1
SHARE PURCHASE AGREEMENT
BETWEEN
WOOD XXXXX INC.
AND
XXXXXXX X. XXXXX
THE XXXXX FAMILY TRUST
RELATING TO THE PURCHASE OF
MIDWAY SUPPLY LTD.
MADE AS OF
JUNE 30, 1998
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TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1 - INTERPRETATION 2
1.1 DEFINITIONS 2
1.2 HEADINGS 6
1.3 EXTENDED MEANINGS 6
1.4 ACCOUNTING PRINCIPLES 6
1.5 INCLUSIVE LANGUAGE 7
1.6 CURRENCY 7
1.7 SCHEDULES 7
ARTICLE 2 - PURCHASE AND SALE 8
2.1 PURCHASE AND SALE AND PURCHASE PRICE 8
2.2 ADJUSTMENT OF THE PURCHASE PRICE 9
2.3 CLOSING 10
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES 10
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS 10
3.2 SURVIVAL OF VENDOR'S REPRESENTATIONS,
WARRANTIES AND COVENANTS 23
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 24
3.4 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS 25
ARTICLE 4 - COVENANTS 26
4.1 TAXES 26
4.2 COVENANTS OF THE VENDORS 26
4.3 COVENANTS OF THE PURCHASER 27
4.4 ACKNOWLEDGMENT AND COVENANTS OF THE VENDORS 28
ARTICLE 5 - THIRD PARTY CLAIMS 29
ARTICLE 6 - RIGHTS OF SET-OFF 30
ARTICLE 7 - CONDITIONS 31
7.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER 31
7.2 CONDITIONS FOR THE BENEFIT OF THE VENDORS 33
ARTICLE 8 - GENERAL 35
8.1 FURTHER ASSURANCES 35
8.2 TIME OF THE ESSENCE 35
8.3 COMMISSIONS 35
8.4 LEGAL FEES 35
8.5 PUBLIC ANNOUNCEMENTS 35
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8.6 BENEFIT OF THE AGREEMENT 36
8.7 ENTIRE AGREEMENT 36
8.8 AMENDMENTS AND WAIVER 36
8.9 ASSIGNMENT 36
8.10 NOTICES 37
8.11 GOVERNING LAW 39
8.12 ATTORNMENT 39
8.13 INDEPENDENT LEGAL ADVICE 39
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SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of June 30, 1998;
BETWEEN: WOOD XXXXX INC., a corporation incorporated under
the laws of Canada;
(hereinafter referred to as the "Purchaser")
AND: XXXXXXX X. XXXXX, a business executive residing in the
Province of British Columbia;
(hereinafter referred to as "Xxxxxxx")
AND: XXXXXXX X. XXXXX and XXXXXXXX XXXXX, in their
capacity as trustees for and on behalf of THE XXXXX
FAMILY TRUST, a trust under the laws of British
Columbia;
(hereinafter referred to as the "Trust")
(Xxxxxxx and the Trust are hereinafter
sometimes collectively referred to as the
"Vendors")
WHEREAS the Corporation is engaged in the Business (as defined herein) in
the Province of British Columbia;
WHEREAS the Vendors are the beneficial and registered owners of all of the
issued and outstanding shares in the capital stock of the Corporation
(collectively the "Shares");
AND WHEREAS the Vendors desire to sell and the Purchaser desires to
purchase the Shares, upon and subject to the terms and conditions hereinafter
set forth;
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NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained the parties hereto
agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless something in the subject matter or context is
inconsistent therewith:
1.1.1 "Agreement" means this agreement and all amendments made
hereto by written agreement between the Vendors and the Purchaser;
1.1.2 "Ancillary Agreements" means the Acknowledgment, Release and
Indemnity Agreements, the Employment Agreement, the Escrow Agreement
and the Non-Competition Agreements;
1.1.3 "Balance Sheet" means the balance sheet of the Corporation
as at the Balance Sheet Date;
1.1.4 "Balance Sheet Date" means May 31, 1997;
1.1.5 "Business" means the business of the Corporation consisting
in the sale and distribution of industrial and institutional
sanitation and janitorial products and services, including sanitary
paper products, janitorial and cleaning chemicals and equipment and
general sanitation supplies in British Columbia;
1.1.6 "Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Vancouver, British Columbia;
1.1.7 "Class F Shares" has the meaning set out in Section 2.1.2;
1.1.8 "Closing Balance Sheet" means the balance sheet of the
Corporation as at the Closing Date and an accompanying review
engagement report prepared by the accountants of the Corporation at
the cost of the Vendors in accordance with GAAP applied on a basis
consistent with prior periods;
1.1.9 "Closing Date" means June 30, 1998;
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1.1.10 "Combined Closing Balance Sheet" means the balance sheet of the
Corporation and Fraser Valley, on a combined basis, as at the
Closing Date and an accompanying review engagement report prepared
by the accountants of the Corporation at the cost of the Vendors in
accordance with GAAP applied on a basis consistent with prior
periods;
1.1.11 "Contaminant" means any substance or material which does not occur
naturally in the environment or which falls within the definition
of "pollutants", "waste", "special waste", "hazardous chemicals",
"hazardous waste", "dangerous goods", "toxic substances", or any
variation of such terms or any terms of similar import in any
Environmental Law including, without limitation, urea formaldehyde,
asbestos, PCB transformers and poly-chlorinated biphenyls.
1.1.12 "Control" (including the terms "Controlling" and "Controlled")
means the power to elect the majority of the board of directors or
the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise;
1.1.13 "Consents" means the consents, approvals and authorizations
required to be obtained pursuant to Schedule 3.1.7;
1.1.14 "Corporation" means Midway Supply Ltd.;
1.1.15 "Covenant Agreement" has the meaning set out in Section 7.2.1.6;
1.1.16 "Employment Agreement" has the meaning set out in Section 7.1.1.8;
1.1.17 "Environment" means all components of the Earth, including air,
all layers of the atmosphere, land, soil, water, organic and
inorganic matter, living species and organisms, any combination of
the above components, interacting natural systems that include the
above components and the ambient milieu with which living species
have dynamic relations;
1.1.18 "Environmental Laws" means all Laws relating in whole or in part
to the Environment or its protection, as the same would be applied
as of the date hereof, including any Laws relating to (i) the
natural or accidental release, emission, discharge, deposit,
issuance, spraying, injection, inoculation, abandonment, burial,
spilling, incineration, disposal, leaking, seeping,
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pouring, emptying, throwing, dumping, placing or exhausting
of any Contaminant into the Environment and (ii) the storage,
disposal, destruction, incineration, burial, recycling, handling,
transportation or use of a Contaminant;
1.1.19 "Environmental Permits" has the meaning set out in Section
3.1.46.2;
1.1.20 "Escrow Agreement" has the meaning set out in Section 7.1.1.9;
1.1.21 "Financial Statements" has the meaning set out in Section 3.1.8;
1.1.22 "Fraser Valley" means Fraser Valley Industrial Chemicals Inc.;
1.1.23 "GAAP" has the meaning specified in Section 1.4;
1.1.24 "Governmental Authority" means any federal, provincial, regional,
municipal or local or other governmental authority, domestic or
foreign, having jurisdiction over the Corporation or the Business
and includes any agency, department, commission, board, bureau,
instrumentality, court, tribunal or other Person exercising
executive, legislative, judicial, regulatory or administrative
functions constituted or appointed by any such authority;
1.1.25 "Interim Financial Statements" has the meaning specified in
Section 3.1.9;
1.1.26 "Law" means any law, statute, by-law, regulation or any legally
binding rule, directive, guideline, policy, notice, order or
ordinance of any Governmental Authority, including Environmental
Laws;
1.1.27 "Leased Premises" has the meaning set out in Section 3.1.14;
1.1.28 "Lien" in relation to any property or asset, means any encumbrance
or title defect of whatever kind or nature, regardless of form,
whether or not recorded or registered or consensual or statutory or
arising by law, including any lien, charge, mortgage,
hypothecation, pledge, security interest, assignment, lease,
option, easement, servitude, right of way, encroachment,
restrictive covenant, right of use or any other claim or right of
any kind or nature whatsoever which affects ownership or possession
of, or title to, or any interest in, or the right to use or occupy
such property or asset;
1.1.29 "Material Contract" has the meaning set out in Section 3.1.24;
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1.1.30 "Net Assets" means shareholders' equity as shown on the Combined
Closing Balance Sheet;
1.1.31 "Non-Canadian" has the meaning set out in Section 3.3.4;
1.1.32 "Non-Competition Agreements" has the meaning set out in Section
7.1.1.7;
1.1.33 "Parent Common Shares" means the common shares of Xxxxx
Corporation issuable to a holder of Class F Shares in accordance
with the exercise of the retraction rights relating to the Class F
Shares as set out in Section 8 of the Class F Share Conditions (as
defined in the Covenant Agreement);
1.1.34 "Permits" means all permits, licenses, certificates, approvals,
authorizations, consents, registrations, qualifications and the
like issued by any Governmental Authority which are held by the
Corporation in connection with the operation of the Business;
1.1.35 "Person" means an individual, corporation, joint venture,
partnership, trust, trustee, unincorporated organization, or any
other entity;
1.1.36 "Personal Property Leases" has the meaning set out in Section
3.1.15;
1.1.37 "Premises Leases" has the meaning set out in Section 3.1.14;
1.1.38 "Purchase Price" has the meaning set out in Section 2.1.1;
1.1.39 "Purchased Shares" has the meaning set out in Section 2.1.1;
1.1.40 "Related Person" means:
(a) with respect to any Person who is an
individual, a child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law
or sister-in-law of that person, including adoptive
relationships; and
(b) with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with
that person;
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1.1.41 "Shares" has the meaning set forth in the preamble hereto;
1.1.42 "Taxes" means all federal, provincial, local, foreign and other
taxes, including income taxes, sales taxes, goods and services
taxes, use taxes, occupancy taxes, excise taxes, property taxes,
franchise taxes and employment and payroll related taxes;
1.1.43 "Time of Closing" means 10 a.m. (Vancouver Time) on the Closing
Date; and
1.1.44 "Xxxxx" means Xxxxx Corporation.
1.2 HEADINGS
The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof
and include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 EXTENDED MEANINGS
In this Agreement words importing the singular number only shall include
the plural and vice versa, words importing the masculine gender shall include
the feminine and neuter genders and vice versa and words importing persons
shall include individuals, partnerships, associations, trusts, unincorporated
organizations and corporations.
1.4 ACCOUNTING PRINCIPLES
Wherever in this Agreement reference is made to a calculation to be made
in accordance with generally accepted accounting principles, such reference
shall be deemed to be to the generally accepted accounting principles from time
to time approved by the Canadian Institute of Chartered Accountants, or any
successor institute, applicable as at the date on which such calculation is
made or required to be made in accordance with generally accepted accounting
principles ("GAAP").
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1.5 INCLUSIVE LANGUAGE
As used herein, the word "or" is not exclusive and the word "including" is
not limiting (whether or not non-limiting language such as "without limitation"
or "but not limited to" or words of similar import is used with reference
thereof).
1.6 CURRENCY
All references to currency herein are to lawful money of Canada.
1.7 SCHEDULES
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 2.1.1: Shareholders of the Corporation; Allocation of Purchase Price
Schedule 2.1.2: Class F Share Conditions
Schedule 3.1.3: Memorandum and Articles of the Corporation
Schedule 3.1.7: Third Party Consents
Schedule 3.1.8: Financial Statements
Schedule 3.1.9: Interim Financial Statements
Schedule 3.1.10: Corporate Reorganization Transactions
Schedule 3.1.12: Liens
Schedule 3.1.14: Leased Premises and Premises Leases
Schedule 3.1.15: Personal Property Leases
Schedule 3.1.17: Inventory
Schedule 3.1.19: Capital Expenditures
Schedule 3.1.20: Dividends
Schedule 3.1.22: Tax Accounts
Schedule 3.1.23: Outstanding Liabilities
Schedule 3.1.24: Material Contracts
Schedule 3.1.29: Royalty, Licence Fee or Management Fee
Schedule 3.1.30: Employment Contracts
Schedule 3.1.31: Employee Benefit Plans
Schedule 3.1.35: Related Person Indebtedness
Schedule 3.1.37: Intellectual Property
Schedule 3.1.40: Insurance Policies
Schedule 3.1.42: Amounts payable to Related Persons
Schedule 3.1.43: Litigation
Schedule 3.1.46: Environmental Matters
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Schedule 3.1.52: Bank Accounts
Schedule 3.3.7: Financial Statements of the Purchaser
Schedule 3.3.8: Memorandum on Rule 144 Resale of Restricted Securities
Schedule 0.0.0.0: Non-Competition Agreements
Schedule 0.0.0.0: Employment Agreement
Schedule 0.0.0.0: Escrow Agreement
Schedule 0.0.0.00: Opinion of the Vendors' Counsel
Schedule 0.0.0.0: Covenant Agreement
ARTICLE 2 - PURCHASE AND SALE
2.1 PURCHASE AND SALE AND PURCHASE PRICE
2.1.1 Subject to the terms and conditions hereof, on the Closing
Date, each of the Vendors shall sell to the Purchaser the number of
Shares set opposite the name of each Vendor on Schedule 2.1.1 hereto
(the aggregate number of such Shares is herein collectively called
the "Purchased Shares") and the Purchaser shall purchase the
Purchased Shares from the Vendors, free and clear of all Liens, for
a total purchase price of $2,400,000 (hereinafter referred to as the
"Purchase Price"), subject to adjustment in accordance with Section
2.2, to be allocated amongst the Vendors in accordance with Schedule
2.1.1.
2.1.2 The Purchase Price shall be paid against delivery to the
Purchaser of share certificates evidencing the Purchased Shares duly
endorsed for transfer to the Purchaser and satisfied (i) as to an
aggregate amount of $1,341,160 payable pro rata to the Vendors in
accordance with their respective shareholdings set forth in Schedule
2.1.1 by certified cheque or bank draft to the order of each of the
Vendors, and delivered by the Purchaser at the Time of Closing, (ii)
as to $35,295 payable by cheque to the order of XxXxxxxx Xxxxxxxx,
as escrow agent, and delivered by Xxxxx Xxxxxxx at the Time of
Closing, such amount having been deposited "in trust" with Xxxxx
Xxxxxxx by the Purchaser, (iii) as to $35,295, by the delivery to
XxXxxxxx Xxxxxxxx, as escrow agent, of a certified cheque or bank
draft, such amounts in (ii) and (iii) and interest thereon to be
held in escrow pursuant to the Escrow Agreement in order to secure
the payment of any amounts due by the Vendors to the Purchaser
pursuant to this Agreement. The escrowed funds will be dealt with on
the terms and conditions set forth in the Escrow Agreement, and (iv)
as to an aggregate
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amount of $988,250, by the delivery pro rata to the Vendors in
accordance with their respective shareholdings set forth in Schedule
2.1.1 at the Time of Closing of a total of 87,845 class F
exchangeable shares of the capital stock of the Purchaser ("Class F
Shares"), to be issued from treasury and having the attributes set
out in Schedule 2.1.2.
2.2 ADJUSTMENT OF THE PURCHASE PRICE
2.2.1 The amount of the Purchase Price allocable to the Common
Shares is based on the assumption that the net asset value ("Net
Assets") of the Corporation and Fraser Valley, on a combined basis,
on the Combined Closing Balance Sheet shall be not less than
$1,600,000. In the event that Net Assets as shown on the Combined
Closing Balance Sheet are greater or less than $1,600,000 on the
Closing Date, then the Vendors of the Common Shares will pay the
Purchaser the amount of the shortfall (in accordance with the
percentages of their Common Shares set out on Schedule 2.1.1) or the
Purchaser will pay the Vendors of the Common Shares the amount of
the excess (in accordance with the percentages of their Common
Shares set out on Schedule 2.1.1), as the case may be, together with
interest on such amount at the rate of 6% per annum calculated from
the Closing Date to the date of payment.
2.2.2 On or before August 31, 1998, the Vendors shall deliver the
Closing Balance Sheet and the Combined Closing Balance Sheet to the
Purchaser.
2.2.3 The Closing Balance Sheet and the Combined Closing Balance
Sheet shall be final, conclusive and binding unless the Purchaser
gives written notice of its disagreement with any item or items
thereon within 30 days following the receipt of the Closing Balance
Sheet, specifying in reasonable detail the nature and extent of such
disagreement.
2.2.4 If within 5 days following the receipt by the Vendors of a
notice of the type referred to in Section 2.2.3, the Vendors and the
Purchaser are unable to resolve any disagreement with respect to the
Closing Balance Sheet, Combined Closing Balance Sheet and the
determination of Net Assets, the disagreement shall be submitted to
Price Waterhouse for arbitration. Price Waterhouse shall act as an
arbitrator to determine and resolve only those issues in dispute.
Price Waterhouse shall deliver a decision within 30 days of the
submission of the dispute, and such decision shall be consistent
with this Agreement, shall be set forth in a
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written statement delivered to the Purchaser and the Vendors and
shall be final, conclusive and binding on the Purchaser and the
Vendors. The adjusting payments, if any, required by Section 2.2.1
shall be made forthwith after receipt of the final determination of
Net Assets by Price Waterhouse, together with all interest thereon at
the rate of 6% per annum from the Closing Date to the date of
payment. The fees and expenses of Price Waterhouse in connection with
any such determination shall be paid one half by the Vendors and one
half by the Purchaser. Otherwise, the Purchaser and the Vendors
shall each pay their own costs incurred, including the fees and
expenses of their respective accountants or attorneys, if any.
2.3 CLOSING
The sale and purchase of the Purchased Shares and the execution and
delivery of the Ancillary Agreements shall be completed at the Time of Closing
at the offices of XxXxxxxx Xxxxxxxx, Pacific Centre 000 Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS
The Vendors jointly and severally represent and warrant to the Purchaser
the following, and acknowledge that the Purchaser is entitled to rely on such
representations and warranties notwithstanding any due diligence investigation
done by the Purchaser prior to the closing:
3.1.1 the Corporation is a corporation duly incorporated,
organized and subsisting under the laws of British Columbia as a
private issuer as that term is defined in the Securities Act
(British Columbia) with the corporate power to own its assets and to
carry on the Business and has made all necessary filings under all
applicable corporate, securities and taxation Laws or any other Laws
to which the Corporation is subject and is qualified to own its
properties and assets and to carry on the Business as presently
carried on by it;
3.1.2 Schedule 2.1.1 sets out (i) the authorized capital of the
Corporation and (ii) the number of Shares of the Corporation which
are issued and outstanding, which shares have been validly issued as
fully paid and
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non-assessable and registered in the names of the Vendors as set
forth on Schedule 2.1.1;
3.1.3 a true and complete copy of the Memorandum and Articles of
the Corporation, including the rights, privileges, restrictions and
conditions attached to the Shares are attached hereto as Schedule
3.1.3;
3.1.4 the Purchased Shares constitute all of the issued and
outstanding Shares in the capital stock of the Corporation;
3.1.5 each of the Vendors is the beneficial and registered owner
of the number of Purchased Shares set opposite the name of such
Vendor on Schedule 2.1.1, free and clear of all Liens, options and
any other rights of others;
3.1.6 there is no contract, option or any other right of another
binding upon or which at any time in the future may become binding
upon:
(i) any of the Vendors to sell, transfer,
assign, or grant any Lien on or affecting, or in any
other way dispose of or encumber any of the Purchased
Shares other than pursuant to the provisions of this
Agreement or any of its assets other than in the ordinary
course of business, or
(ii) the Corporation to allot or issue any
of the unissued shares or securities of the Corporation
or to create any additional class of shares or
securities;
3.1.7 except as disclosed on Schedule 3.1.7, neither the entering
into nor the delivery of this Agreement and the Ancillary Agreements
nor the completion of the transactions contemplated hereby by each
of the Vendors will result in the violation of or require the
Consent of any third party pursuant to:
(i) any of the provisions of the Memorandum
or Articles, as amended, of the Corporation;
(ii) any agreement or other instrument to
which the Corporation or any of the Vendors is a party or
by which the Corporation or any of the Vendors is bound,
or
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(iii) any applicable Law;
3.1.8 the financial statements of the Corporation, consisting of
the Balance Sheet and statements of income, retained earnings and
changes in financial position for the period ended on the Balance
Sheet Date, together with the review engagement report of Cinnamon
Xxxx Xxxxxxxxxx & Company, chartered accountants, thereon and the
notes thereto (hereinafter collectively referred to as the
"Financial Statements"), a copy of which is attached hereto as
Schedule 3.1.8:
(i) are in accordance with the books and
accounts of the Corporation as at the Balance Sheet Date,
(ii) are true and correct and present fairly
the financial position of the Corporation as at the
Balance Sheet Date,
(iii) have been prepared in accordance with
GAAP consistently applied, and
(iv) present fairly all of the assets and
liabilities of the Corporation as at the Balance Sheet
Date including, without limiting the generality of the
foregoing, all contingent liabilities of the Corporation
as at the Balance Sheet Date;
3.1.9 the interim financial statements of the Corporation,
consisting of a balance sheet and statement of income, for the
period ended on May 31, 1998 (hereinafter collectively referred to
as the "Interim Financial Statements"), a copy of which is attached
hereto as Schedule 3.1.9:
(i) are in accordance with the books and
accounts of the Corporation as at May 31, 1998,
(ii) are true and correct and present fairly
the financial position of the Corporation as at May 31,
1998, subject only to usual and proper adjustments, which
will not exceed, in aggregate, $30,000 and without
provision for income or capital taxes, the disposition of
a loan receivable from Midway Purnel Sanitary Supply (PG)
Ltd. in the amount of $136,965 and the disposal or
cancellation of life insurance policies and the
associated cash surrender values;
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(xxx) present fairly all of the assets and
liabilities of the Corporation as at May 31, 1998; and
(iv) have been prepared in accordance with
accounting principles consistent with the principles of
GAAP used in the preparation of the Balance Sheet;
3.1.10 since the Balance Sheet Date, the Business of the Corporation has
been carried on in its usual and ordinary course and in a manner
consistent with prior practices and, the Corporation has not, since
the Balance Sheet Date, entered into any transaction out of the
usual and ordinary course of business;
3.1.11 since the Balance Sheet Date, there has been no material change in
the affairs, business, prospects, operations or condition of the
Corporation, financial or otherwise, whether arising as a result of
any legislative or regulatory change, revocation of any Permit or
right to do business, fire, explosion, accident, casualty, labour
dispute, flood, drought, riot, storm, expropriation, condemnation,
act of God, public force or otherwise, except changes occurring in
the usual and ordinary course of business which have not adversely
affected the affairs, business, prospects, operations or condition
of the Corporation, financial or otherwise;
3.1.12 the Corporation is the owner with a good and marketable title,
free and clear of all Liens, options and any other rights of others,
except for the Liens described on Schedule 3.1.12 of all assets
shown or reflected on the Balance Sheet, except only such of the
assets of the Corporation as have been disposed of in the usual and
ordinary course of business since the Balance Sheet Date, and of all
assets acquired by the Corporation since the Balance Sheet Date;
3.1.13 all machinery, equipment and automotive equipment owned or used by
the Corporation has been properly maintained and is in good working
order for the purposes of ongoing operation, subject to ordinary
wear and tear for machinery and equipment of comparable age;
3.1.14 Schedule 3.1.14 sets forth a true and complete list of all
premises leased by the Corporation ("Leased Premises") and any lease
in respect thereof to which the Corporation is a party ("Premises
Leases") and: (i) each Premises Lease is in full force and effect,
unamended by oral or written
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agreement, and the Corporation is entitled to the full benefit and
advantage of such Premises Lease in accordance with the terms
thereof, (ii) each Premises Lease is in good standing, all rental and
other payments payable by the Corporation under the leases have been
duly paid, (iii) there is currently no outstanding default by the
Corporation under the Premises Leases nor is there currently any
outstanding default by any landlord thereunder or dispute between the
Corporation and any landlord under any of the Premises Leases; (iv)
the Corporation has not sublet, assigned or transferred any of its
interests in such Premises Lease and (v) the Leased Premises are the
only premises used by the Corporation;
3.1.15 Schedule 3.1.15 sets forth a true and complete list of all lease
agreements concerning personal property leased by the Corporation
("Personal Property Leases") and: (i) each Personal Property Lease
is in full force and effect, unamended by oral or written agreement,
and the Corporation is entitled to the full benefit and advantage of
each Personal Property Lease in accordance with the terms thereof,
(ii) each Personal Property Lease is in good standing, all rental
and other payments payable by the Corporation under the Personal
Property Leases have been duly paid, (iii) there is currently no
outstanding default by the Corporation thereunder nor of the other
parties thereunder nor dispute between the Corporation and any other
party thereunder, and (iv) the Corporation has treated all Personal
Property Leases as operating leases for Canadian income tax
purposes;
3.1.16 except for the Premises Leases, the Corporation holds no ownership
or other interest in or right affecting any real estate or real
property;
3.1.17 the inventory of the Corporation consist of items saleable in the
ordinary course of business reasonably fit for their usual purpose,
except for obsolete and slow-moving items and materials below
standard quality which have been written down on the books of
account of the Business to net realizable value, or adequate
reserves having been provided therefor, all in accordance with GAAP.
Except as disclosed in Schedule 3.1.17, there is no recurring or
ongoing high incidence of product failure or warranty claims against
the Corporation related to the Business;
3.1.18 there are no outstanding orders, notices or similar requirements
relating to the Corporation issued by any Governmental Authority,
including building, environmental, fire, health, labour or police
authorities, and
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there are no matters under discussion with any such Governmental
Authority relating to orders, notices or similar requirements;
3.1.19 except as disclosed on Schedule 3.1.19, no single capital
expenditure in excess of $25,000 or capital expenditures in the
aggregate in excess of $50,000 have been made or authorized by the
Corporation since the Balance Sheet Date;
3.1.20 except as disclosed on Schedule 3.1.20, no dividends have been
declared or paid on or in respect of the Shares and no other
distribution on any of its securities or shares has been made by the
Corporation since the Balance Sheet Date and all dividends which to
the date hereof have been declared or paid by the Corporation have
been duly and validly declared and are fully paid;
3.1.21 the Corporation does not have any liability, obligation or
commitment for the payment of Taxes of whatever nature or kind, or
interest or penalties with respect thereto, except such as are
disclosed in the Financial Statements or such Taxes not yet due as
have arisen since the Balance Sheet Date in the usual and ordinary
course of business and for which adequate provision in the accounts
of the Corporation has been made, and the Corporation is not in
arrears with respect to any required withholdings or instalment
payments or other payments of any Tax or duty of any kind or any
penalty or interest thereon and has not filed any waiver for a
taxation year of the Corporation under the Income Tax Act (Canada)
or any other legislation imposing Tax on the Corporation; all
obligations of the Corporation with respect to its employees for
withholding Taxes, Canada Pension Plan contributions, unemployment
insurance contributions and workers compensation remittances or
contributions of any kind which are due as of the Closing Date will
have been paid by the Corporation prior to the Closing Date; there
are no outstanding disputes with or assessments from the Workmen's
Compensation Board of British Columbia or the Employment Standards
Branch;
3.1.22 the tax accounts of the Corporation as disclosed in Schedule
3.1.22 attached hereto are true and complete in all material
respects;
3.1.23 except as disclosed on Schedule 3.1.23, there are no outstanding
liabilities (whether absolute or contingent) against the Corporation
except trade debts incurred in the usual and ordinary course of
business;
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3.1.24 set forth on Schedule 3.1.24 is a true and complete list of all
contracts or agreements (except for the Premises Leases, the
Personal Property Leases and the employment agreement with the
Vendors listed on Schedule 3.1.31) to which the Corporation is a
party or is otherwise bound which are (i) outside the ordinary
course of business, (ii) involve a financial commitment by the
Corporation of at least $25,000, (iii) have a term in excess of 60
days or (iv) to which any Related Person of the Corporation is a
party (collectively, the "Material Contracts" and individually, a
"Material Contract"). Subject only to the requirement to obtain the
Consents, the Corporation has not received notice of any default,
and the Corporation is not in default, under any Material Contract,
nor has there occurred any event which, with a lapse of time or
giving of notice, or both, would constitute such a default. Subject
only to the requirement to obtain the Consents, each Material
Contract is in full force and effect, unamended by written or oral
agreement and the Corporation is (i) entitled to the full benefit
and advantage of each Material Contract in accordance with the terms
thereof, (ii) each Material Contract is in good standing, and (iii)
there is no currently outstanding default by the Corporation nor by
any other party thereunder nor is there a dispute between the
Corporation and any party thereunder;
3.1.25 the Corporation is not in default or breach of any contract or
commitment to which it is a party and there exists no condition,
event or act which, with the giving of notice or lapse of time or
both would constitute such a default or breach and all such
contracts and commitments are in good standing and in full force and
effect without amendment thereto and the Corporation is entitled to
all benefits thereunder;
3.1.26 the Corporation is not a party to or bound by any guarantee,
indemnification, surety or similar obligation;
3.1.27 the Corporation does not have any subsidiaries or agreements,
options or commitments to acquire any shares or securities of any
corporation or interests of or in any other entity or to acquire or
lease any business operations, real property or assets;
3.1.28 there is no agreement, option, understanding or commitment, or any
right or privilege capable of becoming an agreement, for the
purchase from the Corporation of the Business or any of its assets
other than in the usual and ordinary course of business;
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3.1.29 except as disclosed on Schedule 3.1.29, the Corporation is not a
party to or bound by any contract or commitment to pay any royalty,
licence fee or management fee or which contains restrictive
covenants or covenants not to compete in any line of business with
any other Person;
3.1.30 the Corporation does not have any employment contract, whether
written or oral, with any person whomsoever except contracts with
the employees as are listed in Schedule 3.1.30 attached hereto,
whether or not such contracts are in writing; Schedule 3.1.30 truly
and correctly sets out for each employee of the Corporation, the
annual salary, the length of employment of each of the employees
with the Corporation and other remuneration (including any bonus,
deferred compensation, incentive profit sharing, remuneration,
medical insurance, pension, retirement, vacation and such leave
arrangements) as well as all accrued and unpaid vacation pay and
sick pay payable to each employee; no labour relations or labour
standards, discrimination in employment or employment practices,
harassment, occupational health and safety standards or workers
compensation issue or matter is pending or, to Vendors' knowledge,
threatened with respect to any employee of the Corporation; except
as disclosed in Schedule 3.1.30, to the best of the knowledge of the
Vendors, no employee has made or has any basis for making any claim
(whether under Law, any employment contract, or otherwise) on
account of or for (i) overtime pay, other than overtime for the
current payroll period, (ii) wages or salary for any period other
than the current payroll period, (iii) vacation time off, sick time
or pay in lieu of any of the foregoing, other than that earned in
respect of the current payroll period or (iv) any violation of any
Law;
3.1.31 the Corporation is not bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any benefit plan including, without
limiting the generality of the foregoing, any pension
plan maintained by or on behalf of the Corporation for
any of its employees,
except such agreements and plans as are listed in Schedule 3.1.31
attached hereto;
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3.1.32 all benefit plans listed in Schedule 3.1.31 attached hereto have
been duly registered where required by, and are in good standing
under, all applicable Laws including, without limiting the
generality of the foregoing, the Income Tax Act (Canada) and the
Pension Benefits Standards Act (British Columbia) and all required
employer contributions under any such plans have been made and the
applicable funds have been funded in accordance with the terms
thereof of the plans and no past service funding liabilities exist
thereunder;
3.1.33 no trade union, council of trade unions, employee bargaining
agency or affiliated bargaining agent:
(i) holds bargaining rights with respect to
any of the Corporation's employees by way of
certification, interim certification, voluntary
recognition, designation or successor rights,
(ii) has applied to be certified as the
bargaining agent of any of the Corporation's employees;
3.1.34 except for (i) remuneration paid to employees in the usual and
ordinary course of business and made at current rates of
remuneration, and (ii) dividends in the aggregate amount of $130,000
described in Schedule 3.1.20 and (iii) bonuses to employees in the
aggregate amount of $98,000 paid as of May 31, 1998, no payments
have been made or authorized since the Balance Sheet Date by the
Corporation to officers, directors or employees of the Corporation;
3.1.35 except as disclosed on Schedule 3.1.35, no Vendor, director,
former director, officer, shareholder or employee of the Corporation
or any Person who is a Related Person with any such Person is
indebted to the Corporation;
3.1.36 the Corporation is not conducting its business in any jurisdiction
other than the Province of British Columbia;
3.1.37 attached hereto as Schedule 3.1.37 is a list of all registered
trade marks, trade names, patents and copyrights, of all
unregistered trade marks, trade names and copyrights and of all
patent applications, trade xxxx registration applications and
copyright registration applications, both domestic and foreign,
owned or made by the Corporation;
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3.1.38 all trade marks, trade names, patents and copyrights, both
domestic and foreign, used in or required for the proper carrying on
of the Corporation's Business are validly and beneficially owned by
the Corporation with the sole and exclusive right to use the same
and are in good standing and duly registered in all appropriate
offices to preserve the right thereof and thereto;
3.1.39 the conduct of the Business by the Corporation does not infringe
upon the trade marks, trade names, patents or copyrights, domestic
or foreign, of any other Person;
3.1.40 attached hereto as Schedule 3.1.40 is a true and complete list of
all insurance policies maintained by the Corporation that also
specifies the insurer, the amount of the coverage, the type of
insurance, the policy number and any pending claims thereunder and
any previous insurance claims that have been made by the
Corporation; the Corporation maintains third party liability and
property damage automobile insurance in an amount of not less than
$1,000,000 per occurrence for all vehicles owned or leased by the
Corporation; all such insurance policies are in full force and
effect and the premiums have been fully paid to date;
3.1.41 none of the Vendors is a non-resident person within the meaning of
Section 116 of the Income Tax Act (Canada); and
3.1.42 the Corporation is not indebted to any Related Person, except for
salary and other similar compensation accrued to the Closing Date
and payable to the Vendors, or except as set out in Schedule 3.1.42;
3.1.43 except as disclosed on Schedule 3.1.43 hereto, there is no action,
suit, proceeding, claim, grievance or investigation in any court or
before any arbitrator or before of by any Governmental Authority
existing, pending or threatened, related to the Business or the
transactions contemplated by this Agreement; and there is no factual
or legal basis which could give rise in the future to the pendency
or threat of any such action, suit, proceeding, claim or
investigation which could, if determined adversely, have a material
adverse effect on the Corporation or the ability of the Corporation
to carry on the Business following Closing;
3.1.44 the Corporation and the Leased Premises (being all premises from
which it conducts the operations of the Business) are in compliance
with all
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applicable Laws of all Governmental Authorities having
jurisdiction, are not in breach of any such Laws and there is
no requirement to conduct a corrective or remedial action with
respect to such premises in order to carry on the Business as
presently conducted, and the Corporation is duly licensed,
registered or qualified, and duly possesses and is in
compliance with all Permits and quotas, in the Province of
British Columbia and all municipalities thereof in which the
Corporation carries on its business to enable the Business to
be carried on as now conducted and its assets to be owned,
leased and operated, and all such Permits are valid and
subsisting and in good standing and none of the same contains
or is subject to any term, provision, condition or limitation
which has or may have an adverse effect on the operation of
the Business or which may adversely change or terminate such
Permit by virtue of the completion of the transactions
contemplated hereby;
3.1.45 the operation of the Corporation on the Leased Premises is not
subject to any restriction or limitation and is not in contravention
of any Law or of any decree or order of any Governmental Authority
having jurisdiction;
3.1.46 except as specifically disclosed in Schedule 3.1.46 and without
limiting the scope of any other representation and warranty herein:
3.1.46.1 The Business, the Leased Premises and the Corporation
have been and are in compliance with applicable Laws,
including, without limitation, Environmental Laws;
3.1.46.2 The Corporation holds all Permits required under
applicable Environmental Laws for the operation of the
Business (the "Environmental Permits"); each
Environmental Permit is valid and in force and the
operations of the Corporation are in compliance with the
conditions set out in the Environmental Permits; there
are no grounds for revocation, expiry or annulment of any
Environmental Permits;
3.1.46.3 The Vendors, the Corporation, its employees, agents,
shareholders, directors and officers have never been
declared guilty of committing an offence for a violation
of Environmental Laws and have never had a fine imposed
against them and have never otherwise settled such a
prosecution in relation to the Business or the premises
used in the Business;
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3.1.46.4 There are no Contaminants, waste or pollutants of any
kind whatsoever in, on or under the Leased Premises or
in, on or under the assets of the Business or the
Corporation, the presence of which constitutes a
violation of applicable Environmental Laws;
3.1.46.5 The waste, effluents and air emissions generated by
the operation of the Business by the Corporation have
been and are treated, transported and eliminated in
accordance with applicable Environmental Laws;
3.1.46.6 The Corporation has not received any written or
verbal notice or request for information in the context
of any environmental federal, provincial, regional or
municipal investigation or inspection;
3.1.46.7 The Corporation does not own or use any underground
or aboveground storage tank in connection with the
Business;
3.1.46.8 There are no PCBs, asbestos, urea formaldehyde or
radioactive substances in, on or under the premises used
by the Corporation in connection with the Business; and
3.1.46.9 there is no present requirement of any applicable
Environmental Law which is due to be imposed which will
materially increase the Corporation's cost of complying
with the Environmental Laws.
3.1.47 the Closing Balance Sheet and statements of income, retained
earnings and changes in financial position for the period ended on
the Closing Date, together with the review engagement report of
Cinnamon Xxxx Xxxxxxxxxx & Company, chartered accountants, thereon
and the notes thereto:
(i) will be in accordance with the books and accounts of the
Corporation as at the Closing Date;
(ii) will be true and correct and present fairly the financial
position of the Corporation as at the Closing Date;
00
- 00 -
(xxx) will have been prepared in accordance with GAAP
consistent with the principles of GAAP used in the
preparation of the Financial Statements; and
(iv) will present fairly all of the assets and liabilities of
the Corporation as at the Closing Date including, without
limiting the generality of the foregoing, all contingent
liabilities of the Corporation as at the Closing Date;
3.1.48 the Combined Closing Balance Sheet as at the Closing Date,
together with the review engagement report of Cinnamon Xxxx
Xxxxxxxxxx & Company, chartered accountants, thereon and the notes
thereto:
(i) will be in accordance with the books and accounts of the
Corporation and Fraser Valley as at the Closing Date;
(ii) will be true and correct and present fairly the combined
financial position of the Corporation and Fraser Valley
as at the Closing Date;
(iii) will reflect the elimination of all intercompany profits
included in ending inventory of either the Corporation or
Fraser Valley;
(iv) will have been prepared in accordance with GAAP
consistent with the principles of GAAP used in the
preparation of the Balance Sheet; and
(v) will present fairly all of the assets and liabilities of
the Corporation and Fraser Valley as at the Closing Date
including, without limiting the generality of the
foregoing, all contingent liabilities of the Corporation
and Fraser Valley as at the Closing Date;
3.1.49 the accounts receivable of the Corporation which will be shown on
the Closing Balance Sheet will be collectible in the ordinary and
usual course of business and the Closing Balance Sheet will include
an appropriate allowance for uncollectible accounts;
3.1.50 the Closing Balance Sheet will include an appropriate allowance
for earned but unused vacation;
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3.1.51 the minute books of the Corporation contain a complete record of
all material decisions taken by the directors and of the
shareholders of the Corporation; the Corporation's financial and
other books and records accurately reflect the financial
transactions and the operations related to the Business;
3.1.52 Schedule 3.1.52 hereto sets forth a complete list of all bank
accounts and similar accounts held or operated by the Corporation,
stating the name of the financial institution, the account number
and the persons having authority to sign in respect of each such
account;
3.2 SURVIVAL OF VENDOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.2.1 The representations and warranties of the Vendors set forth
in Section 3.1 shall survive the completion of the sale and purchase
of the Purchased Shares herein provided for and, notwithstanding
such completion, the representations and warranties set forth in
Section 3.1 shall continue in full force and effect for the benefit
of the Purchaser for a period of three years from the Closing Date,
except for the representations and warranties of the Vendors set
forth in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.1.7
and 3.1.12 and any representation and warranty fraudulently made,
all of which shall survive in perpetuity and the representations and
warranties in relation to Taxes, all of which shall survive until
the expiry of the longest limitation period under applicable Law
relating thereto.
3.2.2 The covenants of the Vendors set forth in this Agreement
shall survive the completion of the sale and purchase of the Shares
herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Purchaser
in accordance with the terms thereof.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendors that:
3.3.1 the Purchaser is a corporation duly incorporated, organized
and subsisting under the laws of Canada;
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3.3.2 the Purchaser has good and sufficient power, authority and
right to enter into and deliver this Agreement and the Ancillary
Agreements and to complete the transactions to be completed by the
Purchaser contemplated hereby;
3.3.3 the Class F Shares will, at closing, be validly issued to
the Vendors in accordance with Schedule 2.1.1 as fully paid and
non-assessable;
3.3.4 Purchaser is not a "non-Canadian" for the purposes of and
within the meaning of the Investment Canada Act, R.S.C. 1985, c. 28
(1st Supp.);
3.3.5 Purchaser is not a non-resident of Canada for the purposes
of the Income Tax Act, S.C. 1970-72-72 c. 63 (Canada);
3.3.6 Purchaser is a taxable Canadian corporation as defined in
subsection 89(1) of the Income Tax Act (Canada);
3.3.7 the audited financial statements of the Purchaser for the
period ended December 31, 1997, together with the report thereon of
Ernst & Young, dated February 13, 1998 annexed hereto as Schedule
3.3.7:
(i) are in accordance with the books and accounts of the
Purchaser as at December 31, 1997,
(ii) are true and correct and present fairly the financial
position of the Purchaser as at December 31, 1997,
(iii) have been prepared in accordance with GAAP consistently
applied, and
(iv) present fairly all of the assets and liabilities of the
Purchaser as at December 31, 1997 including, without
limiting the generality of the foregoing, all contingent
liabilities of the Purchaser as at December 31, 1997; and
3.3.8 based on advice received from Winthrop, Stimson, Xxxxxx & Xxxxxxx,
Purchaser's U.S. securities law counsel, as set forth in the
memorandum attached as Schedule 3.3.8, and subject to the
qualifications set forth in the memorandum, the Class F Shares and
the Parent Common Shares
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(i) under Rule 144 of the United States Securities Act of
1933, as amended, ("Rule 144"), are not tradeable by the
Vendors within the first twelve months following the
Closing Date,
(ii) under Rule 144, are tradeable by the Vendors in the
second twelve month period following the Closing Date,
subject to the volume of sale and manner of sale
restrictions set out in the memorandum, and
(iii) under Rule 144, are tradeable by the Vendors without
restrictions other than the manner of sale restrictions
referred to in the memorandum commencing the third year
following the Closing Date.
3.4 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.4.1 The representations and warranties of the Purchaser set
forth in Section 3.3 shall survive the completion of the sale and
purchase of the Shares herein provided for and, notwithstanding such
completion, the representations and warranties set forth in Section
3.3 shall continue in full force and effect for the benefit of the
Vendors for a period of three years from the Closing Date, except
for the representations and warranties of the Purchaser set forth in
Sections 3.3.1, 3.3.2 and 3.3.3 any representation and warranty
fraudulently made, all of which shall survive in perpetuity and the
representations and warranties in relation to Taxes, all of which
shall survive until the expiry of the longest limitation period
under applicable Law relating thereto.
3.4.2 The covenants of the Purchaser set forth in this Agreement
shall survive the completion of the sale and purchase of the Shares
herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Vendors in
accordance with the terms thereof.
ARTICLE 4 - COVENANTS
4.1 TAXES
The Purchaser does not assume and shall not be liable for any taxes under
the Income Tax Act (Canada) or any other taxes whatsoever which may be or
become payable
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by the Vendors including, without limiting the generality of the foregoing, any
taxes resulting from or arising as a consequence of the sale by the Vendors to
the Purchaser of the Purchased Shares herein contemplated, and the Vendors
shall indemnify and save harmless the Purchaser from and against all such
taxes.
4.2 COVENANTS OF THE VENDORS
4.2.1 Each of the Vendors shall jointly and severally indemnify
and save harmless the Purchaser and the officers and directors of
the Purchaser from and against all claims, actions, demands, suits,
proceedings, losses, damages, fines, liabilities (whether accrued,
actual, contingent or otherwise), costs and expenses, including
reasonable environmental characterization and remediation costs,
reasonable lawyers fees and other reasonable consultants fees,
directly or indirectly suffered by the Purchaser and the officers
and directors of the Purchaser from any breach of any covenant of
the Vendors contained in this Agreement or from any inaccuracy or
misrepresentation in any representation or warranty set forth in
Section 3.1 notwithstanding any information obtained by the
Purchaser at or before the Closing Date as to such inaccuracy or
misrepresentation.
4.2.2 The Vendors shall ensure that the representations and
warranties of the Vendors set out in Section 3.1 are true and
correct at the Time of Closing and that the conditions of closing
for the benefit of the Purchaser set out in Section 7.1.1 over which
the Vendors have reasonable control have been performed or complied
with by the Time of Closing.
4.2.3 The Vendors shall permit the Purchaser, through its agents
and representatives, to make such reasonable investigation prior to
and at the Time of Closing of the assets of the Corporation and of
its financial and legal condition as the Purchaser considers
necessary or advisable to familiarize itself with such assets and
other matters and the Vendors shall supply any and all documents and
records of the Corporation to the Purchaser and its agents and
representatives as they may reasonably require. The Vendors shall
also permit the inspection of the assets of the Corporation by the
Purchaser prior to and at the Time of Closing by such federal,
provincial or municipal authorities as the Purchaser may require.
Such investigations and inspections shall not, however, affect or
mitigate the Vendors' covenants, representations and warranties
hereunder which shall continue in full force and effect.
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4.2.4 The Vendors shall use their best efforts as employees of the
Corporation to ensure that the Corporation's relationships with
suppliers continue on substantially the same terms and conditions
following the Closing Date.
4.2.5 Each of the Vendors shall indemnify and save harmless the
Purchaser and the officers and directors of the Purchaser from and
against all liabilities (whether actual, contingent, accrued or
otherwise), claims and demands of or in connection with any matter
relating to any contracts between the Corporation and any Related
Person entered into prior to the date of this Agreement and not
disclosed in the Schedules hereto.
4.3 COVENANTS OF THE PURCHASER
4.3.1 The Purchaser shall ensure that the representations and
warranties of the Purchaser set out in Section 3.3 are true and
correct at the Time of Closing and that the conditions of closing
for the benefit of the Vendors set out in Section 7.2.1 over which
the Purchaser has reasonable control have been performed or complied
with by the Time of Closing.
4.3.2 The Purchaser shall indemnify and save harmless the Vendors
from and against all losses, damages or expenses directly or
indirectly suffered by the Vendors resulting from any breach of any
covenant of the Purchaser contained in this Agreement or from any
inaccuracy or misrepresentation in any representation or warranty
set forth in Section 3.3.
4.4 ACKNOWLEDGMENT AND COVENANTS OF THE VENDORS
The Vendors acknowledge and agree that:
4.4.1 the Class F Shares have not been, and the Parent Common
Shares will not be, registered under the United States Securities
Act of 1933, as amended (the "Securities Act"), or any other
securities laws of the United States or Canada (the "Securities
Laws") because Purchaser is issuing the Class F Shares, and Xxxxx
Corporation will be issuing the Parent Common Shares, in reliance
upon exemptions from the registration and prospectus requirements of
the Securities Laws which they believe are available in connection
with the transactions contemplated by this Agreement;
4.4.2 Purchaser has relied upon the fact that the Class F Shares
and the Parent Common Shares are to be held by the Vendors for
investment; and
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4.4.3 exemption from registration under the Securities Laws would
not be available if the Class F Shares and the Parent Common Shares
were acquired by the Vendors with a view to distribution.
Accordingly, the Vendors hereby confirm to Purchaser and Xxxxx Corporation
that the Vendors are acquiring the Class F Shares, and will acquire the Parent
Common Shares, for the account of the Vendors, for investment and not with a
view to the resale or distribution thereof under the Securities Laws. The
Vendors agree not to transfer, sell or offer for sale all or any portion of the
Class F Shares and the Parent Common Shares, unless there is an effective
registration or other qualification or exemption relating thereto under the
Securities Laws. The Vendors understand that neither Purchaser nor Xxxxx
Corporation is under any obligation to register the Class F Shares and the
Parent Common Shares or to assist the Vendors in complying with any exemption
from registration under the Securities Laws. Prior to acquiring the Class F
Shares and, upon exchange, the Parent Common Shares, the Vendors have made such
investigation of Purchaser and Xxxxx Corporation and their respective
businesses as the Vendors have deemed advisable and has had made available to
the Vendors all information with respect thereto that the Vendors have
requested to make an informed decision to acquire the Class F Shares and the
Parent Common Shares. The Vendors consider themselves to be persons possessing
experience and sophistication as an investor that is adequate for the
evaluation of the merits and risk of the Vendors' investment in the Class F
Shares and, upon exchange, the Parent Common Shares. The Vendors acknowledge
that each certificate for the Class F Shares and the Parent Common Shares will
be imprinted with a legend in substantially the following form: "The
securities represented by this certificate were originally issued on June 30,
1998, and have not been registered under the Securities Act of 1933, as
amended, or any other securities laws of the United States or Canada. The
transfer of the securities represented by this certificate is subject to the
conditions specified in Section 4.4 of the Share Purchase Agreement dated as of
June 30, 1998 among the parties thereto, and The Purchaser reserves the right
to refuse the transfer of such securities until such conditions have been
fulfilled with respect to such transfer. A copy of such conditions will be
furnished by the Purchaser to the holder hereof upon written request and
without charge."
ARTICLE 5 - THIRD PARTY CLAIMS
In the event of a third party claim against Purchaser or the Corporation
for which the Vendors are or may be liable hereunder:
5.1 Purchaser shall tender in writing defence of the claim to the
Vendors, within 15 working days after the Purchaser knows of the
claim. The
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Vendors shall have the right, by notice to the Purchaser
within 30 days following the receipt of the notice by the
Purchaser of the third party claim, to assume the defence of
such third party claim, with counsel reasonably satisfactory
to the Purchaser and at no cost to the Purchaser. If the
Purchaser so chooses, the Purchaser may participate in the
defence of such third party claim at its sole cost and
expense; provided, however, that such participation may not in
any way interfere with or contradict the defence of such
claim. The Vendors shall cooperate fully to make available to
the Purchaser, at the Purchaser's expense, all pertinent
information and witnesses under the Vendors' control, make
such assignments and take such other steps as may be
reasonably requested by counsel for the Purchaser to conduct
such defence.
5.2 In the event that the Vendors assume the defence of such
third party claim, the Vendors, at their expense, shall diligently
proceed with the defence of said third party claim and, in
connection therewith, the Purchaser, at the Vendors' expense, shall
cooperate fully to make available to the Vendors, all pertinent
information and witnesses under the Purchaser's control, make such
assignments and take such other steps as may be reasonably requested
by counsel for the Vendors to conduct such defence.
5.3 The Vendors shall not make any settlement or compromise of
any third party claim without the written consent of the Purchaser,
which consent shall not unreasonably be withheld or delayed.
5.4 Subject to the provisions of Section 5.3, the final
resolution or determination of any such third party claim, including
all related costs and expenses, will be binding and conclusive upon
the parties hereto.
5.5 Should the Vendors fail to assume the defence of any third
party claim or fail to diligently and reasonably defend such third
party claim, the Vendors' right to defend the claim shall terminate
and the Purchaser shall be solely entitled to defend, settle and
compromise such third party claim as in its reasonable discretion
may appear advisable, and the resolution or final determination of
such defence, settlement or compromise, including all related costs
and expenses, will be binding and conclusive upon the Vendors, and
the Vendors shall indemnify the Purchaser in respect to such
resolution or final determination and all such costs and expenses.
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5.6 The provisions of this Article 5 shall apply mutatis mutandis
for the benefit of the Vendors in the event of any third party claim
against the Vendors for which the Purchaser is or may be liable
hereunder.
ARTICLE 6 - RIGHTS OF SET-OFF
6.1 The Vendors agree that the Purchaser shall have rights to set-off or
compensate any claim the Purchaser may have against the Vendors under this
Agreement or any Ancillary Agreements entered into by the Vendors in connection
with the transaction contemplated hereby or under the terms and conditions of
the Class F Shares against the payments due by the Purchaser hereunder or under
the Ancillary Agreements or under the terms and conditions of the Class F
Shares; provided that Purchaser will have no right of set-off against amounts
payable to any Vendor under his or her Employment Agreement.
6.2 If the Purchaser exercises the right of set-off, the Purchaser shall give
a prior written notice to the Vendors, that the Purchaser has elected to
exercise such right of set-off.
6.3 The Purchaser and the Vendors agree that nothing in this Article 6 shall
derogate from any of the provisions of this Agreement or the Ancillary
Agreements in favour of the Purchaser or any rights of Purchaser under the law
in respect of any claim of the Purchaser.
ARTICLE 7 - CONDITIONS
7.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER
7.1.1 The sale by the Vendors and the purchase by the Purchaser of
the Purchased Shares is subject to the following conditions which
are for the exclusive benefit of the Purchaser to be performed or
complied with at or prior to the Time of Closing:
7.1.1.1 the representations and warranties of the Vendors set
forth in Section 3.1 shall be true and correct at the Time
of Closing with the same force and effect as if made at and
as of such time;
7.1.1.2 the Vendors shall have performed or complied with all of
the terms, covenants and conditions of this Agreement to be
performed or complied with by the Vendors at or prior to the
Time of Closing;
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7.1.1.3 the Purchaser shall be furnished with such certificates,
affidavits or statutory declarations of the Corporation and
of the Vendors or of officers of the Corporation and of the
Vendor as the Purchaser or the Purchaser's counsel may
reasonably think necessary in order to establish that the
terms, covenants and conditions contained in this Agreement
to have been performed or complied with by the Vendors or by
the Corporation, as the case may be, at or prior to the Time
of Closing have been performed and complied with and that
the representations and warranties of the Vendors herein
given are true and correct at the Time of Closing;
7.1.1.4 no material damage by fire or other hazard to the assets
of the Corporation shall have occurred from the date hereof
to the Time of Closing;
7.1.1.5 all directors and officers of the Corporation specified
by the Purchaser shall resign;
7.1.1.6 the Vendors and all directors and officers of the
Corporation shall release the Corporation from any and all
possible claims against the Corporation arising from any
act, matter or thing arising at or prior to the Time of
Closing; for greater certainty, such release will not affect
the obligations of the Corporation under any of the
Ancillary Agreements;
7.1.1.7 there shall be a non-competition agreement entered into
between the Purchaser, the Corporation and each of the
Vendors substantially in the form attached hereto as
Schedule 7.1.1.7 (the "Non-Competition Agreements");
7.1.1.8 there shall be an employment agreement entered into
between the Corporation and each of Xxxxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxx and Xxxxxxx Xxxxx substantially in the form
attached hereto as Schedule 7.1.1.8 (the "Employment
Agreement");
7.1.1.9 there shall be an escrow agreement entered into between
the Purchaser, the Vendors and XxXxxxxx Xxxxxxxx, as escrow
agent, in substantially the form attached hereto as Schedule
7.1.1.9 (the "Escrow Agreement");
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7.1.1.10 the Vendors shall have delivered to the Purchaser a
favourable opinion of the Vendors' counsel substantially in
the form attached hereto as Schedule 7.1.1.10;
7.1.1.11 the execution of a Share Purchase Agreement among the
Purchaser, Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxx and Xxxxx Xxxxx
dated the date hereof with respect to the sale of all the
shares of Fraser Valley; and
7.1.1.12 the form and legality of all matters incidental to the
sale by the Vendors and the purchase by the Purchaser of the
Shares shall be subject to the approval of the Purchaser's
counsel, acting reasonably.
7.1.2 In case any term or covenant of the Vendors or condition to
be performed or complied with for the benefit of the Purchaser at or
prior to the Time of Closing shall not have been performed or
complied with at or prior to the Time of Closing, the Purchaser may,
without limiting any other right that the Purchaser may have, at its
sole option, either:
7.1.2.1 rescind this Agreement by notice to the Vendors, and in
such event the Purchaser shall be released from all
obligations hereunder; or
7.1.2.2 waive compliance with any such term, covenant or
condition in whole or in part on such terms as may be agreed
upon without prejudice to any of its rights of rescission in
the event of non-performance of any other term, covenant or
condition in whole or in part;
and, if the Purchaser rescinds this Agreement pursuant to Section 7.1.2
and the term, covenant or condition for which the Purchaser has rescinded
this Agreement was one that the Vendors had covenanted, pursuant to
Section 4.2.2, to ensure had been performed or complied with, the Vendors
shall be liable to the Purchaser for any losses, damages or expenses
incurred by the Purchaser as a result of such breach.
7.2 CONDITIONS FOR THE BENEFIT OF THE VENDORS
7.2.1 The sale by the Vendors and the purchase by the Purchaser of
the Purchased Shares is subject to the following conditions which
are for the exclusive
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benefit of the Vendors to be performed or complied with at
or prior to the Time of Closing:
7.2.1.1 the representations and warranties of the Purchaser set
forth in Section 3.3 shall be true and correct at the Time
of Closing with the same force and effect as if made at and
as of such time;
7.2.1.2 the Purchaser shall have performed or complied with all
of the terms, covenants and conditions of this Agreement to
be performed or complied with by the Purchaser at or prior
to the Time of Closing;
7.2.1.3 the Vendors shall be furnished with such certificates,
affidavits or statutory declarations of the Purchaser or of
officers of the Purchaser as the Vendors or the Vendors'
counsel may reasonably think necessary in order to establish
that the terms, covenants and conditions contained in this
Agreement to have been performed or complied with by the
Purchaser at or prior to the Time of Closing have been
performed and complied with and that the representations and
warranties of the Purchaser herein given are true and
correct at the Time of Closing;
7.2.1.4 the execution of a Share Purchase Agreement among the
Purchaser, Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxx and Xxxxx Xxxxx
dated the date hereof with respect to the sale of all the
shares of Fraser Valley;
7.2.1.5 the Corporation shall have executed Employment
Agreement[S]; and
7.2.1.6 Xxxxx Corporation shall have executed a Covenant
Agreement in favour of the Vendors substantially in the form
of Schedule 7.2.1.6 (the "Covenant Agreement).
7.2.2 In case any term or covenant of the Purchaser or condition
to be performed or complied with for the benefit of the Vendors at
or prior to the Time of Closing shall not have been performed or
complied with at or prior to the Time of Closing, the Vendors may,
without limiting any other right that the Vendors may have, at its
sole option, either:
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7.2.2.1 rescind this Agreement by notice to the Purchaser, and in
such event the Vendors shall be released from all
obligations hereunder; or
7.2.2.2 waive compliance with any such term, covenant or
condition in whole or in part on such terms as may be agreed
upon without prejudice to any of its rights of rescission in
the event of non-performance of any other term, covenant or
condition in whole or in part;
and, if the Vendors rescind this Agreement pursuant to Section 7.2.2.1
and the term, covenant or condition for which the Vendors have rescinded
this Agreement was one that the Purchaser had covenanted, pursuant to
Section 4.3.2, to ensure had been performed or complied with, the
Purchaser shall be liable to the Vendors for any losses, damages or
expenses incurred by the Vendors as a result of such breach.
ARTICLE 8 - GENERAL
8.1 FURTHER ASSURANCES
Each of the Vendors and the Purchaser shall from time to time execute and
deliver all such further documents and instruments and do all acts and things
as the other party may, either before or after the Closing Date, reasonably
require to effectively carry out or better evidence or perfect the full intent
and meaning of this Agreement.
8.2 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
8.3 COMMISSIONS
8.3.1 The Vendors shall solidarily (jointly and severally)
indemnify and save harmless the Purchaser from and against any
claims whatsoever for any commission or other remuneration payable
or alleged to be payable to any person in respect of the sale and
purchase of the Purchased Shares, to the extent such person purports
to act or have acted for the Vendors in connection with the sale of
the Purchased Shares.
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8.3.2 The Purchaser shall indemnify and save harmless the Vendors
from and against any claims whatsoever for any commission or other
remuneration payable or alleged to be payable to any person in
respect of the sale and purchase of the Purchased Shares, to the
extent such person purports to act or have acted for the Purchaser
in connection with the sale of the Purchased Shares.
8.4 LEGAL FEES
Each of the parties hereto shall pay their respective legal and accounting
costs and expenses incurred in connection with the preparation, execution and
delivery of this Agreement and all documents and instruments executed pursuant
hereto and any other costs and expenses whatsoever and howsoever incurred.
8.5 PUBLIC ANNOUNCEMENTS
Prior to closing, no public announcement or press release concerning the
sale and purchase of the Shares shall be made by the Vendors or the Purchaser
without the prior consent and joint approval of the Vendors and the Purchaser,
save as may be required by applicable Law.
8.6 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns
of the parties hereto.
8.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
There are no representations, warranties, terms, conditions, undertakings or
collateral agreements, express, implied or statutory, between the parties other
than as expressly set forth in this Agreement.
8.8 AMENDMENTS AND WAIVER
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by both of the parties
hereto and no waiver of any breach of any term or provision of this Agreement
shall be effective or binding unless made
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in writing and signed by the party purporting to give the same and, unless
otherwise provided, shall be limited to the specific breach waived.
8.9 ASSIGNMENT
This Agreement may not be assigned by any party hereto without the written
consent of the other parties, but the rights and obligations of the Purchaser
hereunder may be assigned by the Purchaser without the consent of the other
parties hereto to an affiliate of the Purchaser, as determined by the
provisions of the Canada Business Corporations Act, provided that such
affiliate enters into a written agreement with the Vendors to be bound by the
provisions of this Agreement in all respects and to the same extent as the
Purchaser is bound and provided that the Purchaser shall continue to be bound
by all the obligations hereunder as if such assignment had not occurred and
perform such obligations to the extent that such affiliate fails to do so.
8.10 NOTICES
Any demand, notice or other communication to be given in connection with
this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
To the Vendors:
XXXXXXX X. XXXXX
c/o Cinnamon Xxxx Xxxxxxxxxx & Company
000 - 0000 Xxxxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxx Xxxxxxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
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THE XXXXX FAMILY TRUST
c/o Cinnamon Xxxx Xxxxxxxxxx & Company
000 - 0000 Xxxxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxx Xxxxxxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
To the Purchaser:
WOOD XXXXX INC.
0000 - 00xx Xxxxxx
Xxxxxxx, Xxxxxx
X0X 0X0
Fax No.:(000) 000-0000
Attention:Xx. Xxxxxx X. XxxXxxxxx
With a copy to:
XxXxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Fax No.:(000) 000-0000
Attention: Xx. Xxxxxx X.X. Xxxxx
or to such other address, individual or electronic communication number as
may be designated by notice given by either party to the other. Any
demand, notice or other communication given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery
thereof and, if given by registered mail, on the third Business Day
following the deposit thereof in the mail and, if given by electronic
communication, on the day of transmittal thereof if given during the normal
business hours of the recipient and on the Business Day during which such
normal business hours next occur if not given during such hours on any day.
If the party giving any demand, notice or other communication knows or
ought reasonably to know of any difficulties with the postal system which
might affect the delivery of mail, any such demand, notice or other
communication shall not be mailed but shall be given by personal delivery
or by electronic communication.
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8.11 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada
applicable therein.
8.12 ATTORNMENT
For the purpose of all legal proceedings, this Agreement shall be
deemed to have been performed in the Province of British Columbia and the
courts of the Province of British Columbia shall have jurisdiction to
entertain any action arising under this Agreement. Each of the parties to
this Agreement accepts the jurisdiction of such courts and irrevocably
express to be bound by any judgment rendered thereby in connection with
this Agreement.
8.13 INDEPENDENT LEGAL ADVICE
Each of the Vendors acknowledges, represents and agrees that: (i) he has
had the opportunity to consult with independent legal counsel with respect to
the provisions of this Agreement; (ii) the nature, scope and effect of the
provisions of this Agreement have been adequately explained to him; and (iii)
he understands and accepts the provisions of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement.
WOOD XXXXX INC.
Per:_____________________
_________________________
XXXXXXX X. XXXXX
THE XXXXX FAMILY TRUST
Per:_____________________
Per:_____________________
