
the financial condition of the Purchaser (subject, in the case of the
Purchaser's Interim Financial Statements, to normal, recurring year-end
adjustments that may be required upon audit). All material liabilities
and obligations, whether absolute, accrued or contingent, whether
direct or indirect, and whether due or to become due, which existed at
the date of such Purchaser Financial Statements have been disclosed in
the balance sheets included in the Purchaser Financial Statements or in
notes to the Purchaser
34
Financial Statements to the extent such liabilities were required,
under Canadian GAAP, to be so disclosed. The statements of operations,
shareholders' equity and cash flows included in the Purchaser Financial
Statements present fairly in all material respects the results of
operations, shareholders' equity and cash flows of the Purchaser for
the periods indicated (subject, in the case of the Purchaser's Interim
Financial Statements, to normal, recurring year-end adjustments that
may be required upon audit), and the notes included in the Purchaser
Financial Statements present fairly in all material respects the
information purported to be shown thereby.
5.9 REPORTING ISSUER. The Purchaser has been a reporting issuer (as such
term is defined in the SECURITIES ACT (Ontario) since June 29, 2000 and
is not on the list of defaulting issuers established by the Ontario
Securities Commission.
5.10 SECURITIES LAW EXEMPTION. The Purchaser is issuing the Purchaser Shares
to the Vendor in reliance on the exemption in section 72(l)(j) of the
SECURITIES ACT (Ontario).
5.11 HOLD PERIOD. The Purchaser Shares will be "freely tradeable" in Ontario
by the Vendor, after June 29, 2001, pursuant to section 72(5) of the
SECURITIES ACT (Ontario), provided it complies with such section and
the sale by the Vendor is not a "control person distribution" (as that
term is defined in Rule 14-501).
ARTICLE 6
SURVIVAL AND RELIANCE ON REPRESENTATIONS & WARRANTIES AND INDEMNIFICATION
6.1 SURVIVAL NOTWITHSTANDING INVESTIGATION. Notwithstanding any
investigation conducted before the Closing Date, including for greater
certainty, the Due Diligence Investigation, and notwithstanding implied
knowledge or notice of any fact or circumstance which any Person may
have as a result of such investigation or otherwise, the parties hereto
shall be entitled to rely upon the representations and warranties set
forth herein and the obligations of the parties hereto with respect
thereto shall survive the Closing Date and shall continue in full force
and effect in accordance with and subject to the terms of this ARTICLE
6.
6.2 GENERAL INDEMNIFICATION BY VENDOR PARTIES. Subject to the provisions
contained herein, the Vendor Parties shall be liable to the Purchaser
and its directors, officers and employees (collectively, the "PURCHASER
INDEMNIFIED PERSONS" and singly a "Purchaser Indemnified Person") and
shall defend, indemnify and hold harmless all of the Purchaser
Indemnified Persons against any and all Claims incurred or suffered by
or imposed upon any of the Purchaser Indemnified Persons arising
directly or indirectly out of:
(a) the breach of any representation or warranty contained or
contemplated by this Agreement or in any other agreement or
document required to be furnished by a Vendor Party to the
Purchaser hereunder; and
35
(b) the breach or non-fulfilment of any agreement, covenant or
obligation of any of Vendor Parties contained in this
Agreement or in any other agreement or document required to be
entered into by any of the Vendor Parties pursuant hereto to
the extent not waived in writing by the Purchaser.
The obligation of indemnification of such Vendor Parties hereunder shall be
joint and several.
6.3 INDEMNIFICATION BY THE PURCHASER. The Purchaser shall be liable to
Vendor and its officers, directors and employees (collectively the
"VENDOR INDEMNIFIED PERSONS" and singly a "VENDOR INDEMNIFIED PERSON")
and shall defend, indemnify and hold harmless all of the Vendor
Indemnified Persons against any and all Claims incurred or suffered by
or imposed upon any of the Vendor Indemnified Persons arising directly
or indirectly out of:
(a) the breach of any agreement, covenant, representation or
warranty of the Purchaser contained in or contemplated by this
Agreement or in any other agreement or document required to be
furnished by the Purchaser to Vendor hereunder; and
(b) the breach or non-fulfilment of any agreement, covenant or
obligation of the Purchaser contained in this Agreement or in
any agreement or document required to be entered into by the
Purchaser pursuant hereto, to the extent not waived in writing
by Vendor;
6.4 INDEMNIFICATION AGAINST THIRD PARTY CLAIMS.
(a) Promptly upon receipt by any of the Purchaser Indemnified
Persons or the Vendor Indemnified Persons (in this Section
referred to as the "INDEMNITEE") of a notice of any third
party Claim (a "THIRD PARTY CLAIM") in respect of which the
Indemnitee proposes to demand indemnification from the
Purchaser or Vendor Parties (in this Section referred to as
the "INDEMNITOR") pursuant to the provisions hereof, the
Indemnitee shall give written notice to that effect to the
Indemnitor with reasonable promptness.
(b) The Indemnitor shall have the right by written notice to the
Indemnitee not later than 30 days after giving of the notice
described in subsection 6.4(a) to assume the control of the
defence, compromise or settlement of the Third Party Claim,
provided that such assumption shall, by its terms, be without
cost to the Indemnitee and shall not limit in any way the
Indemnitee's right to indemnification pursuant to the
provisions hereof.
(c) Upon the assumption of control by the Indemnitor as aforesaid,
the Indemnitor shall, at its expense, diligently proceed with
the defence, compromise or settlement of the Third Party Claim
at Indemnitor's sole expense, including retention of counsel
reasonably satisfactory to the Indemnitee and, in connection
therewith, the Indemnitee shall co-operate fully, but at the
sole
36
expense of the Indemnitor, to make available to the Indemnitor
all pertinent information and witnesses under the Indemnitee's
control, make such assignments and take such other steps as in
the opinion of counsel for the Indemnitor are necessary to
enable the Indemnitor to conduct such defence, provided always
that the Indemnitee shall be entitled to reasonable security
from the Indemnitor for any expense, costs or other
liabilities to which it may be or may become exposed by reason
of such co-operation.
(d) The final determination of any such Third Party Claim,
including all related costs, attorneys' fees and expenses,
shall be binding and conclusive upon the Indemnitor and the
Indemnitee as to the validity or invalidity, as the case may
be, of such Third Party Claim against the Indemnitor
hereunder.
Notwithstanding any provision of this Section 6.4, the
Indemnitor may not consent to any settlement of a Third Party
Claim if the terms of such settlement require the Indemnitee
to act or refrain from acting, without the prior written
consent of the Indemnitee.
(e) Should the Indemnitor fail to give notice to the Indemnitee as
provided in subsection 6.4(b), the Indemnitee shall be
entitled to make such settlement of the Third Party Claim as
in its sole discretion may appear advisable, and such
settlement or any other final determination of the Third Party
Claim shall be binding upon the Indemnitor.
6.5 INDEMNIFICATION TO BE AFTER TAX, INSURANCE, ETC. The amount of the
indemnification for any Claim which the Purchaser Indemnified Persons
and the Vendor Indemnified Persons shall be entitled to receive
pursuant to this Agreement shall be payable on demand and shall be
determined after giving effect to any insurance recoveries, tax savings
and recoveries from third parties and of any interest, fines,
penalties, expenses and disbursements of any nature whatsoever incurred
by Opco.
6.6 EXPIRY AND LIMITS OF LIABILITY
(a) The representations and warranties of the Vendor Parties
herein (other than those of the Vendor Parties with respect to
the matters set forth in subsection 6.6(b)), shall terminate
on the date which is 180 days after the date the Purchaser has
publicly released the audited financial statements for the
year ended August 31, 2003 except to the extent that, during
such period, any Purchaser Indemnified Person shall have given
detailed notice (to the extent feasible) to the Vendor of a
specified Claim in respect of any representation or warranty
in which case such representation and warranty with respect to
such Claim shall continue in full force and effect until the
final determination of such Claim.
37
(b) Notwithstanding the foregoing provisions of subsection 6.6(a):
(i) representations and warranties herein of Vendor
Parties with respect to the Opco Shares and the share
capital of Opco as set forth in Sections 3.3 and 3.4
shall survive indefinitely;
(ii) representations and warranties herein of Vendor
Parties relating to any liability of the Opco for the
payment of Taxes shall survive so long as any claim
may be made in respect of such matters under any
applicable statute of limitations; and
(iii) notwithstanding the foregoing, there shall be no
limit of time on the representations and warranties
of Vendor Parties relating to any matter in the case
of fraud, gross negligence, voluntary omission or bad
faith on the part of Vendor Parties.
(c) Notwithstanding the other provisions of this Section 6.6, no
Claims with respect to breaches or failure of representations
and warranties may be made against the Vendor Parties
hereunder unless and until the aggregate amount of all Claims
which may be made pursuant to this Agreement exceed $100,000,
in which event the Vendor Parties shall become liable for the
full amount of all Claims on a dollar for dollar basis, up to
a maximum amount equal to the Purchase Price, which for the
purposes of this ARTICLE 6 shall be determined as the closing
price of the Purchaser Shares on date preceding the Closing
Date on The Toronto Stock Exchange.
It is agreed that any liability for the payment of Taxes by
Opco shall not be subject to any maximum amount set forth in
Section 6.6(c) and shall indemnify the Purchaser on a dollar
for dollar basis including, without limiting the generality of
the foregoing, the Vendor Parties shall indemnify the
Purchaser and hold same harmless for any amounts payable by
Opco as a result of the following: (i) audit by the Internal
Revenue Service ("IRS") of the dental division of EFOS USA,
including all Taxes payable and fees and disbursements of the
advisors of Purchaser and the time of Purchaser's employees in
respect of any new assessment made by the IRS relating to
Taxes; (ii) any Taxes, penalties, professional fees and
employees time payable and resulting from any adjustment of
the capital dividend account of Opco; (iii) any unremitted
sales taxes and fees and disbursements of the advisors of the
Purchaser and the time of Purchaser's employees in respect of
any new assessment issued by the State of California or any
other Governmental Authority in the United States, regarding a
default to collect sales tax on sales in any jurisdiction
including penalties and interest; (iv) any penalties, taxes
and interest regarding the failure to file forms 1120F and
8833 with the IRS and regarding unpaid United States state
Income Taxes and (v) denial or reduction of the deductibility
of management fees paid in 1997 to the Vendor by Opco,
including penalties and interest.
38
(d) The representations and warranties of the Purchaser shall
terminate on the date which is 180 days after the date on
which the Purchaser has publicly released the audited
financial statements for the year ended August 31, 2003 except
to the extent that, during such period any Vendor Indemnified
Person shall have given detailed notice to the Purchaser of a
specified Claim in respect of any representation or warranty
in which case such representation and warranty shall continue
in full force and effect until the final determination of such
Claim.
(e) Notwithstanding the foregoing provisions of subsection 6.6(d):
(i) representations and warranties herein of the
Purchaser with respect to the Purchaser Shares and
the share capital of the Purchaser set forth in
Section 5.2 shall survive indefinitely;
(ii) notwithstanding the foregoing, there shall be no
limit of time on the representations and warranties
of the Purchaser relating to any matter in the case
of fraud, gross negligence, voluntary omission or bad
faith on the part of the Purchaser.
(f) Notwithstanding the other provisions of this Section 6.6, no
Claims with respect to breaches or failure of representations
and warranties may be made against the Purchaser hereunder
unless and until the aggregate amount of all Claims which may
be made pursuant to this Agreement exceed $500,000, in which
event the Purchaser shall become liable for the full amount of
all Claims on a dollar for dollar basis, up to a maximum
amount equal to the Purchase Price.
6.7 INDEMNIFICATION SOLE REMEDY. The provisions of this ARTICLE 6 shall
constitute the sole remedy of the Purchaser, Vendor and Guarantors (in
contract, tort or otherwise) for or in respect of the transactions
contemplated by the Agreement, including any misrepresentation or
breach of any warranty, obligation, covenant or agreement contained in
this Agreement or in any agreement, certificate or other document
delivered or given pursuant to this Agreement.
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 CONDUCT OF BUSINESS OF OPCO. During the period from the date of this
Agreement to the Closing Date, each Vendor Party shall cause Opco to
carry on its Business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use reasonable efforts to preserve intact
its current business organisations, keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others
having business dealings with it to the end that its goodwill and
ongoing
39
businesses shall be unimpaired in any material respect at the Closing
Date. Without limiting the generality of the foregoing, without
Purchaser's consent (which consent shall not be unreasonably withheld
or delayed), during the period from the date of this Agreement to the
Closing Date, the Vendor Parties shall cause and shall ensure that Opco
does not:
(a) (i) except as permitted under this Agreement, declare, set
aside or pay any dividends on, or make any other distributions
in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorise
the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or
convertible securities (other than the issuance of shares upon
the exercise of options outstanding on the date of this
Agreement and in accordance with their present terms);
(c) except as permitted under this Agreement, amend its articles,
by-laws or other comparable organisational documents;
(d) acquire or agree to acquire (i) by amalgamating, merging or
consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other
business organisation or division thereof or (ii) any assets
that are material, individually or in the aggregate, to Opco,
except purchases in the ordinary course of business consistent
with past practice;
(e) sell, lease, license, mortgage or otherwise encumber or
subject to any Encumbrance (other than Encumbrances pursuant
to its existing credit facilities) or otherwise dispose of any
of their properties or assets which are material, individually
or in the aggregate, to Opco, except in the ordinary course of
business consistent with past practice;
(f) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt
securities, or guarantees any debt securities of another
person, except for borrowings under their existing credit
facilities for working capital purposes and up to the
borrowing limits set forth therein, the endorsement of checks
in the normal course of business and the extension of credit
in the normal course of business, or (ii) make any loans,
advances or
40
capital contributions to, or investments in, any other Person,
other than advances to employees in accordance with past
practice;
(g) except for the items currently contracted for by Opco, make or
agree to make any new capital expenditure or expenditures
which, individually, is in excess of $20,000 or, in the
aggregate, are in excess of $100,000;
(h) make any material Tax election or settle or compromise any
material income Tax liability;
(i) pay, discharge, settle or satisfy any Claims, liabilities or
obligations (absolute, accrued or contingent, asserted or
unasserted), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) included in the Financial Statements or
incurred in the ordinary course of business consistent with
past practice;
(j) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which Opco is
a party, or waive, release or assign any material rights or
claims;
(k) except as required to comply with applicable Law, (i) adopt,
enter into or amend any Employee Benefit Plan, (ii) increase
in any manner the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee of Opco
(except for normal increases or bonuses in the ordinary course
of business consistent with past practice), or (iii) except as
permitted in clause (ii) above, grant any awards under any
Employee Benefit Plan (including the grant of stock options,
stock appreciation rights, stock based or stock related
awards, performance units or restricted stock, or the removal
of existing restrictions in any Employee Benefit Plan or
agreement or awards made thereunder);
(l) other than as required by law or GAAP, make any material
change to its accounting policies or procedures; or
(m) authorise any of, or commit or agree to take any of, the
foregoing actions.
7.2 ADDITIONAL COVENANTS. In addition to any agreements or deeds required
to give effect to the transfer of the Opco Shares in favour of the
Purchaser, the Vendor Parties agree to ensure that prior to the Closing
Date to the satisfaction of the Purchaser, acting reasonably ▇▇▇▇▇
▇▇▇▇▇▇ shall have repaid in full the sum of $80,000 owed by "Bright
Buys" to Opco.
7.3 PUBLIC ANNOUNCEMENTS. From the date of this Agreement until the earlier
of the Closing Date or the termination of this Agreement, none of the
Vendor Parties, Purchaser nor Opco will issue or cause the publication
of any press release or other public
41
announcement with respect to this Agreement or the transactions
contemplated hereby without the prior consent of Purchaser (in the case
of the Vendor Parties) or the Vendor Parties (in the case of
Purchaser), which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that (i) nothing herein will prohibit either party from
issuing or causing publication of any such press release or public
announcement to the extent that such party's counsel determines such
action to be required by law, or the regulations of any government
agency or the stock exchange on which Purchaser Shares is traded, in
which case the party making such determination will, if practicable in
the circumstances, use reasonable efforts to allow the other party
reasonable time to comment on such release or announcement in advance
of its issuance; (ii) Opco may disclose this Agreement and the
transactions contemplated hereby to third parties in connection with
securing consents of such third parties and in connection with any
permits, approvals, filings or consents required by law to be obtained;
and (iii) Purchaser may disclose this Agreement and the transactions
contemplated hereby to third parties in connection with securing
consents of third parties and in connection with any permits,
approvals, filings or consents required by law to be obtained. To the
extent feasible, prior to the Closing, all press releases or other
announcements or notices regarding the transactions contemplated by
this Agreement shall be made jointly by Purchaser and Opco.
7.4 ACCESS TO INFORMATION; DUE DILIGENCE INVESTIGATION; CONFIDENTIALITY.
The Vendor Parties shall afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of
Purchaser access during the period prior to the Closing Date, to such
of the properties, books, contracts, commitments, records, officers and
employees as Purchaser may reasonably request for the purpose of
conducting a full and complete due diligence investigation (the "DUE
DILIGENCE INVESTIGATION") of all aspects of Opco and the Vendor
Parties, including, without limitation, financial, legal and accounting
and, during such period, the Vendors Parties shall furnish promptly to
Purchaser and its representatives all information concerning it and its
business, properties and personnel as such other party may request.
Purchaser shall hold any such information which is non-public in
confidence. Purchaser shall make all reasonable best efforts to
minimize disruption to the business of Opco which may result from the
requests for data and information hereunder. All requests for access
and information shall be co-ordinated through senior executives of the
parties to be designated. Any investigation by Purchaser shall not
affect the representations and warranties of the Vendor Parties.
7.5 NON-NEGOTIATION. In consideration of the substantial expenditure of
time, effort and expense undertaken by Purchaser in connection with its
Due Diligence Investigation and the preparation and execution of this
Agreement, each of the Vendor Parties and Opco agrees that, after the
execution of this Agreement until the earlier of (i) the termination of
this Agreement or (ii) the Closing Date, it shall not, directly or
indirectly, solicit, encourage, initiate, negotiate or discuss with any
third party (including by way of furnishing any information concerning
Opco) or permit the consummation of any acquisition proposal relating
to or affecting Opco, or any direct or indirect interests in Opco,
whether by purchase of assets or stock, purchase of interests, business
combination, amalgamation, merger or other transaction, and that it
will promptly advise
42
Purchaser of the terms of any communications it may receive relating to
any bid for all or any part of any such interest in Opco.
7.6 COMMERCIALLY REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of Purchaser and the Vendor Parties
agree to use its commercially reasonable best efforts between the date
hereof and the Closing to secure fulfilment of all of the conditions
precedent to the obligations of Purchaser hereunder (in the case of the
Vendor Parties) and of the Vendor Parties hereunder (in the case of
Purchaser).
7.7 COVENANTS OF PARTIES. From the date of this Agreement until the earlier
of the Closing Date or the termination of this Agreement, each of the
parties to this Agreement covenants and agrees that it shall take no
action which would (i) materially adversely affect the ability of any
party to this Agreement to obtain any consents required for the
transactions contemplated hereby or (ii) materially adversely affect
the ability of any party to perform its covenants and agreements under
this Agreement.
7.8 CONTACT WITH CUSTOMERS AND SUPPLIERS. The Purchaser (and all of its
agents and affiliates and any employees, directors or officers thereof)
shall not contact or communicate with the employees, customers,
suppliers and licensors of Opco in connection with the transactions
contemplated hereby except with the prior written consent of Opco,
which consent shall not be unreasonably withheld but may be conditioned
upon an officer of Opco being present.
7.9 LISTING OF PURCHASER SHARES. The Purchaser shall ensure, on a best
efforts basis, that its subordinate voting shares continue to be listed
on The Toronto Stock Exchange and NASDAQ.
7.10 OTHER ACTIONS. No party shall take any action, except in every case as
may be required by applicable law, that would or is intended to result
in (i) any of its representations and warranties set forth in this
Agreement that are qualified as to materiality being or becoming
untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material manner having an Opco
Material Adverse Effect or Material Adverse Effect of Purchaser, as the
case may be, (iii) any of the conditions set forth in this Agreement
not being satisfied or in a violation of any provision of this
Agreement, or (iv) adversely affecting the ability of any of them to
obtain any of the consents or approvals required from any Governmental
Entity as a condition to Closing.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to consummate the transactions contemplated hereby at the
Closing is subject to the fulfilment to each party's satisfaction on or
prior to the Closing Date of each of the following conditions:
43
(a) SECURITIES MATTERS. The regulatory approval required under
Canadian and U.S. securities laws and under the by-laws,
regulations or policies of the Canadian and U.S. securities
regulatory authorities and stock exchanges and any approval of
the Purchaser's shareholders as may be required by any
securities regulatory authority.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other judgment or order
issued by any court of competent jurisdiction or other
statute, law, rule, legal restraint or prohibition shall be in
effect preventing the consummation of the transactions
contemplated hereby.
(c) PRIOR TRANSACTIONS. The Prior Corporate Transactions and the
Prior Asset Transactions shall have been completed in
accordance with the provisions of this Agreement all to the
satisfaction of the parties.
(d) AMENDMENT OF THE AGREEMENT. This Agreement shall be amended,
after completion of the Prior Corporate Transactions in order
to reflect the impact of the Prior Corporate Transactions on
the ownership of Opco Shares. The Newcos which will acquire
Opco Shares pursuant to the Prior Corporate Transactions shall
all be made parties to this Agreement.
8.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligation of Purchaser
to purchase the Opco Shares at the Closing is subject to the fulfilment
to the Purchaser's satisfaction on or prior to the Closing Date of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Vendor Parties contained in this Agreement shall
be true and correct in all respects, in each case as of the
date of this Agreement and as of the Closing Date as though
made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier
date, in which case as of such earlier date. Purchaser shall
have received a certificate signed on behalf of each of the
relevant Vendor Parties of same to such effect.
(b) PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
by the Vendor Parties on or prior to the Closing Date shall
have been performed or complied with by the Vendor Parties and
the Vendor in all material respects.
(c) OPINION ADDRESSED TO PURCHASER. The Purchaser shall have
received a favourable opinion of counsel to the Vendor and
each of the Vendor Parties, addressed to the Purchaser dated
the Closing Date, as to such matters as Purchaser and its
counsel may reasonably request including (i) the
incorporation, organisation and existence of the Vendor and
Opco, (ii) the authority of each of the Vendor Parties to
execute the agreement; (iii) the valid and binding effect of
the Agreement on each of the Vendor Parties,
44
(iv) the authorised and the issued and outstanding capital
stock of Opco, (v) the due execution and authorisation of the
transfer of the Opco Shares, (vi) the absence of litigation
and all other matters as may be reasonably requested by
Purchaser.
(d) CONSENTS. All necessary consents set forth in Schedule 3.6
shall have been obtained including prior approval of the Board
of Directors of the Purchaser.
(e) RESIGNATIONS. The Purchaser shall have received the
resignations, effective as of the Closing Date, of each
director and officer of Opco specified by the Purchaser in
writing at least five business days prior to the Closing,
along with a release of all claims against Opco.
(f) NO MATERIAL ADVERSE EFFECT. No fact or development shall have
occurred since the date of this Agreement and be continuing
which has had or would be reasonably likely to result in any
change, effect, event, occurrence or state of facts (or any
development that has had or is reasonably likely to have any
change or effect) that, individually or in the aggregate, has
had or would reasonably be expected to have an Opco Material
Adverse Effect. Purchaser shall have received a certificate
signed on behalf of Opco by the President of Opco to such
effect.
(g) DELIVERY OF SHARE CERTIFICATES. Vendor shall have executed and
delivered to Purchaser the Opco Shares duly executed in blank
for transfer.
(h) EMPLOYMENT AGREEMENTS. The Senior Executives shall have
entered into the form of employment agreement attached as
Schedule 8.2(h) which form of employment agreement shall
include non-competition and non-solicitation agreements.
(i) CONTRACTUAL ESCROW. The Vendor and CIBC Mellon Trust Company
shall have entered into and delivered to the Purchaser the
Escrow Agreement.
(j) LOCK-UP AGREEMENT. The Vendor and CIBC Mellon Trust Company
shall have entered into and executed the Lock-Up Agreement.
(k) CERTIFICATES AND DOCUMENTS. Opco shall have delivered at or
prior to the Closing to the Purchaser or their counsel:
(i) the articles and by-laws of the Vendors, certified by
its President as of the Closing Date;
(ii) resolutions of the Board of Directors and, as
necessary, of the shareholders, of the Vendor,
authorising and approving all matters in connection
with this Agreement and the transactions contemplated
herein, certified by the President of Opco as of the
Closing Date; and
45
(iii) such other documents relating to the transactions
contemplated in this Agreement as the Purchaser may
reasonably request.
(l) FINANCIAL STATEMENTS. The Vendor Parties shall have delivered
the Audited Financial Statements and (i) an unaudited balance
sheet as of the end of the most recent quarter preceding the
Closing, (ii) audited statements of income and cash flows for
each of the three fiscal years preceding the Closing, and
(iii) unaudited statements of income and cash flows for the
interim period between the latest audited balance sheet date
and the date of the balance sheet being provided pursuant to
clause (iv) in each case meeting the applicable requirements
under Canadian securities regulations assuming Opco was a
publicly traded company during such periods. In addition, the
Vendor Parties shall have delivered to the Purchaser a written
discussion of the material variations in the accounting
principles, practices and methods used in preparing each of
the Financial Statements and other financial documents
referred to in this Section 8.2(l) from the principles,
practices and methods generally accepted in Canada and in the
United States and in Regulation S-X. Each material variation
shall be described and reconciled to U.S. GAAP, as required by
the SEC and the Canadian securities authorities.
(m) EMPLOYEES. The Purchaser shall have received satisfactory
evidence, acting reasonably, that at least 90% of all
Employees currently employed by Opco continue to be employed
by Opco on the Closing Date.
(n) ACCOUNTANTS. The Purchaser shall have received confirmation
that Ernst & Young, Opco's auditors, are independent certified
public accountants qualified to deliver the accountant's
report on the SEC Financial Statements as required by the
Canadian securities commissions and the SEC. In addition, Opco
shall have entered into an agreement on terms satisfactory to
the Purchaser with Ernst & Young pursuant to which Ernst &
Young shall (A) deliver to the Purchaser any consents with
respect to the Purchaser's use of the SEC Financial Statements
(and required reconciliations thereof to U.S. GAAP) and the
use of Ernst & Young's name in connection with the Purchaser's
filings with the Canadian securities commissions and the SEC
and (B) deliver customary "comfort letters" with respect to
the Financial Statements and required reconciliations, as may
be reasonably requested by the Purchaser.
8.3 CONDITIONS TO OBLIGATIONS OF THE VENDOR. The Vendor's obligation to
sell the Opco Shares at the Closing is subject to the fulfilment to its
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Purchaser contained in this Agreement shall be
true and correct in all respects in each case as of the date
of this Agreement and as of the Closing Date as though made on
the Closing Date, except to the extent such representations
46
and warranties expressly relate to an earlier date, in which
case as of such earlier date. The Vendor shall have received a
certificate signed on behalf of Purchaser by an executive
officer of Purchaser to such effect.
(b) PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
by the Purchaser on or prior to the Closing Date shall have
been performed or complied with by the Purchaser in all
material respects.
(c) PAYMENT OF PURCHASE PRICE. Purchaser shall have delivered to
the Vendor certificates representing Cash Consideration and
the Purchaser Shares in payment of the Purchase Price to be
received by such Vendor for the Opco Shares.
(d) CERTIFICATES AND DOCUMENTS. Purchaser shall have delivered at
or prior to the Closing to Vendor resolutions of the Board of
Directors of Purchaser, authorising and approving all matters
in connection with this Agreement and the transactions
contemplated herein, certified by the Secretary of Purchaser
as of the Closing Date.
(e) AUTHORISATIONS. All authorisations, approvals or permits, if
any, of any Governmental Authority regulatory body or stock
exchanges that are required in connection with the lawful
issuance and sale of the Purchaser Shares pursuant to this
Agreement shall have been duly obtained and shall be effective
on and as of the Closing.
(f) LISTING. The Purchaser Shares shall have been conditionally
authorised for listing on The Toronto Stock Exchange and on
NASDAQ.
(g) OPINION ADDRESSED TO VENDOR. The Vendor and each Guarantor
shall have received a favourable opinion of counsel to the
Purchaser, addressed to the Vendor and the Guarantors dated
the Closing Date, as to such matters as Vendor and the
Guarantors and their counsel may reasonably request including
(i) the incorporation, organization and existence of the
Purchaser; (ii) the authority of the Purchaser to execute the
Agreement; (iii) the valid and binding effect of the Agreement
on the Purchaser; (iv) the due issuance of the Purchaser
Shares as fully paid and non-assessable shares; (v) the
listing of the Purchaser Shares on the Toronto Stock Exchange;
(vi) the SECURITIES ACT (Ontario) exemption under which the
Purchaser Shares are being issued and the hold period
applicable to the Purchaser Shares to the same effect as
Sections 5.10 and 5.11 and all other matters as may be
reasonably requested by the Vendor.
47
ARTICLE 9
OTHER AGREEMENTS
9.1 CONFIDENTIALITY. From the date hereof and after the Closing, each
Vendor Party shall strictly maintain the confidentiality of all
information, documents and materials relating to the Vendor Parties or
the transactions contemplated by this Agreement, including without
limitation the existence of this Agreement and the terms thereof,
except to the extent disclosure of any such information is required by
law or authorised by Purchaser, or otherwise made publicly available by
Purchaser, or reasonably occurs in connection with disputes over the
terms of this Agreement. In the event that such Vendor Party reasonably
believes after consultation with counsel that it is required by law to
disclose any confidential information described in this Section 9.1,
such Vendor Party will (i) provide Purchaser with prompt notice before
such disclosure in order that Purchaser may attempt to obtain a
protective order or other assurance that confidential treatment will be
accorded to confidential information, and (ii) cooperate with Purchaser
in attempting to obtain such order or assurance. The provisions of this
Section 9.1 shall not apply to any information, documents or materials
which are in the public domain or shall come into the public domain,
other than by reason of default by such Vendor Party of this Agreement
or becomes known in the industry through no wrongful act on the part of
such Vendor Party.
9.2 COOPERATION AFTER THE CLOSING. The Vendor Parties will, at any time,
and from time to time, after the Closing Date, execute and deliver such
further instruments of conveyance and transfer and take such additional
action as may be reasonably necessary to effect, consummate, confirm or
evidence the transactions contemplated by this Agreement. Without
limiting the other obligations of the Vendor Parties and the Purchaser,
as the case may be hereunder, each Vendor Party agrees that, after the
Closing, it shall provide reasonable cooperation and assistance to the
other, as the case may be, with respect to any matters, disputes, suits
or claims by or against any person not a party to this Agreement.
9.3 NON-COMPETITION. The Vendor Parties listed in Schedule 9.3 shall not,
for a period of five (5) years from the Closing Date ("NON-COMPETE
PERIOD"), within Canada, the United States and the European Union and
in any country in which the Purchaser or Opco presently conducts or may
conduct the Business in the future, without the prior written consent
of the Purchaser, directly or indirectly, in any manner whatsoever,
including, without limitation, either individually or in partnership or
jointly or in conjunction with any other person, as employee,
principal, agent, shareholder or in any other manner whatsoever, carry
on or be engaged in or be concerned with or lend money to, guarantee
the debts or obligations of, or permit their names to be used or
employed by any person or entity engaged or concerned with or
interested in the Business.
9.4 SECONDARY OFFERING. Purchaser shall use its best efforts, taking into
account the then prevailing market conditions, to proceed with a public
offering of its securities pursuant to a prospectus, registration
statement or a similar document under the relevant
48
jurisdiction (the "PUBLIC OFFERING"). Purchaser agrees to give Vendor
notice of its intention with respect to the Public Offering no later
than ten (10) days prior to the intended date for filing of the
preliminary prospectus, offering memorandum or similar document with
the securities commission or relevant authority having jurisdiction in
the matter. The notice shall provide, subject to the terms hereof,
Vendor with the possibility to qualify the Purchaser Shares held by
Vendor, so as to permit the resale of such Purchaser Shares pursuant to
the terms of the said prospectus or otherwise as the underwriters agree
or where the board of directors of the Purchaser in its good faith
judgment, acting reasonably, determines that to qualify the Purchaser
Shares should not be made or continued.
In the event that the Purchaser enters into an underwriting agreement
or other agreement relating to said Public Offering, the Vendor shall
permit Vendor to sell up to 2,000,000 Purchaser Shares to the
underwriter on the terms and conditions set forth in the said agreement
so long as the underwriters agree and subject to the following
conditions:
(a) the Public Offering shall be in an amount such that at least
50% of the proceeds of the Public Offering shall be for the
Purchaser's use;
(b) the order of priority for the sale of the Purchaser Shares to
be sold pursuant to such Public Offering shall be as follows:
(i) first, such number of shares to satisfy other
registration rights previously entered into by the
Purchaser (other than for ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇);
(ii) second, 1,000,000 Purchaser Shares for ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇; and
(iii) third, the balance, to the extent that such Purchaser
Shares may be sold under the Public Offering up to a
maximum of 2,000,000 Purchaser Shares (or such lesser
number as have been released from the provisions of
the Lock-Up Agreement) for the Vendor.
The Vendor shall pay on a pro-rata basis in accordance with the portion
of the proceeds of the offering received by it, all selling expenses
incurred in connection with any distribution of its Shares, including
the fees and expenses of any investment dealer and all transfer taxes
applicable to the sale of the Purchaser Shares.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing (except as limited as to time in paragraph 10.1(b) below):
(a) by the mutual written consent of the Vendor and the Purchaser;
49
(b) by the Vendor or the Purchaser, if the Closing shall not have
occurred prior to the 45th day following the date hereof;
PROVIDED, HOWEVER, that the right to terminate this Agreement
under this subsection 10.1(b) shall not be available to either
party if such party's failure to fulfil any obligation under
this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such
date; or
(c) by the Purchaser in the event a condition set forth in Section
8.1 or 8.2 becomes incapable of being fulfilled or by the
Vendor in the event a condition set forth in Section 8.1 or
8.3 becomes incapable of being fulfilled.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party
hereto; PROVIDED, HOWEVER, that nothing herein shall relieve either the
Vendor or the Purchaser from liability for any breach of this Agreement
or failure to perform hereunder.
10.3 WAIVER. At any time prior to Closing, any party may (a) extend the time
for the performance of any of the obligations or other acts of any
other party hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant
hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound
thereby.
ARTICLE 11
MISCELLANEOUS
11.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Schedules hereto and the Purchaser Disclosure Memorandum contain the
entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge
have been merged into this Agreement and the Schedules hereto.
11.2 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified, (b) when sent
by confirmed electronic mail or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day,
(c) five days after having been sent by registered or certified
airmail, return receipt requested, postage prepaid, or (d) two business
days after deposit with an internationally recognised overnight
courier, specifying next day delivery, with written verification of
receipt. The address for all notices, requests, consents and other
communications hereunder to be delivered or sent to any party shall be
to such party's address as set forth on Schedule A. The address for all
notices, requests, consents and other communications hereunder to the
Vendors' Parties and Purchaser shall be delivered or sent to the
following:
50
THE VENDOR PARTIES:
Efos Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇)
▇▇▇ ▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: MR. ▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT AND CEO
THE PURCHASER:
EXFO Electro-Optical Engineering, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ (▇▇▇▇▇▇)
▇▇▇ ▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
Or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
11.3 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an
amendment, by each party to this Agreement, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
11.4 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. Neither the Purchaser nor the Vendor Parties may assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the Purchaser or the Vendor, as the case may be.
11.6 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.
11.7 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Province of Ontario without
regard to the principles of conflicts of law thereof and the federal
laws of Canada applicable therein.
51
11.8 CURRENCY. Unless otherwise stated, all amounts set forth herein are in
the legal currency of Canada.
11.9 EXECUTION. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed
by each party and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature page were an original
thereof.
11.10 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of
this Agreement shall not in any way be affected or impaired thereby and
the parties will attempt to agree upon a valid and enforceable
provision which shall be a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this
Agreement.
11.11 INTERPRETATION. The Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or
affect the meaning or interpretation of any provision hereof. The
language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party hereto.
Any references to the "KNOWLEDGE" of Opco or the "OPCO'S KNOWLEDGE" or
"VENDOR PARTIES' KNOWLEDGE" or to the "KNOWLEDGE" of Vendor Parties or
any similar formulation shall mean the actual knowledge of the officers
of Opco. Any references to the "KNOWLEDGE" of the Purchaser or the
"PURCHASER'S KNOWLEDGE" or any similar formulation shall mean the
actual knowledge of the officers of Purchaser. This Agreement and the
rights and obligations thereunder shall enure to be and binding on the
heirs, administrators or assigns of the Shareholders.
11.12 REMEDIES. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the Purchaser
and the Vendor will be entitled to specific performance of the
obligations of each under this Agreement. Each of the Vendor Parties
and the Purchaser agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to
waive, in any action for specific performance of any such obligation,
the defence that a remedy at law would be adequate.
11.13 LANGUAGE. The Parties have requested that this Agreement and all
contracts, documents, or notices relating thereto be drafted in the
English language. Les parties ont exige que cette convention soit
redigee en langue anglaise.
11.14 FEES AND DISBURSEMENTS. Unless otherwise expressly provided for in this
Agreement, each party to this Agreement shall assume its own expenses
and costs relating to this
52
transaction and to the execution of what is contained herein and,
without limiting the generality of the foregoing, the fees and
disbursements of its own legal counsel, accountants, financiers and
consultants. It is specifically agreed that Opco shall not assume any
of the expenses or costs of the Vendor or the Vendor Parties relating
to this transaction.
53
IN WITNESS WHEREOF, the parties hereto have caused this Share Purchase Agreement
to be duly executed by their respective authorised signatories as of the date
first indicated above.
EFOS CORPORATION EXFO ELECTRO-OPTICAL
ENGINEERING INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------- -----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President Title: President and Chief Executive
Officer
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
SCHEDULE 1.1(FFF)
PERMITTED ENCUMBRANCES
TD Bank General Security Agreement
- end -
SCHEDULE 1.1(III)
PRIOR CORPORATE TRANSACTIONS
----------------------------
The Vendor will carry out the following steps prior to the Closing:
1. The Vendor will cause Opco to amend its articles to change its 49
issued and outstanding common shares into 3,700,000 common shares.
2. The Vendor will incorporate, as wholly owned, single-purpose
subsidiaries, [three] new corporations under the BUSINESS CORPORATIONS
ACT (Ontario) ("Newcos"). The tax and fiscal year-end of each Newco
shall be later than August 31st.
3. The Vendor will transfer to the Newcos 2,000,000 of the Opco Shares in
exchange for common shares of the Newcos under section 85 of the TAX
ACT. Other than those Opco Shares, the Newcos will not have any assets
or liabilities.
4. The number of Opco Shares to be held by each Newco will be as follows:
Newco 1 1,000,000
Newco 2 500,000
Newco 3 500,000
5. At the Closing, the Vendor will cause the Newcos to sell their Opco
Shares to the Purchaser with the Purchase Price to be allocated as
follows:
Purchaser Shares
Newco 1 1,000,000
Newco 2 500,000
Newco 3 500,000
- end -
SCHEDULE 1.1(VV)
MATERIAL CLIENTS
----------------
ITF Technologies Optiques Inc.
Newport Corporation
JDS Uniphase Corporation
Avanex Corporation
Corning Incorporated
Lucent Technologies Inc.
Oplink Communications, Inc.
Zenastra Photonics Inc.
- end -
SCHEDULE 3.4
ARTICLES AND BY-LAWS OF OPCO AND OPCO SHARES
--------------------------------------------
NAME AND ADDRESS OPCO SHARES HELD OPCO SHARES TO BE RECEIVED
--------------------------------------------------------------------------------
Efos Corp. 1,700,000 1,700,000
Corp. sub 1 1,000,000 1,000,000
Corp. sub 2 500,000 500,000
Corp. sub 3 500,000 500,000
--------- ---------
3,700,000 3,700,000
See the attached articles and by-laws of Efos Inc.
- end -
SCHEDULE 3.6
CONSENTS AND APPROVALS
----------------------
Toronto Dominion Bank
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Approval by shareholders of Vendor by way of special resolution.
- end -
SCHEDULE 3.8
FINANCIAL STATEMENTS
--------------------
Attached are audited financial statements for the years-ended 1998, 1999 and
2000.
US GAAP reconciliation to be available on closing as per discussions.
Attached are the January 31st, 2001 first Quarter un-audited financial
statements.
- end -
SCHEDULE 3.9
UNDISCLOSED LIABILITIES
-----------------------
None
- end -
SCHEDULE 3.12(A)
TAXES DUE
---------
SCHEDULE 3.12(B)
TAX RETURNS FILED OUTSIDE OF CANADA
-----------------------------------
None
- end -
SCHEDULE 3.13
OPCO INTELLECTUAL PROPERTY
--------------------------
Patent summary lists attached as well as assignments and licence of dental
patents to DENTSPLY International Inc.
- end -
SCHEDULE 3.15
INVENTORIES
-----------
SCHEDULE 3.16
OPCO CONTRACTS
--------------
As requested per section 3.16:
(a) None
(b) None
(c) TD Bank Banking Agreement; also see Schedule 3.6.
(d) Great West Life Lease
(e) None
(f) DENTSPLY IP licenses and non-comp in dentistry
(g) IRAPS [▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇]
(h) None
- end -
SCHEDULE 3.17
NON-ARM'S LENGTH TRANSACTIONS
-----------------------------
None
- end -
SCHEDULE 3.18
INSURANCE
---------
As requested see attached:
Chubb Insurance Co. of Canada
Commercial Package - Policy No. 3532-37-22
Umbrella Liability - Policy No. 79732947
Automobile Policy - Policy No. C03375874
- end -
SCHEDULE 3.19
EMPLOYMENT MATTERS
------------------
See attached:
Position Listing
- end -
SCHEDULE 3.20
BENEFIT PLANS
-------------
See attached:
Group Benefit Plan - EFOS Inc.
- end -
SCHEDULE 3.22
JOINT VENTURE INTERESTS
-----------------------
None
- end -
SCHEDULE 3.25
THIRD PARTY CONSENTS
--------------------
1/ Great West Life regarding property lease.
2/ Toronto Dominion Bank re: Operating Agreement and Guarantees [Note: as
per prior discussions it is EXFO's intention to repay the operating
loan]
- end -
SCHEDULE 3.26
BANK ACCOUNTS
-------------
Toronto Dominion Bank
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ funds Acct: 1275 0646 0457500
US funds Acct: 1275 0646 7304160
- end -
SCHEDULE 3.27
GUARANTEES
----------
None
- end -
SCHEDULE 3.28
COLLECTIBILITY OF ACCOUNTS RECEIVABLE
-------------------------------------
Accounts Receivable list to be provided at time of closing as per clause 3.28.
- end -
SCHEDULE 3.35
DISTRIBUTIONS
-------------
None
- end -
SCHEDULE 3.38
CAPITAL EXPENDITURES
--------------------
See attached table.
- end -
SCHEDULE 4.1
ARTICLES AND BY-LAWS OF VENDOR
------------------------------
See the attached Articles and by-laws of EFOS Corporation.
- end -
SCHEDULE 8.2(H)
SUMMARY TERMS FOR EMPLOYMENT AGREEMENTS
---------------------------------------
SCHEDULE 8.2(I)
ESCROW AGREEMENT
----------------
SCHEDULE 8.2(J)
LOCK-UP AGREEMENT
-----------------
SCHEDULE 9.3
NON-COMPETITION
---------------
1/ ▇▇▇▇ ▇▇▇▇▇▇▇
2/ ▇▇▇▇▇ ▇▇▇▇▇▇
2/ EFOS Corporation and Newcos
- end -
