Exhibit 10.1
SHARE PURCHASE AGREEMENT
XXXXX X. XXXXXXXX IN TRUST
XXX XXXXX IN TRUST
XXXXX XXXXXXX IN TRUST
XXXX XXXXXXX IN TRUST
XXXXXXX XXXXX IN TRUST
XXX XXXXX IN TRUST
XXXX X. XXXXXX IN TRUST
XXXXXX XXXXXXX IN TRUST
(collectively, the "Vendors")
- and -
TELIZON INC.
(the "Corporation")
- and -
TELEPLUS CONNECT CORP.
(the "Purchaser")
June 30, 2005
TABLE OF CONTENTS
ARTICLE 1 - INTERPRETATION.......................................................................................1
1.01 Defined Terms.........................................................................................1
1.02 Gender and Number.....................................................................................4
1.03 Headings, Etc.........................................................................................4
1.04 Currency..............................................................................................4
1.05 Severability..........................................................................................4
1.06 Entire Agreement......................................................................................5
1.07 Amendments............................................................................................5
1.08 Waiver................................................................................................5
1.09 Governing Law.........................................................................................5
1.10 Inclusion.............................................................................................5
1.11 Accounting Terms......................................................................................5
1.12 Incorporation of Schedules............................................................................5
ARTICLE 2 - PURCHASED SHARES AND PURCHASE PRICE..................................................................6
2.01 Purchase and Sale.....................................................................................6
2.02 Purchase Price........................................................................................6
2.03 Payment of the Purchase Price.........................................................................6
2.04 Closing Adjustments...................................................................................6
2.05 Security for Balance of Purchase Price................................................................8
2.06 The Closing...........................................................................................7
2.07 Interest..............................................................................................8
2.08 Payment of Taxes and Registration Charges on Transfer.................................................8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF VENDORS............................................................8
3.01 Due Incorporation, Existence and Corporate Power of the Corporation...................................8
3.02 Extra-Provincial Qualification........................................................................8
3.03 Authorized Capital of the Corporation.................................................................8
3.04 Options, etc..........................................................................................9
3.05 Title to Purchased Shares.............................................................................9
3.06 Dividends and Distributions...........................................................................9
3.07 Corporate Records.....................................................................................9
3.08 Validity of Agreement.................................................................................9
3.09 Restrictive Documents................................................................................10
3.10 Residence............................................................................................10
3.11 Conduct of Business in Ordinary Course...............................................................10
3.12 Title to Assets......................................................................................10
3.13 Condition of Assets..................................................................................11
3.14 No Material Adverse Change...........................................................................11
3.15 Compliance with Laws.................................................................................11
3.16 Environmental Compliance.............................................................................11
3.17 Authorizations.......................................................................................11
3.18 No Options, Etc......................................................................................12
3.19 Real Property........................................................................................12
3.20 Lease................................................................................................12
3.21 Material Contracts...................................................................................12
3.22 No Breach of Contracts...............................................................................13
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3.23 Intellectual Property Rights.........................................................................13
3.24 Subsidiaries and Investments.........................................................................14
3.25 Books and Records....................................................................................14
3.26 Financial Statements.................................................................................14
3.27 Debt.................................................................................................14
3.28 Capital Expenditures.................................................................................14
3.29 Employees............................................................................................15
3.30 Insurance............................................................................................16
3.31 Litigation...........................................................................................16
3.32 Taxes................................................................................................16
3.33 Bank Accounts and Powers of Attorney.................................................................16
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................17
4.01 Representations and Warranties of the Purchaser......................................................17
ARTICLE 5 - PRE-CLOSING COVENANTS OF THE PARTIES........................................................17
5.01 Conduct of Business Prior to Closing.................................................................17
5.02 Due Diligence Investigations.........................................................................18
5.03 Actions to Satisfy Closing Conditions................................................................18
5.04 Transfer of the Purchased Shares.....................................................................18
5.05 Request for Consents.................................................................................19
5.06 Audited Financial Statements.........................................................................19
5.07 Filings and Authorizations...........................................................................19
5.08 Notice of Untrue Representation or Warranty..........................................................19
ARTICLE 6 - CONDITIONS OF CLOSING...............................................................................19
6.01 Conditions for the Benefit of the Purchaser..........................................................19
6.02 Conditions for the Benefit of the Vendors............................................................21
6.03 Conditions Precedent.................................................................................23
ARTICLE 7 - CLOSING.............................................................................................23
7.01 Date, Time and Place of Closing......................................................................23
7.02 Closing Procedures...................................................................................23
7.03 Risk of Loss.........................................................................................24
7.04 Expenses.............................................................................................24
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES.....................................24
8.01 Survival of Representations and Warranties...........................................................24
8.02 Indemnification in Favour of the Purchaser...........................................................24
8.03 Indemnification in Favour of the Vendors.............................................................25
8.04 Indemnification Proceedings..........................................................................25
8.05 Limitations..........................................................................................26
8.06 Exclusion of Other Remedies..........................................................................26
ARTICLE 9 - POST-CLOSING COVENANTS..............................................................................26
9.01 Access to Books and Records..........................................................................26
9.02 Further Assurances...................................................................................27
9.03 Assistance By Vendors................................................................................27
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ARTICLE 10 - ARBITRATION........................................................................................27
10.01 Best Endeavours to Settle Disputes...................................................................27
10.02 Arbitration..........................................................................................27
ARTICLE 11 - MISCELLANEOUS......................................................................................28
11.01 Notices..............................................................................................28
11.02 Publicity............................................................................................30
11.03 Time of the Essence..................................................................................30
11.04 Brokers..............................................................................................30
11.05 Third Party Beneficiaries............................................................................30
11.06 Enurement............................................................................................30
11.07 Counterparts.........................................................................................30
11.08 Joint and Several Liability..........................................................................30
11.09 Knowledge............................................................................................31
11.10 Assignment...........................................................................................31
11.11 Non-Merger...........................................................................................31
MEMORANDUM OF AGREEMENT made as of the 30th day of June, 2005, among Xxxxx X.
Xxxxxxxx In Trust, Xxx Xxxxx In Trust, Xxxxx Xxxxxxx In Trust, Xxxx Xxxxxxx In
Trust, Xxxxxxx Xxxxx In Trust, Xxx Xxxxx In Trust, Xxxx X. Xxxxxx In Trust and
Xxxxxx XxXxxxx In Trust (collectively, the "Vendors"), TELIZON INC., a
corporation incorporated under the laws of the Province of Ontario (the
"Corporation") and TELEPLUS CONNECT CORP., a corporation incorporated under the
laws of the Province of Ontario, (the "Purchaser") witnesses that:
WHEREAS the Corporation carries on the Business consisting of the resale of Xxxx
Canada services for local, toll and Internet services to both residential and
commercial customers;
AND WHEREAS the Vendors own, and will own as of the Closing Date, all of the
issued and outstanding shares in the capital of the Corporation;
AND WHEREAS the Purchaser is a subsidiary of Teleplus Enterprises Inc.;
AND WHEREAS the Vendors, in reliance upon the representations and warranties of
the Purchaser contained herein, have agreed to sell to the Purchaser and that
the Purchaser, in reliance upon the representations and warranties of the
Vendors and the Corporation contained herein, has agreed to purchase from the
Vendors all of the issued and outstanding shares in the capital of the
Corporation in accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by the parties), the
parties agree as follows:
ARTICLE 1 -
INTERPRETATION
1.01 Defined Terms.
As used in this Agreement, the following terms have the following
meanings:
"Adjustment Amount" has the meaning ascribed thereto in Section 2.04;
"Agreement" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; "hereof", "hereto" and
"hereunder" and similar expressions mean and refer to this Agreement
and not to any particular Article, Section, Subsection or other
subdivision; "Article", "Section", "Subsection" or other subdivision of
this Agreement followed by a number means and refers to the specified
Article, Section, Subsection or other subdivision of this Agreement;
"Ancillary Agreements" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement; and
"Ancillary Agreement" means any one of such agreements, certificates or
other instruments;
"Audited Financial Statements" has the meaning ascribed thereto in
Section 5.06;
"Authorization" means, with respect to any Person, any authorization,
order, permit, approval, grant, license, consent, right, franchise,
privilege, certificate, judgment, writ, injunction, award,
determination, direction, decree, or by-law, rule or regulation of any
Governmental Entity, whether or not having the force of law, having
jurisdiction over such Person;
"Benefit Plans" means all employee benefit plans relating to the
employees of the Corporation, including profit sharing, deferred
compensation, phantom stock option, stock option, employee stock
purchase, bonus, retirement, health or insurance plans (oral or
written) which are disclosed as benefit plans on Schedule 3.29(10);
"Books and Records" means all technical, business and financial
records, financial books and records of account, books, data, reports,
files, lists, drawings, plans, logs, briefs, customer and supplier
lists, deeds, certificates, contracts, surveys, title opinions or any
other documentation and information in any form whatsoever (including
written, printed, electronic or computer printout form) relating to
Corporation and the Business;
"Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed
machinery and fixed equipment) situate on the Leased Property;
"Business" means the resale of Xxxx Canada services for local line,
toll and Internet services for both residential and commercial
customers presently and heretofore carried on by the Corporation;
"Business Day" means any day of the year, other than a Saturday, Sunday
or any day on which Canadian chartered banks are required or authorized
to close in Toronto, Ontario;
"Claim" means any claim of any nature whatsoever, including any demand,
liability, obligation, debt, cause of action, suit, proceeding,
judgment, award, assessment, and reassessment;
"Closing" means the completion of the transaction of purchase and sale
contemplated in this Agreement;
"Closing Date" means July 8, 2005, or such other date as the parties
may agree in writing;
"Consents" means the consents of contracting parties to any Contract or
Lease to the change in control of the Corporation contemplated in this
Agreement, and "Consent" means any one of such Consents;
"Contracts" means all contracts to which the Corporation is a party
including all contracts, leases of personal property, licenses,
undertakings, engagements or commitments of any nature, written or
oral, to which the Corporation is entitled in connection with the
Business, including those identified in Schedule 3.21;
"Corporate Records" means the corporate records of a corporation,
including (i) all articles, by-laws, any unanimous shareholders
agreement and any amendments thereto; (ii) all minutes of meetings and
resolutions of shareholders, directors and any committee thereof; (iii)
the share certificate books, register of shareholders, register of
transfers and register of directors; and (iv) all accounting records;
"Due Diligence Period" has the meaning ascribed thereto in Section
5.02(1);
"Effective Date" means June 30, 2005;
"Encumbrances" means any liability, debt, lien, charge, mortgage,
pledge, security interest, claim, defect of title, restriction,
agreement of sale, adverse claim, easement, reassessment, encroachment,
burden or other encumbrance of any kind or nature whatsoever or any
items similar or related to the foregoing;
"Environmental Laws" means all applicable Laws relating to the
environment, health and safety matters or conditions, Hazardous
Substances, pollution or protection of the environment;
"Final Balance Sheet" has the meaning ascribed thereto in Section 2.04;
"Financial Statements" means the consolidated balance sheet of the
Corporation for the fiscal year ended July 31, 2004 and the
accompanying consolidated statements of shareholders' equity, income
and changes in consolidated financial position for the Corporation for
the year then ended and all notes thereto as reported upon by a firm of
chartered accountants;
"GAAP" means, at any time, accounting principles generally accepted in
Canada at such time;
"Governmental Entity" means (i) any multi-national, federal,
provincial, state, municipal, local or other governmental or public
department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) any subdivision, agent,
commission, board, or authority of any of the foregoing; or (iii) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing;
"Hazardous Substance" includes any contaminant, pollutant, dangerous
substance, liquid or solid waste, industrial waste, hauled liquid or
solid waste, toxic substance, hazardous waste, hazardous material, or
hazardous substance (including anything with any of the foregoing as a
component thereof), whether or not such substance is "hazardous" as
defined under any Laws;
"Intellectual Properties" means all right, title, interest and benefit
of the Corporation in and to any registered or unregistered, trade or
brand names, service marks, copyrights, copyright applications,
designs, inventions, patents, patent applications, patent rights
(including any patents issuing on such applications or rights),
licences, sub-licences, franchises, formulas, processes, know-how,
technology, computer rights and other intellectual or industrial
property of the Corporation or pertaining to the Business, including
the property listed in Schedule 3.23;
"ITA" means the Income Tax Act (Canada) and aall references in this
Agreement to the Income Tax Act (Canada) and to amounts to be withheld
pursuant thereto shall be deemed to be made to the Income Tax Act
(Canada), as now enacted or as it may from time to time be amended,
re-enacted or replaced, and in the case of any such amendment,
re-enactment or replacement, any references herein to the Income Tax
Act (Canada) and to amounts to be withheld pursuant thereto shall be
read as referring to such amended, re-enacted or replaced provisions;
"Landlord" means Xxxx Bay Developments Limited;
"Laws" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative
or ministerial or departmental or regulatory judgments, orders,
decisions, rulings or awards, or any provisions of the foregoing,
including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which
such word is used; and "Law" means any one of them;
"Lease" means the lease between Telizon Internet Services Inc. and the
Landlord in respect of the Leased Premises;
"Leased Property" means the premises located at 00 Xxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxx;
"Loss" means any loss whatsoever, including expenses, costs, damages,
penalties, fines, charges, claims, demands, liabilities, interest and
any and all legal fees and disbursements;
"One Xxxx Acquisition" has the meaning ascribed thereto in Section
6.01(5);
"Parties" means the Corporation, the Vendors and the Purchaser, and any
other person who may become a party to this Agreement; and "Party"
means any one of them;
"Permitted Encumbrances" means: (i) Encumbrances for taxes, assessments
or governmental charges or levies on property not yet due and
delinquent; (ii) easements, encroachments and other minor imperfections
of title which do not, individually or in the aggregate detract from
the value of, or impair the use or marketability of any real property;
and (iii) Encumbrances against assets of the Corporation the value of
which assets do not in the aggregate exceed $20,000, including those
Encumbrances disclosed in Schedule 3.12;
"Person" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or
Governmental Entity, and pronouns have a similarly extended meaning;
"Purchase Price" has the meaning ascribed thereto in Section 2.02;
"Purchased Shares" has the meaning ascribed thereto in Section 2.01;
"Security Right" means, with respect to any security, any option,
warrant, subscription right, pre-emptive right, other right, proxy,
put, call, demand, plan, commitment, agreement, understanding or
arrangement of any kind relating to such security, whether issued or
unissued, or any other security convertible into or exchangeable for
any such security. "Security Right" includes any right relating to
issuance, sale, assignment, transfer, purchase, redemption, conversion,
exchange, registration or voting and includes rights conferred by
statute by the issuer's constituting documents or by agreement;
"Shareholders' Equity" means the total assets of the Corporation minus
the total liabilities of the Corporation;
"Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Corporation owns directly or indirectly, more than
20% of the outstanding voting securities or equity interests;
"Time of Closing" means 2:00 p.m. (Toronto time) on the Closing Date or
such other time as the Closing may occur; and
"Working Capital" means the excess of current assets over current
liabilities.
1.02 Gender and Number.
Any reference in this Agreement to gender shall include all genders,
and words importing the singular number only shall include the plural and vice
versa.
1.03 Headings, Etc.
The division of this Agreement into Articles, Sections, Subsections and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.04 Currency.
All references in this Agreement or any Ancillary Agreement to dollars,
unless otherwise specifically indicated, are expressed in Canadian currency.
1.05 Severability.
Any Article, Section, Subsection or other subdivision of this Agreement
or any Ancillary Agreement or any other provision of this Agreement or any
Ancillary Agreement which is, or becomes, illegal, invalid or unenforceable
shall be severed from this Agreement and any Ancillary Agreement and be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof or thereof.
1.06 Entire Agreement.
This Agreement together with the Ancillary Agreements constitutes the
entire agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. There are no representations,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connection with the subject matter of this
Agreement, except as specifically set forth herein and therein. If there is any
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.
1.07 Amendments.
This Agreement and any Ancillary Agreement may only be amended,
modified or supplemented by a written agreement signed by all of the parties to
such agreement.
1.08 Waiver.
No waiver of any of the provisions of this Agreement or any Ancillary
Agreement shall be deemed to constitute a waiver of any other provision (whether
or not similar), nor shall such waiver constitute a waiver or continuing waiver
unless otherwise expressly provided in writing duly executed by the party to be
bound thereby.
1.09 Governing Law.
This Agreement and all Ancillary Agreements shall be governed by and
interpreted and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein which apply to contracts made and to
be performed entirely in Ontario.
1.10 Inclusion.
Where the word "including" or "includes" is used in this Agreement, it
shall mean "including (or includes) without limitation".
1.11 Accounting Terms.
All accounting terms not specifically defined in this Agreement shall
be construed in accordance with GAAP.
1.12 Incorporation of Schedules.
The following are the schedules that are attached to and incorporated
in this Agreement:
Schedule 3.06 - Dividends and Distributions
Schedule 3.12 - Permitted Encumbrances
Schedule 3.17 - Authorizations
Schedule 3.21 - Material Contracts
Schedule 3.22 - Breach of Contracts
Schedule 3.23 - Intellectual Property
Schedule 3.26 - Financial Statements
Schedule 3.28 - Capital Expenditures
Schedule 3.29(7) - Employees
Schedule 3.29(10) - Benefit Plans
Schedule 3.29(11) - Payments made since date of Financial Statements
Schedule 3.30 - Insurance
Schedule 3.33 - Bank Accounts and Powers of Attorney
ARTICLE 2 -
PURCHASED SHARES AND PURCHASE PRICE
2.01 Purchase and Sale.
Subject to the terms and conditions hereof, the Vendors hereby agree to
sell, assign and transfer to the Purchaser and the Purchaser agrees to purchase
from the Vendors at the Time of Closing on the Closing Date, the shares owned by
the Vendors representing all (but not less than all) of the issued and
outstanding shares (the "Purchased Shares") in the capital of the Corporation.
2.02 Purchase Price.
The aggregate purchase price (the "Purchase Price") payable by the
Purchaser to the Vendors for the Purchased Shares shall, subject to adjustment
in accordance with Section 2.04, be Nine Million Seven Hundred Thousand Dollars
($9,700,000.) in lawful money of Canada.
2.03 Payment of the Purchase Price.
The Purchase Price shall be paid and satisfied as follows:
(e) Three Million Seven Hundred Sixteen Thousand Eight Hundred
Twenty Two Dollars ($3,716,822.) shall be paid to the Vendors
at the Time of Closing by certified cheque or bank draft
payable to or to the order of the Vendors at the Time of
Closing; and
(f) Two Million One Hundred Seventy Five Thousand Seven Hundred
One Dollars ($2,175,701.) shall be paid to the Vendors by
certified cheque or bank draft to or to the order of the
Vendors in twenty four (24) equal principal installments in
the amount of Ninety Thousand Six Hundred Fifty Four Dollars
and Twenty One Cents ($90,654.21.) each commencing August 1,
2005 to and including July 1, 2007;
(g) Two Million One Hundred Seventy Five Thousand Seven Hundred
One Dollars ($2,175,701.) shall be paid to the Vendors by
certified cheque or bank draft payable to or to the order of
the Vendors on or before July 1, 2006; and
(h) One Million Six Hundred Thirty One Thousand Seven Hundred
Seventy Six Dollars ($1,631,776.) shall be paid to the Vendors
by certified cheque or bank draft payable to or to the order
of the Vendors on or before July 1, 2007.
2.04 Closing Adjustments.
(1) The Purchase Price will be adjusted in the event that the
Shareholders' Equity of the Corporation on the Effective Date is more or less
than the amount reflected in the Financial Statements as hereinafter provided.
(2) Following Closing, the Corporation will cause to be prepared and
will deliver to the Vendors and the Purchaser within sixty (60) days following
the Closing Date an audited consolidated balance sheet for the Corporation as at
the Effective Date. Such balance sheet shall be prepared in accordance with GAAP
and on a basis consistent with that used in prior years and without limitation,
on a basis consistent with those principals and methods used in the preparation
of the Financial Statements (the "Final Balance Sheet"). Such Final Balance
Sheet shall be prepared by BDO Dunwoody and be binding upon the Parties and not
subject to appeal.
(3)......Upon receipt by the parties of the Final Balance
Sheet, the Purchase Price shall be adjusted by the amount of the Adjustment
Amount if any. For the purposes hereof "Adjustment Amount" shall mean any
positive or negative difference, on a dollar for dollar basis, between the
Shareholders Equity shown on the Final Balance Sheet and the amount reflected in
the Financial Statements, provided that there shall be deemed to be no
Adjustment Amount unless the aggregate Adjustment Amount exceeds Five Thousand
Dollars ($5,000.). The Adjustment Amount shall be added to or deducted from the
monthly principal installment of Ninety Thousand Six Hundred Fifty Four Dollars
and Twenty One Cents ($90,654.21.) due and payable the 1st day of the month next
following the completion of the Final Balance Sheet.
Any adjustment of the Purchase Price in accordance with the provisions
of this Section 2.04 shall not limit or affect any other rights or causes of
action the Purchaser may have hereunder with respect to the representations,
warranties, covenants and indemnities in its favour contained herein.
2.05 Security for Balance of Purchase Price
(1) The balance of the Purchase Price not paid on closing in the amount
of Five Million Nine Hundred Eighty Three Thousand One Hundred Seventy Eight
Dollars ($5,983,178.) shall be evidenced by a promissory note authorized,
executed and delivered by the Purchaser in favour of the Vendors, (the
"Promissory Note").
(2) The obligation of the Purchaser under Promissory Note shall be
guaranteed by the Corporation (the "Guarantee") and as security for the
Guarantee the Corporation shall in addition authorize, execute and deliver in
favour of the Vendors a general security agreement (the "General Security
Agreement") in form and content satisfactory to the solicitors for the Vendors
and in respect of which a financing statement shall be filed pursuant to the
provisions of the Personal Property Security Act of the Province of Ontario in
first position.
(3) The Promissory Note shall be additionally secured by a pledge of
the Purchased Shares authorized, executed and delivered by the Purchaser in
favour of the Vendors in a form and content satisfactory to the solicitors for
the Vendors, (the "Pledge Agreement"). The Pledge Agreement shall stipulate that
until default pursuant to the provisions of the Promissory Note, the Purchased
Shares may be voted by the Purchaser and any dividends authorized and issued by
the Corporation shall be directed to the Purchaser. Upon default under the
Promissory Note which remains uncured, the Purchased Shares shall be returned to
the Vendors in full satisfaction of such default and that portion of the
Purchase Price previously paid shall be forfeited as liquidated damages and not
as a penalty.
2.06 The Closing
The Closing shall take place at the Time of Closing at the offices of
Xxxxxx, Xxxxxx LLP, 000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxx, or at such
other time, date or place as the parties agree. Notwithstanding any other
provision of this Agreement, the within transactions shall be effective as of
the Effective Date.
2.07 Interest
As a result of the Effective Date, the Purchaser shall pay on Closing,
as an adjustment in favour of the Vendors, interest on Three Million Seven
Hundred Sixteen Thousand Eight Hundred Twenty Two Dollars ($3,716,822.) at the
rate of five percent (5%) per annum from and including July 1, 2005 to the
actual date of Closing.
2.08 Payment of Taxes and Registration Charges on Transfer.
Except as otherwise provided herein, the Vendors shall be liable for
and shall pay all taxes, duties, registration charges or other like charges
properly payable by a vendor in connection with the conveyance and transfer by
it of the Purchased Shares to the Purchaser hereunder. Purchaser shall be liable
for and shall pay all taxes, duties, registration charges or other like charges
properly payable by a Purchaser in connection with the conveyance and transfer
to it of the Purchased Shares hereunder.
ARTICLE 3 -
REPRESENTATIONS AND WARRANTIES OF VENDORS
Representations and Warranties of Vendors. The Vendors hereby represent and
warrant, jointly and severally, as follows to the Purchaser and acknowledge and
confirm that the Purchaser is relying upon such representations and warranties
in connection with the purchase by the Purchaser of the Purchased Shares:
3.01 Due Incorporation, Existence and Corporate Power of the Corporation.
The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the Province of Ontario. The Corporation
has all necessary corporate power and authority to own or lease its properties,
to carry on its business as now being conducted by it, to enter into this
Agreement and the other agreements to which it is or is to become a party
pursuant to the terms hereof and to perform its obligations hereunder and
thereunder.
3.02 Extra-Provincial Qualification.
The Corporation is duly qualified, licensed or registered to carry on
its business as now being conducted in all jurisdictions in which the nature of
the business conducted by it or the property owned or leased by it makes such
qualification, licensing or registration necessary.
3.03 Authorized Capital of the Corporation.
The authorized capital of the Corporation consists of an unlimited
number of Common Shares, of which at the date hereof and at the Time of Closing,
nine (9) Common Shares are and will be duly issued and outstanding as fully paid
and non-assessable. The Purchased Shares shall at Closing constitute all of the
issued and outstanding shares of the capital of the Corporation. The beneficial
owners of the Purchased Shares on closing will be the following:
Jacques and Xxxxx Xxxxx jointly - 1 Share
Xxx Xxxxxxxx and Xxxxx Xxxxx jointly - 1 Share
Xxxxx and Xxxxxxx Xxxxxxx jointly - 2 Shares
Xxx and Xxxx Xxxxx jointly - 1 Share
Xxxx and Xxxxxx Xxxxxxx jointly - 1 Share
Xxxxxx and Xxxxxx XxXxxxx jointly - 1 Share
Xxx and Xxxxxx Xxxxx and Xxxx and Xxxxxx Xxxxxxx jointly - 1 Share
Xxxx and Xxxxxx Xxxxxx jointly - 1 Share
3.04 Options, etc.
At Closing, there will be no Security Rights relating to any of the
unissued shares of the Corporation. Except for the Purchaser's right hereunder,
no Person has any option, warrant, right, call, commitment, conversion right,
right of exchange or other agreement or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement (i) for the
purchase from the Vendors of any of the Purchased Shares; or (iii) for the
purchase, subscription, allotment or issuance of any of the unissued shares in
the capital of the Corporation or of any securities of the Corporation.
3.05 Title to Purchased Shares.
The Purchased Shares are, or as of the Closing Date will be, owned by
the Vendors as the registered owner thereof with a good title thereto, free and
clear of all Encumbrances. The Vendors has the right, power and authority to
enter into this Agreement and to sell such Purchased Shares as contemplated
herein. All rights and powers to vote the Purchased Shares are held exclusively
by the Vendors. Such Purchased Shares are validly issued, fully paid and
non-assessable, were not issued in violation of the terms of any agreement or
other understanding, and were issued in compliance with all applicable laws and
regulations. The delivery of the Purchased Shares to the Purchaser pursuant to
the provisions hereof will transfer to the Purchaser valid title thereto, free
and clear of all Encumbrances.
3.06 Dividends and Distributions.
Except as disclosed in Schedule 3.06, since the date of the Financial
Statements, the Corporation has not declared or paid any dividends or declared
or made any other distribution on any of its shares of any class and has not,
directly or indirectly, redeemed, purchased or otherwise acquired any of its
shares of any class or agreed to do so.
3.07 Corporate Records.
The Corporate Records of the Corporation are materially complete and
accurate and all corporate proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable Laws and with the articles
and by-laws of the Corporation, and without limiting the generality of the
foregoing, (i) the minute books contain materially complete and accurate minutes
of all meetings of the directors and shareholders of the Corporation held since
the incorporation thereof, and all such meetings were duly called and held; (ii)
the minute books contain all written resolutions passed by the directors and
shareholders of the Corporation and all such resolutions were duly passed; (iii)
the share certificate books, register of shareholders and register of transfers
of the Corporation are materially complete and accurate, and all such transfers
have been duly completed and approved; and (iv) the registers of directors and
officers are materially complete and accurate and all former and present
directors and officers of the Corporation were duly elected or appointed as the
case may be.
3.08 Validity of Agreement.
(1) Each of the Corporation and the Vendors, as applicable, have all
necessary corporate power and authority to enter into and perform its
obligations under this Agreement and the Ancillary Agreements to which it is a
party.
(2) The execution, delivery and performance by the Vendors and the
Corporation, as the case may be, of this Agreement and the Ancillary Agreements
to which they are a party and the consummation of the transactions contemplated
thereby:
(a) have been duly authorized by all necessary corporate action on
the part of the Corporation and the Vendors; and
(b) do not (or would not with the giving of notice, the lapse of
time or the happening of any other event or condition) result
in a violation or a breach of, or a default under or give rise
to a right of termination, amendment or cancellation or the
acceleration of any obligation under (i) any charter, by-law
or trust deed instruments of the Corporation and the Vendors
as applicable; (ii) any contracts or instruments to which
either of the Vendors or the Corporation is a party or by
which either of the Vendors or the Corporation is bound other
than those contracts previously disclosed to the Purchaser in
writing; or (iii) of any Laws applicable to them.
(3) This Agreement and any Ancillary Agreement to which the Vendors or
the Corporation are parties constitute legal, valid and binding obligations of
the Vendors and the Corporation, as the case may be, enforceable against them in
accordance with their respective terms.
3.09 Restrictive Documents.
None of the Corporation or the Vendors is subject to, or a party to,
any charter, by-law or trust deed restriction, any Law, any Claim, any contract
or instrument, any Encumbrance or any other restriction of any kind or character
which would prevent the consummation of the transactions contemplated by this
Agreement or compliance by the Corporation or the Vendors with the terms,
conditions and provisions hereof or the continued operation of the Business
after the date hereof or the Closing Date on substantially the same basis as
heretofore operated or which would restrict the ability of the Purchaser to
acquire any of the Purchased Shares, in each case except for the necessity of
obtaining the Consents.
3.10 Residence
None of the Vendors are non-residents of Canada within the meaning of
the Income Tax Act (Canada).
3.11 Conduct of Business in Ordinary Course.
Since the date of the Financial Statements, the Business has been
carried on in the ordinary course. With the assets owned, licensed or leased by
the Corporation, the Corporation will be able to conduct its business following
Closing substantially in the manner presently carried on by it and such assets
include all proprietary rights, trade secrets and other property and assets,
real and personal, applicable to or used in connection with the Business. For
the avoidance of doubt, the Purchaser acknowledges the current practice of the
Corporation of distributing its profits from time to time as management fees to
its shareholders or their nominees. This practice shall be considered to be in
the ordinary course of business of the Corporation.
3.12 Title to Assets.
The Corporation has good title to and has legal and beneficial
ownership of all of the assets and property (other than the Leased Property)
used in connection with the Business free and clear of all Encumbrances, except
for Permitted Encumbrances as disclosed in Schedule 3.12 hereto.
3.13 Condition of Assets.
All assets of the Corporation, including, without limitation,
buildings, fixtures, improvements, machinery, equipment, tools, furniture,
improvements and tangible personal property, whether owned or leased, used in
connection with the Business are in good operating condition and are in a state
of good repair and maintenance having regard to the age and use thereof,
reasonable wear and tear excepted, and are suitable for the purposes for which
they are used in the Business. All of the assets of the Corporation are
reflected on the Financial Statements or, under applicable GAAP, are not
required to be reflected thereon and include substantially all assets that are
necessary for use in and operation of the Business.
3.14 No Material Adverse Change.
Since the date of the Financial Statements there has been no change in
the affairs, assets, liabilities, business, prospects, operations or conditions
of the Corporation or the Business (as the case may be), financial or otherwise,
whether arising as a result of any legislative or regulatory change, revocation
of any licence or right to do business, fire, explosion, accident, casualty,
labour trouble, flood, drought, riot, storm, condemnation, act of God, public
force or otherwise, which has materially adversely affected or which will
materially adversely affect the Corporation or the Business except for general
economic conditions affecting Canada or the industry in which the Corporation
and the Business operates.
3.15 Compliance with Laws.
The Corporation is conducting the Business in compliance with all
applicable Laws of each jurisdiction in which the Business is carried on, except
for acts of non-compliance which in the aggregate are not material.
3.16 Environmental Compliance.
(1) The Corporation has at all times received, handled, generated,
used, stored, deposited, labelled, handled, treated, documented, transported and
disposed of any Hazardous Substances in compliance with all, and there is no
circumstance or condition which would subject the Corporation to any material
liability under any applicable Environmental Laws, health or safety Laws,
approvals or Authorizations.
(2) The Vendors have delivered to the Purchaser copies of all
environmental assessments, audits, studies and other environmental reports in
the possession or reasonably available to the Vendors and of which they have
knowledge relating to the Leased Property or any aspect of the Business.
3.17 Authorizations.
The Corporation owns, holds, possesses or lawfully uses in the
operation of the Business, all Authorizations which are in any manner necessary
to conduct the Business as presently or previously conducted or for the
ownership and use of its assets and property, free and clear of all Encumbrances
except for Permitted Encumbrances and in compliance with all Laws applicable
thereto. True, correct and complete copies of all such Authorizations are
attached as Schedule 3.17 and the Corporation is not in default, nor has it
received any notice of any Claim in default, with respect to any such
Authorizations. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need for the Corporation to comply with
any special qualification or procedures or to pay any amounts other than routine
filing fees. None of such Authorizations will be adversely affected by the
consummation of the transactions contemplated hereby. None of the Vendors nor
any affiliate of the Vendors own or have any proprietary, financial or other
interests (direct or indirect) in any Authorization which the Corporation owns,
possesses or uses in the operation of the Business as now or previously
conducted, save and except only for the ownership of 1500536 Ontario Inc. by
Xxxxx Xxxxxxxx, Xxxxx Xxxxxxx and Xxx Xxxxx.
3.18 No Options, Etc.
No Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming such for the purchase
from the Corporation of any of its assets or property.
3.19 Real Property.
(1) The Corporation has not previously owned, nor is it currently the
owner of, or under any agreement or option to own, any real property or any
interest therein, other than the Lease.
(2) All of the Buildings and Fixtures and the Leased Property (i) were,
to the best knowledge of the Vendors, constructed in accordance with all
applicable laws and with all Authorizations validly issued pursuant thereto;
(ii) are in good operating condition and in a state of good maintenance and
repair; and (iii) are adequate and suitable for the purposes for which they are
presently being used; and with respect to the Leased Property, the lessee has
adequate rights of ingress and egress for the operation of the Business in the
ordinary course. To the best knowledge of the Vendors, none of the Leased
Property or the Buildings and Fixtures thereon, nor the use, operation or
maintenance thereof for the purpose of carrying on the Business violates any
restrictive covenant or any provision of any Law or encroaches on any property
owned by any other Person. No condemnation or expropriation proceeding is
pending or, to the best knowledge of the Vendors, threatened which would
preclude or impair the use of any such property or any part thereof for the
purposes for which it is currently used. There are no outstanding work orders
with respect to any of the property and assets of the Corporation from or
required by any Government Entity or from any other Person and there are no
matters under discussion with or by the Corporation relating to work orders.
3.20 Lease.
The Corporation is not a party to, or under any agreement or option to
become a party to, any lease with respect to real property used or to be used in
the Business. The subsidiary of the Corporation, namely Telizon Internet
Services Inc., is a party to the Lease. The Lease is in good standing, creates a
good and valid leasehold estate in the Leased Property thereby demised and is in
full force and effect without amendment thereto. With respect to the Lease (i)
all rents and additional rents due to the date hereof have been paid; (ii)
neither the lessor, to the best of the knowledge of the Vendors, nor the
Corporation is in default thereunder; (iii) no waiver, indulgence or
postponement of the Corporation's obligations thereunder has been granted by the
lessor; (iv) there exists no event of default or event, occurrence, condition or
act (including the purchase of the Purchased Shares hereunder) which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default under such Lease; (v) the Corporation has not
violated any of the terms or conditions under the Lease in any material respect;
and (vi) to the best knowledge of the Vendors, all of the covenants to be
performed by any other party under the Lease have been fully performed. The
Leased Property is in a state of good maintenance and repair, normal wear and
tear excepted, and is adequate and suitable for the purposes for which it is
presently being used.
3.21 Material Contracts.
The Contracts listed in Schedule 3.21 constitute all the material
Contracts of the Corporation having an aggregate value, whether payable in one
payment or in successive payments, in excess of Fifteen Thousand Dollars
($15,000.). Except as set forth in the Schedules hereto, the Corporation is not
a party to or bound by:
(a) any employment agreement, bonus, deferred compensation,
pension, profit sharing, stock option, phantom stock plan,
employee stock purchase, health, insurance, retirement or
other employee benefit plan, any collective agreements or any
agreement (oral or written) providing for compensation to be
paid to any employee consequent upon the sale of any
substantial portion of outstanding shares in the capital the
of the Corporation;
(b) any agreement or commitment relating to the borrowing of
money;
(c) any agreement or commitment relating to capital expenditures;
(d) any loan or advance to, or investment in, any other Person or
any agreement or commitment relating to the making of any such
loan, advance or investment;
(e) any bonds, debentures, mortgages, notes or other similar
indebtedness or liabilities whatsoever or any agreement to
create or issue any bonds, debentures, mortgages, notes or
other similar indebtedness;
(f) any performance bond, indemnity, guarantee or other contingent
liability in respect of any indebtedness or obligation of any
Person;
(g) any management, consulting or any other similar agreement or
commitment;
(h) any agreement or commitment limiting the freedom of the
Corporation or any successor owner of the Corporation, the
Business or the property and assets of the Corporation to
engage in any line of business or to compete with any other
Person;
(i) any licensing or other agreement or commitment relating to
intellectual property used by the Corporation in the conduct
of the Business;
(j) any agreement or commitment entered into in the ordinary
course of the Business involving an amount of more than Twenty
Five Thousand Dollars ($25,000.) which is not cancellable
without penalty within thirty (30) days; and
(k) any agreement or commitment not entered into in the ordinary course of the
Business.
3.22 No Breach of Contracts.
(1) Each of the Contracts is in full force and effect, unamended, and
there exists no default, warranty claim or other obligation or liability or
event, occurrence, condition or act (including the purchase of the Purchased
Shares hereunder) which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default, or give rise
to a warranty claim or other obligation or liability thereunder. Except as
disclosed in Schedule 3.22, the Corporation has not violated or breached, in any
material respect, any of the terms or conditions of any Contract and all the
covenants to be performed by any other party thereto have been fully and
properly performed. True, correct and complete copies of all Contracts in
writing having an aggregate value, whether payable in one payment or in
successive payments, in excess of Twenty Five Thousand Dollars ($25,000.) have
been delivered or made available to the Purchaser.
(2) For the avoidance of doubt, the Purchaser acknowledges that several
of the Contracts include provisions providing for consequences to the
Corporation should it not meet the target or performance obligations contained
therein. All of the Contracts disclosed in Schedule 3.21 may include such
provision and the Purchaser acknowledges that it either has or will review these
provisions during the Due Diligence Period.
3.23 Intellectual Property Rights.
The Intellectual Properties used in whole or in part in or required for
the carrying on of the Business in the manner heretofore carried on are set out
in Schedule 3.23 and are owned by, validly licensed, or properly registered to
the Corporation as indicated in Schedule 3.23. Except as otherwise expressly
stated in Schedule 3.23, the Corporation: (i) has the exclusive right to use
such Intellectual Properties; (ii) is the owner of record of such Intellectual
Properties; and (iii) has not conveyed, assigned or encumbered any of them. All
registrations and filings necessary to preserve the rights of the Corporation in
the Intellectual Properties have been made and are in good standing. To the best
of the knowledge of the Vendors, the conduct of the Business does not infringe
upon the intellectual properties of any other Person.
3.24 Subsidiaries and Investments.
The Corporation has no subsidiaries other than Telizon Internet
Services Inc. or agreements of any nature to acquire any subsidiary or to
acquire or lease any other business operations, other than in connection with
the One Xxxx Acquisition.
3.25 Books and Records.
All Books and Records of the Corporation have been fully, properly and
accurately kept and, where required, completed in accordance with GAAP and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein. The records, systems, controls, data or information of the Corporation
are not recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Corporation, save and except back-up data that is stored of the
Leased Property.
3.26 Financial Statements.
The Financial Statements have been prepared in accordance with GAAP
applied on a basis consistent with that used in previous fiscal years and
present fairly and accurately:
(a) the assets, liabilities (whether accrued, absolute, contingent
or otherwise), and the financial condition of the Corporation
(as the case may be) as at the respective dates of the
relevant statements;
(b) the financial position of the Corporation (as the case may be)
as at the respective dates of the relevant statements; and
(c) the sales and earnings of the Corporation during the periods
covered thereby.
True, correct and complete copies of the Financial Statements are attached
hereto as Schedule 3.26.
3.27 Debt.
At the Time of Closing, the Corporation does not and shall not have any
long-term debt except for debt incurred in connection with leases and loans
associated with operating assets as disclosed on the Schedules hereto.
3.28 Capital Expenditures.
Except as otherwise expressly stated in Schedule 3.28, no capital
expenditures exceeding in the aggregate Forty Thousand Dollars ($40,000.) have
been made or authorized by the Corporation except in the ordinary course of
business since the date of the Financial Statements.
3.29 Employees.
(1) The Corporation is in compliance with all Laws respecting
employment and employment practices, terms and conditions of employment, pay
equity and wages and hours and has not and is not engaged in any unfair labour
practice.
(2) No unfair labour practice, complaint or grievance against the
Corporation is pending or, to the best of the knowledge of the Vendors,
threatened before any labour relations board or similar Governmental Entity with
respect to the Business.
(3) There is no labour strike, dispute, slowdown or stoppage actually
pending or involving or, to the best of the knowledge of the Vendors, threatened
against the Corporation with respect to the Business.
(4) No grievance which might have an adverse effect upon the
Corporation or the conduct of the Business exists, no arbitration proceeding
arising out of or under any Collective Agreement is pending, and no claim
therefor has been asserted.
(5) No collective bargaining agreement is currently in effect or being
negotiated by the Corporation with respect to any employees of the Corporation.
(6) No pension plan is currently in effect or being negotiated by
either of the Corporation with respect to any employees of the Corporation.
(7) Schedule 3.29(7) contains a complete list of all permanent and full
time employees of the Corporation, their salaries and wage rates, bonus
arrangements, benefits, positions and length of service. Schedule 3.29(7)
contains a correct and complete list showing all amounts due or accrued due for
all salary, wages, bonuses, commissions, vacation with pay, pension benefits or
other employee benefits relating to all employees.
(8) No employee of the Corporation has any agreement as to length of
notice required to terminate his or her employment, other than such as results
by law from the employment of an employee without agreement as to such notice or
as to length of employment.
(9) All bonuses, commissions and other employee benefit payments are
reflected and have been accrued in the Books and Records of the Corporation.
Vacation pay (including all banked vacation pay) has not been so reflected or
accrued.
(10) The only benefit plans existing in respect of the employees of the
Corporation are the Benefit Plans. True, correct and complete copies of all
written Benefit Plans and related documentation have been provided to the
Purchaser and any oral or written Benefit Plans are accurately described on
Schedule 3.29(10). The Benefit Plans are duly registered where required by, and
are in good standing under, all applicable Laws. All required employer and
employee contributions and premiums under the Benefit Plans to the date hereof
have been made, the respective fund or funds established under the Benefit Plans
are funded in accordance with applicable Laws, and no past service funding
liabilities exist thereunder.
(11) No payments have been made or authorized since the date of the
Financial Statements by the Corporation to its officers, directors, former
directors, shareholders or employees or to any Person not dealing at arm's
length (as such term is construed under the Income Tax Act (Canada)) with any of
the foregoing, except in the ordinary course of the Business and at the regular
rates payable to them as salary, pension, bonuses, rents or other remuneration
of any nature, and except as otherwise disclosed in Schedule 3.29(11).
3.30 Insurance.
Schedule 3.30 annexed hereto contains a complete list of insurance
policies which the Corporation maintain with respect to its business, properties
and employees, together with a brief description of each such policy including
the type of policy, name of insurer, coverage allowance, expiration dates,
annual premiums and any pending claims thereunder. The Corporation is not in
default with respect to the payment of any premiums under any such insurance
policy and has not failed to give any notice or to present any claim under any
such insurance policy in a due and timely fashion. Neither the Corporation nor
the Vendors are aware of any circumstances in respect of which any Person may
make a claim against the Corporation whether covered by insurance or not. Such
policies are in full force and effect free from any right of termination on the
part of the insurers, except upon notice as stipulated in such policies. True,
complete and accurate copies of such insurance policies and the most recent
inspection reports received from insurance underwriters have been delivered to
the Purchaser. There has not been any material adverse change in the
relationship of the Corporation with its insurers, the availability of coverage,
or in the premiums payable pursuant to such policies. There have been no
material claims made under any policies of insurance maintained by or for the
benefit of the Corporation over the past five (5) calendar years prior to the
date hereof.
3.31 Litigation.
There is no action, suit or proceeding, at law or in equity, by any
Person, nor any arbitration, administrative or other proceeding by or before (or
to the best knowledge of the Vendors or the Corporation any investigation by)
any Governmental Entity pending, or, to the best of the knowledge of the Vendors
or the Corporation, threatened against or affecting the Corporation or any of
its properties, rights or assets and none of the Vendors or the Corporation
knows of any valid basis for any such action, suit, proceeding, arbitration or
investigation. The Corporation is not subject to any judgment, order or decree
entered in any lawsuit or proceeding.
3.32 Taxes.
The Corporation has filed or caused to be filed, within the times and
within the manner prescribed by Law, all federal, provincial, local and foreign
tax returns and tax reports which are required to be filed by or with respect to
the Corporation. The information contained in such returns and reports is
materially correct and complete and such returns and reports reflect accurately
all liability for taxes of the Corporation for the periods covered thereby. All
federal, provincial, local and foreign income, profits, franchise, sales, use,
occupancy, excise and other taxes and assessments (including interest and
penalties) that are or may become payable by or due from the Corporation have
been fully paid or fully disclosed and fully provided for in the Books and
Records and the Financial Statements. No examination of any tax return of the
Corporation is currently in progress, there are no outstanding agreements or
waivers extending the statutory period providing for an extension of time with
respect to the assessment or re-assessment of tax or the filing of any tax
return by, or any payment of any tax by the Corporation, and to the knowledge of
the Corporation there are no Claims now threatened or pending against the
Corporation in respect of taxes or any matters under discussion with any
Governmental Entity relating to taxes. The Corporation has withheld from each
payment made by it to its employees the amount of all taxes and other deductions
required to be withheld therefrom and has paid the same to the proper taxing or
other authority within the time prescribed under any applicable law.
3.33 Bank Accounts and Powers of Attorney.
Schedule 3.33 is a correct and complete list showing (i) the name of
each bank with which the Corporation has an account or safe deposit box and the
names of all persons authorized to draw thereon or to have access thereto; and
(ii) the names of any persons holding powers of attorney from the Corporation
and a summary statement of the terms thereof.
ARTICLE 4 -
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01 Representations and Warranties of the Purchaser. The Purchaser represents
and warrants as follows to the Vendors and acknowledges and confirms that the
Vendors are relying on such representations and warranties in connection with
the sale by the Vendors of the Purchased Shares:
(1) Due Incorporation and Existence. The Purchaser is a corporation
incorporated, validly existing and in good standing under the laws of the
Province of Ontario. The Purchaser has all necessary corporate power and
authority to own or lease its properties and to carry on its business as now
being conducted by it.
(2) Validity of Agreement.
(a) The Purchaser has all necessary corporate power and authority
to enter into and perform its obligations under this Agreement
and the Ancillary Agreements to which it is a party.
(b) The execution, delivery and performance by the Purchaser of
this Agreement and the Ancillary Agreements to which they are
a party or to which either is a party and the consummation of
the transactions contemplated thereby:
(i) have been duly authorized by all necessary corporate
action on the part of the Purchaser; and
(ii) do not (or would not with the giving of notice, the
lapse of time or the happening of any other event or
condition) result in a violation or a breach of, or a
default under or give rise to a right of termination,
amendment or cancellation or the acceleration of any
obligation under (i) any charter, by-law or trust
deed instruments of the Purchaser as applicable; (ii)
any contracts or instruments to which the Purchaser
is a party or by which the Purchaser is bound; or
(iii) of any Laws applicable to them.
(c) This Agreement and any Ancillary Agreement to which the
Purchaser is a party constitute legal, valid and binding
obligations of the Purchaser, enforceable against it in
accordance with their respective terms.
(3) Restrictive Documents. The Purchaser is not subject to, or a party
to, any charter, by-law or trust deed restriction, any Law, any Claim, any
contract or instrument, any Encumbrance or any other restriction of any kind or
character which would prevent the consummation of the transactions contemplated
by this Agreement or compliance by the Purchaser with the terms, conditions and
provisions hereof.
ARTICLE 5 -
PRE-CLOSING COVENANTS OF THE PARTIES
5.01 Conduct of Business Prior to Closing.
During the period from the date hereof until the Closing Date, the
Vendors and the Corporation will conduct the Business in the ordinary course
thereof, unless the Corporation has obtained the prior written consent of the
Purchaser to do otherwise. Without limiting the generality of the foregoing:
(1) the Corporation will continue to maintain and service the assets
used in the conduct of the Business in the same manner as has been its
consistent past practice;
(2) the Corporation will not enter into any agreement for any material
acquisition or disposition of assets, other than as may be contemplated by the
One Xxxx Acquisition;
(3) each of the Vendors and the Corporation shall use its reasonable
commercial efforts to keep available the service of the present employees and
agents of the Business and to maintain the relations and goodwill with the
suppliers, customers, distributors and any others having business relations with
the Business; and
(4) the Vendors shall use their reasonable commercial efforts to
conduct the Business in such a manner that on the Closing Date the
representation and warranties of the Vendors contained herein shall be true,
correct and complete as if such representations and warranties were made on and
as of such date.
5.02 Due Diligence Investigations.
(1) The Vendors and the Corporation (i) shall permit the Purchaser and
its employees, agents, counsel, accountants or other representatives, up to
Closing, (the "Due Diligence Period"), without undue interference to the
ordinary conduct of the Business, to have reasonable access during normal
business hours and upon reasonable notice (a) to the premises of the
Corporation, including the Leased Property, (b) to the Corporation, all of its
assets and property, the Business and any other information, including
accounting records, corporate records and tax records and returns whether
retained by the Vendors, the Corporation or otherwise, and (c) to the senior
personnel of the Corporation and the Business; and (ii) shall furnish to the
Purchaser or its employees, agents counsel, accountants, or other
representatives such financial and operating data and other information with
respect to the assets and property of the Corporation and the Business as the
Purchaser shall from time to time reasonably request.
(2) No investigations made by or on behalf of a party hereto, whether
under Section 5.02 or any other provision of this Agreement or any Ancillary
Agreement, shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made in this Agreement or any
Ancillary Agreement.
(3) Until the Time of Closing and in the event of termination of this
Agreement without Closing, the Purchaser will keep confidential any information
obtained from the Vendors, the Corporation or their respective agents and
representatives, unless such information (i) is or becomes generally available
to the public other than as a result of a disclosure in violation of this
Agreement; (ii) becomes available to the Purchaser on a non-confidential basis
from a source other than the Vendors, the Corporation or their representatives;
or (iii) was known to the Purchaser on a non-confidential basis before its
disclosure to the Purchaser by the Vendors, the Corporation or their
representatives. If this Agreement is so terminated, promptly after such
termination the Purchaser will return or cause to be returned or destroyed all
documents, work papers and other material, whether in written, electronic or
other form (including all copies thereof), obtained from the Vendors, the
Corporation or their respective agents and representatives in connection with
this Agreement and not theretofore made public.
5.03 Actions to Satisfy Closing Conditions.
Each of the Parties hereby agrees to take all such actions as are
within its power to control and to use its best efforts to cause other actions
to be taken which are not within its power to control, so as to ensure
compliance with all of the conditions set forth in Article 6.
5.04 Transfer of the Purchased Shares.
The Vendors shall take all necessary and reasonable steps and
proceedings to permit good title to the Purchased Shares to be duly and validly
transferred and assigned to the Purchaser at the Time of Closing, free of all
Encumbrances.
5.05 Request for Consents.
The Vendors will use their reasonable commercial efforts to obtain,
prior to Closing, all Consents which are required under the Contracts set forth
in Schedules 3.21 and 3.22. Such Consents shall be upon such terms as are
acceptable to the Purchaser, acting reasonably. The Purchaser will co-operate in
obtaining such Consents.
5.06 Audited Financial Statements.
The Vendors shall, prior to Closing, cause to be prepared and delivered
to the Purchaser, at the cost and expense of the Corporation, unqualified
audited annual financial statements of the Corporation for the two (2) years
ended July 31, 2004 prepared in accordance with GAAP and on a basis consistent
with that used in prior years (collectively, the "Audited Financial
Statements").
5.07 Filings and Authorizations.
Each of the Vendors and the Purchaser, as promptly as practicable after
the execution hereof, (i) will make, or cause to be made, all such filings and
submissions under all Laws applicable to it, as may be required for it to
consummate the purchase and sale of the Purchased Shares in accordance with the
terms of this Agreement; (ii) will use all reasonable efforts to obtain, or
cause to be obtained, all Authorizations, approvals, consents and waivers from
all Persons and Governmental Entities necessary or advisable to be obtained by
it in order to consummate such transfer; and (iii) will use all reasonable
commercial efforts to take, or cause to be taken, all other actions necessary,
proper or advisable in order for it to fulfill its obligations hereunder. The
Vendors and the Purchaser will coordinate and cooperate with one another in
exchanging such information and supplying such assistance as may be reasonably
requested by each in connection with the foregoing.
5.08 Notice of Untrue Representation or Warranty.
The Vendors or the Corporation, as the case may be, shall promptly
notify the Purchaser upon any representation or warranty of the Vendors or the
Corporation contained in this Agreement or any Ancillary Agreement becoming
substantially untrue or substantially incorrect prior to the Time of Closing.
ARTICLE 6 -
CONDITIONS OF CLOSING
6.01 Conditions for the Benefit of the Purchaser.
The purchase and sale of the Purchased Shares is subject to the
following conditions to be fulfilled or performed at or prior to the Time of
Closing, which conditions are for the exclusive benefit of the Purchaser and may
be waived in whole or in part by the Purchaser in its sole discretion:
(1) Truth of Representations and Warranties of the Vendors. The
representations and warranties of the Vendors contained in this Agreement or in
any Ancillary Agreement shall be true and correct as of the Closing Date with
the same force and effect as if such representations and warranties had been
made on and as of such date, and the Vendors shall also have executed and
delivered a certificate to that effect. The receipt of such evidence and the
Closing shall not be a waiver of the representations and warranties of the
Vendors which are contained in this Agreement. Upon the delivery of such
certificates, the representations and warranties of the Vendors in Article 3
shall be deemed to have been made on and as of the Closing Date with the same
force and effect as if made on and as of such date.
(2) Performance of Covenants by the Vendors. Each of the Vendors and
the Corporation shall have fulfilled or complied with all covenants herein
contained to be performed or caused to be performed by them at or prior to the
Time of Closing, and the Vendors and the Corporation shall each have delivered a
certificate to that effect. The receipt of such certificates and the Closing
shall not be a waiver of the covenants of the Vendors and the Corporation which
are contained in this Agreement.
(3) Consents and Authorizations. All Consents and Authorizations and
all other required consents and authorizations shall have been obtained on terms
acceptable to the Purchaser, acting reasonably, in order to permit the Closing
of the sale of the Purchased Shares on the terms and conditions set out in this
Agreement without adversely affecting, or resulting in the violation or a breach
of or a default under or any termination, cancellation, amendment or
acceleration of any obligation under any licence, permit, Lease or Contract in
connection with the Business.
(4) Non-Competition Agreements. Each of the Vendors shall have entered
into non-competition agreements with the Corporation in form and substance
satisfactory to the Purchaser whereby they covenant and agree with the Purchaser
and the Corporation that they will not, directly or indirectly, for a period of
twenty four (24) months from and after the Closing Date, either individually or
in partnership or jointly or in conjunction with any person or persons, firm,
association, syndicate, company or corporation (except the Purchaser or the
Corporation), as principal, shareholder or employee, carry on, be engaged in, be
interested in, be concerned with or be connected in any manner with the
ownership, management or control of, any business enterprise which is
competitive with the Business of the Corporation as now carried on or as now
proposed to be carried on.
(5) Deliveries. The Vendors shall have delivered or caused to be
delivered to the Purchaser the following in form and substance satisfactory to
the Purchaser, acting reasonably:
(a) share certificates representing the Purchased Shares duly
endorsed in blank for transfer, or accompanied by irrevocable
security transfer powers of attorney duly executed in blank,
in either case by the holders of record thereof;
(b) certified copies of (i) the charter documents and extracts
from the by-laws of the Corporation relating to the execution
of documents; (ii) all resolutions of the board of directors
of the Corporation approving the entering into of this
Agreement and the completion of all transactions contemplated
hereunder; (iii) all other instruments evidencing necessary
corporate action of the Corporation with respect to such
matters; and (iv) specimen signatures of the officers of the
Corporation;
(c) a certificate of status, compliance, good standing or like
certificate with respect to each of the Corporation issued by
appropriate government officials of the jurisdiction of its
incorporation;
(d) the certificates referred to in Subsections 6.01(1) and (2);
(e) the non-competition agreements referred to in Subsection
6.01(4);
(f) the Audited Financial Statements;
(g) a favourable opinion of counsel to the Vendors and the
Corporation in form and substance satisfactory to the
Corporation acting reasonably;
(h) all originals of the Corporate Records of the Corporation and
access to the said Corporate Records and original copies of
any and all software licenses necessary for the carrying on of
the Business;
(i) evidence that all necessary steps and proceedings as approved
by counsel for the Purchaser to permit all of the Purchased
Shares to be fully and validly transferred to the Purchaser or
its nominee(s) have been taken;
(j) duly executed resignations effective as of the Time of Closing
of each director and officer of the Corporation as the
Purchaser may specify;
(k) a release in favour of the Corporation of each of the Vendors
and such officers and directors of the Corporation as the
Purchaser may specify in form and substance satisfactory to
the Corporation acting reasonably; and
(l) all necessary assurances, transfers, assignments and consents,
including all necessary Consents, and any other instruments
necessary or reasonably required to effectively carry out the
intent of this Agreement and any Ancillary Agreement and to
transfer the Purchased Shares to the Purchaser, free and clear
of all Encumbrances.
(6) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Purchaser and the Purchaser
shall have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(7) Change in Law. Since the date hereof, no Law, proposed Law, or the
interpretation or enforcement of any Law shall have been introduced, enacted or
announced (including the introduction, enactment or announcement of any Law
respecting taxes or environmental matters or any change therein or in the
interpretation or enforcement thereof), the effect of which will be to prevent
the closing of the transactions contemplated herein or to increase materially
(i) the cost to the Purchaser of the completion of the transactions contemplated
in this Agreement; or (ii) the cost of the Corporation of operating the Business
after Closing on substantially the same basis as heretofore operated.
(8) Purchase Financing. The Purchaser shall have concluded and closed
satisfactory financing arrangements to fund the transaction contemplated by this
Agreement.
If any condition, obligation or covenant of the Vendors or the Corporation to be
performed hereunder or under any Ancillary Agreement at or prior to the Time of
Closing shall not have been fulfilled or performed by such time, the Purchaser
may terminate this Agreement by notice in writing to the Vendors, and in such
event the Purchaser shall be released from all obligations hereunder. The
Vendors shall only be released from their obligations hereunder if the condition
or conditions for the non-performance of which the Purchaser has terminated this
Agreement are not reasonably capable of being performed or caused to be
performed by the Vendors. Notwithstanding the foregoing, the Purchaser shall be
entitled to waive compliance with any of such conditions, obligations or
covenants in whole or in part if it sees fit to do so without prejudice to any
of its rights of termination in the event of non-performance of any other
condition, obligation, or covenant in whole or in part.
6.02 Conditions for the Benefit of the Vendors.
The purchase and sale of the Purchased Shares is subject to the
following conditions to be fulfilled or performed at or prior to the Time of
Closing, which conditions are for the exclusive benefit of the Vendors and may
be waived by the Vendors in their sole discretion:
(1) Truth of Representations and Warranties of the Purchaser. The
representations and warranties of the Purchaser contained in
this Agreement or in any Ancillary Agreement shall be true and
correct as of the Closing Date with the same force and effect
as if such representations and warranties had been made on and
as of such date, and the Purchaser shall also have executed
and delivered a certificate of a senior officer to that
effect. The receipt of such evidence and the Closing shall not
be a waiver of the representations and warranties of the
Purchaser which are contained in this Agreement. Upon the
delivery of such certificates, the representations and
warranties of the Purchaser in Article 4 shall be deemed to
have been made on and as of the Closing Date with the same
force and effect as if made on and as of such date.
(2) Performance of Covenants by the Purchaser. The Purchaser shall have
fulfilled or complied with all covenants herein contained to be performed or
caused to be performed by it at or prior to the Time of Closing, and the
Purchaser shall have delivered a certificate of a senior officer to that effect.
The receipt of such certificate and the Closing shall not be a waiver of the
covenants of the Purchaser which are contained in this Agreement.
(3) Deliveries. The Purchaser shall have delivered or caused to be
delivered to the Vendors the following in form and substance satisfactory to the
Vendors, acting reasonably:
(a) a certified cheque or bank draft payable to the Vendors as
they shall direct in satisfaction of the Purchase Price
payable by the Purchaser to the Vendors at the Time of
Closing;
(b) the Promissory Note, Guarantee, General Security Agreement and
Pledge Agreement more particularly described in Article 2.05
herein;
(c) certified copies of (i) the charter documents and extracts
from the by-laws of the Purchaser relating to the execution of
documents; (ii) all resolutions of the board of directors of
the Purchaser approving the entering into of this Agreement
and the completion of all transactions contemplated hereunder;
(iii) all other instruments evidencing necessary corporate
action of the Purchaser with respect to such matters; and (iv)
specimen signatures of certain of the officers of the
Purchaser;
(d) a certificate of status, compliance, good standing or like
certificate with respect to each of the Purchaser issued by
appropriate government officials of the jurisdiction of its
incorporation;
(e) the certificates referred to in Subsections 6.02(l) and (2);
(f) a favourable opinion of counsel to the Purchaser in form and
substance satisfactory to the Vendors acting reasonably;
(g) a release in favour of the Vendors and officers and directors
of the Corporation from the Corporation in form and substance
satisfactory to the Vendors acting reasonably; and
(h) all necessary assurances, transfers, assignments and consents,
including all necessary consents, and any other instruments
necessary or reasonably required to effectively carry out the
intent of this Agreement and any Ancillary Agreement and to
transfer the agreed upon consideration to the Vendors, free
and clear of all Encumbrances.
(7) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and any Ancillary Agreement shall be
reasonably satisfactory in form and substance to the Vendors and the Vendors
shall have received copies of all such instruments and other evidence as it may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
(8) Change in Law. Since the date hereof, no Law, proposed Law, any
change in any Law, or the interpretation or enforcement of any Law shall have
been introduced, enacted or announced (including the introduction, enactment or
announcement of any Law respecting taxes or environmental matters or any change
therein or in the interpretation or enforcement thereof), the effect of which
will be to prevent the closing of the transactions contemplated herein.
(9) Xxxx PLI Contract. Prior to Closing the Corporation shall have
caused to be assigned the net proceeds of the Wholesale PLI Contract between
Telizon Internet Services Inc. and Xxxx Canada to 2041682 Ontario Inc.
If any condition, obligation or covenant of the Purchaser to be performed
hereunder or under any Ancillary Agreement at or prior to the Time of Closing
shall not have been fulfilled or performed by such time, the Vendors may
terminate this Agreement by notice in writing to the Purchaser, and in such
event the Vendors shall be released from all obligations hereunder. The
Purchaser shall only be released from its obligations hereunder if the condition
or conditions for the non-performance of which the Vendors have terminated this
Agreement are not reasonably capable of being performed or caused to be
performed by the Purchaser. Notwithstanding the foregoing, the Vendors shall be
entitled to waive compliance with any of such conditions, obligations or
covenants in whole or in part if they see fit to do so without prejudice to any
of their rights of termination in the event of non-performance of any other
condition, obligation, or covenant in whole or in part.
6.03 Conditions Precedent.
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions to be fulfilled at or prior to the Time of
Closing, which conditions are true conditions precedent:
(1) No Legal Action. No action or proceeding shall be pending or
threatened by any Person in any jurisdiction, to enjoin, restrict or prohibit
any of the transactions contemplated hereby or the right of the Corporation to
conduct the Business after Closing on substantially the same basis as heretofore
operated.
(2) One Xxxx Acquisition. The Purchaser shall have entered into a share
purchase agreement for the acquisition of all of the issued and outstanding
shares of 1500536 Ontario Inc. for One Million Dollars ($1,000,000.) in form and
substance satisfactory to the Purchaser acting reasonably (the "One Xxxx
Agreement").
If any conditions precedent in this Section 6.03 shall not have been fulfilled
at or prior to the Time of Closing, this Agreement shall be terminated and the
Parties shall be released from all obligations hereunder.
ARTICLE 7 -
CLOSING
7.01 Date, Time and Place of Closing.
The completion of the transactions contemplated by this Agreement shall
take place at the offices of Xxxxxx, Xxxxxx LLP, Barrie, Ontario, on the Closing
Date at the Time of Closing, or at such other place, on such other date, and at
such other time as may be agreed upon in writing between the Vendors and the
Purchaser.
7.02 Closing Procedures.
Subject to satisfaction or waiver by the relevant Party of the
conditions of Closing set forth herein, at the Time of Closing the Vendors shall
deliver actual possession of the Purchased Shares and the requisite instruments
of conveyance and upon such delivery the Purchaser shall pay or satisfy the
Purchase Price in accordance with Section 2.03. The transfer of possession of
the Purchased Shares shall be deemed to take effect as at the Time of Closing.
7.03 Risk of Loss.
If, prior to the Time of Closing, all or any part of the property or
assets of the Corporation are destroyed or damaged by fire or any other casualty
or shall be appropriated, expropriated or seized by any Governmental Entity or
other lawful authority, the Purchaser shall have the option, exercisable by
notice in writing given within five Business Days of the Purchaser receiving
notice in writing from the Vendors of such destruction, damage, expropriation or
seizure:
(a) to complete the purchase without reduction of the Purchase
Price, in which event all proceeds of an insurance or
compensation for expropriation or seizure shall be payable to
the Corporation and any right and claim of the Vendors to any
such amounts not paid by the Closing Date shall be assigned to
the Corporation; or
(b) if all or a substantial portion of the property or assets are
so destroyed or damaged, of terminating this Agreement and not
completing the purchase, in which case all obligations of the
Purchaser shall terminate forthwith upon the Purchaser giving
notice as required herein.
7.04 Expenses.
Unless otherwise expressly provided herein, each of the Parties shall
be responsible for the expenses (including but not limited to fees and expenses
of legal counsel and other professional advisers) incurred by them,
respectively, in connection with the negotiation and settlement of this
Agreement and the completion of the transactions contemplated hereby.
ARTICLE 8 -
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES
8.01 Survival of Representations and Warranties.
(1) The representations and warranties of the Vendors contained in this
Agreement or any Ancillary Agreement shall survive the Closing and,
notwithstanding such or any investigation made by or on behalf of the Purchaser,
shall continue in full force and effect for the benefit of the Purchaser for a
period of eighteen (18) months from the Closing Date and any claim in respect
thereof (except a claim based on tax matters under Section 3.22 which shall
continue until the expiry of the relevant reassessment periods, or a claim based
on fraud which shall have no restriction) shall be made in writing within such
time period.
(2) The representations and warranties of the Purchaser contained in
this Agreement or in any Ancillary Agreement shall survive the Closing and,
notwithstanding such Closing or any investigation made by or on behalf of any of
the Vendors, shall continue in full force and effect for the benefit of the
Vendors for a period of eighteen (18) months from the Closing Date and any claim
in respect thereof (except a claim based on fraud which shall have no
restriction) shall be made in writing within such time period.
8.02 Indemnification in Favour of the Purchaser.
Subject to Sections 8.04 and 8.05, the Vendors jointly and severally
agree to indemnify and save the Purchaser harmless of and from any Claim or Loss
suffered by, imposed upon or asserted against the Purchaser or the Corporation
as a result of, in respect of, connected with or arising out of, under or
pursuant to:
(a) any failure of the Vendors to perform or fulfill any covenant
of the Vendors under this Agreement; and
(b) subject to the limitation period set forth in Section 8.01
hereof, any breach or inaccuracy of any representation or
warranty contained in this Agreement given by the Vendors.
8.03 Indemnification in Favour of the Vendors.
(1) Subject to Sections 8.04 and 8.05, the Purchaser shall indemnify
and save the Vendors harmless of and from any Claim or Loss suffered by, imposed
upon or asserted against the Vendors as a result of, in respect of, connected
with or arising out of, under or pursuant to:
(a) any failure by the Purchaser to perform and fulfill
any covenant of the Purchaser under this Agreement or
any Ancillary Agreement; or
(b) subject to the limitation period set forth in Section
8.01 hereof, any breach or inaccuracy of any
representation or warranty given by the Purchaser
contained in this Agreement or in any Ancillary
Agreement.
8.04 Indemnification Proceedings.
(1) Any Party seeking indemnification under this Article (save and
except for indemnification claims under the provisions of Section 8.05, the
procedure for which shall be governed by the provisions thereof) (the
"indemnified party") shall forthwith notify the Party against whom a claim for
indemnification is sought hereunder (the "indemnifying party") in writing, which
notice shall specify, in reasonable detail, the nature and estimated amount of
the claim. If a claim by a third party is made against an indemnified party, and
if the indemnified party intends to seek indemnity with respect thereto under
this Article, the indemnified party shall promptly (and in any case within 30
days of such claim being made) notify the indemnifying party of such with
reasonable particulars. The indemnifying party shall have thirty (30) days after
receipt of such notice to undertake, conduct and control, through counsel of its
own choosing and at its expense, the settlement or defence thereof, and the
indemnified party shall cooperate with it in connection therewith; except that
with respect to settlements entered into by the indemnifying party (i) the
consent of the indemnified party shall be required if the settlement provides
for equitable relief against the indemnified party, which consent shall not be
unreasonably withheld or delayed; and (ii) the indemnifying party shall obtain
the release of the indemnified party. If the indemnifying party undertakes,
conducts and controls the settlement or defence of such claim (i) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defence through counsel chosen by the indemnified party, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party; and (ii) the indemnifying party shall promptly reimburse the indemnified
party for the full amount of any loss resulting from any claim and all related
expenses (other than the fees and expenses of counsel as aforesaid) incurred by
the indemnified party. The indemnified party shall not pay or settle any claim
so long as the indemnifying party is reasonably contesting any such claim in
good faith on a timely basis. Notwithstanding the two immediately preceding
sentences, the indemnified party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party.
(2) With respect to third party claims, if the indemnifying party does
not notify the indemnified party within thirty (30) days after the receipt of
the indemnified party's notice of a claim of indemnity hereunder that it elects
to undertake the defence thereof, the indemnified party shall have the right,
but not the obligation, to contest, settle or compromise the claim in the
exercise of its reasonable judgment at the expense of the indemnifying party,
provided that any such settlement or compromise shall be subject to the prior
written consent of the indemnifying party, such consent not to be unreasonably
withheld.
(3) In the event of any claim by a third party against an indemnified
party, the defence of which is being undertaken and controlled by the
indemnifying party, the indemnified party will use all reasonable efforts to
make available to the indemnifying party those employees whose assistance,
testimony or presence is necessary to assist the indemnifying party in
evaluating and in defending any such claims; provided that the indemnifying
party shall be responsible for the expense associated with any employees made
available by the indemnified party to the indemnifying party hereunder, which
expense shall be equal to an amount to be mutually agreed upon per person per
hour or per day for each day or portion thereof that such employees are
assisting the indemnifying party and which expenses shall not exceed the actual
cost to the indemnified party associated with such employees.
(4) With respect to third party claims, the indemnified party shall
make available to the indemnifying party or its representatives on a timely
basis all documents, records and other materials in the possession of the
indemnified party, at the expense of the indemnifying party, reasonably required
by the indemnifying party for its use in defending any claim and shall otherwise
cooperate on a timely basis with the indemnifying party in the defence of such
claim.
(5) With respect to any re-assessment for income, corporate, sales,
excise, or other tax or other liability enforceable by Encumbrance against the
property of the indemnified party, the indemnifying party's right to so contest
shall only apply after such payment of such re-assessment or the provision of
such security as is necessary to avoid an Encumbrance being placed on the
property of the indemnified party.
8.05 Limitations.
The obligation of indemnification set out in (i) Sections 8.02 and
8.03, shall be applicable only to the extent that any claims made thereunder, in
the aggregate, exceed Twenty Five Thousand Dollars ($25,000.); and (ii) Sections
8.02 and 8.03 (except any claim based on tax matters under Section 3.22 which
shall apply until the expiry of the relevant reassessment period, any claim
based on fraud which shall have no restriction), shall be applicable only to the
extent that a claim for indemnification is made within eighteen (18) months of
the Closing Date.
8.06 Exclusion of Other Remedies.
No Party shall have the right to bring any proceeding against any other
Party for a breach of any representation, warranty, covenant or agreement
contained in this Agreement, except for a proceeding brought in accordance with
the provisions of this Article and Article 10 hereof. This provision is not
intended to preclude any proceeding by any Party against any other Party based
on a cause of action or right, including any statutory right, other than a cause
of action in contract or tort for breach of a representation, warranty or
agreement contained in this Agreement.
ARTICLE 9 -
POST-CLOSING COVENANTS
9.01 Access to Books and Records.
For a period of six (6) years from the Closing Date or for such longer
period as may be required by applicable Law, the Purchaser covenants and agrees
to retain all original accounting books and records relating to the Corporation
for the period prior to the Closing Date. So long as any such books and records
are retained by the Purchaser pursuant to this Agreement, the Vendors shall have
the reasonable right to inspect and to make copies (at their own expense) of the
same at any time upon reasonable request during normal business hours and upon
reasonable notice for any proper purpose and without undue interference to the
business operations of the Purchaser. The Purchaser shall have the right to have
its representatives present during any such investigations.
9.02 Further Assurances.
From time to time subsequent to the Closing Date, each Party shall at
the request of any other Party execute and deliver such additional conveyances,
transfers and other assurances as may be reasonably required effectively to
carry out the intent of this Agreement and any Ancillary Agreement and to
transfer the Purchased Shares to the Purchaser.
9.03 Assistance By Vendors.
In order that the Corporation may, following the Closing, realize the
full benefit of the Contracts and the Lease, the Vendors will, at the request
and expense and under the direction of the Purchaser, as the Purchaser shall
specify,
(a) take all such action and do or cause to be done all such
things as shall, in the opinion of the Purchaser acting
reasonably, be necessary or proper in order that the
obligations of the Corporation thereunder may be performed in
such manner that the value of such Contracts and the Lease
shall be preserved and shall enure to the benefit of the
Corporation, and that the collection of moneys due and payable
to the Corporation in and under the Contracts and the Lease
shall be received by the Corporation, and
(b) promptly pay over to the Corporation any moneys collected
after the Closing Date by or paid to the Vendors in respect of
every such Contract and the Lease.
9.04 Securities Law Compliance Certificates. Each Vendor who is an officer of
the Corporation agrees and covenants that, from time to time subsequent to the
Closing Date, such officer shall provide to the Purchaser such certificates
regarding the conduct of the Business and/or financial information of the
Corporation prior to the Closing as the Purchaser may reasonably require from
such officer to enable the Purchaser's Chief Executive Officer and Chief
Financial Officer (and such other executive officers of the Purchaser) to
execute and deliver such certificates (the "Officers' Certificates") as they are
required to execute and file with the Securities Exchange Commission under
Xxxxxxxx-Xxxxx Act of 2002 (or such other legislative or regulatory requirements
as may be adopted) when such Officers' Certificates include or, in whole or in
part, are based upon the conduct of the Business and/or the financial
information of the Corporation prior to the Closing. Each Vendor who is an
officer of the Corporation agrees that this Covenant shall survive for a period
of six (6) years from the Closing Date or for such longer period as may be
required by applicable Law.
ARTICLE 10 -
ARBITRATION
10.01 Best Endeavours to Settle Disputes.
In the event of any dispute, claim, question or difference arising out
of or relating to this Agreement or any agreement executed pursuant to this
Agreement or any breach hereof, the parties hereto shall use their best
endeavours to settle such dispute, claim, question or difference. To this
effect, they shall consult and negotiate with each other, in good faith and
understanding of their mutual interests, to reach a just and equitable solution
satisfactory to all parties.
10.02 Arbitration.
Except as is expressly provided in this Agreement, if the parties do
not reach a solution pursuant to Section 10.01 within a period of 15 Business
Days following the first notification in writing by any party to another party
of any dispute, claim, question or difference, then upon written notice by any
party to the others, the dispute, claim, question or difference shall be finally
settled by arbitration in accordance with the provisions of the Arbitrations Act
(Ontario) and any amendments thereto, based upon the following:
(a) the arbitration tribunal shall consist of one arbitrator
appointed by mutual agreement of the parties, or in the event
of failure to agree within ten (10) Business Days, any party
may apply to a judge of the Superior Court of Justice to
appoint an arbitrator. The arbitrator shall be qualified by
education and training to pass upon the particular matter to
be decided;
(b) the arbitrator shall be instructed that time is of the essence
in proceeding with his determination of any dispute, claim,
question or difference and, in any event, the arbitration
award must be rendered within thirty (30) days of the
submission of such dispute to arbitration;
(c) the arbitration shall take place in Toronto, Ontario;
(d) the arbitration award shall be given in writing and shall be
final and binding on the parties, subject only to one appeal
to another arbitration tribunal appointed pursuant to
subsection 10.02(a), and shall deal with the question of costs
of arbitration and all matters related thereto;
(e) an appeal to a further arbitration tribunal of an arbitration
award shall also be given in writing and shall be final and
binding on the parties, not subject to any appeal and shall
deal with the question of costs of arbitration and all matters
related thereto; and
(f) judgment upon the award rendered may be entered in any Court
having jurisdiction, or, application may be made to such Court
for a judicial recognition of the award or an order of
enforcement thereof, as the case may be.
ARTICLE 11 -
MISCELLANEOUS
11.01 Notices.
Any notice, direction or other instrument required or permitted to be
given hereunder shall be in writing and given by delivering or sending it by
telecopy or other similar form of communication addressed:
(1) to the Purchaser at:
Teleplus Connect Corp.
000 Xx-Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxxxx Dellelce LLP
0 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx XxxXxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(2) to the Vendors at:
Xxxxx X. Xxxxxxxx In Trust
00 Xxxxxx Xxx Xxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
Xxx Xxxxx In Trust
00 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx X0X 0X0
Xxxxx Xxxxxxx In Trust
00 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx X0X 0X0
Xxxx Xxxxxxx In Trust
000 Xxxxx Xxxxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
Xxxxxxx Xxxxx In Trust
0 Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxx Xxxxx In Trust
00 Xxx Xxxxx, Xxxxxxxxx #0
Xxxxxxxx, Xxxxxxx X0X 0X0
Xxxx X. Xxxxxx In Trust
00 Xxxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx XxXxxxx In Trust
0000 Xxxxxxxx Xxxx, X.X. #0
Xxxxxxx, XX X0X 0X0
with a copy to:
Xxxxxx, Xxxxxx LLP
000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(3) to the Corporation at:
Telizon Inc.
000-00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0X0
Attention: Xxx Xxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any such notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given, if sent by telecopier or other similar
form of telecommunications on the next Business Day following such transmission
or, if delivered, to have been received on the date of such delivery. Any Party
may change its address for service from time to time by notice given in
accordance with the foregoing and any subsequent notice shall be sent to the
party at its changed address.
11.02 Publicity.
Save as required by Law or by any stock exchange, none of the Parties
shall issue any press release or make any other public statement or announcement
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior written approval of the other
Parties to the contents and the manner of presentation and publication thereof.
If disclosure is required by Law or by any stock exchange, the disclosing Party
shall consult in advance with the other Parties and attempt in good faith to
reflect such other Parties' concerns in the required disclosure.
11.03 Time of the Essence.
Time shall be of the essence of this Agreement.
11.04 Brokers.
The Vendors shall indemnify and save harmless the Purchaser from and
against any Claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any broker, agent or other intermediary who purports
to act or have acted for the Vendors.
11.05 Third Party Beneficiaries.
Each Party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person, other than
the Parties hereto, and no Person, other than the Parties hereto, shall be
entitled to rely on the provisions hereof in any action, suit, proceeding,
hearing or other forum.
11.06 Enurement.
This Agreement shall enure to the benefit of and be binding upon each
of the Parties, their successors and any permitted assigns.
11.07 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute one and the same instrument.
11.08 Joint and Several Liability.
In the event that there is no Closing, for any reason whatsoever, and
notwithstanding any other provision hereof, the Corporation shall be jointly and
severally liable with each of the Vendors, as a principal and not as a surety,
with respect to all of the representations, warranties, covenants, indemnities
and agreements of the Vendors.
11.09 Knowledge.
Where any representation or warranty contained in this Agreement or any
Ancillary Agreement is expressly qualified by reference to the knowledge of the
Vendors, or where any other reference is made herein or in any Ancillary
Agreement to the knowledge of the Vendors, it shall be deemed to refer to the
knowledge of each of the Vendors and the Corporation. Each of the Vendors hereby
confirms that it has made due and diligent inquiry of such Persons (including
appropriate officers of the Vendors and the Corporation) as it considers
necessary as to the matters that are the subject of such representations,
warranties or references.
11.10 Assignment.
This Agreement may not be assigned by the Vendors without the prior
written consent of the Purchaser. This Agreement may be assigned by the
Purchaser without the consent of the Vendors, provided that any assignee enters
into a written agreement with the Vendors to be bound by the provisions of this
Agreement in all respects and to the same extent as the Purchaser is bound.
11.11 Non-Merger.
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties of the Parties contained in this
Agreement and the Ancillary Agreements shall not merge on and shall survive the
Closing and, notwithstanding such Closing, or any investigation made by or on
behalf of any Party, shall continue in full force and effect. Closing shall not
prejudice any right of one Party against any other Party in respect of anything
done or omitted hereunder or under any of the Ancillary Agreements or in respect
of any right to damages or other remedies.
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first above written.
TELEPLUS CONNECT CORP.
/s/ Marius Silvasan
Per: ______________________________
Marius Silvasan President
I have the authority to bind the Corporation
/s/ Xxxxx X. Xxxxxxxx
---------------------------- ------------------------------------
Witness: Xxxxx X. Xxxxxxxx In Trust
/s/ Xxx Xxxxx
---------------------------- ------------------------------------
Witness: Xxx Xxxxx In Trust
/s/ Xxxxx Xxxxxxx
---------------------------- ------------------------------------
Witness: Xxxxx Xxxxxxx In Trust
/s/Xxxx Xxxxxxx
---------------------------- ------------------------------------
Witness: Xxxx Xxxxxxx In Trust
/s/ Xxxxxxx Xxxxx
---------------------------- ------------------------------------
Witness: Xxxxxxx Xxxxx In Trust
/s/ Xxx Xxxxx
---------------------------- ------------------------------------
Witness: Xxx Xxxxx In Trust
/s/ Xxxx X. Xxxxxx
---------------------------- ------------------------------------
Witness: Xxxx X. Xxxxxx In Trust
/s/ Xxxxxx XxXxxxx
---------------------------- ------------------------------------
Witness: Xxxxxx XxXxxxx In Trust
TELIZON INC.
/s/ Xxx Xxxxx
Per: ------------------------------
Xxx Xxxxx, President
I have the authority to bind the Corporation
