SHARE PURCHASE AGREEMENT between CRITICALCONTROL SOLUTIONS CORP. and BPOMS, INC. July 30, 2009
Exhibit 10.1
between
CRITICALCONTROL
SOLUTIONS CORP.
and
BPOMS,
INC.
July
30, 2009
TABLE
OF CONTENTS
| ARTICLE 1 - DEFINITIONS | 1 | |
| 1.1 | Definitions and Interpretation | 1 |
| 1.2 | Other Definitional and Interpretive Matters | 5 |
| ARTICLE 2 - PURCHASE AND SALE OF THE COMPANY SHARES | 6 | |
| 2.1 | Purchase and Sale | 6 |
| 2.2 | Purchase Price | 6 |
| 2.3 | Closing Date | 6 |
| ARTICLE 3 - REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION | 6 | |
| 3.1 | Representations and Warranties of the Seller | 6 |
| 3.2 | Representations and Warranties of the Buyer | 7 |
| ARTICLE 4 - REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY | 8 | |
| 4.1 | Representations and Warranties concerning the Company | 8 |
| ARTICLE 5 - COVENANTS | 25 | |
| 5.1 | Covenants of Seller Prior to Closing Date | 25 |
| 5.2 | Covenants of Buyer Prior to Closing Date | 26 |
| 5.3 | Post Closing Covenants | 26 |
| ARTICLE 6 - CONDITIONS | 30 | |
| 6.1 | Conditions for the Benefit of the Buyer | 30 |
| 6.2 | Conditions for the Benefit of the Seller | 31 |
| 6.3 | Waiver of Conditions | 31 |
| ARTICLE 7 - DELIVERIES AT CLOSING | 32 | |
| 7.1 | Closing | 32 |
| 7.2 | Documents Delivered to Buyer | 32 |
| 7.3 | Documents Delivered to Seller | 32 |
| ARTICLE 8 - REMEDIES FOR BREACHES OF THIS AGREEMENT | 32 | |
| 8.1 | Survival of Representations and Warranties | 32 |
| 8.2 | Indemnification Provisions for Benefit of the Buyer | 33 |
| 8.3 | Indemnification Provisions for Benefit of the Seller | 33 |
| 8.4 | Deemed Adjustments | 33 |
| 8.5 | Claim Notice; Notice of a Disputed Claim | 33 |
| ARTICLE 9 - LIMITATIONS ON INDEMNIFICATION | 34 | |
| 9.1 | Limitations on Indemnification | 34 |
| ARTICLE 10 - MISCELLANEOUS | 34 | |
| 10.1 | Press Releases and Public Announcements | 34 |
| 10.2 | No Third-Party Beneficiaries | 34 |
| 10.3 | Entire Agreement | 34 |
| 10.4 | Succession and Assignment | 34 |
| 10.5 | Counterparts | 35 |
| 10.6 | Headings | 35 |
| 10.7 | Notices | 35 |
| 10.8 | Governing Law | 36 |
| 10.9 | Amendments and Waivers | 36 |
| 10.10 | Severability | 36 |
| 10.11 | Expenses | 36 |
i
THIS SHARE PURCHASE AGREEMENT
entered into as of July 30, 2009 by and between CRITICALCONTROL SOLUTIONS CORP.,
an Alberta corporation with its principal place of business located at 0000, 000
- 0xx Xxx X.X., Xxxxxxx, Xxxxxxx, Xxxxxx (the “Buyer”) and BPOMS, INC., a
Delaware corporation with its principal place of business located at 0000 Xxxxx
Xxxxxxx, Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000 (the
“Seller”). The Buyer and the Seller are referred to collectively
herein as the “Parties”. The Parties hereto agree as
follows:
RECITALS
|
A.
|
The
Seller owns all of the outstanding shares in the capital of BPO Management
Services, Ltd. (the “Company”); and
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B.
|
This
Agreement contemplates a transaction in which the Buyer will purchase from
the Seller, and the Seller will sell to the Buyer, all of the outstanding
shares in the capital of the Company in return for the sum of One Hundred
Thousand Dollars ($100,000.00) on closing, in accordance with the terms
and conditions herein.
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NOW, THEREFORE, in
consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
ARTICLE 1
DEFINITIONS
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1.1
|
Definitions
and Interpretation
|
In this
Agreement, the following terms shall have the following meanings:
“Accredited Investor” has the
meaning set forth in Section 1.1 of National Instrument 45-106 Prospectus and Registration
Exemptions of the Canadian Securities Administrators.
“Adverse Consequences” means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys’ fees and expenses.
“Affiliate” has the meaning set
forth in Section 2 of the Securities Act
(Alberta).
“Basis” means any past or
present fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction that
forms or could reasonably be expected to form the basis for any specified
consequence.
“BPOMS Payable” means
approximately $2,585,001 owed by the Company to the Seller and Seller’s
subsidiaries, after offsetting the amounts owed by Seller and/or Seller’s
subsidiaries to the Company that have been cancelled and extinguished by the
Company on July 30, 2009 as referenced in the Disclosure Schedule.
“Business” means the provision
by the Company of Enterprise Content Management products, services and solutions
aimed at helping business and government capture, access, deliver and preserve
their documents.
“Business Day” means any day
other than a Saturday, Sunday, statutory holiday or day on which banks in the
City of Calgary are not generally open for business.
“Closing” has the meaning set
forth in Section 2.4 below.
“Closing Date” has the meaning
set forth in Section 2.4 below.
“Closing Time” means 2:00 pm
(MST) on the Closing Date.
“Company Employees” means
individuals currently employed or retained by the Company on a full-time,
part-time or temporary basis, including those employees on disability leave,
parental leave or other absence.
“Company Indebtedness” means
the BPOMS Payable and all indebtedness for borrowed money, accounts payable,
lease payments and other contractual amounts owed, together with all other
liabilities and obligations of the Company, including any related
prepayment fees, interest or expenses, owed by the Company to any third
party or any employee as of the Closing Date.
“Company Shares” means all of
the shares in the capital of the Company.
“Confidential Information”
means any information concerning the Business and affairs of the Company that is
not already generally available to the public.
“Disclosure Schedule” has the
meaning set forth in Section 4.1 below. The Disclosure Schedule shall be deemed
to incorporate by reference all information contained in the Due Diligence File,
whether or not expressly referenced or listed in the in the Disclosure
Schedule.
“Due Diligence File” means the
electronic folder and all files and information contained therein that
represents a compilation of the documentation and information delivered from the
Company and Seller to Buyer during Buyer’s due diligence process, as well as all
other information and correspondence received by Buyer from the Company and
Seller at any time during Buyer’s due diligence process or for any other purpose
delivered to Buyer at any time at or prior to Closing.
“Employee Benefit Plan” means
any benefit plan, program, agreement or arrangement maintained, contributed to
or provided by the Company or any Affiliate for the benefit of any of the
Company’s employees, former employees or dependent or independent contractors or
their respective dependents or beneficiaries, whether written or unwritten,
including all bonus, deferred compensation, incentive compensation, share
purchase, share option, share appreciation, phantom share, savings, profit
sharing, severance or termination pay, health or other medical, life, disability
or other insurance (whether insured or self-insured), supplementary unemployment
benefit, pension, retirement and supplementary retirement plans, programs,
agreements and arrangements, except for any statutory plans to which the Company
is obligated to contribute or comply or plans administered pursuant to
applicable federal or provincial health, workers compensation and employment
insurance legislation.
2
“Environmental, Health, and Safety
Requirements” shall mean all federal, provincial, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or by-products, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now in effect and
applicable to the Company.
“eReview” means Seller’s
proprietary document collaboration and shareing software solution and related
services as referenced in the Due Diligence File.
“Exception” has the meaning
provided by Section 3.1(a) hereof.
“Financial Statements” has the
meaning set forth in Section 4.1(g) below.
“GAAP” means Canadian generally
accepted accounting principles as in effect from time to time.
“Governmental Body” means any
government or governmental or regulatory body thereof, or political subdivision
thereof, whether federal, provincial, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or
private).
“Indemnified Party” has the
meaning set forth in Section 8.5 below.
“Indemnifying Party” has the
meaning set forth in Section 8.5 below.
“Intellectual Property” means
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions, and re-examinations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all website content and domain names, (h) all other
proprietary rights, and (i) all copies and tangible embodiments thereof (in
whatever form or medium).
“June 30 Financial Statements”
means the unaudited financial statements of the Company for the interim period
ended June 30, 2009.
“Knowledge” of a certain matter
means the actual knowledge of the Seller of that matter and the knowledge which
the Seller would have if they conducted such reasonable inquiry that a prudent
person in similar circumstances would consider necessary as to that
matter.
“Kodak Service Agreement” means
the Service Agreement dated October 10, 2001 between Kodak Canada Inc. and
DocuCom Imaging Solutions Inc., as amended.
3
“Law” means all constitutions,
treaties, laws, statutes, codes, ordinances, principles of common law, orders,
decrees, rules, regulations and municipal by-laws, whether domestic, foreign or
international of any Government Body, in each case binding on or affecting the
party or Person referred to in the context in which such word is
used.
“Legal Proceeding” means any
judicial, administrative or arbitral actions, suits, mediation, investigation,
inquiry, proceedings or claims (including counterclaims) by or before a
Governmental Body.
“Liability” means any liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for
Taxes.
“Limitation of Liability” will
have the meaning provided by Section 9.1(b) hereof.
“Material” or “Material Adverse Effect” or
“Material Adverse Change” means a material adverse effect on or change in the
business, assets (including intangible assets), financial condition, prospects,
or results of operations of the Company, which is individually or, in the
aggregate with other individual items, in excess of $25,000.
“Most Recent Fiscal Year End”
means December 31, 2008.
“Ordinary Course of Business”
means the ordinary course of the business of the Company, consistent with past
custom and practice (including with respect to quantity and
frequency).
“Person” means an individual, a
partnership, a corporation, an association, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
“Privacy Laws” means all
applicable privacy laws of Canada and of any applicable provincial or other
governmental subdivision governing the collection, use, disclosure and retention
of personal information about identifiable individuals including, without
limitation, information regarding the Company’s employees, agents, customers and
suppliers.
“Purchase Price” has the
meaning set forth in Section 2.2 below.
“Securities Act” means the
Securities Act
(Alberta), as amended.
“Security Interest” means any
mortgage, pledge, lien, encumbrance, charge, or other security interest, other
than (a) mechanic’s, builder’s, and similar liens, (b) liens for Taxes not yet
due and payable or for Taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (c) purchase money liens and liens securing
rental payments under capital lease arrangements, and (d) other liens arising in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
“to/To the Knowledge of the
Seller” means to the extent of Seller’ Knowledge.
“Tax” or “Taxes” means any federal,
provincial, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, shares, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
4
“Tax Return” means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
“Transaction” means the
purchase and sale of the Company Shares hereunder, including payment of the
Purchase Price.
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1.2
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Other
Definitional and Interpretive
Matters
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(a)
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Unless
otherwise expressly provided, for purposes of this Agreement, the
following rules of interpretation shall
apply:
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(i)
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Calculation of Time
Period. When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of
such period is a non-Business Day, the period in question shall end on the
next succeeding Business Day.
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(ii)
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Dollars. Any
reference in this Agreement to Dollars or $ shall mean Canadian
Dollars.
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(iii)
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Exhibits/Schedules. The
Annexes, Exhibits and Schedules to this Agreement are hereby incorporated
and made a part hereof and are an integral part of this
Agreement. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms
used in any Annexes, Schedule or Exhibit but not otherwise defined therein
shall be defined as set forth in this Agreement. The Annexes,
Exhibits and Schedules are as
follow:
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Schedule
4.1
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Disclosure
Schedule re: Seller Representations and Warranties in Section
4.1
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(iv)
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Gender and
Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall
include the plural and vice versa.
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(v)
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Headings. The
provision of a Table of Contents, the division of this Agreement into
Articles, Sections and other subdivisions and the insertion of headings
are for convenience of reference only and shall not affect or be utilized
in construing or interpreting this Agreement. All references in
this Agreement to any “Section” are to the corresponding Section of this
Agreement unless otherwise
specified.
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(vi)
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Herein. The
words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to
this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise
requires.
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(vii)
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Including. The
word “including” or any variation thereof means “including, without
limitation” and shall not be construed to limit any general statement that
it follows to the specific or similar items or matters immediately
following it.
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(viii)
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The
parties hereto have participated jointly in the negotiation and drafting
of this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall
arise favouring or disfavouring any party by virtue of the authorship of
any provision of this Agreement.
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5
ARTICLE
2
PURCHASE
AND SALE
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2.1
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Purchase
and Sale.
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On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to and hereby does sell to the
Buyer, all of the Company Shares and the BPOMS Payable for the consideration
specified in Section 2.2.
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2.2
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Purchase
Price.
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In
consideration for the sale and transfer of the Company Shares and the BPOMS
Payable, the Buyer agrees to pay and issue to the Seller the sum of One Hundred
Thousand Dollars ($100,000.00) (the “Purchase Price”) payable in cash, or by
wire transfer, bank draft or certified cheque. In addition, the Buyer
agrees to assume all Company Indebtedness.
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2.3
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Closing
Date.
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The
closing of the transactions contemplated by this Agreement (the “Closing” or
“Closing Date”) shall take place on July 31, 2009.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES CONCERNING THE TRANSACTION
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3.1
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Representations
and Warranties of the Seller.
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Except as
set forth in the Disclosure Schedule, the Seller represents and warrants to the
Buyer as of or contemporaneously with the Closing as follows.
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(a)
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Authorization of
Transaction.
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The
Seller has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions, except that the enforceability of the Agreement
(A) may be subject to or limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to or affecting the
rights of creditors and (B) is subject to general principles of equity
(including the possibility of unavailability of specific performance or
injunctive relief), regardless of whether considered in a proceeding in equity,
at law, or otherwise (such limitations on enforceability being hereinafter
called the “Exception”). The Seller need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any third
party, including any government or Governmental Body in order to consummate the
transactions contemplated by this Agreement.
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(b)
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Non-contravention.
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Neither
the execution and the delivery of this Agreement by the Seller, nor the
consummation of the transactions contemplated hereby by the Seller, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
is bound except as may be disclosed in the Disclosure Schedule or the Due
Diligence File.
6
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(c)
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Brokers’
Fees.
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The
Seller has not engaged nor is obligated to pay any commissions or brokers fees
in connection with the transactions contemplated by this Agreement.
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(d)
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Company
Shares.
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The
Seller holds of record and owns beneficially 4,332,318 Company Shares, which
constitute all of the shares in the capital of the Company, free and clear of
any restrictions on transfer (other than under applicable securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a party to any
option, warrant, purchase right, or other contract or commitment that could
require the Seller to sell, transfer, or otherwise dispose of any Company Shares
(other than this Agreement). The Seller is not a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any Company Shares.
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3.2
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Representations and Warranties
of the Buyer.
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The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3.2 are correct and complete.
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(a)
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Organization of the
Buyer.
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The Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the Province of Alberta. The Buyer has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. Correct and complete copies of the Buyer’s
certificate of incorporation and bylaws (as amended to date) have been delivered
to the Seller.
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(b)
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Authorization of
Transaction.
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The Buyer
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement, and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by the
Buyer and constitutes the valid and legally binding obligations of the Buyer,
enforceable in accordance with its terms and conditions, subject only to the
Exception. The Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or Governmental Body in order to consummate the transactions contemplated by
this Agreement.
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(c)
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Non-contravention.
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Neither
the execution and the delivery of this Agreement nor the consummation of the
transactions contemplated hereby and thereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its articles or bylaws, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject.
7
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(d)
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Investment.
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The Buyer
understands that the Company Shares are being offered and sold in reliance upon
exemptions for transactions not involving any public offering from the
prospectus and registration requirements under applicable securities
Laws. The Buyer: (A) is acquiring the Company Shares solely as
principal for its own account, and not with a view to the resale or distribution
thereof, (B) is a sophisticated investor with knowledge and experience in
business and financial matters, (C) has received certain information concerning
the Seller and the Company and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding the Company Shares, and (D) is able to bear the economic risk and lack
of liquidity inherent in holding the Company Shares and is an Accredited
Investor.
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(e)
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Disclosure.
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The
representations and warranties contained in this Section 3.2 do not contain any
untrue statement of a material fact. No representation or warranty
contained in this Section 3.2 omits to state any material fact necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY
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4.1
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Representations
and Warranties concerning the
Company
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Except as
set forth in the disclosure schedule delivered by the Seller to the Buyer
simultaneously herewith (the “Disclosure Schedule”), the Seller represents and
warrants to the Buyer as of or contemporaneously with the Closing, to the
Knowledge of the Seller, as follows:
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(a)
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Organization,
Qualification, and Corporate
Power.
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The
Company is a corporation duly organized, validly existing, and in good standing
under the law of the Province of Ontario, the jurisdiction of its
incorporation. The Company neither owns or leases any property or
premises, nor has operations or personnel based outside Ontario, except as
described in the Disclosure Schedule. The Company has full corporate
power and authority and, all licenses, permits, and authorizations issued by any
Governmental Body necessary to carry on the businesses in which it is engaged
and in which it presently proposes to engage and to own and use the properties
owned and currently being used by it. The Disclosure Schedule lists
the directors and officers of the Company. The Seller has delivered
to the Buyer correct and complete copies of the articles and bylaws and all
other organizational documents of the Company as amended to date. The
minute books (containing the records of meetings of the shareholders, the board
of directors, and any committees of the board of directors), the share
certificate books, and the share record books of the Company are correct and
complete in all material respects. The Company is not in material
default under or in violation of any provision of its articles or bylaws or any
other organizational document.
8
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(b)
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Capitalization.
|
The
authorized and issued capital of the Company is as described in the Disclosure
Schedule. All of the issued and outstanding Company Shares have been
duly authorized, are validly issued, fully paid, and non-assessable, and, are
held of record by the Seller. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of the
Company Shares. There are no outstanding or authorized share
appreciation, phantom share, profit participation, or similar rights with
respect to the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the Company
Shares.
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(c)
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Non-contravention.
|
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will:
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(i)
|
violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
Governmental Body, or court to which the Company is subject or
any provision of the articles or bylaws of the
Company or
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(ii)
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Except
as provided in the Disclosure Schedule, conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its
assets).
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(iii)
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The
Company does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
Governmental Body in order for the Company and the Seller to consummate
the transactions contemplated by this
Agreement.
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(d)
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Brokerage
Fees.
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The
Company has not engaged and is not obligated to pay any commissions or brokers
fees in connection with the transactions contemplated by this
Agreement.
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(e)
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Title to
Assets.
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Except as
to properties and assets owned, leased or provided by a customer of the Company,
the Company has good and marketable title to, or a valid leasehold interest in,
the properties and assets used by them and located on the Company’s premises, or
shown in the June 30 Financial Statements or acquired by the Company after the
date thereof, except for properties and assets disposed of in the Ordinary
Course of Business since June 30, 2009 and, except as disclosed in Section
4.1(e) of the Disclosure Schedule. All such property and assets which are owned
by the Company are owned free of Security Interests except as disclosed in the
Disclosure Schedule.
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(f)
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Financial Statements
and Books and Records.
|
Included
in the Due Diligence File are the annual financial statements for the Company as
of and for the fiscal years ended December 31, 2006, December 31, 2007 and
December 31, 2008. Such financial statements are hereinafter called the
“Financial Statements”.
9
It was
the Seller’s intention when engaging the accounting firm noted in each
report, that the Financial Statements be prepared in accordance with
GAAP, consistently applied. To the Knowledge of the Seller, there are
no entries contained in the Financial Statements which are not in accordance
with GAAP, consistently applied. Each of the Financial Statements
presents fairly the financial condition of the Company as of such dates and the
results of operations of the Company for such periods. The financial condition
of the Company is now approximately the same as the financial condition
reflected in the Financial Statements for the Most Recent Fiscal Year End and as
reflected in the June 30 Financial Statements, when such financial condition is
taken as a whole, subject to any adjustments to balances for goodwill and/or
other intangibles.
It was
the Seller’s intention when engaging the accounting firmnoted in each report,
that the financial and other books, records, files and accounts of the Company
be maintained in accordance with GAAP on a basis consistent with prior
years. To the Knowledge of the Seller, there are no entries contained
in the Company’s financial and other books, records, files and accounts which
are not in accordance with GAAP, consistently applied.
The
Company’s financial and other books, records, files and accounts in all material
respects:
|
|
(i)
|
are
complete, in reasonable detail and accurately and fairly reflect the
financial transactions of the Company,
and
|
|
|
(ii)
|
are
fairly reflected in the Financial Statements for the Most Recent Fiscal
Year End and the June 30 Financial
Statements.
|
It was
the Seller’s intention when engaging the accounting firm noted in each report,
that the Company maintain systems of internal accounting controls sufficient to
provide reasonable assurances as to the following matters (and the Seller has no
Knowledge of any specific circumstances in which the Company’s accounting
control systems do not provide reasonable assurance with respect to such
matters): (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit the preparation of financial statements in conformity
with GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the actual levels at reasonable intervals and appropriate action is taken with
respect to any differences.
|
(g)
|
Events Subsequent to
June 30, 2009.
|
Except as
indicated in the Disclosure Schedule, to the Seller’s Knowledge, since June 30,
2009, there has not been any Material Adverse Change. In addition,
and without limiting the generality of the foregoing, since that date, except as
indicated in the Disclosure Schedule:
|
(i)
|
the
Company has not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
|
|
(ii)
|
the
Company has not entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) outside
the Ordinary Course of
Business;
|
10
|
(iii)
|
no
party (including the Company) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $25,000 to which the
Company is a party;
|
|
(iv)
|
the
Company has not imposed any Security Interest upon any of its assets,
tangible or intangible, outside the Ordinary Course of
Business;
|
|
(v)
|
the
Company has not made any capital expenditure (or series of related capital
expenditures) either involving singly or in the aggregate more than $25,000 or outside the
Ordinary Course of Business;
|
|
(vi)
|
the
Company has not made any capital investment in, any loan to, or any
acquisition of the securities or all or substantially all of the assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) either involving singly or in the aggregate more than $25,000 or outside the
Ordinary Course of Business;
|
|
(vii)
|
the
Company has not issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation involving more than $25,000 singly or in the
aggregate;
|
|
(viii)
|
the
Company has not delayed or postponed the payment of accounts payable and
other Liabilities that are not reflected in the Due Diligence
File;
|
|
(ix)
|
the
Company has not intentionally and knowingly cancelled, compromised,
waived, or released any right or claim (or series of related rights and
claims) either involving singly or in the aggregate more than $25,000 or outside the
Ordinary Course of Business;
|
|
(x)
|
except
in the Ordinary Course of Business, the Company has not granted
any license or sublicense of any rights under or with respect to any
Intellectual Property;
|
|
(xi)
|
there
has been no change made or authorized in the articles or bylaws of the
Company;
|
|
(xii)
|
the
Company has not issued, sold, or otherwise disposed of any of the Company
Shares, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of the
Company Shares;
|
|
(xiii)
|
the
Company has not declared, set aside, or paid any dividend or made any
distribution with respect to the Company Shares (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of the
Company Shares;
|
|
(xiv)
|
the
Company has not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to its property, ordinary wear and
tear excepted;
|
|
(xv)
|
the
Company has not made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the Ordinary
Course of Business except as identified in the Disclosure
Schedule;
|
|
(xvi)
|
the
Company has not hired any new employees, entered into any employment
contract or collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement or terminated the
employment of any employee, outside the Ordinary Course of Business except
as identified in the Disclosure
Schedule;
|
11
|
(xvii)
|
the
Company has not granted any increase in the base compensation of any of
its directors, officers, and employees, outside the Ordinary Course of
Business except as identified in the Disclosure
Schedule;
|
|
(xviii)
|
other
than as disclosed in this Agreement or the Disclosure Schedule, the
Company has not adopted, amended, modified, or terminated any bonus,
profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan), outside the Ordinary Course of
Business;
|
|
(xix)
|
the
Company has not made any other change in employment terms for any of its
directors, officers, and employees, outside the Ordinary Course of
Business;
|
|
(xx)
|
the
Company has not made or pledged to make any charitable
contribution;
|
|
(xxi)
|
there
has not been any other material occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business
involving the Company; and
|
|
(xxii)
|
as
referred to in this Section, the Company has not committed to any of the
foregoing.
|
|
(h)
|
Undisclosed
Liabilities.
|
The
Company does not have any Liabilities except for (A) Liabilities set forth in
the Financial Statements for the Most Recent Fiscal Year End and the June 30
Financial Statements, (B) Liabilities which have arisen after June 30, 2009 in
the Ordinary Course of Business, (C) Liabilities which are not required by GAAP
to be included in the Financial Statements and which, to the extent Material,
are set forth in the Disclosure Schedule, and (D) Liabilities that are otherwise
apparent from the Due Diligence File.
|
(i)
|
Legal
Compliance.
|
The
Company and its predecessors have complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, provincial, local, and foreign
governments (and all agencies thereof), and no investigation, charge, complaint,
claim, has been filed or commenced against any of them alleging any failure so
to comply. Further, no action, suit, proceeding, hearing, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply.
|
(j)
|
Tax
Matters.
|
Except as
indicated in the Disclosure Schedule:
|
(i)
|
the
Company has prepared and filed all Tax Returns on time with all
appropriate Government Bodies which were required to be filed before the
Closing Date. Each such Tax Return was correct and complete. True copies
of all Tax Returns prepared and filed by the Company during the past five
years and that the Buyer has requested have been provided to the Buyer on
or before the date of this
Agreement;
|
|
(ii)
|
the
Company has paid all Taxes due and payable by it. The Company has paid all
Tax installments due and payable by
it;
|
12
|
(iii)
|
there
are no assessments or reassessments of Taxes that have been issued and are
outstanding. The Company is not negotiating any assessment or reassessment
with any Government Body. Neither the Company nor the Seller is aware of
any Liability of the Company for Taxes or any grounds for an assessment or
reassessment including aggressive treatment of income expenses, credits or
other claims for deduction under any Tax Return. Neither the Company nor
the Seller has received any indication from any Government body that an
assessment or reassessment of the Company is proposed in respect of any
Taxes, regardless of its merits. There is no pending or threatened
proceeding with respect to any claim or refund made by the Company with
respect to Taxes previously paid. The Company has not executed any
agreement extending the period for assessment, reassessment or collection
of any Taxes;
|
|
(iv)
|
the
Company has withheld from each payment made to any Company employees or
former employees of the Company, officers, directors, and to all Persons
who are non-residents of Canada for the purposes of the Income Tax Act all
amounts required by applicable Law and has remitted such withheld amounts
within the prescribed periods to the appropriate Government
Body.
|
|
(k)
|
Real Property and
Leases.
|
The
Company does not own any real property. The Disclosure Schedule
contains a list of all leases and subleases for real property to which the
Company is a party, the square footage leased with respect to each lease and the
expiration date of each lease and sublease. These leases and
subleases are valid and enforceable and are not in default. The
Seller is unaware of any condition or situation that does or would render the
real property leased or occupied by the Company, the improvements located
thereon, and the furniture, fixtures and equipment relating thereto (including
plumbing, heating, air conditioning and electrical systems), to be out of
conformance with any and all applicable health, fire, safety, zoning, land use
and building laws, ordinances and regulations. There are no
outstanding contracts made by the Company for any improvements made to the real
property leased or occupied by the Company that have not been paid for or as to
which payments are not current (e.g., diesel generator). The
Disclosure Schedule also contains correct and complete copies of the leases and
subleases listed therein. With respect to each lease and sublease
listed in the Disclosure Schedule:
|
(i)
|
the
lease or sublease is legal, valid, binding, enforceable, and in full force
and effect, according to its terms, subject to the
Exception;
|
|
(ii)
|
the
lease or sublease will continue to be legal, valid, binding, enforceable,
and in full force and effect according to its terms following the
consummation of the transactions contemplated hereby, subject to the
Exception;
|
|
(iii)
|
the
Company is not in breach or default and, to the Knowledge of the Seller,
no other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
|
|
(iv)
|
the
Company has not repudiated and, to the Knowledge of the Seller, no other
party to the lease or sublease has repudiated any provision
thereof;
|
|
(v)
|
to
the Knowledge of the Seller, there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
|
13
|
(vi)
|
with
respect to each sublease, the representations and warranties set forth in
subsections (i) through (v) above are true and correct with respect to the
underlying lease; and
|
|
(vii)
|
the
Company has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold.
|
|
(l)
|
Intellectual
Property.
|
|
(i)
|
Except
as listed in the Disclosure Schedule, and except as to PCs, as to which
the Company has made reasonable efforts to ensure that all standard
shrink-wrap or click-wrap installed software is completely and currently
licensed, the Company owns, or has the right to use pursuant to license,
sublicense, agreement or other valid permission, all Intellectual Property
used in the operation of the Business of the Company as presently
conducted. Each item of Intellectual Property owned or used by
the Company immediately prior to the Closing hereunder will be owned or
available for use by the Company on identical terms and conditions
immediately subsequent to the Closing hereunder. Certain marketing and
business description materials contained in the Due Diligence File contain
references to Seller’s eReview product. In addition, the sales
forecast and pipeline reports included in the Due Diligence File contain
references to eReview sales opportunities. Notwithstanding
these references, Buyer acknowledges and agrees that eReview is NOT part
of the Intellectual Property owned by the Company, and Buyer is receiving
no rights or license to use, market or sell the Seller’s eReview
product.
|
|
(ii)
|
|
|
(A)
|
To
the Knowledge of the Seller, the Company has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third
parties;
|
|
(B)
|
To
the Knowledge of the Seller, the Company has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any Intellectual Property
rights of any third party). The Seller is unaware of any fact
or condition that would cause the Seller to believe that a third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the
Company.
|
|
(iii)
|
With
respect to all Intellectual Property owned by the Company (the “Owned
Intellectual Property”), the Disclosure Schedule identifies each
Intellectual Property registration which has been issued to the Company
and identifies each pending application or application for registration
which the Company has made with respect to any of its Owned Intellectual
Property. The Disclosure Schedule also identifies each
license, agreement, or other permission which the Company has granted to
any third party with respect to any of its Owned Intellectual Property
(together with any exceptions), other than licenses granted in the
Ordinary Course of Business, and the assignment of the Owned Intellectual
Property to Healthaxis, Ltd. as specified in Section 6.2(e) of this
Agreement. The Seller has delivered to the Buyer correct and complete
copies of all such registrations and applications, and all such licenses,
agreements, and permissions granted by the Company to any third party with
respect to Owned Intellectual Property (excluding licenses granted by the
Company in the Ordinary Course of Business). The parties
acknowledge that the Disclosure Schedule will describe, in general terms,
such licenses, agreements and other
permissions.
|
14
|
(iv)
|
With
respect to each item of Owned Intellectual Property, the Seller does not
have Knowledge of any fact or condition that would cause the Seller to
believe that the following is not
true:
|
|
(A)
|
the
Company possess all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other
restriction;
|
|
(B)
|
the
item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
|
|
(C)
|
no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of the Seller, is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item;
|
|
(D)
|
except
as may be provided in each of the Company’s contracts for services to its
customers, the Company has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item;
and
|
|
(E)
|
each
software program and script developed by the Company, including the source
code and object code thereof and the design documents in connection
therewith, is an original work of persons employed by or contracted to the
Company.
|
|
(v)
|
No
past or present employee, independent contractor or agent has any right,
title or interest in or to any of the Company’s owned Intellectual
Property.
|
|
(vi)
|
Except
as to standard shrink-wrap or click-wrap software licenses, the Disclosure
Schedule identifies each item of Intellectual Property that any third
party owns and that the Company uses pursuant to license, sublicense,
agreement or permission (the “Licensed Intellectual
Property”). The Seller has delivered to the Buyer correct and
complete copies of all such licenses with respect to the Licensed
Intellectual Property or the software which is licensed is referred to in
one or more contracts between the Company and its
customers. With respect to each item of Licensed
Intellectual Property identified in the Disclosure Schedule, the Seller
does not have Knowledge of any fact or condition that would cause the
Seller to believe that the following is not
true:
|
|
(A)
|
the
license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and
effect;
|
|
(B)
|
the
license, sublicense, agreement, or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions
contemplated hereby;
|
|
(C)
|
no
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
|
15
|
(D)
|
no
party to the license, sublicense, agreement, or permission has repudiated
any provision thereof;
|
|
(E)
|
with
respect to each sublicense, the representations and warranties set forth
in subsections (A) through (D) above are true and correct with respect to
the underlying license;
|
|
(F)
|
the
underlying item of Licensed Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
|
|
(G)
|
no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of the Seller, is
threatened, which challenges the legality, validity, or enforceability of
the underlying item of Licensed Intellectual Property;
and
|
|
(H)
|
the
Company has not granted any sublicense or similar right with respect to
the license, sublicense, agreement, or
permission.
|
|
(vii)
|
The
Seller does not have Knowledge of any fact or circumstance that would
cause it to believe that the following is not true: the Company’s software
is reasonably free of computer viruses and does not contain any
contaminants or time bombs, including any codes or instructions, that may
be used to access, modify, delete, damage or disable any computer
system.
|
|
(viii)
|
The
Seller does not have Knowledge of any fact or circumstance that would
cause it to be believe that the following is not true: the documentation
possessed by Company in respect of software developed by or for the
Company will be sufficient to allow Buyer and the Company’s existing
staff, with the assistance of skilled software professionals possessing
experience in this industry, to operate such software and to further
develop and maintain it.
|
|
(ix)
|
The
Disclosure Schedule lists all open source software used and licensed by
the Company. The Seller is unaware of any fact or circumstance
that would cause it to believe that the following is not true: the Company
has complied with all applicable open source licences by which it is
bound.
|
|
(x)
|
The
Company has used reasonable commercial efforts to take precautions and to
protect its proprietary information from unauthorized access or
disclosure.
|
|
(m)
|
Tangible
Assets.
|
Except as
to any of the following provided by a customer, the Company owns or leases all
premises, machinery, equipment, and other tangible assets necessary for the
conduct of the Company’s businesses as presently conducted. To the
Knowledge of the Seller, each such tangible asset owned or leased by it has been
maintained in accordance with the Company’s normal practice, and is in good
operating condition and repair (subject to normal wear and tear).
16
|
(n)
|
Inventory.
|
The
current inventory of consumables of the Company, subject to a reasonable
allowance for obsolete inventory consistent with the allowance reflected in the
June 30 Financial Statements, is good and usable and is capable of being sold in
the Ordinary Course of Business. The Company’s inventory level is consistent
with past practice.
|
(o)
|
Contracts.
|
The
Disclosure Schedule lists the following contracts and other agreements to which
the Company is a party:
|
(i)
|
any
agreement (or group of related agreements) for the lease of personal
property (including without limitation software) to or from any Person
providing for lease payments in excess of $10,000 per
annum;
|
|
(ii)
|
any
agreement (or group of related agreements) for the purchase or sale of
supplies, products or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of
more than one year, result in a material loss to the Company or, except
for Contracts made in the Ordinary Course of Business, involve
consideration in excess of $10,000;
|
|
(iii)
|
any
agreement concerning a partnership or joint venture or arrangement to
share profits;
|
|
(iv)
|
any
agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of $10,000 or under which
it has imposed a Security Interest on any of its assets, tangible or
intangible;
|
|
(v)
|
any
agreement concerning confidentiality or
non-competition;
|
|
(vi)
|
any
agreement with any of the Seller and their Affiliates (other than the
Company) or any members of their immediate
families;
|
|
(vii)
|
any
profit sharing, share option, share purchase, share appreciation, deferred
compensation, severance, or other plan or arrangement for the
benefit of its current or former directors, officers, and
employees;
|
|
(viii)
|
any
collective bargaining
agreement;
|
|
(ix)
|
any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees or any members of their immediate
families, excluding claims for reimbursement of expenses incurred in the
Ordinary Course of Business;
|
|
(x)
|
any
agreement under which the consequences of a default or termination could
have a Material Adverse Effect;
or
|
|
(xi)
|
any
other agreement (or group of related agreements) which was not entered
into in the Ordinary Course of the
Business.
|
17
The
Seller has delivered to the Buyer a correct and complete copy of each written
agreement listed in the Disclosure Schedule (as amended to date), and to the
Knowledge of the Seller, a written summary of the terms of all oral agreements
referred to in the Disclosure Schedule. With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable, and in full
force and effect, subject to the Exception; (B) subject to obtaining
the consents indicated in the Disclosure Schedule, the agreement will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms immediately following the consummation of the transactions
contemplated hereby except for the Exception; (C) the Company is not in breach
or default and, to the Knowledge of the Seller, no other party is in breach or
default of the agreement; (D) to the Knowledge of the Seller, no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (E) to the Knowledge of the Seller, no party has repudiated any
provision of the agreement. Without limiting the generality of the
foregoing, the Company is in compliance with all covenants under all agreements
with its bank and other lenders except as referenced in the Disclosure
Schedule.
|
(p)
|
Customers and
Receivables.
|
|
(i)
|
The
Company has delivered to the Buyer a true and complete list of all
customers of the Business as of the date hereof. Such customer
list and other information in the Disclosure Schedule reasonably
accurately summarizes or reflects with respect to each customer all
information relevant to this Section
4.1(p).
|
|
(ii)
|
Except
as may be reflected in the Disclosure Schedule, the Seller has no
Knowledge of any facts or circumstances arising outside the Ordinary
Course of Business which could reasonably be expected to result in the
loss of any customers or sources of revenue of the Business or any
reduction in volume of purchases from the Business prior to the end of
their contract term by any customer which, in the aggregate, could be
Material to the Business.
|
|
(iii)
|
All
accounts receivable of the Company are fairly reflected on the Company’s
books and records. All accounts receivable of the Company arose
from bona fide transactions in the Ordinary Course of the Business and are
valid, enforceable and to the Knowledge of the Seller fully collectable
accounts (subject to a reasonable allowance, consistent with past practice
for doubtful accounts as reflected in the June 30 Financial Statements,
and subject to the disclosure made in the Disclosure
Schedule). Such accounts receivable are not subject to any
set-off or counterclaim rights of which Seller is
aware.
|
|
(q)
|
Suppliers.
|
Listed in
the Disclosure Schedule are the names and addresses of the ten (10) largest
suppliers (measured by dollar volume of the Company’s purchases) from which the
Company ordered services, materials, supplies, telecommunications capacity,
merchandise and other goods during the twelve-month period ended December 31,
2008. Except as disclosed in the Disclosure Schedule, the Company has
not received any notice that any such supplier will not sell services, raw
materials, supplies, merchandise and other goods to the Company at any time, on
terms and conditions substantially similar to those used in its current sales to
the Company, subject only to general and customary price increases.
|
(r)
|
Telecommunications
Infrastructure.
|
Listed in
the Disclosure Schedule are:
|
(i)
|
all
the rights of way, tower locations, regen hut locations, and rights for
lit and unlit fiber owned or licensed in favor of the Company;
and
|
18
|
(ii)
|
a
list of all contracts, licences, agreements and understandings relating to
telecommunications infrastructure to which the Company is a
party.
|
|
(s)
|
Powers of
Attorney.
|
The
Disclosure Schedule lists all outstanding powers of attorney executed on behalf
of the Company.
|
(t)
|
Insurance.
|
The
Disclosure Schedule sets forth the following information with respect to each
insurance policy (including policies providing property, casualty, liability,
and workers’ compensation coverage and bond and surety arrangements) to which
the Company has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past 5 years:
|
(i)
|
the
name, address, and telephone number of the
agent;
|
|
(ii)
|
the
name of the insurer, the name of the policyholder, and the name of each
covered insured;
|
|
(iii)
|
the
policy number and the period of coverage;
and
|
|
(iv)
|
a
description of any retroactive premium adjustments or other loss sharing
arrangements.
|
The
Seller has delivered to the Buyer the insurance policies, brokers certificates
or other information in the Company’s possession concerning insurance covering
the Company. With respect to each insurance policy, the Seller is
unaware of any fact or circumstance that would cause the following to be untrue:
(A) if unexpired, the policy is legal, valid, binding, enforceable, and in full
force and effect in accordance with its terms, (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions contemplated
hereby except to the extent such policies are held at the Seller/parent company
level, in which event coverage may lapse upon sale of the Company Stock to Buyer
by virtue of the fact that the Company will no longer be a subsidiary of Seller
upon Closing; (C) neither the Company nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. The Disclosure
Schedule describes any self insurance arrangements affecting the
Company. Seller has not made, and does not make, any representation
or warranty that any such coverages may be continued beyond the Closing Date,
and Buyer has been advised to seek the advice of its on consultants and
professional advisors to assure that Buyer has adequate insurance coverage at
and following the Closing.
|
(u)
|
Litigation.
|
The
Disclosure Schedule sets forth each instance in which the Company (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of the Seller, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi judicial or administrative agency of any federal,
provincial, local, or foreign jurisdiction or before any
arbitrator. There is presently no Basis of which Seller is aware for
the commencement of any Material action, suit or proceeding against the Company
with any reasonable likelihood of success.
19
|
(v)
|
Product and Service
Warranties.
|
Each
product or service sold, licensed or delivered by the Company has been in
material conformity with all applicable contractual commitments, all express
warranties, and all warranties, if any, that are implied as a matter of the law
governing the contract at issue. The Company does not have any existing
Liability of which Seller is aware for replacement or repair of any product or
re-performance of any service or other damages in connection therewith, subject
only to the reserve for warranty claims, if any, set forth in the June 30
Financial Statements as adjusted for the passage of time through the Closing
Date in accordance with the normal, past custom and practice of the
Company. To the Seller’ Knowledge, no product or service
manufactured, sold, licensed or delivered by the Company is subject to any
guaranty, warranty, or other indemnity beyond the warranties described in the
Disclosure Schedule. The Disclosure Schedule describes the normal
terms and conditions of sale or lease or licensing of or providing of services
by or for the Company (including applicable guarantee, warranty and indemnity
provisions).
|
(w)
|
Product and Service
Liabilities.
|
The
Seller is unaware of any Liability or any Basis of Liability for the Company
arising out of any injury to individuals or damage to property as a result of
the ownership, possession, use or license of any product or service
manufactured, sold, leased, licensed or delivered by the Company prior to the
date hereof.
|
(x)
|
Employees.
|
The
Disclosure Schedule sets out:
|
(i)
|
a
complete list of all Company Employees;
and
|
|
(ii)
|
their
position/title.
|
The
Disclosure Schedule also sets out with respect to the Company Employees as of
the date hereof, in a non-individually identifiable format:
|
(iii)
|
their
status (i.e., full time, part time, temporary, casual, seasonal, co-op
student);
|
|
(iv)
|
their
total annual remuneration, including a breakdown of (A) salary and (B)
bonus or other incentive compensation, if
any;
|
|
(v)
|
other
terms and conditions of their employment (other than Employee Benefit
Plans), including accrued vacation, car allowance or lease;
and
|
|
(vi)
|
their
total length of employment including any prior employment that would
affect the calculation of years of service for any
purpose.
|
The
Company has no written employment contracts with any Company Employee other than
those of which copies are included in the Disclosure Schedule. The
Disclosure Schedule sets out, as of the date hereof, a list of all independent
contractors and consultants who provide services to the Company in connection
with the key business functions of the Company, including:
|
(vii)
|
name;
|
|
(viii)
|
title;
|
20
|
(ix)
|
current
compensation;
|
|
(x)
|
eligibility
to participate in any Employee Benefit
Plans;
|
|
(xi)
|
length
of relationship with the
Company.
|
Except as
set out in the Disclosure Schedule, the Company is not a party to or bound by
any contract or commitment to pay any management or consulting
fee. Seller is unaware of any plans by any executive, key employee or
group of employees, not including the Seller, to terminate employment with the
Company at or following Closing. The Company is not a party to or
bound by any collective bargaining agreement. The Company has not
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes by any existing employee within the twelve (12)
month period preceding Closing. The Seller is unaware of any unfair
labor practice committed by the Company within the twelve (12) month period
preceding Closing. The Seller is unaware of any instance in which the
Company is not in compliance with all applicable workers compensation law and
employee regulations of the applicable jurisdiction. The Seller is
unaware of any organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company.
|
(y)
|
Employee Benefits
Plans.
|
|
(i)
|
The
Disclosure Schedule sets forth a correct and complete list
of: (i) all employee benefit plans, programs, agreements,
policies, arrangements or payroll practices, including bonus plans,
employment, consulting or other compensation agreements, collective
bargaining agreements, incentive, equity or equity-based compensation, or
deferred compensation arrangements, change in control, termination or
severance plans or arrangements, share purchase, severance pay, sick
leave, vacation pay, salary continuation for disability, hospitalization,
medical insurance, life insurance and scholarship plans and programs
maintained by the Company or to which the Company contributed or is
obligated to contribute thereunder for current or former employees of the
Company.
|
|
(ii)
|
Correct
and complete copies of the following documents, with respect to each of
the Employee Benefit Plans have been made available or delivered to Buyer
by the Company (and the Buyer has acknowledged receipt) or otherwise
included or referenced in the Disclosure Schedule, to the extent
applicable: (i) any plans, all amendments thereto and related
trust documents, insurance contracts or other funding arrangements, and
amendments thereto; (ii) summary plan descriptions; (iii) written
communications to employees relating to the Employee Benefit Plans; and
(iv) written descriptions of all non-written agreements relating to the
Employee Benefit Plans.
|
|
(iii)
|
Seller
is unaware of any respect in which the Employee Benefit Plans have not
been maintained in all material respects in accordance with their terms
and with all applicable federal and provincial Laws and
regulations. Seller is unaware of any instance in
which any fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit
Plan.
|
|
(iv)
|
Seller
is unaware of any respect in which the Disclosure Schedule does not set
forth on a plan by plan basis, the present value of benefits payable
presently or in the future to Company Employees under each unfunded
Employee Benefit Plan.
|
21
|
(v)
|
To
the Knowledge of the Seller all contributions (including all employer
contributions and employee salary reduction contributions) required to
have been made under any of the Employee Benefit Plans (including workers
compensation) or by law, to any funds or trusts established thereunder or
in connection therewith have been made by the due date thereof (including
any valid extension), and contributions for any period ending on or before
the Closing Date that are not yet due will have been paid or sufficient
accruals for such contributions and other payments in accordance with GAAP
are duly and fully provided for in the June 30 Financial
Statements. Seller is unaware of any accumulated funding
deficiencies existing in any of the Employee Benefit
Plans.
|
|
(vi)
|
To
the Knowledge of the Seller, the Company has no liability under any
Employee Benefit Plan that has not been funded nor that has any such
obligation been satisfied with the purchase of a contract from an
insurance company that is not rated AA by Standard & Poor’s
Corporation or the equivalent by any other nationally recognized rating
agency.
|
|
(vii)
|
Seller
is unaware of any pending actions, claims or lawsuits that have been
asserted or instituted against the Employee Benefit Plans, the assets of
any of the trusts under the Employee Benefit Plans or the sponsor or
administrator of any of the Employee Benefit Plans, or against any
fiduciary of the Employee Benefit Plans with respect to the operation of
any of the Employee Benefit Plans (other than routine benefit claims), nor
do or the Seller have any Knowledge of facts that could form the basis for
any such claim or lawsuit.
|
|
(viii)
|
Seller
is unaware of any Employee Benefit Plan that provides for post-employment
life or health insurance, benefits or coverage for any participant or any
beneficiary of a participant, except as may be required by Law, and at the
expense of the participant or the participant’s
beneficiary.
|
|
(ix)
|
To
the Knowledge of the Seller, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment becoming due to any Company Employee, (ii)
increase any benefits otherwise payable under any Employee Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any
such benefits under any Employee Benefit
Plan.
|
|
(x)
|
The
Company does not have any contract, plan or commitment, whether legally
binding or not, to create any additional Employee Benefit Plan or to
modify any existing Employee Benefit
Plan.
|
|
(xi)
|
No
share or other security issued by Company forms or has formed a material
part of the assets of any Employee Benefit
Plan.
|
|
(xii)
|
Seller
is unaware of any individual who performs services for the Company (other
than through a contract with an organization other than such individual)
and who is not treated as an employee of any Company for federal income
tax purposes by is not an employee for such
purposes.
|
|
(xiii)
|
Notwithstanding
anything to the contrary in this Agreement, an account payable for the
Company’s minimum “Safe Harbor” contribution has been established and
appears on the Company’s books and records as of the effective date of the
Closing, and the Seller shall have no liability for any contribution to
the Company’s pension or profit-sharing plan as to any portion of
2009.
|
22
|
(z)
|
Xxxx
Xxxxx.
|
The Company has no
obligations or liability to Xxxx Xxxxx under any employment contract, Employment
Benefit Plan or other written
or unwritten agreement,
arrangement, understanding or practice that requires or will require any payment
to Xxxx Xxxxx by the Company.
|
(aa)
|
Guaranties.
|
The
Company is not a guarantor or otherwise liable for any Liability or obligation
(including indebtedness) of any other Person.
|
(bb)
|
Environmental, Health,
and Safety Matters.
|
Seller is
unaware of any manner in which the following are not true:
|
(i)
|
the
Company and its predecessors and Affiliates have complied and are in
compliance in all material respects with all Environmental, Health, and
Safety Requirements;
|
|
(ii)
|
without
limiting the generality of the foregoing, the Company has obtained and
complied with, and is in compliance in all material respects with, all
permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business. A list of all
such permits, licenses and authorizations is contained in the Disclosure
Schedule, as well as and copies of all such permits, licenses and
authorizations have been provided by the Company to the
Buyer;
|
|
(iii)
|
neither
the Company nor its predecessors or Affiliates has received any written or
oral notice, report or other information regarding any actual or alleged
violation of Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety
Requirements;
|
|
(iv)
|
neither
the Company nor its predecessors or Affiliates has treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any
hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a
manner that has given or would give rise to liabilities, including any
liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to
any other Environmental, Health, and Safety
Requirements;
|
|
(v)
|
neither
the Company nor any of its predecessors or Affiliates has, either
expressly or by operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or remedial
action, of any other Person relating to Environmental, Health, and Safety
Requirements;
|
|
(vi)
|
no
facts, events or conditions relating to the past or present facilities,
properties or operations of the Company or any of its predecessors or
Affiliates will prevent, hinder or limit continued compliance by the
Company with Environmental, Health, and Safety Requirements, give rise to
any investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources
damage.
|
23
|
(cc)
|
Licenses, Agency and
Distribution Agreements.
|
The
Disclosure Schedule lists all agreements to which the Company is a party or by
which it is bound under which the right to manufacture, process, market or use
any product, service or other property of the Company has been granted, licensed
or otherwise provided by the Company to any agent, distributor, dealer, licensee
or other person. The Disclosure Schedule also lists all agreements to
which the Company is a party or by which it is bound under which the right to
market, manufacture, process or use any product, service or other product has
been granted to the Company by any other person or by which the Company has been
appointed as an agent, distributor, licensee or franchisee. Complete
and correct copies of all of the agreements referred to in this paragraph have
been provided by the Company to the Buyer. None of the agreements
listed in the Disclosure Schedule grant to any third person any authority to
incur any liability or obligation or enter into any agreement on behalf of the
Company. The Seller has no Knowledge of the intention of the other
parties to any of the agreements referred to in this paragraph to terminate such
agreements.
|
(dd)
|
Subsidiaries.
|
The
Company has no subsidiaries.
|
(ee)
|
Related Party
Matters.
|
Except as
disclosed in the Disclosure Schedule, the Company is not a party to or bound by
any agreement with, is not indebted to, and no amount is owing to the Company
by, any of the Seller or any officers, former officers, directors, former
directors, shareholders, former shareholders, or any members of the immediate
family of any of the foregoing persons or any entity controlled by any of the
foregoing persons. Without limiting the generality of the foregoing,
none of the foregoing persons (i) is involved in any business arrangement or
other relationship with the Company, (ii) owns any property or right, tangible
or intangible, that is used by the Company, (iii) has any claim or cause of
action against the Company, or (iv) owns any direct or indirect interest of any
kind in, or is a director, officer or employee of, or consultant to, or has the
right to participate in the profits of any Person who is a competitor, supplier,
customer, landlord, creditor or debtor of the Company.
|
(ff)
|
Compliance with
Privacy Laws.
|
Except as
disclosed in the Disclosure Schedule, Seller is unaware of any manner in which
the collection, use and retention of personal information by the Company and the
disclosure or transfer of personal information by the Company to any third
parties has not complied with all Privacy Laws and is not consistent with the
Company’s own privacy practices. Seller is unaware of any
restrictions on the Company’s collection, use, disclosure and retention of
personal information except as provided by Privacy Laws and, in some cases,
contracts with clients.
24
|
(gg)
|
Accounts; Lockboxes;
Safe Deposit Boxes.
|
|
(i)
|
The
Disclosure Schedule contains a true and complete list
of:
|
|
(A)
|
the
names of each bank, savings and loan association, securities or
commodities broker or other financial institution in which the Company has
an account, including cash contribution accounts, and the names of all
persons authorized to draw thereon or have access thereto;
and
|
|
(B)
|
the
location of all lockboxes and safe deposit boxes of the Company and the
names of all persons authorized to draw thereon or have access
thereto.
|
|
(ii)
|
The
Seller have not commingled monies or accounts of Company with other monies
or accounts of the Seller or relating to their other activities and
affairs nor, except as to distributions to the Seller, has transferred
monies or accounts of the Company other than to an account of the
Company.
|
|
(hh)
|
Restrictions on Doing
Business.
|
|
(i)
|
Except
as disclosed in the Disclosure Schedule, the Company is not a party to or
bound by any agreement which would restrict or limit the Company’s right
to carry on any business or activity or to solicit business from any
person or in any geographical area or otherwise to conduct the Business as
the Company may determine from time to
time.
|
|
(ii)
|
The
Seller is unaware of any legislation or any judgment, order or requirement
of any court or Governmental Body which is not a general application to
persons carrying on a business similar to the Business to which the
Company is subject.
|
ARTICLE
5
COVENANTS
|
5.1
|
Covenants
of Seller Prior to Closing Date.
|
The
Seller covenants as follows with respect to the period between the date of this
Agreement and the Closing Date:
|
(a)
|
Access to
Information.
|
The
Seller will, and will cause the Company to: (A) afford the Buyer full and free
access to the Company's personnel, properties, contracts, books and records, and
other documents and data; (B) provide the Buyer with copies of all such
contracts, books and records, and other existing documents and data as the Buyer
may reasonably request; and (C) provide the Buyer with such additional
financial, operating, and other data and information as the Buyer may reasonably
request.
|
(b)
|
Operation of the
Business of the Company.
|
The
Seller will, and will cause the Company to: (A) conduct the business of the
Company only in the Ordinary Course of Business; (B) confer with the Buyer
concerning operational matters of a material nature; and (C) otherwise report to
the Buyer concerning the status of the business, operations, and finances of the
Company.
25
|
(c)
|
Negative
Covenant.
|
Except as
otherwise expressly permitted by this Agreement, the Seller will not, and will
cause the Company not to, without the prior consent of the Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
4.1(h) is likely to occur.
|
(d)
|
Notification.
|
The
Seller will promptly notify the Buyer in writing if the Seller or the Company
becomes aware of any fact or condition that causes or constitutes a breach of
any of the Seller’s representations and warranties as of the date of this
Agreement, or if the Seller or the Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Schedule if the
Disclosure Schedule were dated the date of the occurrence or discovery of any
such fact or condition, the Seller will promptly deliver to the Buyer a
supplement to the Disclosure Schedule specifying such change. During the same
period, Seller will promptly notify the Buyer of the occurrence of any breach of
any covenant of the Seller in this Article 5 or of the occurrence of any event
that may makes the satisfaction of the conditions in Section 6.1 impossible or
unlikely.
|
(e)
|
Best
Efforts.
|
The
Seller will use its best efforts to cause the conditions in Article 6 to be
satisfied.
|
5.2
|
Covenants
of Buyer Prior to Closing Date.
|
The Buyer
covenants as follows with respect to the period between the date of this
Agreement and the Closing Date:
|
(a)
|
Best
Efforts.
|
The Buyer
will use its best efforts to cause the conditions in Article 6 to be
satisfied.
|
5.3
|
Post
Closing Covenants.
|
The
Parties agree as follows with respect to the period following the
Closing:
|
(a)
|
General.
|
In case
at any time after the Closing any further action is necessary to carry out the
purposes of this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under Article 8 below). In addition, each Party will provide
reasonable assistance in a timely fashion with respect to information requests
concerning periods prior to Closing, including reasonable support for requests
regarding audit and tax matters. Notwithstanding the foregoing,
requests made by the Seller of the Buyer or the Company, or vice versa, in the
context of an arbitration or litigation shall not come within the ambit of this
sub-paragraph.
26
|
(b)
|
Litigation
Support.
|
In the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand not involving one Party or the Company claiming against another Party
or the Company, in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Company, each of
the other Parties will cooperate with him or it and its or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article 8 below).
|
(c)
|
Confidentiality.
|
Except as
provided by Section 5.2(d) hereof, each of the Seller will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer all tangible embodiments (and all copies) of the
Confidential Information which are in its possession.
|
(d)
|
Disclosure of
Confidential Information.
|
In the
event that the Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 5.2(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, the Seller
is, on the advice of counsel, compelled by law to disclose any Confidential
Information, that Seller may disclose the Confidential Information as so
compelled; provided, however, that the disclosing Seller shall use reasonable
efforts to obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall
designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public immediately
prior to the time of disclosure. All expenses, fees and costs
incurred by Seller, including for the reasonable time and disbursements of
attorneys, in complying with this section 5.2(d) shall be paid in full and in
advance by Buyer as a condition precedent to Seller’ obligations in this section
5.2(d).
|
(e)
|
Covenant Not to
Compete.
|
|
(i)
|
Commencing
on the Closing Date and for a period of three (3) years from the Closing
Date, the Seller covenants not to engage directly or indirectly in any
business competitive to the Business anywhere in the following
provinces:Ontario, Manitoba and Quebec; provided, however, that no owner
of less than 1% of the outstanding shares of any publicly-traded
corporation shall be deemed to engage solely by reason thereof in any of
its businesses.
|
|
(ii)
|
Without
limiting the provisions of Section 5.2(e)(i) hereof, commencing on the
Closing Date and for a period of 5 years from the Closing Date, the Seller
covenants not to, directly or
indirectly:
|
|
(A)
|
solicit,
endeavor to solicit or gain the business of any person that is a customer,
or has been within three (3) years prior to the
Closing Date, a customer of the Business or has been pursued as a
prospective customer of the Business, for the purpose of selling to such
customer or prospective customer any products or services which are
competitive with those offered by the
Company;
|
27
|
(B)
|
induce
or endeavor to induce any employee of the Business to leave its or her
employment;
|
|
(C)
|
employ
or attempt to employ or assist any person in employing any employee of the
Business during the term of their employment;
or
|
|
(D)
|
solicit
or endeavor to solicit any person that is a supplier or business partner
of the Business at the time of Closing in a manner that would be
competitive with the
Business.
|
|
(iii)
|
Buyer
hereby acknowledges and agrees that eReview product sales and services are
not included in the Business, and nothing in this Section 5.3(e) of this
Agreement is intended to prevent Seller or it affiliates from marketing or
selling the eReview product and service in Canada, including eReview sales
to existing prospects shown on the sales pipeline reports included in the
Due Diligence File.
|
|
(iv)
|
If
the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 5.2(e) is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be
appealed.
|
|
(v)
|
The
Seller hereby expressly agrees and acknowledges
that:
|
|
(A)
|
in
this section, the words “directly or indirectly” include any action taken
by either of the Seller for its own benefit or for the benefit of any
Person competing with the Business, either individually or in partnership
or jointly or in conjunction with any other Person as principal, agent,
trustee, employee or shareholder (except for the holding of less than 1%
of the shares of a corporation as referred to in Section 5.2(e)(i) hereof
);
|
|
(B)
|
The
Company has protectable business interests with respect to its suppliers,
employees, customers and prospective customers, and that competition as
proscribed above with and against such business interests would be harmful
to the Company and Buyer;
|
|
(C)
|
the
covenants contained in this Section 5.2(e) above are reasonable as to time
and geographical area and do not place any unreasonable burden upon the
Seller’s ability to earn a
livelihood;
|
|
(D)
|
the
public will not be harmed as a result of enforcement of the covenants
contained in this Section
5.2(e);
|
|
(E)
|
the
legal counsel for Seller has reviewed the covenants contained in this
Section 5.2(e);
|
28
|
(F)
|
the
parties have entered into the covenants contained herein in connection
with and as a condition precedent to the consummation of this Agreement,
pursuant to which Buyer shall acquire the outstanding shares of the
Company; the agreements, actions, covenants, and promises contained herein
are intended to protect and ensure the value of the Company, including its
goodwill, which actions, covenants, and promises are a material
consideration to Buyer in connection with this Agreement; and, to the
extent that the laws of any jurisdiction in which this Agreement shall be
interpreted, construed, and/or enforced distinguish between covenants
given in connection with the sale of a business and its goodwill and
covenants given in connection with employment, this covenant will be given
the broader interpretation customarily given to covenants in connection
with the sale of a business and the transfer of goodwill to a buyer;
and
|
|
(G)
|
Seller
understands and agrees to each and every term and condition contained in
Section 5.2(e) of this
Agreement.
|
|
(vi)
|
Seller
recognizes and acknowledges that irreparable damage will result to Buyer
in the event of a breach by Seller of the provisions of this Section
5.2(e) and, accordingly, in the event of such a breach, Buyer will be
entitled, in addition to any other legal or equitable damages and remedies
to which it may be entitled or which may be available, to an injunction to
restrain the violation
thereof.
|
|
(f)
|
Electronic
Mail.
|
Seller
shall provide transition services for email currently used by the employees of
the Company under the xxxxx.xxx domain name. Seller shall ensure that all
currently active accounts used by employees of the Company are maintained as
active and accessable for a 30 day transition period. In addition, for 1
year following the Closing Date, the Seller shall ensure all emails at each
address used by employees of the Company shall be automatically redirected to
their equivalent corresponding address at the XxxxxxxxXxxxxxx.xxx
domain.
|
(g)
|
Release of Lease
Guaranty.
|
Buyer
shall use commercially reasonable efforts to obtain, within 30 days following
Closing, a full release from HREIT Holdings 65 Corporation (the “Landlord”) of
the Seller from the indemnity and guaranty with respect the Company’s lease with
Landlord dated November 23, 2007, which release shall be in form and substance
acceptable to Seller and its counsel.
|
(h)
|
Access to Accounting
System.
|
Seller
and its affiliates will provide Buyer with access to the existing Company
accounting system (and provide related hardware hosting support) for a period of
60 days following the Closing Date sufficient to permit Buyer to migrate the
Company’s accounting system to its own accounting platform.
29
ARTICLE
6
CONDITIONS
|
6.1
|
Conditions
for the Benefit of the Buyer.
|
The
purchase by the Buyer of the Company Shares is subject to the following
conditions, which are for the exclusive benefit of the Buyer and which are to be
performed or complied with at or prior to the time of Closing:
|
(a)
|
the
representations and warranties set forth in Section 3.1 and Section 4 will
be true and correct in all material respects (and for this purpose all
materiality qualifications in such representations and warranties will be
disregarded) as at the time of Closing with the same force and effect as
if made at and as of such time;
|
|
(b)
|
the
Seller will have performed or complied with all of the terms, covenants
and conditions of this Agreement to be performed or complied with by the
Seller at or prior to the time of
Closing;
|
|
(c)
|
there
will have been obtained from all appropriate governmental authorities such
approvals or consents as are required to permit the change of ownership of
the Company Shares contemplated hereby and to permit the Business of the
Company to be carried on by the Buyer as now
conducted;
|
|
(d)
|
the
Seller will have obtained any consents or waivers of third parties
required to sell and transfer the Company Shares to the Buyer and to allow
the Buyer to cause the Company to conduct the Business as it is conducted
prior to the time of Closing; without limiting the generality of the
foregoing, the Seller shall have obtained consents to the change of
control resulting from the Transaction under each of the contracts, if
any, referred to in the Disclosure Schedule which specify that consent is
required and for which Buyer has specifically requested Seller to obtain
such consent;
|
|
(e)
|
no
action or proceeding will be pending or threatened by any person or
governmental authority to enjoin, restrict or prohibit the sale and
purchase of the Shares contemplated hereby, or the right of the Buyer or
the Company to conduct the Business of the
Company;
|
|
(f)
|
all
directors of the Company shall resign and the elected officers of the
Company shall resign their respective offices unless Buyer requests that
any such officer not resign. To the extent Buyer requires a
resignation of any employee, it is understood and agreed that Buyer will
be responsible for all pay in lieu of notice, severance, or other
post-termination amounts due to such employee as a result of the forced
resignation;
|
|
(g)
|
the
Seller and all directors (subject to Buyer’s achieving a satisfactory
agreement with Xxxxx Xxxxx as contemplated in Section 6.1(k) below) of the
Company shall release the Company from any and all possible claims against
the Company arising from any act, matter or thing arising at or prior to
the time of Closing; provided, however, except in respect of claims made
against the Seller by the Buyer pursuant to this Agreement, the Seller may
make a claim at any time against the Company for protection, defense and
indemnification pursuant to the bylaws, any applicable law, and/or for
defense, liability and indemnification coverage under any policy of
insurance the benefits of which run directly or indirectly to the Seller
in their capacity as a former director, owner or employee of the Company
and such claims shall not be released by the
Seller;
|
|
(h)
|
the
Buyer shall have reached an agreement with Kodak Canada Inc. regarding the
Kodak Service Agreement in a form and substance satisfactory to the Buyer;
and
|
|
(i)
|
the
Buyer shall have reached an agreement with Xxxxx Xxxxx regarding certain
employment matters in a form and substance satisfactory to the
Buyer.
|
30
|
6.2
|
Conditions
for the Benefit of the Seller.
|
The sale
by the Seller and the purchase by the Buyer of the Company Shares is subject to
the following conditions, which are for the exclusive benefit of the Seller and
which are to be performed or complied with at or prior to the time of
Closing:
|
(a)
|
the
representations and warranties of the Buyer set forth in Section 3.2 will
be true and correct in all material respects (and for this purpose any
materiality qualifications in such representations and warranties will be
disregarded) as at the time of Closing with the same force and effect as
if made at and as of such time;
|
|
(b)
|
the
Buyer will have performed or complied with all of the terms, covenants and
conditions of this Agreement to be performed or complied with by the Buyer
at or prior to the time of Closing;
|
|
(c)
|
the
Seller will be furnished with such certificates of officers of the Buyer
as the Seller or the Seller’s counsel may reasonably require in order to
establish that the terms, covenants and conditions contained in this
Agreement to have been performed or complied with by the Buyer at or prior
to the time of Closing have been performed or complied with in all
material respects, and that the representations and warranties of the
Buyer herein given are true and correct in all material respects at the
time of Closing;
|
|
(d)
|
the
Buyer shall have caused its wholly owned subsidiary, CriticalControl
Solutions Inc., to have entered into an indemnification agreement
acceptable to Seller pursuant to which CriticalControl Solutions Inc.
shall unconditionally indemnify and hold harmless the Seller from any and
all liability, losses and costs incurred by Seller under the existing
indemnity and guaranty in favor of the Landlord with respect the Company’s
lease with Landlord dated November 23, 2007, which indemnification
agreement shall be in form and substance acceptable to Seller and its
counsel;
|
|
(e)
|
the
Seller shall have received a full release from Royal Bank of Canada
(“RBC”) of Seller from any guaranty or other similar undertaking with
respect the Company’s indebtedness owed to RBC in form and substance
satisfactory to Seller and its counsel or all of the Company’s
indebtedness owed to RBC shall have been satisfied and all of the
Company’s credit facilities with RBC shall have been cancelled;
and
|
|
(f)
|
Healthaxis,
Ltd. (an affiliate of Seller) shall have received an assignment from Buyer
of all ownership and intellectual property rights in and to the accounts
payable front end data capture solution that has been jointly developed
between Healthaxis, Ltd. and the Company specifically to support the
accounts payable business that is conducted by Healthaxis,
Ltd.
|
|
6.3
|
Waiver
of Conditions.
|
The
Buyer, in the case of a condition set out in Section 6.1, and the Seller, in the
case of a condition set out in Section 6.2, will have the exclusive right to
waive the performance or compliance of such condition in whole or in part and on
such terms as may be agreed upon without prejudice to any of its rights in the
event of non-performance of or non-compliance with any other condition in whole
or in part. Any such waiver will not constitute a waiver of any other
conditions in favor of the waiving party.
31
ARTICLE 7
DELIVERIES
AT CLOSING
|
7.1
|
Closing.
|
The sale
and purchase of the Company Shares will be completed at the Closing Time on the
Closing Date at the offices of the Company.
|
7.2
|
Documents
Delivered to Buyer.
|
At
Closing, Seller shall deliver to Buyer, in addition to any other documents
required by any provision of this Agreement, the following
documents:
|
(a)
|
share
certificates representing the Company Shares, duly endorsed in blank or
accompanied by share transfer powers sufficient to transfer the Company
Shares to the Buyer free and clear of all Security
Interests;
|
|
(b)
|
a
certificate of good standing for the Company dated not more than 3
Business Days prior to the Closing Date certified by the appropriate
governmental officials in the incorporating jurisdiction of the
Company;
|
|
(c)
|
all
of the third party consents specified in Section 4.1(c)
above;
|
|
(d)
|
resignations,
effective as of the Closing, of each director and elected officer of the
Company if and as required herein;
|
|
(e)
|
releases
in the form acceptable to the Buyer, as contemplated by Section 6.1(h)
hereof; and
|
|
(f)
|
a
legal opinion from Seller’s General Counsel in form and substance
reasonably acceptable to Buyer, addressed to the Buyer, and dated as of
the Closing Date.
|
|
7.3
|
Documents
Delivered to Seller.
|
At
Closing, Buyer shall deliver to the Seller the following:
|
(a)
|
cash
or a wire transfer, certified cheque or bank draft for the Purchase
Price;
|
|
(b)
|
Board
of Director resolution of Buyer authorizing the execution and performance
of this Agreement; and
|
|
(c)
|
a
legal opinion in form and substance reasonably acceptable to Seller,
addressed to the Seller and dated as of the Closing
Date.
|
ARTICLE
8
REMEDIES
FOR BREACHES OF THIS AGREEMENT
|
8.1
|
Survival
of Representations and Warranties.
|
All
representations and warranties of the Seller contained in Section 3.1 shall
survive the Closing and continue in full force and effect for a period of twelve
(12) months following the Closing. All of the representations and
warranties of the Seller contained in Section 4.1 above shall, except as
hereinafter provided, survive the Closing hereunder and continue in full force
and effect for a period of twelve (12) months thereafter as representations and
warranties of current condition as of the Closing.
32
|
8.2
|
Indemnification Provisions for
Benefit of the Buyer.
|
|
(a)
|
In
the event the Seller breaches any of its representations, warranties, and
covenants contained herein and, if there is an applicable survival period
pursuant to Section 8.1 above, provided that the Buyer makes a written
claim for indemnification against the Seller pursuant to Section 8.5 by
delivering a Claim Notice below within such survival period, then, subject
to Article 9 hereof, the Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, or caused by the breach, subject to the
limitations contained in Section 9.1
hereof.
|
|
(b)
|
Subject
to the limitations contained in Section 9.1 hereof, the Seller agrees to
indemnify the Company and the Buyer from and against the entirety of any
Adverse Consequences which the Company or the Buyer may suffer resulting
from, arising out of or caused by any Liability of the Company for any
Taxes (other than taxes which are accrued for in the June 30 Financial
Statements, disclosed in the Disclosure Schedule, or incurred in the
Ordinary Course of the Business of the Company after June 30, 2009) with
respect to any Tax period (or portions thereof) of the Company ending on
or before the Closing Date.
|
|
8.3
|
Indemnification Provisions for
Benefit of the Seller.
|
In the
event the Buyer breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8.1 above, provided that any of the Seller makes a written claim for
indemnification against the Buyer pursuant to Section 8.5 below
within such survival period by delivering a Claim Notice, then the Buyer agrees
to indemnify the Seller from and against the entirety of any Adverse
Consequences the Seller may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the breach.
|
8.4
|
Deemed
Adjustments.
|
All
indemnification payments under this Article 8 shall be deemed adjustments to the
Purchase Price.
|
8.5
|
Claim Notice; Notice of a
Disputed Claim.
|
|
(a)
|
A
Party hereto (the “Indemnified Party”) may deliver to the other Party (the
“Indemnifying Party”) a written notice (“Claim Notice”) that the
Indemnified Party has suffered Adverse Consequences resulting from a
breach of a representation, warranty or covenant and providing the facts
alleged as the basis for such claim and the section or sections of this
Agreement alleged to have been violated and the estimated total dollar
amount of the Adverse Consequences claimed. In the event that
the Indemnifying Party disputes liability for or the amount of the Adverse
Consequences set forth in the Claim Notice (a “Disputed Claim”), the
Indemnifying Party shall notify the Indemnified Party in writing of such
dispute (“Notice of a Disputed Claim”) and specify the amount disputed and
basis therefor and the amount the Indemnifying Party believes to be the
correct amount, if any, within thirty (30) days after receipt of the Claim
Notice. The failure by the Indemnifying Party to deliver a
Notice of a Disputed Claim to the Indemnified Party within thirty (30)
days after receipt by the Indemnifying Party of the Claim Notice shall
constitute the Indemnifying Party’s acceptance of the item(s) in the Claim
Notice.
|
|
(b)
|
If
a written Notice of a Disputed Claim is sent pursuant to paragraph (a)
above, the Parties shall during the thirty (30) days following the date of
such delivery negotiate in good faith to resolve the Disputed Claim and
reach a resolution of the matter on an expedited basis. If,
after such resolution period, the Parties are unable to reach agreement,
the Indemnified Party may pursue such Disputed Claim pursuant to
arbitration.
|
33
ARTICLE 9
LIMITATIONS
ON INDEMNIFICATION
|
9.1
|
Limitations
on Indemnification
|
|
(a)
|
Except
as hereinafter provided, the Buyer shall not be entitled to make any claim
for indemnification against the Seller pursuant to Section 8.2 unless and
until the amount of the Adverse Consequences incurred by the Buyer as a
result of all misrepresentations, breaches of warranties and breaches of
covenants contained in this Agreement is equal to $50,000 (the “Threshold
Amount”). If the Buyer has incurred Adverse Consequences in an
aggregate amount at least equal to the Threshold Amount, then the Seller
will be liable to the Buyer for the full amount of all Adverse
Consequences that the Buyer may suffer resulting from or arising out of
any such breaches, minus the Threshold
Amount.
|
|
(b)
|
Notwithstanding
any other provision of this Agreement, the maximum aggregate liability of
the Seller for any and all claims by the Buyer for indemnification in
respect of Adverse Consequences resulting from or arising out of any and
all breaches of representations and warranties will be limited to
$100,000.00 (the “Limitation of
Liability”).
|
ARTICLE
10
MISCELLANEOUS
|
10.1
|
Press Releases and Public
Announcements.
|
No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to or following the Closing without the
prior written approval of the other Party, which approval will not be
unreasonably withheld or delayed, it being understood that both Parties shall
cooperate on the timing of their respective releases to ensure compliance with
applicable law or any listing requirements of any securities
exchanges.
|
10.2
|
No
Third-Party Beneficiaries.
|
This
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
|
10.3
|
Entire
Agreement.
|
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
|
10.4
|
Succession
and Assignment.
|
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party;
provided, however, that Buyer may assign this Agreement to an entity that is
wholly owned by the Buyer or is controlled by the same persons that currently
control the Buyer, or to a person or entity in connection with a merger,
reorganization or sale of substantially all of the assets of the
Buyer. In the event of such assignment, CriticalControl Solutions
Corp. will guarantee all obligations of the entity which becomes the Buyer
hereunder, and will execute a guarantee agreement in form acceptable to the
Seller, acting reasonably.
34
|
10.5
|
Counterparts.
|
This
Agreement may be executed in one or more counterparts and by facsimile, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument. The Parties agree to deliver signed originals of this
Agreement to each other within five business days after the Closing if this
Agreement is executed by facsimile counterparts.
|
10.6
|
Headings.
|
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
|
10.7
|
Notices.
|
All
notices, requests, demands, claims, and other communications hereunder will be
in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the
Seller:
BPOMS,
Inc.
0000
Xxxxx Xxxxxxx, Xxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxxxxx 00000
Attn: Xxx
Xxxxxxx, President
With a
copy to :
BPOMS,
Inc.
0000
Xxxxx Xxxxx Xxxxxxx 000
Xxxxx
000
Xxxxxx,
Xxxxx 00000
Attn: J.
Xxxxx Xxxx, SVP & General Counsel
If to the
Buyer:
CriticalControl
Solutions Corp.
1100, 000
- 0xx Xxx X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxxxxxx Xxxxxxx
35
With a copy to:
Xxx
Xxxxxxx
Xxxx
Xxxxxxx Xxxxxx LLP
2800, 000
- 0xx Xxxxxx X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Tel:
(000) 000 0000
Fax:
(000) 000 0000
Any Party
may send any notice, request, demand, claim, or other communication hereunder to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
|
10.8
|
Governing
Law.
|
This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the Province of Alberta and the laws of Canada applicable
therein. Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof shall be settled by final and binding
arbitration governed by the laws of Alberta. The arbitration shall be
conducted in the English language, and the proceeding held in a mutually agreed
location. Unless the parties agree otherwise at the time, the
arbitration proceeding shall be governed by the arbitration rules contained in
the Alberta International Commercial Arbitration Act.
|
10.9
|
Amendments
and Waivers.
|
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Seller. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
|
10.10
|
Severability.
|
Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
|
10.11
|
Expenses.
|
Each of
the Parties will bear its costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
36
IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement as of the date first above
written.
|
CRITICALCONTROL
SOLUTIONS CORP.
|
|
|
Per:
_____________________________________
|
|
|
BPOMS,
INC.
|
|
|
Per:
_____________________________________
|
37
