STOCK PURCHASE AGREEMENT by and among CANCABLE HOLDING CORP., CANCABLE, INC. and the STOCKHOLDERS PARTY HERETO December 31, 2005
by
and
among
CANCABLE
HOLDING CORP.,
CANCABLE,
INC.
and
the
STOCKHOLDERS
PARTY HERETO
December
31, 2005
TABLE
OF
CONTENTS
|
PURCHASE
AND SALE OF THE INTERESTS
|
1
|
|
|
1.01
|
Purchase
and Sale of the Interests
|
1
|
|
SECTION II.
|
||
|
THE
PURCHASE PRICE; ESCROW AGREEMENT
|
2
|
|
|
2.01
|
Purchase
Price
|
2
|
|
2.02
|
The
Indemnity Escrow Deposit
|
2
|
|
SECTION III.
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
2
|
|
|
3.01
|
Organization
and Qualification
|
2
|
|
3.02
|
Authority
|
3
|
|
3.03
|
No
Legal Bar; Conflicts
|
3
|
|
3.04
|
Capitalization
|
3
|
|
3.05
|
Financial
Statements; No Undisclosed Liabilities
|
4
|
|
3.06
|
Absence
of Certain Changes
|
5
|
|
3.07
|
Accounts
Receivable
|
5
|
|
3.08
|
No
Dividends, Loans, etc
|
6
|
|
3.09
|
Real
Property Owned or Leased
|
6
|
|
3.10
|
Title
to Assets; Condition of Property
|
7
|
|
3.11
|
Taxes
|
8
|
|
3.12
|
Compliance
with Applicable Law; Permits; Authorizations
|
9
|
|
3.13
|
Contractual
and Other Obligations; Customers and Suppliers
|
10
|
|
3.14
|
Employment
and Compensation
|
12
|
|
3.15
|
Employee
Benefit Plans
|
12
|
|
3.16
|
Labor
Relations
|
13
|
|
3.17
|
Insurance
|
14
|
|
3.18
|
Conduct
of Business; Allowances
|
14
|
|
3.19
|
Intellectual
Property
|
14
|
|
3.20
|
Power
of Attorney; Bank Accounts
|
16
|
|
3.21
|
Books
and Records
|
16
|
|
3.22
|
Litigation;
Disputes
|
16
|
|
3.23
|
No
Warranties or Indemnities
|
17
|
|
3.24
|
Insider
Interests; Intercompany Transactions
|
17
|
|
3.25
|
Disclosure
|
17
|
|
3.26
|
Investment
Canada Act
|
17
|
|
3.27
|
Value
of Assets and Revenues in Canada and the United States
|
17
|
|
3.28
|
Advisors
|
00
|
-x-
|
XXXXXXX XX.
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDERS
|
18
|
|
|
4.01
|
Authority
|
18
|
|
4.02
|
Ownership
of Interests
|
18
|
|
4.03
|
No
Legal Bar; Conflicts
|
18
|
|
4.04
|
Adequate
Opportunity to Review; No Duress
|
19
|
|
SECTION V.
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
|
19
|
|
|
5.01
|
Organization
|
19
|
|
5.02
|
Authority
|
19
|
|
5.03
|
No
Legal Bar; Conflicts
|
19
|
|
5.04
|
Investment
Purpose
|
20
|
|
5.05
|
Value
of Assets and Revenues in Canada
|
20
|
|
SECTION VI.
|
||
|
COVENANTS
OF THE STOCKHOLDERS, THE COMPANY AND THE
PURCHASER
|
20
|
|
|
6.01
|
Publicity
|
20
|
|
6.02
|
Confidential
Information
|
20
|
|
6.03
|
Taxes
|
21
|
|
6.04
|
Non-Assertion
of Claims
|
21
|
|
6.05
|
Non-Solicitation
Agreements
|
21
|
|
6.06
|
Benefit
Plans
|
22
|
|
6.07
|
Escrow
Agreement
|
22
|
|
6.08
|
D&O
Insurance
|
22
|
|
SECTION VII.
|
||
|
CLOSING
|
22
|
|
|
7.01
|
Time
and Place of Closing
|
22
|
|
7.02
|
Delivery
of Interests
|
22
|
|
SECTION VIII.
|
||
|
CONDITIONS
TO THE STOCKHOLDERS’ OBLIGATION TO CLOSE
|
22
|
|
|
8.01
|
No
Litigation
|
22
|
|
8.02
|
Covenants/Conditions
|
23
|
|
8.03
|
Related
Transactions
|
23
|
|
8.04
|
Purchase
Price
|
23
|
|
8.05
|
Escrow
Agreement
|
23
|
-ii-
|
SECTION IX
|
||
|
CONDITIONS
TO THE PURCHASER’S OBLIGATION TO CLOSE
|
23
|
|
|
9.01
|
No
Litigation
|
23
|
|
9.02
|
Covenants/Conditions
|
23
|
|
9.03
|
Related
Transactions
|
23
|
|
9.04
|
Secretary’s
Certificate
|
23
|
|
9.05
|
Other
Certificates
|
24
|
|
9.06
|
Opinion
of the Company’s Counsel
|
24
|
|
9.07
|
Sale
of All the Interests
|
24
|
|
9.08
|
Resignation
|
24
|
|
9.09
|
Employment
Agreement Waiver
|
24
|
|
9.10
|
Escrow
Agreement
|
24
|
|
9.11
|
Certificates
|
24
|
|
9.12
|
Outstanding
Options
|
24
|
|
9.13
|
Consents
and Approvals
|
24
|
|
9.14
|
Estimated
Closing Balance Sheet
|
24
|
|
9.15
|
Payment
of the Obligations
|
25
|
|
9.16
|
Conversion
|
25
|
|
9.17
|
Terminations
and Cancellations
|
25
|
|
SECTION X.
|
||
|
INDEMNIFICATION
|
25
|
|
|
10.01
|
Indemnification
by the Stockholders
|
25
|
|
10.02
|
Indemnification
by the Purchaser
|
25
|
|
10.03
|
Procedure
for Indemnification
|
25
|
|
10.04
|
Subrogation
|
28
|
|
10.05
|
Validity
|
28
|
|
10.06
|
Time
Periods for Indemnifications
|
28
|
|
10.07
|
Indemnity
Escrow Deposit
|
28
|
|
10.08
|
Limits
on Indemnification
|
29
|
|
10.09
|
Exclusive
Remedy
|
30
|
|
SECTION XI.
|
||
|
MISCELLANEOUS
|
30
|
|
|
11.01
|
Notices
|
30
|
|
11.02
|
Amendment
|
31
|
|
11.03
|
Entire
Agreement
|
31
|
|
11.04
|
Further
Assurances
|
31
|
|
11.05
|
Expenses
|
31
|
|
11.06
|
Injunctive
Relief
|
32
|
|
11.07
|
Governing
Law; Jurisdiction
|
32
|
|
11.08
|
Waiver
of Jury Trial
|
32
|
|
11.09
|
Invalidity
|
32
|
|
11.10
|
Successors
and Assigns
|
33
|
|
11.11
|
Counterparts
|
33
|
|
11.12
|
Knowledge
|
33
|
|
11.13
|
Interpretation
|
33
|
|
11.14
|
Gender
and Number
|
33
|
|
11.15
|
Third
Party Rights
|
33
|
|
11.16
|
Headings
|
33
|
-iii-
ANNEXES
|
A
|
DEFINITIONS
|
|
B
|
SHARE
CERTIFICATES
|
|
C
|
UNSECURED
CREDITOR CLAIMS
|
SCHEDULES
|
2.01(c)
|
PURCHASE
PRICE ALLOCATION
|
|
3.03
|
NO
LEGAL BAR; CONFLICTS
|
|
3.04
|
CAPITALIZATION
|
|
3.05
|
FINANCIAL
STATEMENTS; NO UNDISCLOSED LIABILITIES
|
|
3.06
|
ABSENCE
OF CERTAIN CHANGES
|
|
3.07
|
ACCOUNTS
RECEIVABLE
|
|
3.08(a)
|
DIVIDENDS,
LOANS, ETC.
|
|
3.08(b)
|
COMPANY
INDEBTEDNESS
|
|
3.08(c)
|
NON-ORDINARY
COURSE PAYMENTS AND DISBURSEMENTS; Annex 1: List of
Disbursements
|
|
3.09
|
LEASED
REAL PROPERTY
|
|
3.10(a)
|
LIENS
|
|
3.11
|
TAXES
|
|
3.12(b)
|
PERMITS
|
|
3.13(a)
|
CONTRACTS
|
|
3.13(b)
|
DEFAULTS
|
|
3.13(c)
|
CUSTOMERS
AND SUPPLIERS INFORMATION
|
|
3.14
|
EMPLOYMENT
AND COMPENSATION
|
|
3.15
|
EMPLOYEE
BENEFIT PLANS
|
|
3.17
|
INSURANCE
|
|
3.19(a)
|
INTELLECTUAL
PROPERTY RIGHTS
|
|
3.19(c)
|
INTELLECTUAL
PROPERTY FILINGS
|
|
3.19(d)
|
ROYALTIES
|
|
3.20
|
POWER
OF ATTORNEY; BANK ACCOUNTS
|
|
3.22
|
LITIGATION;
DISPUTES
|
|
3.23
|
NO
WARRANTIES OR INDEMNITIES
|
|
3.24
|
INSIDER
INTERESTS; INTERCOMPANY TRANSACTIONS
|
|
3.26
|
CAPITAL
EXPENDITURES
|
|
4.03
|
NO
LEGAL BAR; CONFLICTS
|
|
5.03
|
NO
LEGAL BAR; CONFLICTS
|
|
8.03
|
RELATED
TRANSACTIONS
|
|
11.05
|
TRANSACTION
EXPENSES
|
EXHIBITS
|
A
|
ESCROW
AGREEMENT
|
|
B
|
PROPRIETARY
RIGHTS AND INVENTION ASSIGNMENT AGREEMENTS
|
|
C
|
OPINION
OF THE COMPANY’S AND THE STOCKHOLDERS’ COUNSEL
|
|
D
|
ESTIMATED
CLOSING BALANCE SHEET
|
-iv-
STOCK
PURCHASE
AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) made on the 31st day of December,
2005 by and among Cancable Holding Corp., a Delaware corporation (the
“Purchaser”); Cancable, Inc., an Ontario corporation (the “Company”); Xxxxxxxxx
Fund II Inc. (“Xxxxxxxxx”) and BMO Capital Corporation (formerly known as Bank
of Montreal Capital Corporation, “BMO” and together with Xxxxxxxxx, the
“Stockholders”). Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in Annex
A
hereof.
W
I T
N E S S E T H:
WHEREAS,
the Company provides IT products and services, contract field technical and
help
desk support services for cable television companies and other
telecommunications companies, which includes installing
cable services and connections (including cable television installation),
installing cable modems, configuring end users’ computers, providing inbound
technical call center sales and trouble resolution for cable Internet
subscribers (together
with any other business activities in which the Company is currently engaged,
the “Business”);
WHEREAS,
each of the Stockholders is the holder of (x) the common shares in the capital
of the Company and (y) an option to purchase common shares (the “Options”) each
set forth opposite such Stockholder’s name on Schedule 3.04
hereto,
which common shares constitute all of the issued and outstanding shares of
capital stock and any other equity interests of the Company (all such Shares
held by the Stockholders being hereinafter referred to as the “Interests”);
and
WHEREAS,
the Purchaser desires to acquire from each of the Stockholders, and each of
the
Stockholders desires to sell to the Purchaser, all of the Interests held by
such
Stockholder, on the terms and subject to the conditions hereinafter set
forth.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth and intending to be legally bound, the parties
hereto hereby agree as follows:
SECTION I.
PURCHASE
AND SALE OF THE INTERESTS
1.01 Purchase
and Sale of the Interests.
Subject
to the terms and conditions of this Agreement and on the basis of the
representations, warranties, covenants and agreements herein contained, at
the
Closing, each of the Stockholders is simultaneously herewith selling, assigning
and conveying to the Purchaser, free and clear of all Liens, and the Purchaser
is simultaneously herewith purchasing, acquiring and accepting from each of
the
Stockholders, all of the Interests held by each Stockholder and set forth
opposite such Stockholder’s name on Schedule 3.04
hereto,
in consideration for the payment of the Purchase Price and the consummation
of
the other transactions described in Section 8.03.
-1-
SECTION II.
THE
PURCHASE PRICE; ESCROW AGREEMENT
2.01 Purchase
Price.
(a)
The
aggregate purchase price for the Interests (the “Purchase Price”) shall be
$1.00, payable at the Closing as set forth in Section 2.01(b) below.
(b) Payment
of the Purchase Price.
The
Purchase Price shall be paid simultaneously herewith by the Purchaser to the
Stockholders in accordance with their Percentage Interests by personal check,
bank check or in cash.
2.02
The
Indemnity Escrow Deposit.
(a)
Contemporaneously with the execution of this Agreement, the Purchaser, the
Stockholders and Gowling Xxxxxxx Xxxxxxxxx LLP (the “Escrow Agent”) will enter
into an escrow agreement, in the form attached hereto as Exhibit A
(the
“Escrow Agreement”), and simultaneously herewith, the Purchaser shall deposit
$1,400,000 (“Indemnity
Escrow Amount”
and,
together with all earnings thereon, collectively, the “Indemnity
Escrow Deposit”)
into
the escrow account. The Indemnity Escrow Deposit will be held, invested and
disbursed as provided in the Escrow Agreement.
(b) The
Indemnity Escrow Deposit shall be applied as provided in the Escrow
Agreement.
(c) Nothing
in this Section 2.02 or in the Escrow Agreement (including, without
limitation, the expiration of the Escrow Agreement in accordance with its terms)
or otherwise shall limit the agreements and obligations of the parties hereto
set forth herein, including, without limitation, pursuant to Section X
hereof.
SECTION III.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to the Purchaser, as of the date hereof,
that:
3.01 Organization
and Qualification.
(a)
The
Company is a corporation, duly organized and validly existing under the laws
of
the Province of Ontario and has full power and authority to own its properties
and to conduct the businesses in which it is now engaged. Each of the Company’s
Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full power
and authority to own its respective properties and to conduct the businesses
in
which it is now engaged. The Company and each of its Subsidiaries are qualified
to conduct business and are in good standing (or subsisting, as applicable)
in
each jurisdiction (domestic or foreign) wherein the failure so to qualify
(individually or in the aggregate) would be reasonably likely to have a Material
Adverse Effect.
(b) Accurate
and complete copies of the Company’s and each of its Subsidiary’s articles of
incorporation, including all amendments thereto and restatements thereof and
by-laws and of the director and stockholder minutes and the stock record books
of the Company and each Subsidiary have been made available to the Purchaser.
Complete and accurate records with respect to the issuance, transfer, redemption
and cancellation of Shares and any other equity interests of the Company and
each Subsidiary are set forth in such record books.
-2-
3.02 Authority.
The
execution and delivery by the Company of this Agreement and each other
instrument or document required to be executed and delivered by the Company
pursuant hereto, the performance by the Company of its covenants and agreements
hereunder and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. This Agreement and each other instrument or document required
to be executed and delivered by the Company pursuant hereto constitutes a valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with its terms (except as may be limited by bankruptcy,
moratorium, insolvency or other similar laws generally affecting the enforcement
of creditors’ rights).
3.03 No
Legal Bar; Conflicts.
Neither
the execution and delivery of this Agreement or any other instrument or document
required to be executed and delivered by the Company pursuant hereto, nor the
consummation of the transactions contemplated hereby or thereby, (a) violates
or
will violate (i) any provision of the articles of incorporation of the
Company or its bylaws or (ii) except as set forth on Schedule
3.03
hereto,
any statute, ordinance, regulation, rule, policy, instrument, code, directive,
guideline, order, judgment or decree of any court or other Governmental
Authority or any Permit, or (b) except as set forth on Schedule 3.03
hereto,
conflicts with or will conflict with or results in or will result in any breach
or modification of any of the terms of or constitutes or will constitute a
default under or results in or will result in the termination of or the creation
of any Lien, acceleration right or other right pursuant to the terms of any
Contract or Permit, or will in any way affect the continuation, validity or
effectiveness of any Contract or Permit. Except as set forth on Schedule 3.03
hereto,
no consents, approvals or authorizations of, or designations, registrations,
declarations or filings with or notices to, any Governmental Authority or any
other Person or entity (including, without limitation, pursuant to the terms
of
any Contract, Permit or otherwise) are required in connection with the execution
and delivery of this Agreement or any other instrument or document required
to
be executed and delivered by the Company pursuant hereto, or the consummation
of
the transactions contemplated hereby or thereby.
3.04 Capitalization.
The
authorized capital of the Company consists of an unlimited number of common
shares and an unlimited number of Class A convertible, retractable, cumulative,
voting preference shares. The Interests constitute all of the outstanding
capital stock or other equity interests of the Company (or interests convertible
into or exchangeable for equity interests), and no share certificates were
ever
issued in respect of any of such shares other than those of which copies are
attached hereto as Annex
B.
Schedule
3.04
sets
forth the ownership of all the outstanding equity interests (and interests
convertible into or exchangeable for equity interests) of the Company’s
Subsidiaries (the “Subsidiary Interests”), and neither the Company nor any of
its Subsidiaries own any capital stock or other equity interest (or interests
convertible into or exchangeable for equity interests) in any Person other
than
the Company’s Subsidiaries. All of the Interests and Subsidiary Interests have
been duly and validly authorized and issued in accordance with all applicable
laws concerning the issuance of securities, are fully paid and non-assessable
and are owned beneficially and of record by each of the Stockholders (or, in
the
case of the Company’s Subsidiaries, the Company) as set forth on Schedule
3.04
hereto,
in each case free and clear of all Liens. Except as set forth on Schedule
3.04
hereto,
there are no outstanding subscriptions, warrants, options, calls, commitments
or
other rights or agreements to which the Company, any of its Subsidiaries or
any
of the Stockholders is subject to or bound relating to the voting, issuance,
sale, purchase, transfer or redemption of any securities of the Company or
any
of its Subsidiaries, and (i) no Person other than the Stockholders has any
interest in any securities of the Company and (ii) no Person other than the
Company has any interest in any securities of any of the Company’s Subsidiaries.
Except as set forth on Schedule
3.04
hereto,
no Shares or other securities of the Company or any of its Subsidiaries are
reserved for any purpose. At the Closing, the Stockholders will deliver to
the
Purchaser good, valid and marketable title to the Interests, free and clear
of
all Liens. Other than as set forth on Schedule
3.04,
neither
the Company nor any of its Subsidiaries has any interest in any securities
of
any corporation, limited liability company or other entity.
-3-
3.05 Financial
Statements; No Undisclosed Liabilities.
(a)
The
Company has delivered to the Purchaser (i) the Company’s consolidated
audited balance sheets as at November 30, 2004, November 30, 2003, November
30,
2002, November 30, 2001 and November 30, 2000 (such audited balance sheet at
November 30, 2004, the "Balance Sheet") and the related statements of income,
cash flow and retained earnings for the 12-month periods then ended, each
accompanied by the reports of BDO Dunwoody, LLP, Ernst & Young, LLP or
Xxxxxxx Xxxxx, CPA (as the case may be), independent chartered (or certified,
as
the case may be) accountants, which firms have audited such financial statements
(collectively, the “Annual Financial Statements”) and (ii) the Company’s
consolidated balance sheet as at each of August 31, 2005, September 30, 2005,
October 31, 2005 and November 30, 2005 (the “Current Balance Sheet”) and the
related statements of changes in financial position for the nine, ten, 11 and
12-month periods then ended (the items referred to in clause (ii), the “Interim
Financial Statements” and together with the Annual Financial Statements, the
“Financial Statements”). The Financial Statements (including, without
limitation, all schedules and notes thereto) are complete and correct in all
material respects, have been prepared from the books and records of the Company
(on a consolidated basis) and, except as set forth on Schedule 3.05(a)
hereto,
in accordance with GAAP consistently applied and maintained throughout the
periods indicated (subject, in the case of the Interim Financial Statements,
to
the absence of footnotes and normal year-end adjustments, which, if included,
would not have a material effect on the information on such Interim Financial
Statements), and fairly present in all material respects the financial condition
of the Company (on a consolidated basis) as at their respective dates and the
results of its operations for the periods covered thereby. The Annual Financial
Statements include all footnotes and all adjustments (which consist only of
normal recurring accruals) necessary for such fair presentation.
(b) Except
to
the extent set forth in or reserved against in the Current Balance Sheet or
as identified on Schedule 3.05(b)
hereto,
and except for current liabilities (determined in accordance with GAAP
consistently applied) incurred since the Current Balance Sheet Date in the
ordinary course of business consistent with past practices (and not materially
different in type or amount from those incurred in the Company's (and its
Subsidiaries’) conduct of its business in the ordinary course), the Company and
its Subsidiaries have no liabilities or obligations of any nature, whether
accrued, absolute, known or unknown, contingent or otherwise, whether due or
to
become due, whether properly reflected under GAAP as a liability or a charge
or
reserve against an asset or equity account or not, and whether the amount
thereof is readily ascertainable or not.
-4-
3.06 Absence
of Certain Changes.
Except
as set forth on Schedule 3.06
hereto,
subsequent to October 31, 2005, there has not been with respect to the Company
or any of its Subsidiaries any (a) material adverse change in the condition
(financial or otherwise), results of operations, assets, liabilities, prospects,
properties or business; (b) damage, destruction or other loss (in each case,
whether or not insured) affecting the assets, properties, business or
operations; (c) labor organization or activity, labor dispute or, to the
knowledge of the Company, threatened labor dispute involving any employee;
(d)
(i) actual or, to the knowledge of the Company, threatened dispute with any
customer or supplier, (ii) actual or, to the knowledge of the Company,
threatened loss of business from any customer or supplier or (iii) to the
knowledge of the Company, any event or circumstance which could reasonably
be
expected to result in any such dispute or loss of business, where such dispute
or loss of business would be reasonably likely (individually or in the
aggregate) to have a Material Adverse Effect; (e) changes in the methods or
procedures for billing or collection of customer accounts or recording of
customer accounts receivable or reserves for doubtful accounts or in the payment
of payables, debts and other liabilities associated with any customer accounts;
(f) sale, assignment or transfer of any of the assets thereof, except in the
ordinary course of business, consistent with past practice; (g) issuance of
any
shares of stock or other equity interest, bonds or other corporate securities
or
debt instruments, granting of any options, warrants or other rights calling
for
the issuance thereof, or borrowing any funds (except current borrowings in
the
ordinary course of business pursuant to existing credit arrangements); (h)
cancellation of any debts or waivers of any claims or rights of substantial
value; (i) agreements or commitments for capital expenditures in excess of
$50,000 (individually or in the aggregate); (j) making or permitting of any
amendment or termination of any Contract except in the ordinary course of
business (such ordinary course to include, without limitation, any renewal
of an
otherwise expiring Contract); (k) change in any method of accounting or
accounting principles; (l) write-offs as uncollectible of any notes or accounts
receivable, except in the ordinary course of business consistent with past
practice, none of which, individually or in the aggregate, are material; (m)
increase in the compensation, commission, bonus or other direct or indirect
remuneration payable or to become payable to any salesman, distributor, agent
or
employee; (n) accrual or arrangement for or payment of bonuses or special
compensation of any kind to any director, officer or employee; (o) direct or
indirect payment of any severance or termination pay to any officer or employee
in excess of two (2) months' salary; (p) creation of any Liens with respect
to
any assets; (q) agreements or contracts entered into other than in the ordinary
course of business or otherwise requiring the payment by the Company of $50,000
(individually or in the aggregate) or more with the exception of purchase orders
entered into in the ordinary course of business and consistent with past
practices of the Company and; or (r) agreement or commitment to do any of the
foregoing.
3.07 Accounts
Receivable.
Each
account receivable of the Company and each of its Subsidiaries which is
reflected in the Current Balance Sheet, and each account receivable of the
Company which has arisen since the date of the Current Balance Sheet (the
“Current Balance Sheet Date”) is valid and shall have arisen only from bona fide
arms-length transactions in the ordinary course of the business. To
the
Company’s knowledge, there are no facts or circumstances generally which would
be reasonably likely to result in any material increase in the uncollectibility
of its accounts receivable, as a class. All accounts receivable are fully and
correctly reflected on the Financial Statements or, with respect to accounts
receivable arising after the Current Balance Sheet Date, on the books and
records of the Company, in each case, except as set forth on Schedule 3.07
hereto,
in accordance with GAAP. No basis exists for the assertion of any counterclaim
or set-off or the repayment of any accounts receivable or payments heretofore
received by the Company. Schedule
3.07
hereto
accurately sets forth the amount of all commissions paid or due, and to whom
paid or due, with respect to all accounts receivable by the Company and each
of
its Subsidiaries as of the date hereof.
-5-
3.08 No
Dividends, Loans, etc. (a)
Except
as set forth on Schedule 3.08(a)
hereto,
subsequent to October 31, 2005, neither the Company nor any of its Subsidiaries
has (i) declared or paid any dividend (whether in cash, in property or
otherwise) or made any other distribution of any kind in respect of its
Interests or any other equity security, and neither the Company nor any of
its
Subsidiaries has any obligation (contingent or otherwise) to pay any dividends
or make any other distribution of any kind, or (ii) purchased, redeemed or
otherwise acquired or disposed of or issued any Interests or other equity
securities or any notes, bonds or other securities of any kind and has no
obligation (contingent or otherwise) to do any of the foregoing. Except as
set
forth on Schedule 3.08(a),
the
Company and/or its relevant Subsidiary has paid on a timely basis (i) all
amounts due and payable under Company Indebtedness, leases and all other
contractual obligations and (ii) all other amounts due and payable to any
Persons. Except as set forth on Schedule 3.08(a),
neither
the Company nor any of its Subsidiaries has any outstanding loans or advances
to
any Stockholder or to any family member of any Stockholder, or to any Affiliate
of any Stockholder.
(b) Except
as
set forth on Schedule 3.08(b)
hereto,
no Company Indebtedness exists, and immediately after giving effect to the
purchase and sale of the Interests contemplated hereby, all Company Indebtedness
set forth on Schedule 3.08(b)
and all
Liens relating thereto shall be repaid in full and terminated.
(c) Except
as
set forth on any of Schedule
3.06,
Schedule
3.08(a)
or
Schedule
3.08(c),
since
September 1, 2005, neither the Company nor any of its Subsidiaries has made
any
payment or other disbursement of funds (whether by cash, check, electronic
transfer or any other means) for any purpose whatsoever other than those made
in
the ordinary course of business, consistent with past practice. Attached as
Annex
1
to
Schedule
3.08(c)
is a
true, complete and correct listing of every payment or other disbursement of
funds (whether by cash, check, electronic transfer or any other means) for
any
purpose whatsoever made by the Company or any of its Subsidiaries since
September 1, 2005, except those for less than $5,000 individually and $15,000
in
the aggregate.
3.09 Real
Property Owned or Leased.
(a)
A list
and description of all real property leased to the Company or any of its
Subsidiaries is set forth on Schedule 3.09
hereto
(the “Real Property”). Neither the Company nor any of its Subsidiaries owns any
real property. All such leased Real Property is held subject to written leases
or other agreements which are valid and effective in accordance with their
respective terms, and there are no existing defaults or events of default,
or
events which with notice or lapse of time or both would constitute defaults,
thereunder on the part of the Company (or its relevant Subsidiary). True and
complete copies of all such leases, together with any amendments thereto, have
been made available to the Purchaser. To the knowledge of the Company, there
is
no default or claimed or purported or alleged default or state of facts which
with notice or lapse of time or both would constitute a default on the part
of
any other party in the performance of any obligation to be performed or paid
by
such other party under any lease referred to on Schedule 3.09
hereto.
Neither the Company, any of its Subsidiaries nor any of the Stockholders has
received any written or oral notice to the effect that any lease will not be
renewed at the termination of the term thereof or that any such lease will
be
renewed only at a substantially higher rent.
-6-
(b) (i)Neither
the Company, any of its Subsidiaries nor any of the Stockholders has received
any written notice of, and, to the knowledge of the Company there is no
violation of any laws, rules, regulations, codes, guidelines or ordinances
relating to the Real Property or requesting or requiring the performance of
any
repairs, alterations or other work in order so to comply.
(ii) Neither
the Company, any of its Subsidiaries nor any of the Stockholders has received
any written notice of, and, to the knowledge of the Company there is no
currently proposed or pending assessment for public improvements or of any
condemnation, taking by eminent domain, Crown expropriation or similar
proceedings with respect to any portion of the Real Property.
(iii) To
the
knowledge of the Company, the buildings and other improvements constituting
a
part of the Real Property have no structural, roof or other defects and such
buildings and improvements (including, without limitation, all plumbing,
heating, electrical, air conditioning, ventilation and other mechanical systems
and equipment) are in good working order, condition and repair, normal wear
and
tear excepted.
(iv) The
uses
to which the Company and its Subsidiaries put the Real Property conform in
all
material respects with all applicable laws, rules, ordinances, regulations
and
all applicable agreements to which the Company or any such Subsidiary is a
party
or by which the Real Property is subject to or bound, including, without
limitation, those relating to zoning, environmental, health and safety standards
and the rules and regulations relating thereto.
3.10 Title
to Assets; Condition of Property.
(a)
The
Company and its Subsidiaries (as the case may be) have good, valid and
marketable title to all of their respective properties and assets, real,
personal and mixed, tangible and intangible, including, without limitation,
the
properties and assets reflected in the Current Balance Sheet (except for assets
leased under leases set forth on Schedules
3.08, 3.09 or 3.13
hereto,
and except for accounts receivable collected since the Current Balance Sheet
Date in the ordinary course of business consistent with past practices), free
and clear of all Liens except Liens arising under Company Indebtedness and
those
listed on Schedule
3.10(a)
hereto
and described thereon or Liens disclosed in the Financial Statements;
provided,
that
notwithstanding the foregoing, the Company has good, valid and marketable title
to all of the outstanding shares of stock of its Subsidiary, free and clear
of
all Liens. Except with respect to assets leased pursuant to valid leases set
forth on Schedules
3.08(b) or 3.13
hereto,
the Company or its Subsidiaries owns all the tangible properties and assets
located at or on the Real Property and owns all of the tangible properties
and
assets necessary for the conduct of the Business as currently
conducted.
-7-
(b) All
of
the assets and properties (including, without limitation, all equipment and
the
improvements, fixtures and appurtenances on or to the Real Property) owned
or
leased by the Company or any of its Subsidiaries pursuant to written leases
set
forth on any of Schedules
3.09 or 3.13
hereto
are in good operating condition and repair, normal wear and tear excepted,
and
have been maintained and serviced in accordance with the prudent conduct of
business, are suitable for the purposes for which they presently are being
used
and constitute all of the assets and properties used in the operations of,
and
necessary to operate, the Business as conducted on the date hereof. None of
the
assets or properties owned or leased by the Company or any of its Subsidiaries
(or uses to which they are put) fails to conform in any material respect with
any applicable agreement, law, ordinance or regulation.
3.11 Taxes.
(a)
Except
as set forth on Schedule
3.11
hereto,
the Company and each of its Subsidiaries have filed or caused to be filed on
a
timely basis all federal, state, provincial, local, foreign and other tax
returns, forms, statements, reports and declarations (collectively, “Tax
Returns”) required to be filed by such Persons and have paid all federal, state,
provincial, local, foreign and other taxes, including, but not limited to,
income, gross receipts, capital stock, profits, stamp, occupation, transfer,
value added, excise, franchise, sales, use, property (whether real, personal
or
mixed), employment, unemployment, disability, withholding, social security
and
workers’ compensation taxes and estimated income and franchise tax payments, and
interest, penalties, fines, costs and assessments (collectively, “Taxes”), due
and payable with respect to the periods covered by such Tax Returns (whether
or
not reflected thereon). All Tax Returns filed by or on behalf of the Company
or
any of its Subsidiaries are complete and correct in all material respects and
were prepared in material compliance with all applicable laws and
regulations.
(b) Except
as
set forth on Schedule
3.11,
(i) no penalties or other charges are, or will become, due with respect to
the late filing of any Tax Return, and (ii) neither the Company nor any of
its Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. Except as set forth on Schedule 3.11,
there
are no Liens for Taxes (other than for Taxes not yet due and payable) on any
of
the properties or assets, real, personal or mixed, tangible or intangible,
of
the Company or any of its Subsidiaries. Except as set forth on Schedule
3.11,
no
deficiency in Taxes of the Company or any of its Subsidiaries for any period
has
been asserted by any taxing authority which remains unpaid at the date
hereof.
(c) Except
as
set forth on Schedule
3.11,
there
is no action, suit, proceeding, audit, investigation or claim pending or, to
the
knowledge of the Company, threatened in respect of any Taxes for which Company
or any of its Subsidiaries is or may become liable, nor (except as set forth
on
Schedule
3.11)
has any
deficiency or claim for any such Taxes been proposed, asserted or, to the
knowledge of the Company, threatened. Except as set forth on Schedule
3.11,
no
written inquiries or notices have been received by the Company or any of its
Subsidiaries or any Stockholder from a taxing authority with respect to possible
claims for Taxes imposed on the Company or any of its Subsidiaries which have
not been resolved prior to the date hereof, and neither the Company nor any
Stockholder has any reason to believe that such an inquiry or notice is pending
or threatened, and there is no basis for any additional claims or assessments
for Taxes. There are no assessments relating to the Company’s or any of its
Subsidiaries’ Tax Returns pending or (to the knowledge of the Company)
threatened.
-8-
(d) No
claim
has ever been made by a taxing authority in a jurisdiction in which the Company
or any of its Subsidiaries does not file Tax Returns that the Company or any
such Subsidiary is or may be subject to taxation in that jurisdiction. The
Company has made available to the Purchaser accurate and complete copies of
the
federal, provincial and state income (or franchise) Tax Returns filed by or
on
behalf of the Company or any of its Subsidiaries for the past five years. Except
as set forth on Schedule 3.11,
neither
the Company nor any of its Subsidiaries is, or has ever been, the common parent
or a member of any affiliated group of corporations filing a consolidated
federal income Tax Return, or is a party to any Tax sharing agreement or is
otherwise liable for the Taxes of any third party.
(e) Except
as
set forth on Schedule
3.11(e)
hereto,
the accrual for Taxes reflected in the Financial Statements accurately reflects
the total amount of all unpaid Taxes, whether or not disputed and whether or
not
presently due and payable, of the Company and each of its Subsidiaries as of
the
close of the periods covered by the Financial Statements. Adequate accruals
and
reserves have been made in the Financial Statements and the books and records
of
the Company for the payment of all unpaid federal, state, provincial, foreign,
local and other Taxes of the Company and each of its Subsidiaries for all
periods through the respective dates thereof and through the Closing Date,
whether or not yet due and payable and whether or not disputed by the Company
or
any of its Subsidiaries, and, to the knowledge of the Company, nothing has
occurred subsequent to the dates of such Financial Statements or such accruals
or reserves in such books and records which make such accruals and reserves
reasonably likely to be inadequate.
(f) Except
as
set forth on Schedule 3.11,
there
are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment or collection
of
any Taxes or deficiencies against the Company or any of its Subsidiaries, and
no
power of attorney granted by the Company or any of its Subsidiaries with respect
to any Taxes is currently in force.
(g) Except
as
set forth on Schedule
3.11,
the
Company and each of its Subsidiaries are in compliance, and at all times have
been in compliance, with all applicable laws, rules and regulations relating
to
the withholding of Taxes and have collected or withheld and paid over, within
the time prescribed under any applicable law, to the proper Governmental
Authority all amounts required to be so collected or withheld and paid over
for
all periods up to (but not including) the Closing Date under all applicable
laws
to the extent such amounts are required to be paid before such
date.
3.12 Compliance
with Applicable Law; Permits; Authorizations.
(a) General.
Neither
the Company nor any of its Subsidiaries is in default under, nor has it failed
to comply with or is otherwise in violation (i) in any material respect of
any material law, statute, ordinance, regulation, rule, policy, instrument,
code, directive, guideline or any order, judgment or decree of any court or
other Governmental Authority or (ii) any provision of such Person’s
articles of incorporation, bylaws or similar documents. To the knowledge of
the
Company, there is no basis for assertion of any violation of the foregoing
or
for any claim for compensation or damages or otherwise arising out of any
violation of the foregoing. Neither the Company, any of its Subsidiaries nor
any
of the Stockholders has received any notification (written or otherwise) of
any
asserted present or past failure to comply with any of the foregoing which
has
not been satisfactorily responded to in the time period required
thereunder.
-9-
(b) Permits.
Set
forth on Schedule
3.12(b)
hereto,
is a complete and accurate list of all permits, licenses, approvals, franchises,
appointments, notices and authorizations issued by any Governmental Authority
(collectively, the “Permits”), held by the Company or any of its Subsidiaries.
The Permits set forth on Schedule
3.12(b)
hereto
are all the Permits required for the lawful conduct of the Business as conducted
on the date of this Agreement. All the Permits set forth on Schedule
3.12(b)
hereto
are in full force and effect and neither the Company nor any of its Subsidiaries
has engaged in any activity which would cause or permit revocation or suspension
of any such Permit, and no action or proceeding looking to or contemplating
the
revocation or suspension of any such Permit is pending or, to the knowledge
of
the Company, threatened. There are no existing defaults or events of default
or
events or states of fact which with notice or lapse of time or both would
constitute a default by the Company or any of its Subsidiaries. The consummation
of the purchase and sale of the Interests contemplated hereby shall not
constitute a violation or default under, result in the termination of, or
otherwise impair the Company’s (or any of its Subsidiaries’) rights under, any
Permit.
(c) Environmental.
The
Company and each of its Subsidiaries are in compliance in all material respects
with all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws, or in any plan, order, decree, judgment, notice or demand
letter issued, entered, promulgated or approved thereunder to which it is
subject.
3.13 Contractual
and Other Obligations; Customers and Suppliers.
(a)
Set
forth on Schedule 3.13(a)
hereto
(collectively, the “Contracts”) is a correct and complete list of all (written
and oral) contracts, agreements, licenses, leases, guarantees and other
documents to which the Company or any of its Subsidiaries is a party or by
which
the Company, any of its Subsidiaries or any of the assets or properties of
the
Company or any of it Subsidiaries is subject to or bound including, without
limitation, all amendments thereto, which:
(i) relate
to
the employment of any Person by the Company or any of its Subsidiaries, which
is
not cancelable by the Company or such Subsidiary without penalty or other
financial obligation within 60 days (other than pursuant to applicable Laws
and
Regulations, or any bonus, deferred compensation, pension, profit sharing,
equity option, employee equity purchase, retirement or other employee benefit
plan;
(ii) contain
restrictions with respect to payment of dividends or any other distribution
in
respect of the Company’s or any of its Subsidiaries’ securities;
(iii) relate
to
capital expenditures, other than contracts, agreements or commitments not
exceeding $50,000 individually or in the aggregate;
(iv) relate
to
or evidence any loan or other indebtedness (other than accounts receivable
from
trade debtors in the ordinary course of business) or advance to (other than
travel allowances and other reasonable business expenses to its employees),
or
investment in, any Person or any agreement, contract or commitment relating
to
the making of any such loan, advance or investment;
-10-
(v) relate
to
or evidence any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than the endorsement of
negotiable instruments for collec-tion in the ordinary course of
business);
(vi) are
with
customers or clients of the Business pursuant to which (on an individual basis)
the Company or any of its Subsidiaries received revenue during the 12-month
period ended on November 30, 2004 or the 12-month period ended on November
30,
2005;
(vii) are
with
any Governmental Authority;
(viii) are
management service, consulting or any other similar type contracts (includ-ing
any employee lease or outsourcing arrangement) pursuant to which the Company
or
any of its Subsidiaries is the “client” or the party being
counseled;
(ix) relate
to
the purchase, sale, lease or disposal of any assets, shares or other securities
of the Company, other than inventory in the ordinary course of
business;
(x) are
(other than as set forth in item (i) above) between the Company or any of
its Subsidiaries and any of its or their Affiliates or Stockholders or are
material contracts with employees (including any officer, director, agent or
consultant);
(xi) which
(other than as set forth in clauses (i) - (x), above) involve annual base
payments by or to the Company or any of its Subsidiaries of $50,000 or more
and
is not cancelable without penalty within 30 days; or
(xii) are
otherwise material to the Company or any of its Subsidiaries.
(b) Except
as
set forth on Schedule
3.13(b),
neither
the Company nor any of its Subsidiaries is in default under any Contract and
no
claim of such a default has been made, and no event has occurred which with
the
giving of notice or the lapse of time or both would constitute such default
under any Contract. To the knowledge of the Company, no other party to any
Contract is in default thereunder. Other than the Company Indebtedness, each
of
the Contracts has been entered into in the ordinary course of business and
is at
arms’ length. The Company has made available to the Purchaser true and complete
copies of each written, and true and complete written descriptions of each
oral,
Contract. Each of the Contracts is in full force and effect and is a legal,
valid and binding obligation of the Company or the applicable Subsidiary thereof
and (to the knowledge of the Company) each other party thereto. The Company
or
the applicable Subsidiary thereof is a party to each Contract either directly
or
through a legal, valid and effective assignment which has been entered into
in
accordance with the terms of such Contract and which (to the knowledge of the
Company) is binding and enforceable against the assignor and each other party
to
each such Contract.
-11-
(c) There
have been no terminations, cancellations, limitations or material modifications
and there exists no actual or, to the knowledge of the Company, threatened,
facts which might reasonably be anticipated to result in a termination,
cancellation or limitation of, or any material modification or change in, the
business relationships of the Company or any of its Subsidiaries with any of
the
ten largest customers of the Company and its Subsidiaries (taken as a whole)
in
the conduct of the Business (measured by dollar volume of revenue received
by
the Company and its Subsidiaries) during the 12-month period ended October
31,
2005 or with any of the ten largest suppliers of the Company any its
Subsidiaries (taken as a whole) in the conduct of the Business (measured by
dollar volume of expenditures by the Company and its Subsidiaries) during the
12-month period ended October 31, 2005, each of which is set forth on
Schedule
3.13(c)
hereto.
Except as set forth on Schedule
3.13(c)
hereto,
there exists no condition or state of facts or circumstances known to the
Company involving customers or suppliers of or to the Company or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect as a result of the consummation of the transactions contemplated by
this
Agreement.
3.14 Employment
and Compensation.
Set
forth on Schedule
3.14
hereto,
with respect to the Company and its Subsidiaries, is a complete and accurate
list of (a) all agreements, plans, arrangements or commitments with employees,
Stockholders, consultants, independent contractors (other than the Company's
tax
and legal advisors), sales representatives, agents or any family members of
any
employee, Stockholder, consultant or agent, with regard to employment,
compensation, benefits or perquisites (it being understood and agreed that
the
disclosure of a company-wide benefit plan shall suffice, and no disclosure
of
specific claims for medical, dental or other similar benefits need be set forth
on such schedule), (b) all full-time and part-time employees and their
respective current positions, job categories and salaries (including any bonus
and perquisites), service dates and the material terms of their employment
and
(c) unless otherwise set forth on Schedule
3.15,
a list
of any plan, program, policy or similar arrangement or agreement maintained
by
or on behalf of the Company or any of its Subsidiaries that provides benefits
to
or for the benefit of current or former employees of the Company or any of
its
Subsidiaries. Except as set forth on Schedule
3.14
hereto,
all bonuses heretofore granted to employees have been paid in full to such
employees. Except as set forth on Schedule 3.14
hereto,
neither the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will result in any liability for severance pay,
or transaction fee or similar payment requirements to any Stockholder, employee,
sales representative, independent contractor, consultant, distributor agent
or
Affiliate of the Company or any of its Subsidiaries. Except for the employment
contracts listed on Schedule
3.14
hereto,
there are no employment contracts which are not terminable on the giving of
reasonable notice in accordance with applicable law. The Company and its
Subsidiaries have been and are being operated in full compliance with all
applicable laws relating to employees. All current assessments under the
Workplace Safety and Insurance Act (Ontario) and any similar workers’
compensation legislation in other provinces in relation to the Company or any
of
its Subsidiaries and all of their respective contractors and subcontractors
have
been paid or accrued and none of the Company or any of its Subsidiaries has
been
or is subject to any special or penalty assessment under such legislation which
has not been paid.
3.15 Employee
Benefit Plans.
Schedule 3.15 sets forth a complete
and accurate list of all plans
with respect to the employees or former employees of the Company or any of
its
Subsidiaries to which the Company or any of its Subsidiaries is a party to
or
bound by or to which the Company or any of its Subsidiaries sponsors or has
an
obligation to contribute relating to retirement savings, pensions, bonuses,
profit sharing, deferred compensation, incentive compensation, life or accident
insurance, hospitalization, health, welfare, medical or dental treatment or
expenses, disability, unemployment insurance benefits, employee loans, vacation
pay, severance or termination pay or other benefit plan (the
“Employee Plans”). Except as set out in Schedule 3.15:
-12-
| (a) |
The
Company and its Subsidiaries have provided the Purchaser with a copy
of
each Employee Plan and the material documents that support each Employee
Plan.
|
| (b) |
All
Employee Plans are, and have been, established, registered, qualified,
administered, maintained, funded and invested in all material respects
in
accordance with the terms of such Employee Plans including the terms
of
the material documents that support such Employee Plans, any applicable
collective agreement and all applicable
laws.
|
| (c) |
To
the knowledge of the Company or any of its Subsidiaries, no event has
occurred respecting any Employee Plan which would result in the revocation
of the registration of such Employee Plan or entitle any person (without
consent of the Company or any of its Subsidiaries as applicable) to
wind
up or terminate any Employee Plan, in whole or in part, or which could
otherwise reasonably be expected to adversely affect the Tax status
of any
such Employee Plan.
|
| (d) |
None
of the Employee Plans provide for benefit increases or the acceleration
of, or an increase in, funding obligations that are contingent upon,
or
will be triggered by the completion of the transactions contemplated
herein.
|
| (e) |
There
are no unfunded liabilities in respect of any Employee Plan including
going concern unfunded liabilities, solvency deficiencies or wind-up
deficiencies where applicable.
|
| (f) |
None
of the Employee Plans provide benefits beyond retirement or other
termination of service to employees or former employees or to the
beneficiaries or dependants of such employees and neither the Company
nor
any of its Subsidiaries is obligated to provide any of the foregoing,
except in each case as required by law.
|
| (g) |
There
is no proceeding, action, suit or claim (other than routine claim for
payments of benefits) pending or threatened involving any Employee
Plan or
its assets and neither the Company nor any of its Subsidiaries has
Knowledge of any facts or circumstances that would be reasonably likely
to
give rise to any such action, suit or
claim.
|
3.16 Labor
Relations.
Neither
of the Company nor any of its Subsidiaries is a party, either directly,
voluntarily or by operation of law, to any collective agreement, letter of
understanding, letter of intent or other written communication with any
bargaining agent, trade union or association which may qualify as a trade union,
which would apply to any employees of the Company or any of its Subsidiaries.
There are no outstanding or, to the knowledge of the Company, threatened unfair
labor practices, complaints or applications of any kind, including any
proceedings which could result in certification of a trade union as bargaining
agent for employees of the Company or any of its Subsidiaries, and there have
not been any such proceedings within the last three years. To
the
knowledge of the Company, there are no threatened or apparent union organizing
activities involving any employees of the Company or any of its Subsidiaries.
None of the Company or any of its Subsidiaries has any labor problems that
might
materially affect the value of the Company or any of its Subsidiaries or lead
to
an interruption of any of their operations at any location.
-13-
3.17 Insurance.
The
Company and each of its Subsidiaries maintains insurance policies covering
all
of their respective assets and properties (including, without limitation, all
of
the Real Property) in such amounts and with respect to such occurrences which
may arise in connection with the operation of the Business as are reasonable
for
prudent owners of comparable assets. Such policies are in full force and effect,
all premiums due thereon have been paid in full and the Company or the relevant
Subsidiary thereof has complied in all material respects with the provisions
of
such policies. A complete and accurate list of all insurance policies of the
Company and its Subsidiaries is set forth on Schedule
3.17
hereto.
No such policies will be affected by the consummation of the transactions
contemplated by this Agreement. Neither the Company nor any of its Subsidiaries
has received any notices (either written or oral) of any pending or threatened
termination or material premium increases with respect to any of such policies.
Neither the Company nor any of its Subsidiaries has had any casualty loss or
other occurrence which may give rise to any claim of any kind not covered by
insurance and, to the knowledge of the Company, there has been no occurrence
which may give rise to any claim of any kind not covered by insurance. No third
party has filed any claim against the Company or any of its Subsidiaries for
personal injury, property damage or other occurrence of a kind for which
liability insurance is generally available which is not fully insured. All
claims against the Company and its Subsidiaries covered by insurance have been
reported to the insurance carrier on a timely basis and all material claims
since January 1, 2003 are listed on Schedule
3.17
hereto.
3.18 Conduct
of Business; Allowances.
Neither
the Company nor any of its Subsidiaries is restricted from conducting the
Business or any other business in any manner or location by agreement, court
decree or otherwise. Neither the Company nor any of its Subsidiaries has any
obligation outside of the ordinary course of business to make allowances to
any
customers. The Business is conducted entirely through the Company and its
Subsidiaries (and not through any affiliate, partner or any other Person) and
the Company conducts no business other than the Business.
3.19 Intellectual
Property.
(a)
Set
forth on Schedule
3.19(a)
hereto
is a list and brief description of (i) all patents, trademarks, service
marks, trade names, registered copyrights, internet domain names, domain name
reservations or registrations, software and any application for any of the
foregoing (including details of all due dates for further filings, maintenance,
payments or other actions falling due in respect of any of the foregoing within
twelve (12) months of the date hereof, which dates are accurate and complete)
of
any kind in which the Company or any of its Subsidiaries has any interest or
which is otherwise used in or relates to the Company's or any of its
Subsidiaries’ conduct of the Business (collectively, the “Proprietary Rights”)
and (ii) all licenses and agreements pursuant to which the Company or any
of its Subsidiaries is granted or grants any rights with respect to the
Proprietary Rights or which otherwise relate thereto (the “Proprietary
Licenses,” and the Proprietary Rights that are not the subject of the
Proprietary Licenses, the "Owned Proprietary Rights"). The Company or its
Subsidiaries either (A) own all unencumbered right, title and interest in and
to, or (B) has the right to use, as used in the conduct of the Business on
the
date hereof (free and clear of all Liens and restrictions (other than
restrictions described in the agreements set forth on Schedule 3.19(a)),
pursuant to the Proprietary Licenses, all of the Proprietary Rights. The
Proprietary Rights are all proprietary and intellectual property rights
necessary to the conduct of the Business as currently conducted and as proposed
to be conducted as of the date hereof. No adverse claims have been made and
no
dispute has arisen with respect to any of the Owned Proprietary Rights or (to
the knowledge of the Company) the Proprietary Licenses. The operation of the
Company and it Subsidiaries and the use (currently or as proposed to be used
as
of the date hereof) by the Company and its Subsidiaries of the Owned Proprietary
Rights or (to the knowledge of the Company) the Proprietary Licenses do not
involve infringement of any patent, trademark, service xxxx, trade name,
copyright, trade secret, agreement, license or other proprietary right. Neither
the Company, any of its Subsidiaries nor any of the Stockholders has received
any notice (oral or written) or has any knowledge of any claimed conflict with
respect to any of the foregoing, nor to the knowledge of the Company is there
any claim or assertion that any of the foregoing Proprietary Rights are invalid
or defective in any way or are there any facts or prior act upon which such
a
claim or assertion could be based. None of the Owned Proprietary Rights or
(to
the knowledge of the Company) the Proprietary Licenses are subject to any order,
action or proceeding that restricts, or is reasonably likely to restrict in
any
manner, the use transfer, licensing or validity of such Proprietary
Right.
-14-
(b) The
Company or its relevant Subsidiary has entered into proprietary rights and
invention assignment agreements with all current employees of the Company or
its
Subsidiaries and all current consultants and contractors who are performing
or
have performed services on behalf of the Company or any of its Subsidiaries
relating to the development or enhancement of the Company’s information systems,
in the form attached hereto as Exhibit B.
The
Company has taken all actions that are customary and reasonable in its industry
to protect the confidentiality of all trade secrets and confidential information
(including, without limitation, know-how, specifications, financial and business
plans) comprising the Proprietary Rights. To the knowledge of the Company,
no
Person has interfered with, infringed upon, misappropriated or violated any
of
the Proprietary Rights. Neither the Owned Proprietary Rights, nor (to the
knowledge of the Company) the Proprietary Licenses are subject to any order,
action or proceeding that restricts, or is reasonably expected to restrict
in
any manner, the use, transfer, licensing or validity of any such Proprietary
Right.
(c) Neither
the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will in any way affect the continuation, validity
or effectiveness of any Proprietary Rights or any contract, agreement, license
or other right referred to on Schedule
3.19(a)
hereto
or require the consent, waiver, approval, authorization of, notice to, or
designation, registration, declaration or filing with, any party or third party
in respect of any such Proprietary Rights, contract, agreement, license or
other
right, except for the consents, waivers, approvals and filings set forth on
Schedule
3.19(c)
which
are necessary or appropriate to file with Governmental Authorities in order
to
evidence a transfer or assignment.
-15-
(d) Except
for commercially available software and equipment which are the subject of
typical “shrink wrap” or “off-the-shelf” provisions and as set forth in
Schedule 3.19(d)
hereto,
neither the Company nor any of its Subsidiaries owes any royalties or other
payments to third parties in respect of Proprietary Rights.
3.20 Power
of Attorney; Bank Accounts.
Except
as set forth on Schedule
3.20
hereto,
neither the Company nor any of its Subsidiaries has granted any power of
attorney (revocable or irrevocable) to any Person for any purpose whatsoever.
Set forth on Schedule
3.20
hereto
is a complete and accurate list of (i) the name of each institution in
which the Company or any of its Subsidiaries has a bank account, securities
account, safe-deposit box, lockbox account or any other account, the title
and
number of such accounts and the names of all Persons authorized to draw thereon
or have access thereto and (ii) all marketable securities and all other
notes or other obligations evidenced by written instruments and attributable
to,
or utilized in, any aspect of the Business and reflected in the Financial
Statements or thereafter acquired by the Company or any of its
Subsidiaries.
3.21 Books
and Records.
The
books and records of the Company and its Subsidiaries are complete and correct
in all material respects. The financial books and records of the Company and
its
Subsidiaries have been maintained in accordance with GAAP consistently applied
and accurately reflect, in all material respects, the basis for the financial
position and results of operations of the Company and its Subsidiaries set
forth
in the Financial Statements. True and complete copies of all of such books
and
records have been made available for inspection by the Purchaser and its
representatives.
3.22 Litigation;
Disputes.
(a)
Except
as set forth on Schedule
3.22
hereto,
there are no claims, disputes, actions, suits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any of its Subsidiaries, the Business, the transactions contemplated
hereby, any of the Real Property or any of the other properties or assets of
the
Company or any of its Subsidiaries (including Proprietary Rights), or in respect
of any Environmental Claim. None of the matters set forth on Schedule 3.22
hereto
could (individually or in the aggregate), if adversely determined against the
Company or any of its Subsidiaries, have a Material Adverse Effect. To the
knowledge of the Company, there is no reasonable basis for any such claim,
dispute, action, suit, investigation or proceeding. Neither the Company nor
any
of its Subsidiaries is in default in respect of any judgment, order, writ,
injunction or decree of any Governmental Authority.
(b) Neither
the Company nor any of its Subsidiaries is currently involved in and, to the
knowledge of the Company, does not reasonably anticipate any dispute with any
of
its current or former employees, agents, brokers, distributors, vendors,
customers, business consultants, franchisees, franchisors, representatives
or
independent contractors (or any current or former employees of any of the
foregoing Persons) affecting the Company or any of its
Subsidiaries.
-16-
3.23 No
Warranties or Indemnities.
Except
as set forth on Schedule
3.23
hereto,
there are no express warranties or indemnities, written or oral, made by the
Company, any of its Subsidiaries or any of their respective officers, employees,
agents or representatives with respect to the services or products of the
Company or any of its Subsidiaries other than as set forth in its
Contracts.
3.24 Insider
Interests; Intercompany Transactions.
Except
as disclosed on Schedule
3.24
hereto,
no present or former Stockholder, principal, officer, director, employee or
Affiliate of the Company or any of its Subsidiaries or any immediate or other
family member of any such person or any Person in which any such person is
an
officer, director, principal, partner, member or stockholder (other than as
a
stockholder of companies in which any such Persons hold less than 2% of the
publicly traded equity securities of a company) (a) is presently a party to
any
transaction or arrangement with the Company or any of its Subsidiaries (other
than for services as officers, managers or employees of the Company or a
Subsidiary thereof in the ordinary course of business consistent with past
practices), (b) owns any interest in any of the assets or properties of the
Company or any of its Subsidiaries, (c) owns any interest in, controls or is
an
employee, officer, director or agent of, or consultant to any other entity
which
is a competitor, supplier, customer, vendor, landlord or tenant of the Company
or any of its Subsidiaries or (d) is indebted or liable to, owns any interest
in, or owns, holds or has guaranteed any obligation or debt of the Company
or
any of its Subsidiaries.
3.25 Disclosure.
No
representation or warranty made under this Agreement (including the Exhibits
and
Schedules hereto) or any certificate or other document delivered by the Company
or any of the Stockholders or any representative thereof pursuant hereto, and
none of the information furnished by the Company or any of the Stockholders
set
forth herein, including the Exhibits or Schedules hereto, or in any document
delivered or made available by the Company, any of the Stockholder or any
representative thereof to the Purchaser or any representative of the Purchaser,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
3.26 Investment
Canada Act.
The
value of the assets of the Company, together with all other entities in Canada,
the control of which is being acquired directly or indirectly, calculated in
the
manner proscribed by the Investment
Canada Act,
is less
than $5,000,000. None of such Persons (i) engages in the production of uranium
or owns an interest in a uranium-producing property in Canada, (ii) provides
a
financial service (as such term is defined in the Investment
Canada Act),
(iii)
provides any transportation service (as such term is defined in the Investment
Canada Act)
or (iv)
is a cultural business (as such term is defined in the Investment
Canada Act).
3.27 Value
of Assets and Revenues in Canada and the United States.
The
Company, together with entities controlled by the Company does not have (i)
assets with an aggregate value greater than $50,000,000 or (ii) annual gross
revenues from Sales in or from Canada with an aggregate value greater than
$50,000,000, in each case determined in accordance with the Notifiable
Transaction Regulations promulgated under the Competition
Act
(Canada).
-17-
The
Company, together with its entities it controls (as defined in the regulations
promulgated under the U.S.
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as
amended), has neither (i) assets located in the United States with an
aggregate fair market value of more than US$53,100,000, nor (ii) aggregate
sales in or into the United States of more than US$53,100,000 million, as shown
on its most recent fiscal year’s consolidated financial statements prior to
Closing.
3.28 Advisors.
Except
as set forth on Schedule
8.03,
no
broker, finder, agent or similar intermediary, accountant, attorney or other
advisor as acted for or on behalf of any of the Sellers, the Company or any
of
its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby, and none of the foregoing is entitled to any fee,
commission or other payment in connection therewith.
SECTION IV.
REPRESENTATIONS
AND
WARRANTIES
OF THE STOCKHOLDERS
Each
of
the Stockholders, severally and not jointly, hereby represents and warrants
to
the Purchaser, as of the date hereof, that:
4.01 Authority.
The
execution and delivery by such Stockholder of this Agreement and each other
instrument or document required to be executed and delivered by such Stockholder
pursuant hereto, the performance by such Stockholder of its covenants and
agreements hereunder and thereunder have been duly authorized by all necessary
corporate, limited liability, partnership or similar action. This Agreement
and
each other instrument or document required to be executed and delivered by
such
Stockholder pursuant hereto constitutes a valid and legally binding obligation
of such Stockholder, enforceable against it in accordance with its terms (except
as may be limited by bankruptcy, moratorium, insolvency or other similar laws
generally affecting the enforcement of creditors’ rights).
4.02 Ownership
of Interests.
Such
Stockholder owns all of the Interests set forth opposite such Stockholder’s name
on Schedule
3.04
hereto,
which Interests (i) represent all of the issued and outstanding stock and any
other equity interests (and securities convertible into or exchangeable for
stock or other equity interests of the Company) of the Company owned
(beneficially or of record) by such Stockholder and (ii) are owned by such
Stockholder free and clear of all Liens (including, without limitation, any
restriction on the right to vote, sell or otherwise dispose of the Interests).
Subject to the Stockholders Agreement, such Stockholder has the unrestricted
right to transfer the Interests owned by such Stockholder to the Purchaser
and,
upon transfer of such Interests to the Purchaser hereunder, the Purchaser will
acquire good, valid and marketable title to such Interests, free and clear
of
all Liens.
4.03 No
Legal Bar; Conflicts.
Neither
the execution and delivery of this Agreement or any other instrument or document
required to be executed and delivered by such Stockholder pursuant hereto,
nor
the consummation of the transactions contemplated hereby or thereby by such
Stockholder, (a) violates or will violate (i) any provision of articles of
incorporation or bylaws of such Stockholder or (ii) any statute, ordinance,
regulation, rule, policy, instrument, code, directive, guideline, order,
judgment or decree of any court or other Governmental Authority or any Permit,
or (b) conflicts with or will conflict with or results in or will result in
any
breach or modification of any of the terms of or constitutes or will constitute
a default under or results in or will result in the termination of or the
creation of any Lien, acceleration right or other right pursuant to the terms
of
any contract, agreement, arrangement or Permit, or will in any way affect the
continuation, validity or effectiveness thereof. Except as set forth on
Schedule 4.03
hereto,
no consents, approvals or authorizations of, or designations, registrations,
declarations or filings with or notices to, any Governmental Authority or any
other Person are required in connection with the execution and delivery of
this
Agreement or any other instrument or document required to be executed and
delivered by such Stockholder pursuant hereto, or the consummation of the
transactions contemplated hereby or thereby.
-18-
4.04 Adequate
Opportunity to Review; No Duress.
Such
Stockholder has been given the opportunity to ask questions of, and receive
answers from, the Company concerning the business and financial affairs of
the
Company. Such Stockholder is represented by legal counsel in connection with
the
transactions contemplated under this Agreement, and has had the opportunity
to
ask questions of, and receive answers from, such legal counsel. Such Stockholder
has had adequate opportunity to review this Agreement and the other documents
contemplated herein. Such Stockholder understands the material terms and
conditions set forth in this Agreement and the other documents contemplated
herein. Such Stockholder is entering into this Agreement willingly, voluntarily
and without duress.
SECTION V.
REPRESENTATIONS
AND
WARRANTIES
OF THE PURCHASER
The
Purchaser hereby represents and warrants to the Company and the Stockholders,
as
of the date hereof, that:
5.01 Organization.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to purchase the Interests.
5.02 Authority.
The
execution and delivery by the Purchaser of this Agreement and each other
instrument or document required to be executed and delivered by the Purchaser
pursuant hereto, the performance by the Purchaser of its covenants and
agreements hereunder and thereunder and the consummation by the Purchaser of
the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action. This Agreement and each other instrument or document
required to be executed and delivered by the Purchaser pursuant hereto
constitutes a valid and legally binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms (except as may be limited
by
bankruptcy, moratorium, insolvency or other similar laws generally affecting
the
enforcement of creditors’ rights).
5.03 No
Legal Bar; Conflicts.
Neither
the execution and delivery of this Agreement or any other instrument or document
required to be executed and delivered by the Purchaser pursuant hereto, nor
the
consummation of the transactions contemplated hereby or thereby by the
Purchaser, (a) violates or will violate (i) any provision of articles of
incorporation or bylaws of the Purchaser or (ii) any statute, ordinance,
regulation, rule, policy, instrument, code, directive, guideline, order,
judgment or decree of any court or other Governmental Authority or any Permit,
or (b) conflicts with or will conflict with or results in or will result in
any
breach or modification of any of the terms of or constitutes or will constitute
a default under or results in or will result in the termination of or the
creation of any Lien, acceleration right or other right pursuant to the terms
of
any contract, agreement, arrangement or Permit, or will in any way affect the
continuation, validity or effectiveness thereof. Except as set forth on
Schedule 5.03
hereto,
no consents, approvals or authorizations of, or designations, registrations,
declarations or filings with or notices to, any Governmental Authority or any
other Person are required in connection with the execution and delivery of
this
Agreement or any other instrument or document required to be executed and
delivered by the Purchaser pursuant hereto, or the consummation of the
transactions contemplated hereby or thereby.
-19-
5.04 Investment
Purpose.
The
Purchaser is acquiring the Interests solely for the purpose of investment and
not with a view to, or for offer of sale in connection with, any distribution
thereof, without prejudice, however to its right at all times to sell or
otherwise dispose of all or any part of the Interests. The Purchaser
acknowledges that the Interests have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”), and represents and warrants that
Purchaser is an “accredited investor” as such term is defined in Rule 501 of
Regulation D of the Securities Act.
5.05 Value
of Assets and Revenues in Canada.
The
Purchaser, together with its affiliates (as defined in the Competition
Act
(Canada)), has assets in Canada with an aggregate value of less than
$350,000,000 and annual gross revenues in, from and into Canada with an
aggregate value of less than $350,000,000, in each case determined in accordance
with the Notifiable Transaction Regulations promulgated under the Competition
Act
(Canada).
SECTION VI.
COVENANTS
OF THE STOCKHOLDERS,
THE
COMPANY AND THE PURCHASER
6.01 Publicity.
Each
Stockholder, on the one hand, and the Purchaser, on the other hand, covenants
and agrees that any and all publicity (whether written or oral) and notices
to
third parties concerning the sale of the Interests and other transactions
contemplated by this Agreement shall be subject to the prior written approval
of
the other party; provided,
however,
that
(a) either party, but only after reasonable consultation with the other
including using commercially reasonable efforts to enable the other party to
review and comment on all such disclosures prior to the making thereof, may
make
disclosure if required under applicable law, and (b) following the consummation
of the transaction contemplated by this Agreement, a mutually agreed upon press
release may be made.
6.02 Confidential
Information.
Each
Stockholder acknowledges that after the Closing the Purchaser and the Company
could be irreparably damaged if the Stockholders’ knowledge of confidential
information regarding the Company or the Business were disclosed to or utilized
on behalf of any Person other than the Purchaser or its Affiliates, and each
of
the Stockholders covenants and agrees that it will not, following the Closing
Date, without the prior written consent of the Purchaser, disclose (or permit
to
be disclosed) or use in any way any such confidential information, unless
(i) after reasonable notice is provided of such to the Purchaser, such
Stockholder is compelled to disclose such confidential information by judicial
or administrative process or, in the opinion of its counsel, by other
requirements of law, (ii) such confidential information is available to the
public through no fault of such Stockholder, or (iii) such confidential
information becomes available to such Stockholder from a third party who is
under no confidential or fiduciary obligation to the Purchaser or the Company
with respect to such confidential information.
-20-
6.03 Taxes.
Except
for the Taxes comprising the Accepted Liability Amount, the Purchaser will
not
assume or otherwise become liable for any Taxes with respect to any period
ending on or prior to the Closing Date or arising out of the transactions
contemplated by this Agreement and the Stockholders will (severally in
accordance with their respective Percentage Interests) indemnify and hold
harmless the Purchaser Indemnified Parties from and against any and all damages
with respect thereto.
6.04 Non-Assertion
of Claims.
Each of
the Stockholders hereby covenants and agrees that from and after the Closing
Date neither they nor any of their respective Affiliates shall commence or
assert any action, cause of action or claim of any kind against the Company
or
the Purchaser to the effect that the ownership or use of any of the Company’s
properties and assets (including, without limitation, any of the intellectual
property or Proprietary Rights used in the conduct of the Business, as conducted
on the Closing Date) or the conduct of the Business following the Closing
infringes on any patent, know-how, technology or any other confidential
information or other proprietary right of any kind of any of the Stockholders
or
any of their respective Affiliates.
6.05 Non-Solicitation
Agreements.
(a)
The
Company and each Stockholder acknowledge that (i) the Purchaser would not
have entered into this Agreement but for the agreements and covenants contained
in this Section 6.06 (collectively, the “Restrictive Covenants”) and
(ii) the agreements and covenants contained in this Section 6.06 are
essential to protect the business and goodwill of the Company. To induce the
Purchaser to enter into this Agreement, each Stockholder (severally, and not
jointly) hereby covenants and agrees that during the period commencing on the
date hereof and ending on the date that is two years from the Closing Date
such
Stockholder shall not (and shall cause its Affiliates not to), (x) directly
or
indirectly, solicit or encourage any employee to leave the employment of the
Purchaser or any of its Affiliates (including the Company) or (y) hire any
employee who has left the employment of the Purchaser or any of its Affiliates
(including the Company).
(b) If
any
Stockholder (or Affiliate thereof) breaches, or threatens to commit a breach
of,
any of the provisions of this Section 6.06 hereof, the Purchaser shall be
entitled to right and remedy of having the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause irreparable injury
to the Purchaser and that money damages will not provide adequate remedy to
the
Purchaser. Such right and remedy shall be in addition to, and not in lieu of,
any other rights and remedies available to the Purchaser under law or in equity,
including the right and remedy to require the relevant Stockholder to account
for and pay over to the Purchaser all payments, profits, monies, accruals,
increments or other benefits derived or received by it as the result of any
transactions constituting a breach of any of the Restrictive
Covenants.
-21-
6.06 Benefit
Plans.
Notwithstanding the foregoing, the Purchaser agrees to provide any person who
is
an employee (i) of the Company immediately prior to the Closing and
(ii) of the Company, the Purchaser or another Affiliate thereof after the
Closing with comparable benefits to what they received immediately prior to
the
Closing. Nothing herein shall in any way limit the rights of the Purchaser
or
the Company with respect to the termination of employment of any employee of
the
Company or the adoption, modification or termination of any compensation,
incentive or benefit program.
6.07 Escrow
Agreement.
Each of
the Stockholders and the Purchaser hereby acknowledge that the covenants and
agreements set forth in the Escrow Agreement are binding upon such Person to
the
same extent that they would be binding if set forth in this Agreement. Each
such
Person hereby covenants and agrees to abide by the covenants and agreements
made
by it in the Escrow Agreement as though each such covenant and agreement was
set
forth in this Agreement.
6.08 D&O
Insurance.
The
Company will provide tail coverage for six years following the Closing for
current and former officers and directors of the Company.
SECTION VII.
CLOSING
7.01 Time
and Place of Closing.
The
closing of the purchase and sale of the Interests (the “Closing”) shall be
held at 10:00 A.M. at the offices of Torys LLP, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx
Xxxx on the date hereof (the “Closing Date”).
7.02 Delivery
of Interests.
Delivery of the Interests shall be made by each of the Stockholders to the
Purchaser at the Closing by delivering one or more original certificates in
negotiable form, representing the Interests. Each such certificate evidencing
the Interests shall be accompanied by stock transfer powers duly executed in
blank.
SECTION VIII.
CONDITIONS
TO THE STOCKHOLDERS’ OBLIGATION TO CLOSE
The
obligations of each of the Stockholders to sell the Interests and for each
of
them to otherwise consummate the transactions contemplated by this Agreement
at
the Closing are subject to the following conditions precedent, any or all of
which may be waived by the Stockholders in its sole discretion:
8.01 No
Litigation.
No
action, suit or proceeding against the Company, any of the Stockholders or
the
Purchaser relating to the consummation of any of the transactions contemplated
by this Agreement including, without limitation, any governmental action seeking
to delay or enjoin any such transactions shall be pending or threatened in
writing.
-22-
8.02 Covenants/Conditions.
All the
terms, covenants and conditions of this Agreement to be complied with and
performed by the Purchaser on or before the date of the Closing shall have
been
duly complied with and performed in all material respects, and on the date
of
the Closing, the Purchaser shall deliver to the Stockholders a certificate
dated
the date of the Closing to such effect.
8.03 Related
Transactions.
Immediately prior to, or simultaneously with, the Closing, the transactions
described on the Funds Flow Memorandum, dated the date hereof, among the parties
hereto (and others) (the “Funds Flow Memorandum”) shall be effected.
8.04 Purchase
Price.
The
Purchaser shall have delivered the Purchase Price to the
Stockholders.
8.05 Escrow
Agreement.
The
Purchaser and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
SECTION IX.
CONDITIONS
TO THE PURCHASER’S OBLIGATION TO CLOSE
The
obligation of the Purchaser to purchase the Interests and otherwise consummate
the transactions contemplated by this Agreement at the Closing is subject to
the
following conditions precedent, any or all of which may be waived by the
Purchaser in its sole discretion:
9.01 No
Litigation.
No
action, suit or proceeding against the Company, any of the Stockholders or
the
Purchaser relating to the consummation of any of the transactions contemplated
by this Agreement including, without limitation, any governmental action seeking
to delay or enjoin any such transactions, shall be pending or threatened in
writing.
9.02 Covenants/Conditions.
All the
terms, covenants and conditions of this Agreement to be complied with and
performed by the Company and each of the Stockholders on or before the date
of
the Closing shall have been duly complied with and performed in all material
respects, and on the date of the Closing, the Company and each of the
Stockholders shall deliver to the Purchaser a certificate dated the date of
the
Closing to such effect.
9.03 Related
Transactions.
Immediately prior to, or simultaneously with, the Closing, the transactions
described on the Funds Flow Memorandum shall be effected.
9.04 Secretary’s
Certificate.
The
Company shall have delivered a certificate of the Company’s Secretary as to the
incumbency of the officers of the Company executing this Agreement and any
other
delivered pursuant to this Agreement and certifying as to the (a) resolutions
of
the Company’s Board of Directors and Stockholders authorizing the execution,
delivery and performance of this Agreement and the others contemplated hereby,
(b) good standing of the Company, (c) by-laws of the Company and (d) articles
of
incorporation of the Company, each of which shall be in full force and effect
in
the form attached to such certificate. The Company’s Subsidiary shall have
delivered a certificate of its Secretary as to the incumbency of its officers
and certifying as to its (a) good standing, (b) by-laws of the Company and
(c)
articles of incorporation, each of which shall be in full force and effect
in
the form attached to such certificate.
-23-
9.05 Other
Certificates.
The
Purchaser shall have received such other certificates (including good standing
certificates), instruments and other documents, in form and substance
satisfactory to the Purchaser and counsel for the Purchaser, as it shall have
reasonably requested in connection with the transactions contemplated
hereby.
9.06 Opinion
of the Company’s Counsel.
The
Purchaser shall have received an opinion of Gowling Xxxxxxx Xxxxxxxxx LLP,
counsel for the Stockholders, addressed to the Purchaser pursuant to the
instructions of the Company, dated the date of the Closing and substantially
in
the form of Exhibit
C
hereto.
9.07 Sale
of All the Interests.
All the
Interests shall be sold and delivered to the Purchaser (or its designee) at
the
Closing free and clear of all Liens.
9.08 Resignation.
The
Company shall have delivered to the Purchaser the resignations of Xxxxxxx Xxx
and Xxxxxx XxXxxxxxxx as directors of the Company, such resignations to be
effective as of the Closing, and the Company shall have granted releases to
such
resigning directors.
9.09 Employment
Agreement Waiver.
Xxxx
Xxxxxx shall have executed a waiver or amendment to his employment arrangement
in form and substance satisfactory to the Purchaser.
9.10 Escrow
Agreement.
The
Stockholders and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
9.11 Certificates.
The
Purchaser shall have received from each Stockholder certificate(s) issued by
the
Company representing that Stockholder’s Interest, duly endorsed in blank or with
duly executed stock powers attached.
9.12 Outstanding
Options.
There
shall be outstanding no options, warrants or other rights to purchase any shares
or other securities of the Company.
9.13 Consents
and Approvals.
Purchaser, the Company and the Stockholders shall have secured such consents,
authorizations and approvals of Government Authorities and of private Persons
with respect to the transactions contemplated by this Agreement, as set forth
on
Schedule 3.03,
to the
performance of all obligations of such parties hereunder, as may be required
by
any applicable statute or regulation of the United States, Canada or any
country, state, province or other jurisdiction or by any agreement of any kind
whatsoever to which the Purchaser, the Company or any Stockholder (or any of
their respective assets) is bound.
9.14 Estimated
Closing Balance Sheet.
The
Company shall have delivered the Estimated Closing Balance Sheet, which shall
have been prepared in good faith (but with respect to which none of the
representations and warranties set forth in Section 3.5 shall
apply).
-24-
9.15 Payment
of the Obligations.
The
Purchaser and the Stockholders shall have received evidence satisfactory to
them
that the Priority Liabilities shall have been fully and indefeasibly discharged.
9.16 Conversion.
Certain
amounts of the Convertible Subordinated Debentures shall have been converted
to
equity.
9.17 Terminations
and Cancellations.
The
Purchaser shall have received evidence reasonably satisfactory to it that the
(i) Shareholders Agreement, (ii) Warrants and (iii) GSA’s shall have been
terminated and that the (i) Convertible Secured Subordinated Debentures and
(ii)
Secured Subordinated Debentures shall have been fully satisfied and
cancelled.
SECTION X.
INDEMNIFICATION
10.01 Indemnification
by the Stockholders.
Subject
to the limitations set forth in this Section X, from and after the Closing
Date, each of the Stockholders, severally (to the relative extent of their
Percentage Interest) and not jointly, shall indemnify and hold harmless each
of
the Purchaser Indemnified Parties from and against any and all Damages which
are
sustained or incurred by any of the Purchaser Indemnified Parties in connection
with or by reason of (a)
the
breach by the Company or any of the Stockholders of any of their covenants,
agreements or obligations hereunder or under any of the Ancillary Agreements,
(b)
the
breach or inaccuracy of any of the representations or warranties made by the
Company or any of the Stockholders herein (including in any Exhibit or Schedule
hereto) or, in any Ancillary Agreement (other than those representations and
warranties set forth in Section IV hereof, for which indemnification shall
only be provided severally (in full, subject to the provisions of
Section 10.08) by the breaching Stockholder), (c) the item disclosed on
Schedule 3.22(b) and (d) the Special WSIB Liability.
10.02 Indemnification
by the Purchaser.
Subject
to the limitations set forth in this Section X, from and after the Closing
Date, the Purchaser shall indemnify and hold harmless each of the Stockholder
Indemnified Parties from and against any and all Damages sustained or incurred
by any of the Stockholder Indemnified Parties in connection with or by reason
of
(a)
the
breach by the Purchaser of any of its covenants, agreements or obligations
hereunder or under any of the Ancillary Agreements or (b)
the
breach or inaccuracy of any of the representations or warranties made by the
Purchaser herein or in any of the Ancillary Agreements.
10.03 Procedure
for Indemnification.
(a)
In the
event that any Stockholder Indemnified Party, on the one hand, or any Purchaser
Indemnified Party, on the other hand, shall sustain or incur any Damages in
respect of which indemnity may be sought by such party pursuant to this
Section X (each, an “Indemnification Matter”), the party indemnified
hereunder (the “Indemnitee”) shall notify the party(ies) providing
indemnification (collectively, the “Indemnitor”) by sending written notice,
prior to the expiration of the applicable period within which such claim may
be
made, as set forth in Section 10.06 hereof, to the Indemnitor (each, an
“Indemnity Notice”). The Indemnity Notice shall (y) state the aggregate amount
of Damages or an estimate thereof, in each case to the extent known or
reasonably determinable at such time, and (z) specify in reasonable detail
the
items of such Damages included in the amount so stated, to the extent reasonably
separable, the date each such item was paid or accrued or arose if paid, accrued
or known, and the nature of the misrepresentation, breach or claim to which
such
item is related as well as the subsection of Section 10.01 or
Section 10.02 (as the case may be) under which such claim is being made.
The delay or failure to so state any of the foregoing information shall not
relieve the Indemnitor of any indemnification liability, except to the extent
that the ability of the Indemnitor to provide such indemnification is materially
prejudiced or materially adversely affected by such delay or failure to provide
such information. In the case of an Indemnification Matter involving a third
party claim, which, if successful, could result in an indemnity payment
hereunder, an Indemnity Notice shall be given promptly after the discovery
by an
Indemnitee of the filing or assertion of any claim against the Indemnitee
stating the nature and basis of such claim; provided, however, that any delay
or
failure to provide such Indemnity Notice shall not relieve the Indemnitor of
any
indemnification liability except to the extent that the defense of such action
is materially prejudiced or materially adversely affected by such delay or
failure to notify. The parties hereto hereby acknowledge for all purposes of
this Agreement the valid delivery by the Purchaser of a sufficient Indemnity
Notice with respect to the Special WSIB Liability and the remittance of funds
by
or on behalf of the Purchaser or the Company in possible satisfaction thereof
shall not compromise any right of any Purchaser Indemnified Party
hereunder.
-25-
(b) In
the
case of third party claims for which indemnification is sought under any
provision of this Agreement, the Indemnitee shall give the Indemnitor, a
reasonable opportunity (i) to conduct any proceedings or negotiations in
connection therewith and necessary or appropriate to defend the Indemnitee
(provided such proceedings or negotiations are pursued in a professional and
diligent manner), (ii) to take all other reasonable steps or proceedings to
settle or defend any such claims, provided that the Indemnitor shall not settle
any claim without the prior written consent of the Indemnitee, which consent
shall not be unreasonably withheld or delayed and (iii) to employ counsel
designated by the Indemnitor, which counsel shall not be an employee of the
Indemnitor or any Affiliate thereof) and reasonably satisfactory to the
Indemnitee to contest any such claim or liability in the name of the Indemnitee
or otherwise; provided that the Indemnitor shall not, in connection with any
one
action or separate, substantially similar or related actions in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (unless the services of local or specialty counsel
are warranted) and the Indemnitee shall reasonably cooperate with the Indemnitor
in the defense of such claims or proceedings, at the Indemnitor’s expense.
Without limiting the generality of the foregoing, the Indemnitee shall furnish
the Indemnitor with such documentary or other evidence as is in their possession
as may reasonably be requested by the Indemnitor, for the purpose of defending
against such claim or proceeding.
The
Indemnitor shall, within 30 days of receipt of an Indemnity Notice of such
claim
(the “Indemnity Notice Period”), give written notice to the Indemnitee of its
intention to assume the defense of such claim. If defendants in any action
include any Indemnitee and any Indemnitor and any Indemnitee shall have been
advised by its counsel that there may be legal defenses available to such
Indemnitee which are different from or in addition to those available to any
Indemnitor, or if a conflict of interest exists between any Indemnitee and
any
Indemnitor, then in either case, the Indemnitee shall have the right to employ
its own counsel in such action, and, in such event (or in the event that the
Indemnitor does not timely assume the defense within the Indemnity Notice Period
as provided in the immediately succeeding sentence), the reasonable fees and
expenses of the Indemnitee’s counsel shall be borne by the Indemnitor and shall
be paid by the Indemnitor from time to time within 30 days of receipt of
appropriate invoices therefor. If the Indemnitor does not deliver to the
Indemnitee within the Indemnity Notice Period written notice that the Indemnitor
shall assume the defense of any such claim or litigation resulting therefrom
pursuant to and in accordance with the provisions of this Section X, or if
such notice is timely delivered but the Indemnitor shall not pursue such defense
in a professional and diligent manner, the Indemnitee may, at the expense of
the
Indemnitor, defend against any such claim or litigation in such manner as it
may
deem appropriate but may not settle any such claim or litigation without the
prior consent of the Indemnitor which consent shall not be unreasonably withheld
or delayed. The costs and expenses of all proceedings, contests or lawsuits
and
all other Damages sustained or incurred with respect to such claims, proceedings
or litigations shall be borne solely by the Indemnitor.
-26-
In
the
event that the Indemnitor does timely assume the defense as provided above,
the
Indemnitee shall have the right to fully participate in such defense (including,
without limitation, with counsel of its choice), at its sole expense (except
as
otherwise provided in the second sentence of the preceding paragraph), and
the
Indemnitor shall reasonably cooperate with the Indemnitee in connection with
such participation, and in all cases the Indemnitor shall keep the Indemnitee
fully informed as to all matters concerning each third party claim and shall
promptly notify the Indemnitee in writing of any and all significant
developments relating thereto. Within five Business Days after the occurrence
of
an order or other determination with respect to each third party claim by any
court, panel of arbitrator(s) or Governmental Authority having jurisdiction
thereof, the Indemnitor shall (subject to Section 10.08 hereof) pay the
Indemnitee the amount of Damages sustained or incurred by the Indemnitee which
have not theretofore been paid to the Indemnitee as provided above.
(c) In
the
event that an Indemnification Matter does not involve a third party claim (a
“Direct Claim”) the Indemnitor shall have a period of thirty (30) days after
receipt of the Indemnity Notice within which to object thereto by delivery
to
the Indemnitee of a written notice (the “Objection Notice”). If the Indemnitor
does not so respond within such thirty (30) day period, the Indemnitor shall
be
deemed to have rejected the Direct Claim and in such event the Indemnitee may
initiate arbitration of the Direct Claim pursuant hereto.
In
the
event the Indemnitee and Indemnitor agree on a resolution of the dispute set
out
in the Objection Notice, they shall confirm this resolution in writing and
shall
thereafter be bound by such resolution.
In
the
event that the Direct Claim is deemed to have been rejected or that the
Indemnitee and Indemnitor are unable to settle any dispute with respect to
the
Direct Claim within fifteen (15) days after delivery by the Indemnitor of the
Objection Notice, the dispute shall forthwith, and in any event within thirty
(30) days after the delivery of the Objection Notice or the date on which the
Direct Claim is deemed to have been rejected, be referred to a judge of the
Superior Court of Ontario for arbitration. The arbitration and the appointment
of the arbitrator shall, except to the extent provided for in this Section,
be
conducted in Toronto, Ontario in accordance with the Arbitrations
Act
(Ontario). The Indemnitee and Indemnitor shall cooperate in completing any
arbitration as expeditiously as possible and the arbitrator may hire such
experts as may appear to be appropriate. All of the costs and expenses of the
arbitration shall be borne equally by the Indemnitor and Indemnitee. Arbitration
under this Section shall be in substitution for and precludes the bringing
of
any action in any court in connection with any objection made by either Party
pursuant to this Section.
-27-
The
determination of the arbitrator shall be made within thirty (30) days after
the
date on which the dispute was referred to him or her and the determination
of
the arbitrator shall be final and binding on each of the Indemnitee and
Indemnitor. The Direct Claim shall be paid in accordance with the determination
of the arbitrator.
Within
five (5) days after resolution by agreement of the Indemnitee and Indemnitor,
of
the dispute which was the subject of the Objection Notice or, failing such
resolution, within five (5) days after the final determination of the
arbitration, the Indemnitor shall pay to the Indemnitee the amount of the Direct
Claim, if any, as determined as a result of such resolution or final
determination, as the case may be.
10.04 Subrogation.
It is
expressly understood and agreed that no Stockholder shall be entitled to any
indemnification, right of contribution or other right of recovery from the
Company or any Purchaser Indemnified Party in connection with any claim made
by
any Purchaser Indemnified Party(ies) against the Stockholders (or any of them)
hereunder, all of which are hereby irrevocably and unconditionally waived and
released by each of the Stockholders. No Purchaser Indemnified Party shall
be
required to make any claim against any other Person or to take any other action
in order to pursue any claim against the Stockholders(or any of
them).
10.05 Validity.
The
indemnification agreements provided for in this Section IV shall apply
notwithstanding any investigation made at any time by or on behalf of any party
hereto.
10.06 Time
Periods for Indemnifications.
The
representations and warranties contained in this Agreement or the Ancillary
Agreements shall expire on the 18-month anniversary of the Closing; provided,
that
the
representations and warranties contained in (a) Sections 3.11 and 3.15
hereof shall survive the Closing for the applicable statute of limitations
related to the respective subject matters thereof and (b) Sections 3.01,
3.02, 3.04, 3.10(a), 4.01, 4.02, 5.01 and 5.02 hereof and all covenants and
agreements hereunder shall survive indefinitely; and provided
further,
that
if
written notice is properly given under this Section X with respect to any
alleged breach or inaccuracy of a representation or warranty to which such
party
is entitled to be indemnified hereunder prior to the applicable expiration
date
set forth in this Section 10.06, such representation or warranty shall
continue indefinitely with respect to such claim until it is finally
resolved.
10.07 Indemnity
Escrow Deposit.
Nothing
herein shall limit any Purchaser Indemnified Party's rights or remedies under
this Agreement or under the Escrow Agreement if a Purchaser Indemnified Party's
demand for payment from the Indemnity Escrow Deposit is not satisfied in full
pursuant to the terms of the Escrow Agreement.
-28-
10.08 Limits
on Indemnification.
(a)
Subject
to Section 10.08(c) hereof, no Purchaser Indemnified Party shall be
entitled to indemnification pursuant to Section 10.01 (other than with
respect to indemnification under Section 10.01(d) and with respect to fraud
in
which cases the limitation in this Section 10.08(a) shall not apply) unless
and until the aggregate amount of all Damages sustained or incurred by all
Purchaser Indemnified Parties to which the indemnity set forth in
Section 10.01 hereof relates exceeds an aggregate amount (the “Threshold
Amount”) equal to $50,000; provided,
that
the
Threshold Amount with respect to the aggregate of (i) Damages consisting of
liabilities of Cancable, Inc. (a Nevada corporation) and (ii) Damages consisting
of liabilities of the Company related exclusively to the operations of Cancable,
Inc. (a Nevada corporation) (together, the “US Liabilities”), in each case
incurred or accruing prior to the Closing Date shall be an amount equal to
$250,000 minus
the
Accepted Liability Amount (it is acknowledged and agreed that the
indemnification provided in Section 10.01(c) is a US Liability). If any Damages
exceed the applicable Threshold Amount, then the Stockholders’ liability for
indemnification under Section 10.01 hereof shall be for all such Damages in
excess of such Threshold Amount.
(b) Subject
to Section 10.08(c) hereof and other than with respect to fraud for which
the limitation in this Section 10.08(b) shall not apply, (i) the
aggregate amount of liability of the Stockholders in respect of all matters
covered by Section 10.01(b) shall not exceed $1,200,000 and (ii) the
aggregate liability of each Stockholder pursuant to Section 10.01(b) hereof
shall not exceed an amount equal to $1,200,000 multiplied by such Stockholder’s
Percentage Interest.
(c) The
threshold set forth in Section 10.08(a) hereof shall not apply with respect
to any breach of any of the covenants or agreements set forth in either of
Sections 6.04 or 11.05 or any of the representations or warranties set forth
in
any of Sections 3.01, 3.02, 3.04, 3.08(c), 3.11, 3.15, 3.29, 4.01 or 4.02.
The provisions of Section 10.08(b) shall be applied as though the
references therein to $1,200,000 are instead references to $7,250,000 with
respect to any claims resulting from any breach or inaccuracy of the
representations or warranties set forth in any of Sections 3.01, 3.02, 3.04,
3.10(a), 3.11(e), 3.15, 4.01 or 4.02 (but the liability of each Stockholder
with
respect to breaches of such shall be pro rata, based upon the Percentage
Interest of each Stockholder, other than in the case of breaches or inaccuracies
of any representation or warranty set forth in either of Sections 4.01 or 4.02
for which only the breaching Stockholder(s) shall be liable); provided,
that
in no
case shall the liability of a Stockholder be greater that such Stockholder’s
Percentage Interest times $7,250,000. The provisions of Section 10.08(b)
shall be applied as though the references therein to $1,200,000 are instead
references to $1,600,000 with respect to any claims resulting from any breach
or
inaccuracy of any of the representations or warranties set forth in any of
Sections 3.11, 3.12(c) or 3.22 if, and only if, written notice is properly
given
under this Section X with respect to any such breach or inaccuracy on or before
the date that is three months from the date hereof.
(d) The
Purchaser Indemnified Parties shall not be entitled to indemnification for
any
Damages to the extent that such Damages are expressly reserved for in the
Current Balance Sheet.
-29-
10.09 Exclusive
Remedy.
In the
absence of fraud, this Section X contains each indemnified party’s sole and
exclusive remedy for monetary compensation with respect to any claim under
this
Agreement, but shall not preclude any party from seeking equitable
remedies.
SECTION XI.
MISCELLANEOUS
11.01 Notices.
All
notices, requests or instructions hereunder shall be in writing and delivered
personally, sent by facsimile, sent by Federal Express or other nationally
recognized overnight carrier, or sent by registered or certified mail, postage
prepaid, as follows:
|
(1)
|
If
to the Stockholders:
|
to
the
addresses set forth on
the
signature pages hereto
with
a
copy to:
Gowling
Xxxxxxx Xxxxxxxxx LLP
0
Xxxxx
Xxxxxxxx Xxxxx, Xxx. 0000
000
Xxxx
Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxx X0X 0X0
Attn:
Xxxx X. Xxxxxxxx, Esq.
Fax:
(000) 000-0000
| (2) |
If
to the Company:
|
c/o
Cancable Inc.
0000
Xxxxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxxx,
Xxxxxxx X0X 0X0
with
a
copy to:
Torys
LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxx, Esq.
Fax:
(000) 000-0000
|
(4)
|
If
to the Purchaser:
|
c/o
Creative Vistas, Inc.
0000
Xxxxxx Xxxxxx
Xxxx
#0-00
Xxxxxx,
XX X0X 0X0
Attn:
Chief Executive Officer
Fax:
(000) 000-0000
and
a
copy to:
Torys
LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxx, Esq.
Fax:
(000) 000-0000
-30-
Any
of
the above addresses may be changed at any time by notice given as provided
above; provided, however, that any such notice of change of address shall be
effective only upon receipt. All notices, requests or instructions given in
accordance herewith shall be deemed received on the date of delivery, if hand
delivered, delivered by facsimile or by overnight courier, and three (3)
Business Days after the date of mailing, if mailed by certified mail, return
receipt requested.
11.02 Amendment.
No
supplement, modification, waiver or amendment of any provision of this Agreement
shall be binding unless executed in writing by the Purchaser and the
Stockholders. Unless expressly stated therein, no waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver
of
any other provision, whether or not similar, nor shall any waiver constitute
a
continuing waiver.
11.03 Entire
Agreement.
This
Agreement (including the Exhibits and Schedules hereto) and the documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersedes all prior
agreements, understandings, negotiations and discussions, whether written or
oral, of the parties, and no amendment or modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
11.04 Further
Assurances.
Each of
the Stockholders, on the one hand, and the Company and the Purchaser, on the
other hand, shall use such party’s reasonable best efforts to take such actions
as may be necessary or reasonably requested by the other to carry out and
consummate the transactions contemplated by this Agreement (including the
satisfaction of the conditions precedent set forth in Sections VIII and IX
hereof). Without limiting the generality of the foregoing, from and after the
Closing Date, at the request and expense of the Purchaser, each of the
Stockholders shall fully cooperate with and assist the Purchaser and its
representatives (including, without limitation, its counsel and independent
auditors) in connection with the preparation of any and all Tax Returns by
the
Purchaser or the Company for any period (or portion thereof) beginning after
the
Closing Date or in connection with any Tax audit, examination or proposed or
final assessment or the like (including without limitation any Tax claim)
relating to any aspect of the Company.
11.05 Expenses.
Except
as specifically set forth herein, each of the parties hereto shall bear such
party’s own expenses in connection with this Agreement and the transactions
contemplated hereby whether or not the Closing occurs. The Stockholders shall
be
responsible for and pay any and all out-of-pocket costs and expenses incurred
by
the Company and/or the Stockholders on or prior to the Closing Date (including,
without limitation, all legal, accounting and other professional fees and
expenses) in connection with the sale of the Interests and the other
transactions contemplated hereby which are set forth on Schedule
11.05
(the
“Transaction Expenses”; which expressly do not include any fees or expenses of
the Company’s auditors), which Transaction Expenses the Stockholders hereby
direct be paid at the Closing as described in Section 8.03 to the accounts
and
in the amounts set forth on Schedule
8.03
hereto.
-31-
11.06 Injunctive
Relief.
In the
event of a breach or threatened breach by any of the Stockholders or the
Purchaser of the provisions of this Agreement, each of the parties hereby
consents and agrees that the other party shall be entitled to an injunction
or
similar equitable relief restraining such party from committing or continuing
any such breach or threatened breach or granting specific performance of any
act
required to be performed by the party under any such provision, without the
necessity of showing any actual damage or that money damages would not afford
an
adequate remedy and without the necessity of posting any bond or other
security.
11.07 Governing
Law; Jurisdiction.
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein,
without prejudice to or limitation of any other rights or remedies available
under the laws of any jurisdiction where Property or assets of the parties
hereto may be found and without regard to principles of conflict of law. Each
of
the parties hereto irrevocably submits to the non-exclusive jurisdiction of
the
courts of the Province of Ontario and hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in such
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Each of the parties hereto hereby
irrevocably consents to the service of any and all process in such action or
proceeding by the delivery of such process to each of the parties hereto at
its
address provided in accordance with Section 11.01 hereof.
11.08 Waiver
of Jury Trial.
EACH
PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER OR
RELATING TO THIS AGREEMENT.
11.09 Invalidity.
Should
any provision of this Agreement be held by a court or arbitrator of competent
jurisdiction to be enforceable only if modified, such holding shall not affect
the validity of the remainder of this Agreement, the balance of which shall
continue to be binding upon the parties hereto with any such modification to
become a part hereof and treated as though originally set forth in this
Agreement. The parties further agree that any such court is expressly authorized
to modify any such unenforceable provision of this Agreement in lieu of severing
such unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such
other
modifications as it deems warranted to carry out the intent and agreement of
the
parties as embodied herein to the maximum extent permitted by law. The parties
expressly agree that this Agreement as modified by such court shall be binding
upon and enforceable against each of them. In any event, should one or more
of
the provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth
herein.
-32-
11.10 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the successors
and
permitted assigns of the Company, the Purchaser and the Stockholders. The
Purchaser’s rights or interests under this Agreement (but not its obligations)
may be assigned to any of its wholly-owned (directly or indirectly)
subsidiaries. No Stockholder may assign its rights, interests or obligations
hereunder. Any attempted assignment in contravention of this Section 11.10
shall
be void and of no effect.
11.11 Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
11.12 Knowledge.
Whenever used in this Agreement, the words “to the knowledge of the Company” or
similar words or phrases shall mean the knowledge or awareness of the following
individuals only, such knowledge or awareness being deemed to include (a) the
actual awareness of a fact or other matter by each such individual and (b)
such
facts or other matters about which each such individual reasonably should be
aware as a result of his involvement with the Company: Xxxx Xxxxxx and/or
Xxxx
Xxxxxxx.
11.13 Interpretation.
The
parties hereto agree that this Agreement is the product of negotiations between
sophisticated parties and individuals, all of whom were represented by counsel,
and each of whom had an opportunity to participate in, and did participate
in,
the drafting of each provision hereof. Accordingly, ambiguities in this
Agreement, if any, shall not be construed strictly or in favor of or against
any
party hereto but rather shall be given a fair and reasonable construction
without regard to the rule of contra
proferentum.
The
word “including” shall be deemed followed by “, without limitation,” and the
word “or” shall be interpreted as “and/or.”
11.14 Gender
and Number.
All
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity or number of the Person or Persons
may require.
11.15 Third
Party Rights.
Other
than with respect to the rights of any indemnitees under Section X hereof,
it is the intention of the parties that nothing in this Agreement shall create
or be deemed to create any right with respect to any Person not a party to
this
Agreement.
11.16 Headings.
The
headings to the Sections of this Agreement have been inserted solely for
convenience of reference and shall not modify, define or limit the express
provisions of this Agreement.
* * * *
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IN
WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
on
the date first above written.
PURCHASER:
Cancable
Holding Corp.
By:
/s/
Xxxxx
Xxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxx
Title:
Chairman and CEO
THE
COMPANY:
Cancable,
Inc.
By:
/s/
Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title: President
STOCKHOLDERS:
Xxxxxxxxx
Fund II Inc.
By:
/s/
Xxxx
Xxxx
Name:
Xxxx Xxxx
Title:
Address:
BMO
Capital Corporation
By:
/s/
Xxxxxx XxXxxxxxxx
Name:
Xxxxxx XxXxxxxxxx
Title:
Director
Address:
-34-
Annex
A
Index
of Definitions
Certain
Definitions.
The
following terms when used herein shall have the meanings assigned to them below
(certain other terms are defined elsewhere in this Agreement):
“Accepted
Liability Amount” shall mean the greater of (i) $125,000 and (ii) the actual
amount of Damages incurred by the Company or its Subsidiaries in connection
with
the satisfaction of (x) its Ohio workers compensation claim, (y) Ohio city
Tax
amounts ((x) and (y) are referred to as the second item on Schedule 3.11(a))
and
(z) the Unsecured Creditor Claims.
“Ancillary
Agreements” shall mean the Escrow Agreement and each other document or
instrument delivered pursuant to, or in connection with, this Agreement;
provided, that due diligence materials furnished to the Purchaser shall not
constitute Ancillary Agreements.
“Affiliate”
shall mean with respect to any Person any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
“Annual
Financial Statements” shall have the meaning set forth in Section 3.05(a)
hereof.
“Balance
Sheet” shall have the meaning set forth in Section 3.05(a)
hereof.
“Business”
shall have the meaning set forth in the recitals hereof.
“Business
Day” shall mean a day other than a Saturday or Sunday or other day on which
commercial banks in Toronto, Ontario are authorized or required to
close.
“Closing”
shall have the meaning set forth in Section 7.01 hereof.
“Closing
Date” shall have the meaning set forth in Section 7.01 hereof.
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Company”
shall have the meaning set forth in the introduction hereto.
“Company
Indebtedness” shall mean any obligations and liabilities created, issued or
incurred by the Company for borrowed money, including without limitation, bank
loans, mortgages, notes payable, capital lease obligations, guarantees of
indebtedness of others and loans from the Stockholders, and all principal,
interest, fees, prepayment penalties or other amounts due or owing with respect
thereto.
“Contracts”
shall have the meaning set forth in Section 3.13(a) hereof.
“Convertible
Subordinated Debentures” shall mean the Convertible Secured Subordinated
Debentures of the Company between the Company and each of Xxxxxxxxx and BMO,
each dated as of July 2, 2001 (as amended, restated or otherwise
modified).
-1-
“Current
Month Balance Sheet” shall have the meaning set forth in Section 3.05(a)
hereof.
“Current
Balance Sheet Date” shall have the meaning set forth in Section 3.07(a)
hereof.
“Damages”
shall mean any and all losses, claims, assessments, demands, damages,
liabilities, obligations, costs and expenses, including without limitation,
reasonable fees and disbursements of counsel sustained or incurred by the
Purchaser Indemnified Parties (or any of them) or the Stockholder Indemnified
Parties (or any of them), as the case may be, in any action, dispute, claim
or
proceeding between any of the Purchaser Indemnified Parties, on the one hand,
and any of the Stockholder Indemnified Parties, on the other hand, or involving
a third-party claim against any of the Purchaser Indemnified Parties or any
of
the Stockholder Indemnified Parties, as the case may be, and other out-of-pocket
costs and expenses incurred in connection with investigating, preparing or
defending or preventing any action, suit or proceeding, commenced or threatened,
or any claim whatsoever; provided,
however,
that
Damages shall not include any indirect damages, or punitive or exemplary losses,
claims, assessments, demands, damages, liabilities, obligations, costs or
expenses unless such are owed to a third-party.
“Debt
Holder” shall mean each holder of Company Indebtedness.
“Direct
Claim” shall have the meaning set forth in Section 10.03(c)
hereof.
“Director
Liabilities” shall mean the amounts payable labeled CPP/EI, GST and PST set
forth as the first item on Schedule 3.11(a).
“Dollars”
or “$” shall mean the lawful money of Canada.
“Employee
Plans” shall have the meaning set forth in Section 3.15
hereof.
“Environmental
Claim” shall mean any notice or claim by any Person alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(i) the generation, treatment, storage, transportation or recycling of any
Hazardous Material or the presence, or release, discharge, disposal or emission
into the environment, of any Hazardous Materials at the Real Property or any
other real property, whether or not presently or formerly owned or leased by
the
Company or any Affiliate of the Company or (ii) any violation, or alleged
violation, of any Environmental Laws.
“Environmental
Laws” shall mean all federal, state, local and foreign laws, rules and
regulations relating to environmental health and safety matters, the pollution
or protection of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) or the protection of human health
and
safety from environmental hazards, including laws and regulations relating
to
emissions, discharges, releases or threatened releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials.
-2-
“Estimated
Closing Balance Sheet” shall mean the unaudited estimated balance sheet of the
Company as of the close of business on the Closing Date as if the Closing Date
were the last day of the Company's fiscal year in connection therewith, which
is
attached hereto as Exhibit
D).
“Escrow
Agent” shall have the meaning set forth in Section 2.02(a)
hereof.
“Escrow
Agreement” shall have the meaning set forth in Section 2.02(a)
hereof.
“Financial
Statements” shall have the meaning set forth in Section 3.05(a)
hereof.
“GAAP”
shall mean means those accounting principles which are recognized as being
generally accepted and which are in effect from time to time, as published
in
the Handbook of the Canadian Institute of Chartered Accountants in the case
of
Canadian GAAP.
“Governmental
Authority” shall mean the collective reference to any court, tribunal,
government, or governmental, regulatory or administrative agency, authority
or
instrumentality, federal, state or local, or domestic or foreign.
“GSA’s”
shall mean the General Security Agreements, dated as of July 12, 2001 and
December 20, 2002, between the Company and (i) BMO and (ii) Xxxxxxxxx (as any
may have been amended, restated or otherwise modified).
“Hazardous
Material” shall mean any substance or material which under any Environmental Law
is defined to be “hazardous”, “toxic”, “deleterious”, “caustic”, “dangerous”, a
“contaminant”, a “pollutant”, a “dangerous good”, a “waste”, a “source of
contamination” or a source of a “pollutant”.
“Indemnification
Matter” shall have the meaning set forth in Section 10.03(a)
hereof.
“Indemnitee”
shall have the meaning set forth in Section 10.03(a) hereof.
“Indemnitor”
shall have the meaning set forth in Section 10.03(a) hereof.
“Indemnity
Escrow Amount” shall have the meaning set forth in Section 2.02(a)
hereof.
“Indemnity
Escrow Deposit” shall have the meaning set forth in Section 2.02(a)
hereof.
“Indemnity
Notice” shall have the meaning set forth in Section 10.03(a)
hereof.
“Indemnity
Notice Period” shall have the meaning set forth in Section 10.03(b)
hereof.
“Interests”
shall have the meaning set forth in the recitals hereof.
-3-
“Interim
Financial Statements” shall have the meaning set forth in Section 3.05(a)
hereof.
“Liens”
shall mean all liens, mortgages, charges, security interests, covenants,
easements, restrictions, adverse claims or other encumbrances of any kind
whatsoever and howsoever arising.
“Material
Adverse Change” or “Material Adverse Effect” shall mean a material adverse
effect on the businesses, properties, assets, liabilities, prospects, condition
(financial or other) or results of operations of the Company and its
Subsidiaries (taken as a whole); provided,
however,
that in
no event shall any of the following be deemed to cause a material adverse effect
on the businesses, properties, assets, liabilities, prospects, condition
(financial or other) or results of operations of the Company and its
Subsidiaries (taken as a whole): (i) any change resulting from conditions
(be they political, economic, regulatory or otherwise) generally affecting
the
industry in which the Company and its Subsidiaries operate that does not affect
the Company and its Subsidiaries (taken as a whole) in a disproportionate
manner; (ii) any change resulting from the announcement of any of the
transactions contemplated by this Agreement; (iii) an outbreak or
escalation of war, armed hostilities, acts of terrorism, political instability
or other national or international calamity, crisis or emergency, or any
governmental or other response to any of the foregoing occurring within Canada
or the United States; or (iv) any action or omission taken by the Purchaser
or its Affiliates prior to the Closing.
“Objection
Notice” shall have the meaning set forth in Section 10.03(c)
hereof.
“Owned
Proprietary Rights” shall have the meaning set forth in
Section 3.19(a).
“Percentage
Interest” of any Stockholder shall mean the percentage set forth opposite such
Stockholder’s name on Schedule
3.04
hereto.
“Permits”
shall have the meaning set forth in Section 3.12(b) hereof.
“Permitted
Encumbrances” shall mean, with respect to the Real Property, (a) laws, rules,
regulations and ordinances of general applicability which are not materially
violated by the existing improvements at the Real Property or the current use
thereof, (b) easements, rights of way, covenants, conditions and other matters
which, individually or in the aggregate, do not materially adversely affect
the
Real Property or the use thereof, and (c) encumbrances for Taxes and assessments
either not yet due and payable or, so long as they are adequately reserved
for
in the Company’s Financial Statements, being contested in good faith and in a
timely and appropriate manner.
“Permitted
Liens” shall have the meaning set forth in Section 3.10(a)
hereof.
“Person”
shall mean an individual, a partnership, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization, a
limited or unlimited liability company or a Governmental Authority.
“Pre-Closing
Tax Period” shall have the meaning set forth in Section 6.04
hereof.
-4-
“Priority
Liabilities” shall mean the Priority Notes, the Director Liabilities, the WSIB
Liabilities, and legal fees associated with the proposed transaction with Xxxxxx
Xxxxxxx in the amount of $275,000.
“Priority
Notes” shall mean each of the notes (as such may have been amended, restated or
otherwise modified) made by the Company as of July, 21, 2004 in favor of (i)
Xxxxxxxxx, in the amount of $62,500 and (ii) BMO, in the amount of
$37,500.
“Proprietary
Licenses” shall have the meaning set forth in Section 3.19(a)
hereof.
“Proprietary
Rights” shall have the meaning set forth in Section 3.19(a)
hereof.
“Purchase
Price” shall have the meaning set forth in Section 2.01(a)
hereof.
“Purchaser
Indemnified Parties” shall mean the Purchaser, the Company and each of their
respective employees, officers, directors, stockholders, Affiliates, agents
and
representatives.
“Real
Property” shall have the meaning set forth in Section 3.09(a)
hereof.
“Restrictive
Covenant” shall have the meaning set forth in Section 6.06(a)
hereof.
“Shareholders
Agreement” shall mean the Unanimous Shareholder Agreement of the Company, dated
as of July 12, 2001, among the Company, BMO and Xxxxxxxxx and any other party
thereto (as amended, restated or otherwise modified).
“Shares”
shall mean the shares of the capital stock of the Company (or, if the context
so
requires, any other Person), as more fully described in the Company’s articles
of incorporation (or such other similar document of such other
Person).
“Special
WSIB Liability” shall mean one-half of the amount equal to (i) the Damages
arising out of or in connection with the amounts asserted as owed on Statement
No. 0000000051 (as opposed to future or incremental charges) issued by the
Workplace Safety & Insurance Board to the Company, which invoice was stamped
“Received Dec 21 2005” minus (ii) $232,497.
“Stockholder
Indemnified Parties” shall mean the Stockholders and each of their respective
employees, officers, directors, Affiliates (other than the Company), agents
and
representatives.
“Stockholders”
shall have the meaning set forth in the introduction hereto.
“Subordinated
Debentures” shall mean the Secured Subordinated Debentures of the Company
between the Company and (i) BMO and (ii) Xxxxxxxxx, each dated as of January
31,
2003 (as amended, restated or otherwise modified).
“Subsidiary”
shall mean, as to any Person, any other Person, if the first mentioned Person
owns, directly or indirectly, securities or other ownership interests in such
other Person, having ordinary voting power to elect a majority of the board
of
directors or persons performing similar functions for such other
Person.
-5-
“Tax
Returns” shall have the meaning set forth in Section 3.11(a)
hereof.
“Taxes”
shall have the meaning set forth in Section 3.11(a) hereof.
“Threshold
Amount” shall have the meaning set forth in Section 10.08(a)
hereof.
“Transaction
Expenses” shall have the meaning set forth in Section 11.05
hereof.
“Unsecured
Creditor Claims” shall be those claims set forth on Annex C.
“US$”
shall mean the lawful money of the United States of America.
“Warrants”
shall mean the Warrants, dated as of July 12, 2001, issued by the Company in
favor each of BMO and Xxxxxxxxx (each as amended, restated or otherwise
modified).
“WSIB
Liabilities” shall mean $232,497 owed by the Company to the Workplace Safety
& Insurance Board.
-6-
