Exhibit 10.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 1st day of October, 0000,
X X X X X X X:
XXXXXXXX-XXX HOLDINGS INC., a corporation
incorporated pursuant to the laws of the Province of
Ontario (hereinafter referred to as "Xxxxxxxx-Xxx"),
and 1199846 ONTARIO LTD., a corporation incorporated
pursuant to the laws of the Province of Ontario
(hereinafter referred to as "1199846"),
(hereinafter collectively referred to as the
"Vendors"),
OF THE FIRST PART;
- and -
XXXXXXX XXXXXXXX and XXXXX XXXXXXXX, both of the City
of Oakville, in the Province of Ontario,
(hereinafter collectively referred to as the
"Connollys"),
OF THE SECOND PART;
- and -
NTN INTERACTIVE NETWORK INC., a corporation
amalgamated pursuant to the laws of Canada,
(hereinafter referred to as the "Purchaser"),
OF THE THIRD PART.
WHEREAS the Vendors beneficially own and control all of the issued and
outstanding shares in the capital of Magic Lantern Communications Ltd., a
corporation amalgamated pursuant to the laws of Canada (hereinafter
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referred to as the "Company"), save and except for 1,000 Class A special shares
in the capital of the Company which are beneficially owned and controlled by
Telesat Canada;
AND WHEREAS 1199846 beneficially owns and controls 20.1% of the issued
and outstanding shares in the capital of 745695 Ontario Ltd., a corporation
incorporated pursuant to the laws of the Province of Ontario (hereinafter
referred to as "745695"), with the remaining 79.9% of the issued and outstanding
shares in the capital of 745695 being beneficially owned and controlled by the
Company;
AND WHEREAS the Vendors desire to sell and the Purchaser desires to
purchase the said issued and outstanding shares in the capital of the Company
owned by the Vendors, all upon and subject to the terms and conditions
hereinafter set forth;
AND WHEREAS 1199846 desires to sell and the Purchaser desires to
purchase the said issued and outstanding shares in the capital of 745695 owned
by 1199846, all upon and subject to the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
agreements and covenants herein contained (the adequacy of which consideration
as to each of the parties hereto is hereby mutually admitted), the parties
hereto hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, unless there is something in
the subject matter or context inconsistent therewith, the following words and
terms shall have the respective meanings ascribed to them as follows:
(a) "Agreement" means this Share Purchase Agreement and all
instruments supplemental hereto or in amendment or
confirmation hereof;
(b) "Business" means the businesses presently carried on by the
Company and its Subsidiaries consisting of the marketing and
distribution of video programming and other media resource
material, the operation of a fulfillment service bureau, the
operation of a video dubbing and production facility, and the
operation of a digital conversion service bureau;
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(c) "Business Day" means a day other than a Saturday, Sunday or
any day on which the principal commercial banks located at
Toronto, Ontario are not open for business during normal
banking hours;
(d) "Closing" means the completion of the sale to and purchase by
the Purchaser of the Purchased Shares hereunder by the
transfer and delivery of documents of title thereto and the
payment of the purchase price therefor as contemplated herein;
(e) "Closing Date" means the 1st day of October, 1996, or such
other date as the Parties may agree as the date upon which the
Closing shall take place;
(f) "Closing Time" means 10:00 o'clock a.m. Toronto time, on the
Closing Date or such other time on such date as the Parties
may agree as the time at which the Closing shall take place;
(g) "Financial Statements" means the unaudited consolidated
financial statements of the Company and its Subsidiaries for
the period ended July 31, 1996, consisting of a balance sheet
and a statement of income and retained earnings, as reported
upon by Messrs. Harendorf, Lebane, Moss, Chartered
Accountants, a copy of which is annexed as Schedule "A"
hereto;
(h) "Parties" means the Vendors, the Connollys and the Purchaser,
collectively, and "Party" means any one of them;
(i) "Person" means any individual, corporation, partnership,
trustee or trust or unincorporated association, and pronouns
have a similarly extended meaning;
(j) "Purchaser's Counsel" means Messrs. Xxxxxx, Head, Barristers
and Solicitors, of Pickering, Ontario;
(k) "Purchase Price" means the purchase price to be paid by the
Purchaser to the Vendors for the Purchased Shares as provided
in Article 2 hereof;
(l) "Purchased Shares" means the 33,363 issued and outstanding
common shares in the capital of the Company and the 201 issued
and outstanding common shares in the capital of 745695, all as
shown in Schedule "B" hereto;
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(m) "Subsidiaries" means the corporations listed in Schedule "C"
hereto and "Subsidiary" means any one of the said corporations
listed in Schedule "C" hereto, all of the issued and
outstanding securities of which are beneficially owned and
controlled as follows, as shown in the said Schedule:
(i) Sonoptic Technologies Inc. - 75% of the issued and
outstanding securities of which are beneficially
owned and controlled by the Company, with the
remaining 25% being beneficially owned and controlled
by Provincial Holdings Ltd.;
(ii) 745695 - 79.9% of the issued and outstanding
securities of which are beneficially owned and
controlled by the Company, with the remaining 20.1%
being beneficially owned and controlled by 1199846;
(iii) B.C. Learning Connection Inc. - all of the issued and
outstanding securities of which are beneficially
owned and controlled by 745695; and
(n) "Vendors' Counsel" means Messrs. Xxxxxxx X. Xxxxxxxxx, Q. C.,
Barristers and Solicitors, of Toronto, Ontario.
Terms defined in the preamble to this Agreement shall have the same
meanings herein as are ascribed thereto in the preamble.
1.2 Gender and Number - Words importing the singular include the plural and vice
versa; words importing gender include all genders.
1.3 Entire Agreement - This Agreement, including the Schedules hereto, together
with the agreements and other documents to be delivered pursuant hereto,
constitute the entire agreement between the Parties pertaining to the subject
matter hereof and supercede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties and there are no
warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth
herein and therein.
1.4 Waivers, etc. - No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the provisions of this Agreement, in whole or in
part, shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
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1.5 Other Words and Phrases - In this Agreement, unless otherwise expressly
provided, (i) the words "hereof", "herein", "hereto" and "hereunder" and words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection, paragraph or other subdivision, and (ii) all
references to designated "Articles", "Sections", "Subsections", "paragraphs" or
other subdivisions are to the designated Articles, Sections, Subsections,
paragraphs and other subdivisions of this Agreement.
1.6 Headings - The Article and Section headings contained herein are included
solely for convenience of reference, are not intended to be full or accurate
descriptions of the content thereof and shall not be considered part of this
Agreement.
1.7 Applicable Law - This Agreement and the rights, obligations and relations of
the Parties shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein, and
the courts of Ontario shall have exclusive jurisdiction to entertain any action
in connection with this Agreement.
1.8 Currency - Unless otherwise specified, all references to currency herein are
deemed to mean lawful money of Canada, and all amounts to be paid or calculated
pursuant to this Agreement are to be paid or calculated in lawful money of
Canada.
1.9 Accounting Terms - All accounting terms shall have the meanings ascribed to
them in accordance with generally accepted accounting principles, and all
references to "generally accepted accounting principles" shall be deemed to be,
unless otherwise specified, reference to accounting principles which are
generally accepted in Canada.
1.10 Schedules - The following are the schedules attached to and incorporated in
this Agreement by reference and deemed to be an integral part hereof:
Schedule "A" - Financial Statements
Schedule "B" - Particulars of Purchased Shares; Information
re: Authorized and Issued Capital
Schedule "C" - List of Subsidiaries and Share Capital Thereof
Schedule "D" - Undisclosed Liabilities
Schedule "E" - Liens, Charges and Encumbrances
Schedule "F" - Equipment and Other Personal Property Leases
Schedule "G" - Real Property Leases
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Schedule "H" - Legal Descriptions of Real Property Owned
Schedule "I" - Standard Form Distribution Rights Agreement
Schedule "J" - Employment Contracts, Directors, Officers,
Employees and Independent Contractors
Schedule "K" - Other Material Contracts
Schedule "L" - Litigation
Schedule "M" - Description of Insurance Policies
Schedule "N" - Bank Accounts, etc.
Schedule "O" - Intellectual and Industrial Property
Schedule "P" - Vehicular Equipment Owned or Leased
Schedule "Q" - Addresses of Company and Subsidiaries
Schedule "R" - Promissory Note (Xxxxxxxx-Xxx)
Schedule "S" - Promissory Note (1199846)
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase Price - At the Closing Time, the Vendors shall sell and the
Purchaser shall purchase the Purchased Shares for an aggregate purchase price of
$1,450,000.00, $903,133.00 of which is payable to Xxxxxxxx-Xxx and $546,867.00
of which is payable to 1199846.
2.2 Action by Vendors and Purchaser at the Closing Time -
(a) Delivery of Certificates, etc. - The Vendors shall transfer and deliver
to the Purchaser at the Closing share certificates representing the
Purchased Shares duly endorsed in blank for transfer. The Vendors shall
take such steps as shall be necessary to cause the Company and 745695
to enter the Purchaser or its nominee upon the books of the Company and
745695 respectively as the holder of the Purchased Shares and to issue
share certificates to the Purchaser or its nominee representing the
Purchased Shares;
(b) Payment to the Vendors - The Purchase Price specified in Section 2.1
shall be paid and satisfied by the delivery by the Purchaser to the
Vendors at the Closing of the following:
(i) a certified cheque or bank draft payable to or to the order of
Xxxxxxxx-Xxx in the amount of $200,000.00;
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(ii) a promissory note in favour of Xxxxxxxx-Xxx in the form set
out in Schedule "R" hereto in the amount of $703,133.00; and
(iii) a promissory note in favour of 1199846 in the form set out in
Schedule "S" hereto in the amount of $546,867.00.
2.3 Place of Closing - The Closing shall take place at the Closing Time at the
offices of the Purchaser's Counsel or at such other place as may be agreed upon
by the Vendors and the Purchaser.
2.4 Tender - Any tender of documents or money hereunder may be made upon the
Parties or their respective counsel, and money may be tendered by official bank
draft drawn upon a Canadian chartered bank or by negotiable cheque payable in
Canadian funds and certified by a Canadian chartered bank or trust company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Vendors and the Connollys - The
Vendors and the Connollys hereby jointly and severally represent and warrant to
the Purchaser as follows and acknowledge that the Purchaser is relying on such
representations and warranties in connection with the transactions contemplated
by this Agreement:
(a) Organization and Valid Existence; the Vendors - The Vendors are
corporations duly incorporated and organized and are validly existing
under the laws of the Province of Ontario and the Vendors have all
necessary corporate power, authority and capacity to own and dispose of
the Purchased Shares. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder have been
duly authorized by all necessary corporate action on the part of the
Vendors.
(b) Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of the Vendors enforceable against them in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court
from which they are sought.
(c) Right to Sell - The Vendors:
(i) are the sole beneficial owners of the Purchased Shares, which
shares constitute all the issued and outstanding shares in the
capital of the Company and 745695 save and except for 1,000
Class A special shares in the capital of the Company which are
beneficially owned and controlled by Telesat Canada and 799
common shares in the capital of 745695 which are beneficially
owned and controlled by the Company;
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(ii) have the exclusive right to dispose of the Purchased Shares as
herein provided and such disposition will not violate,
contravene, breach or offend against or result in any default
under any indenture, mortgage, lease, agreement, instrument,
charter or by-law provision, statute, regulation, order,
judgment, decree or law to which the Vendors are a party or
subject or by which the Vendors are bound or affected; and
(iii) are the holders of record of all the Purchased Shares, free
and clear of any liens, charges, encumbrances or rights of
others (other than the rights of the Purchaser hereunder) and
no Person (other than the Purchaser hereunder) has any
agreement, option or any rights capable of becoming an
agreement or option for the acquisition of the Purchased
Shares;
(d) Licences, Registrations and Compliance - The Company and the
Subsidiaries are registered, licensed or otherwise qualified as a
corporation to do business in each jurisdiction in which the nature of
their businesses or the property owned or leased by them makes such
registration, licensing or other qualification necessary, and such
registrations, licences or qualifications (as the case may be) are in
good standing. Neither the Company nor any of the Subsidiaries are in
violation of any applicable laws, regulations, orders, rules, decrees
or ordinances. The Company and the Subsidiaries have offices in the
Provinces of Ontario, New Brunswick and British Columbia and only at
the addresses listed in Schedule "Q" hereto. Neither the Company nor
any Subsidiary have in the past three years had offices at addresses
other than those listed in Schedule "Q" hereto;
(e) Organization and Valid Existence: the Company - The Company is a
corporation duly amalgamated and organized and is validly existing
under the laws of Canada, and has all necessary corporate power,
authority and capacity to own and lease its property and assets
(including, without limitation, the property and assets shown in the
Financial Statements) and to carry on the Business as presently
conducted by it;
(f) Subsidiaries - The Company has no subsidiaries other than the
Subsidiaries listed in Schedule "C" hereto. Each such Subsidiary is
duly incorporated or continued and organized and validly exists under
the laws of its jurisdiction of incorporation or continuance, as the
case may be. The respective jurisdictions of incorporation or
continuance, as the case may be, and the shares in the capital of such
Subsidiaries issued to or in favour of the Company and/or any other
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shareholder thereof are as set forth in Schedule "C". All such shares
have been duly and validly issued, are outstanding as fully paid and
non-assessable shares in the capital of the respective Subsidiaries and
are owned beneficially and of record by the respective shareholders,
free and clear of any liens, charges, encumbrances or rights of others.
No options, warrants or other rights to purchase shares or other
securities of any of the Subsidiaries have been authorized or agreed to
be issued or are outstanding;
(g) Capitalization - The authorized and issued share capital of the Company
is as set forth in Schedule "B" hereto. All such issued share capital
has been duly and validly issued and is outstanding as fully paid and
non-assessable shares in the capital of the Company. No options,
warrants or other rights to purchase shares or other securities of the
Company have been authorized or agreed to be issued or are outstanding;
(h) Financial Statements - The Financial Statements are true and correct
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of the preceding
period. The Financial Statements present a true and complete statement
of the consolidated financial condition and assets and liabilities of
the Company and its Subsidiaries as at July 31, 1996 and the other
statement comprising the Financial Statements, being the statement of
income and retained earnings, accurately sets forth the results of the
operations of the Company and its Subsidiaries on a consolidated basis
throughout the period covered thereby;
(i) Absence of Undisclosed Liabilities - Except to the extent reflected or
reserved against in the Financial Statements or incurred subsequent to
the date thereof and disclosed in Schedule "D" and except as incurred
in the ordinary and usual course of the Business of the Company or its
Subsidiaries, neither the Company nor any Subsidiary has any
outstanding indebtedness or any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of a nature customarily
reflected or reserved against in a balance sheet (including the notes
thereto) prepared in accordance with generally accepted accounting
principles;
(j) Net Worth - The consolidated tangible net worth (paid-up capital plus
earned and contributed surpluses) of the Company and its Subsidiaries,
calculated in accordance with generally accepted accounting principles
(applied on a basis consistent with those applied in connection with
the Financial Statements) is not less than the consolidated tangible
net worth of the Company and its Subsidiaries as at the date of, and as
set forth in the Financial Statements;
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(k) Tax Matters - Each of the Company and each Subsidiary has duly and
timely filed all federal, provincial and local income, franchise,
capital, sales or use, excise, fuel, property or other tax returns or
reports required by any law or regulation to be filed by it and has
duly paid all taxes, assessments and reassessments, and all other
taxes, duties, governmental charges, penalties, interest and fines due
and payable by it on or before the date hereof, save and except that,
(i) the tax return for Sonoptic Technologies Inc. for the fiscal
year ended September 30, 1995 was filed in September, 1996;
(ii) the tax liability of the Company for the fiscal year ended
September 30, 1995 has not been paid, given that the said tax
liability will be offset by a loss carry back based on the tax
return filed for the Company for the six month period ended
March 31, 1996, all of which will result in a net refund to
the Company; and
(iii) the tax liability of 745695 for the fiscal year ended
September 30, 1995, being approximately $2,000.00, has not yet
been paid.
Neither the Company nor any Subsidiary has received from any authority
any assessment, reassessment or notice of underpayment of any taxes or
other charges and no such notice is reasonably to be expected.
The most recent year for which the federal income tax liability of the
Company and the Subsidiaries has been reviewed and finally determined
by the applicable authorities is its fiscal year ended September 30,
1995. 745695 has not yet been assessed by the Province of Ontario for
the fiscal year ended September 30, 1995. There is no misrepresentation
that is attributable to neglect, carelessness, wilful default or fraud
in tax returns previously filed.
No consents extending or waiving the time limited for reassessment of
any taxes, duties, governmental charges, penalties, interest or fines,
or any statutes of limitations related thereto have been filed with
respect to the Company or any Subsidiary for any fiscal year.
Each of the Company and the Subsidiaries has withheld from each payment
made to any of its officers, former officers, directors, former
directors, and employees and former employees the amount of all taxes
and other deductions (including without limitation, income taxes,
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unemployment, disability and other required taxes and contributions)
required to be withheld and has paid the same together with the
employer's share of same, if any (to the extent required to be paid so
no such amount is past due), to the proper tax or other receiving
officers within the prescribed times and has filed, in complete and
accurate form, all information and other returns required pursuant to
any applicable legislation within the prescribed times.
The provision made for taxes included in the Financial Statements is
sufficient for the payment of all accrued and unpaid federal,
provincial and local income, franchise, capital, sales or use, excise,
fuel, property or other taxes, assessments and reassessments, duties,
governmental charges, penalties, interest and fines of, and payable by,
the Company and the Subsidiaries whether or not disputed, for the
period ended on such date and for all periods prior thereto.
(l) Absence of Changes - Since the date of the Financial Statements there
has not been:
(i) any material change in the condition or operations of the
business, assets or financial condition of the Company or its
Subsidiaries other than changes in the ordinary and normal
course of business, none of which has been materially adverse;
or
(ii) any damage, destruction or loss, labour trouble or other
event, development or condition of any character (whether or
not covered by insurance) materially and adversely affecting
the business, assets, properties or future prospects of the
Company or its Subsidiaries;
(m) Absence of Unusual Transactions - Since the date of the Financial
Statements neither the Company nor any Subsidiary has:
(i) transferred, assigned, sold or otherwise disposed of any of
the assets shown in the Financial Statements or cancelled any
debts or claims except in each case in the ordinary and usual
course of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except those listed in Schedule "D" hereto and
except unsecured current obligations and liabilities incurred
in the ordinary and normal course of business;
(iii) issued or sold any shares in its capital or any warrants,
bonds, debentures or other securities of the Company or any
Subsidiary or issued, granted or delivered any right, option
or other commitment for the issuance of any such shares,
warrants, bonds, debentures or other securities;
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(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than
liabilities included in the Financial Statements and
liabilities incurred since the date thereof in the ordinary
and normal course of business;
(v) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital or
purchased or redeemed any such shares thereof or effected any
subdivision, consolidation or reclassification of any such
shares;
(vi) suffered any operating loss or any extraordinary loss, or
waived any rights of substantial value, or entered into any
commitment or transaction not in the ordinary and usual course
of business where such loss, rights, commitment or transaction
is or would be material in relation to the Company or the
Subsidiary, as the case may be;
(vii) amended or changed or taken any action to amend or change its
articles or by-laws;
(viii) made any general wage or salary increases in respect of
personnel which it employs;
(ix) except as disclosed in Schedule "E" hereto, mortgaged,
pledged, subjected to lien, granted a security interest in or
otherwise encumbered any of its assets or property, whether
tangible or intangible; or;
(x) authorized or agreed or otherwise become committed to do any
of the foregoing;
(n) Title to Properties - Except as disclosed in the Financial Statements
or in Schedule "E" hereto, the Company and its Subsidiaries have good
and marketable title to all their respective properties, interests in
properties and assets, real and personal, including without limitation
those reflected in the Financial Statements or acquired since the date
of the Financial Statements (except as since transferred, sold or
otherwise disposed of in the ordinary and usual course of business),
free and clear of all mortgages, pledges, liens, encumbrances or other
charges of any kind or character;
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(o) Leased Equipment - Schedule "F" sets forth a true and complete list of
all equipment, other personal property and fixtures in the possession
or custody of the Company and/or its Subsidiaries which, as of the date
hereof, is leased or held under licence or similar arrangement and of
the leases, licenses, agreements and other documentation relating
thereto.
(p) Collectibility of Accounts Receivable - The accounts receivable shown
in the Financial Statements or acquired subsequent to the date thereof
and prior to the date of this Agreement by the Company or its
Subsidiaries either have been collected or are good and collectible
within 120 days of the date the invoice in respect thereof was issued
at the aggregate recorded amounts thereof (subject to no defence,
counterclaim or set off), except to the extent of any reserves provided
for such accounts in the Financial Statements as adjusted in the
ordinary and usual course of business, and except for an account
rendered to Hascom Television Distributors Limited in May/June of 1996
in the amount of $47,294.00, which amount shall be paid as follows:
(i) $5,777.76 on September 1, 1996;
(ii) $5,777.78 on each of December 1, 1996, March 1, 1997, June 1,
1997, September 1, 1997, December 1, 1997, March 1, 1998, June
1, 1998 and September 1, 1998;
(q) Lease of Real Property - Neither the Company nor any Subsidiary is a
party to or bound by any leases of real property other than those
referred to in Schedule "G" hereto, and all interests held by the
Company and its Subsidiaries as lessees under such leases are free and
clear of any and all liens, charges and encumbrances of any nature and
kind whatsoever.
All rental and other payments required to be paid by the Company or any
Subsidiary, as lessees, pursuant to such leases have been duly paid.
Such leases are in full force and effect without amendment thereto and
neither the Company nor any Subsidiary is otherwise in default in
meeting its obligations contained in any such lease, and none of the
lessors thereto are in default in meeting their obligations contained
in any such lease;
(r) Real Property - Particulars of all real property owned by the Company
and its Subsidiaries are set forth in Schedule "H" hereto, and from the
date hereof to and including the Closing Date the Purchaser or its
agents shall, during normal business hours and upon reasonable notice,
be entitled, at the Purchaser's own cost and expense, to attend upon
and inspect the said real property and the buildings and improvements
located thereon;
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(s) Use - The buildings and improvements located on the real property
referred to in paragraph (r) of this Section 3.1, the operation and
maintenance thereof as now operated and maintained and the purposes for
which they are presently being used, are not in breach in any material
respect of any statute, by-law, ordinance, regulation, covenant,
restriction or official plan (collectively the "Laws"), none of such
buildings and improvements encroaches upon any other lands and there
are no restrictive covenants or Laws which in any restrict or prohibit
the use of the said buildings, improvements and real property for the
purposes for which they are presently being used.
All buildings and other structures located on the real property
referred to in paragraph (r) of this Section 3.1 are not now and have
never been insulated with urea formaldehyde foam insulation, nor do
such buildings or structures contain any aluminum wiring or friable
asbestos or any other substance containing a type of asbestos or
asbestos product which is a hazardous product, toxic or priority
substance or any other substance deemed hazardous or regulated by any
laws or regulations of Canada or the Province of Ontario in force at
the date hereof;
(t) Condition of Assets - All material tangible assets of the Company and
its Subsidiaries used in or in connection with the Business are in good
condition, repair and (where applicable) proper working order,
reasonable wear and tear excepted;
(u) Distribution Rights Agreements - Annexed hereto as Schedule "I" is the
standard form of distribution rights agreement entered into by the
Company with its suppliers, wherein the Company obtains from the said
suppliers the right to distribute their video programs, and none of the
distribution rights agreements entered into by the Company with the
said suppliers and in existence at the date hereof varies materially
from the standard form annexed hereto as Schedule "I". Also set forth
in Schedule "I" hereto is a complete list of all suppliers who have
executed a distribution rights agreement with the Company, including
the number of video titles covered thereby and such other particulars
as are therein set forth;
(v) Employment Contracts - Except as set out in Schedule "J" hereto,
neither the Company nor the Subsidiaries have any written contracts of
employment with any employees or any oral contracts of employment with
any employees, and neither the Company nor the Subsidiaries have any
employees who cannot be dismissed on not more than four months' notice
without further liability, save and except Xxxxx Xxxxx. There is set
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forth in Schedule "J" hereto the names and titles of all the directors,
officers and employees of the Company and each Subsidiary, together
with particulars of the material terms and conditions of employment or
engagement of such persons, including rates of remuneration, benefits,
positions held and date of commencement of employment. The employment
records of the Company and each Subsidiary are true, complete and
correct;
Also set forth in Schedule "J" hereto is a complete list of all
independent contractors, sub-contractors, and agents which are
presently engaged by the Company or the Subsidiaries pursuant to
contract, understanding or arrangement, written or oral, together with
particulars of the material terms and conditions of the contract,
understanding or arrangement.
Neither the Company nor the Subsidiaries have any union or collective
labour, pension, deferred profit sharing, stock option or other similar
agreement and no attempts are being made by any trade union or employee
association to organize or represent any employees of the Company or
the Subsidiaries.
There is not now any circumstances or conduct which could result in the
filing of an unfair labour practice complaint; any such complaints
previously raised and currently ongoing and the current status thereof
are particularized in Schedule "L". No contracts, agreements or
arrangements with any employees or unions shall be entered into by the
Company or the Subsidiaries between the date hereof and the Closing
Date except with the prior written consent of the Purchaser. As well,
between the date hereof and the Closing Date there will be no material
increase in the compensation (monetary or otherwise) of the employees
of the Company or the Subsidiaries without the prior written consent of
the Purchaser;
(w) Material Contracts - Except for the liens, charges and encumbrances
listed in Schedule "E", the equipment and other personal property
leases and agreements referred to in Schedule "F", the real property
leases listed in Schedule "G", the employment contracts listed in
Schedule "J" and the contracts and agreements listed in Schedule "K",
neither the Company nor any Subsidiary is a party to or bound by any
material contract or commitment whether oral or written. The contracts
and agreements listed in Schedule "K" are all in full force and effect
unamended and no material default exists in respect thereof on the part
of any of the parties thereto. Such contracts and agreements include
all the presently outstanding material contracts entered into by the
Company and its Subsidiaries in the course of carrying on their
respective businesses and all quotations, orders or tenders for such
contracts which remain open for acceptance. The Company and its
Subsidiaries have the capacity, including the necessary personnel,
equipment and supplies, to perform all their obligations thereunder;
16
(x) Absence of Guarantees - Neither the Company nor any Subsidiary has
given or agreed to give, or is a party to or bound by, any guarantee of
indebtedness or other obligations of third parties or any other
commitment by which the Company or such Subsidiary is, or is
contingently, responsible for such indebtedness or other obligation;
(y) Absence of Conflicting Agreements - Neither the Company nor any
Subsidiary is a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law
provision, statute, regulation, order, judgment, decree or law which
would be violated, contravened, breached by or under which default
would occur, as a result of the execution and delivery of this
Agreement or the consummation of any of the transactions provided for
herein;
(z) Litigation - Except as disclosed in Schedule "L" hereto, there is no
suit, action, litigation, arbitration proceeding, governmental
proceeding or hearing before an administrative tribunal, including
appeals and applications for review, in progress, pending or threatened
against or relating to the Company or its Subsidiaries or affecting its
or their properties or business which, if determined adversely to the
Company or its Subsidiaries, might materially and adversely affect the
properties, business, future prospects or financial condition of the
Company or its Subsidiaries. Except as shown in the said Schedule,
there is not presently outstanding against the Company or any
Subsidiary any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator.
(aa) Bank Accounts, etc. - There is set forth in Schedule "N" hereto the
name of each bank or other depository in which the Company and each
Subsidiary maintains any bank account, trust account or safety deposit
box and the names of all persons authorized to draw thereon or who have
access thereto;
(bb) Residence of the Vendors - The Vendors are not non-residents of Canada
for the purposes of the Income Tax Act (Canada);
(cc) Insurance - The Company and each Subsidiary maintain such policies of
insurance, issued by responsible insurers, as are appropriate to their
Business, property and assets, in such amounts and against such risks
as are customarily carried and insured against by owners of comparable
businesses, properties and assets; all such policies of insurance are
in full force and effect and neither the Company nor any Subsidiary is
in default, whether as to the payment of premium or otherwise, under
the terms of any such policy.
17
Schedule "M" hereto sets forth a true and complete list of all such
insurance policies presently maintained by the Company and the
Subsidiaries together with a brief description of each such policy
including the type of policy, name of insurer, coverage limits,
expiration dates and annual premiums;
(dd) Intellectual and Industrial Property - Attached as Schedule "O" is a
true and correct schedule (including the appropriate registration
numbers and expiration dates, if applicable) identifying all patents,
patent rights or licences, patent applications, trade marks, trade xxxx
registrations and applications, trade xxxx rights, trade names, trade
secrets, service marks and applications therefore, copyrights and
copyright registrations and copyright applications used in whole or in
part in or required for the proper carrying on of the Business
(collectively, the "Trade Marks"). The Trade Marks, both domestic and
foreign, if any, are validly and beneficially owned by the Company or
the Subsidiaries (as the case may be) with the right to use the same,
and are in good standing and duly registered in all appropriate offices
in Canada, Ontario, New Brunswick and British Columbia in order to
preserve the rights thereof and thereto. The Company or the
Subsidiaries or any of them (as the case may be) own or have the right
to use the Trade Marks, and all intellectual and industrial property
and technology necessary to carry on the Business in the ordinary and
normal course and have taken all reasonable precautions in Canada,
Ontario, New Brunswick and British Columbia to protect the Trade Marks,
and all such intellectual and industrial property and technology. The
operation of the Business does not infringe upon the intellectual or
industrial property or technology of any other Person;
(ee) Vehicular Equipment - Schedule "P" contains a list of all vehicular
equipment owned or leased by the Company and its Subsidiaries. Such
vehicular equipment is in roadworthy condition and is capable of
satisfying the inspection requirements and performance standards
prescribed by the Highway Traffic Act (Ontario) and the Regulations
thereto, as may be amended from time to time, for its particular type
or class;
(ff) Copies of Agreements, etc. - True, correct and complete copies of all
mortgages, leases, agreements, instruments and other documents listed
in Schedules "E", "F", "G", "I", "J", "K" and "M" have been delivered
to the Purchaser;
18
(gg) Corporate Records - The corporate records and minute books of the
Company and each of the Subsidiaries contain complete and accurate
copies of all by-laws of such corporations and minutes of all meetings
and resolutions of the directors and shareholders of such corporations;
all such meetings were duly called and held, all such by-laws and
resolutions were duly passed and the share certificate books, registers
of shareholders, registers of transfers and registers of directors of
the Company and each of the Subsidiaries are complete and accurate in
all material respects;
(hh) Books of Account - The books and records of account of the Company and
each of the Subsidiaries fairly and correctly set out and disclose in
all material respects and in accordance with generally accepted
accounting principles, consistently applied, the financial position of
the Company and each of the Subsidiaries as of the date hereof and all
material financial transactions of the Company and each of the
Subsidiaries have been accurately recorded in such books and records;
(ii) Third Party Approvals - There are no approvals, consents or waivers
required to be obtained or applications required to be filed from or
with governmental authorities in Canada or from any other Person
whatsoever, including pursuant to any contracts containing prohibitions
to the within transactions, in order to permit the transactions
contemplated herein or to preserve the Business and/or assets of the
Company and/or the Subsidiaries;
(jj) Compliance with Environmental Laws - The Company, the Subsidiaries and
the Business are in compliance with and have always been in compliance
with all, and do not violate, and have not violated any, applicable
federal, provincial, municipal or local laws, regulations, orders,
governmental decrees, ordinances or any and all other legislation or
regulatory instruments with respect to environmental, health or safety
matters (collectively, "Environmental Laws").
The Company and the Subsidiaries have never been charged with or
convicted of any offence under Environmental Laws.
19
None of the Company or the Subsidiaries is required to hold any
licence, permit or approval under any Environmental Laws for any reason
whatsoever (including in connection with the operation of the
Business). None of the Company or the Subsidiaries have received any
notification pursuant to any Environmental Laws that any work, repairs,
construction or capital expenditures are required to be made in respect
of any of the assets owned or used by them or any of them as a
condition of continued compliance with any Environmental Laws;
None of the Company or the Subsidiaries have received any notification
pursuant to any Environmental Laws that any work, repairs, construction
or capital expenditures are required to be made in respect of any of
the assets owned or used by them or any of them as a condition of
continued compliance with any Environmental Laws;
(kk) Employment Equity - None of the Company or the Subsidiaries have
received notice of any proposed or pending compliance review in respect
of employment equity and no sanctions have been imposed on any of them
for failing to honour their commitment to employment equity;
(ll) 1113659 Ontario Ltd. ("1113659") - 1113659 is a corporation duly
incorporated and validly existing under the laws of Ontario. 1113659
has no assets or liabilities and has never in the past carried on
business. At present, the authorized capital of 1113659 consists of an
unlimited number of Class "A" special shares, an unlimited number of
Class "B" special shares and an unlimited number of common shares, of
which none of the Class "A" special shares, none of the Class "B"
special shares and 1,000 of the common shares (and no more) have been
duly issued and are outstanding as fully paid and non-assessable
shares. In respect of the said 1,000 issued and outstanding common
shares, 660 are beneficially owned and controlled by Xxxxxxxx-Xxx, 300
are beneficially owned and controlled by Cornpepper Productions Ltd.
and 40 are beneficially owned and controlled by Xxxxxxx X. Xxxxxxxxx.
No options, warrants or other rights to purchase shares or other
securities of 1113659 have been authorized or agreed to be issued or
are outstanding. The Company has made arrangements to acquire, at a
cost of $1,000.00, 50% of the issued and outstanding common shares of
1113659 on or before October 11, 1996, with the remaining 50% being
acquired by International Tele-Film Enterprises Ltd. ("International")
at the same time, with the net result being that, as soon as the said
share transfers have been completed, 50% of the issued and outstanding
common shares of 1113659 will be beneficially owned and controlled by
the Company, with the remaining 50% being beneficially owned and
controlled by International;
(mm) Full Disclosure - None of the foregoing representations, warranties and
statements of fact contains any untrue statement of material fact or
omits to state any material fact necessary to make any such statement
or representation not misleading to a prospective purchaser of the
Purchased Shares seeking full information as to the Company, the
Subsidiaries and 1113659 and their respective properties, business and
affairs.
20
3.2 Representations and Warranties of the Purchaser - The Purchaser hereby
represents and warrants to the Vendors as follows and acknowledges that the
Vendors are relying on such representations and warranties in connection with
the transactions contemplated by this Agreement:
(a) Organization and Valid Existence - The Purchaser is a corporation duly
amalgamated and organized and is validly existing under the laws of
Canada and has all necessary corporate power, authority and capacity to
enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereunder have been duly authorized by
all necessary corporate action on the part of the Purchaser;
(b) Enforceability of Obligations - This Agreement constitute a valid and
binding obligation of the Purchaser enforceable against it in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court
from which they are sought;
(c) Residence of the Purchaser - The Purchaser is not a non-Canadian within
the meaning of the Investment Canada Act.
3.3 No Broker - Each of the Parties represents and warrants to the others that
all negotiations relating to this Agreement and the transactions contemplated
hereby have been carried on between them directly and without the intervention
of any other party in such manner as to give rise to any valid claims against
any of the Parties for a brokerage commission, finder's fee or other like
payment.
3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser at any
time shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by the Vendors herein or pursuant
hereto.
3.5 Nature and Survival of Representations, Warranties and Covenants - All
statements contained in any certificate or other instrument delivered by or on
behalf of a Party pursuant to or in connection with the transactions
contemplated by this Agreement shall be deemed to be made by such Party
hereunder. All representations, warranties, covenants and agreements herein
contained on the part of each of the Parties shall survive the Closing, the
execution and delivery hereunder of share or security transfer instruments and
other documents of title to the Purchased Shares and the payment of the
consideration therefor, provided that:
(a) the representations and warranties contained in Section 3.1 (except
with respect to tax matters), Section 3.2 and Section 3.3 shall only
survive for a period of three (3) years from the Closing Time (such
time hereinafter called the "Warranty Expiry Time"); and
(b) the representations and warranties in respect of tax matters relating
to fiscal years:
21
(i) in respect of which the Canadian Minister of National Revenue
has the right to assess, reassess or make additional
assessments pursuant to the Income Tax Act (Canada) as amended
from time to time; or
(ii) in respect of which any taxation authority of competent
jurisdiction administering any tax legislation pursuant to
which any of the Company or the Subsidiaries is required to
report its income or file an income tax return has the right
to assess, reassess or make additional assessments pursuant to
the taxation legislation of such jurisdiction,
shall survive until the date following the day that the rights of
assessment or reassessment referred to in this sentence cease (such
time hereinafter called the "Tax Warranty Expiry Time").
If no claim has been made against a Party hereto with respect to any
incorrectness or misrepresentation in any such representation or warranty prior
to the Warranty Expiry Time or within thirty (30) days of the expiry of the Tax
Warranty Expiry Time, such Party shall have no further liability hereunder with
respect to such representation and warranty.
ARTICLE 4
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PURCHASER AND THE VENDORS OF
THEIR OBLIGATIONS UNDER THIS AGREEMENT
4.1 Purchaser's Conditions - The obligation of the Purchaser to complete the
purchase of the Purchased Shares hereunder shall be subject to the satisfaction
of, or compliance with, in all materials respects, at or before the Closing
Time, each of the following conditions precedent (each of which is hereby
acknowledged to be inserted for the exclusive benefit of the Purchaser and may
be waived by it in whole or in part):
(a) Truth and Accuracy of Representations of Vendors at the
Closing Time - All of the representations and warranties of
the Vendors made in or pursuant to this Agreement, including,
without limitation, the representations and warranties made by
the Vendors and set forth in Sections 3.1 and 3.3 hereof,
shall be true and correct as at the Closing Time and with the
same effect as if made at and as of the Closing Time (except
as such representations and warranties may be affected by the
occurrence of events or transactions expressly contemplated
and permitted hereby or by transactions in the ordinary and
22
normal course of business), and the Purchaser shall have
received a certificate from a duly authorized senior officer
of each of the Vendors and from the Connollys confirming the
truth and correctness of the representations and warranties of
the Vendors and the Connollys contained herein;
(b) Performance of Obligations - The Vendors shall have performed
or complied with, in all respects, all of their obligations,
covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Vendors of their obligations under
this Agreement shall be satisfactory to the Purchaser and
Purchaser's Counsel and the Purchaser shall have received
copies of all such documentation or other evidence as it may
reasonably request in order to establish the consummation of
the transactions contemplated hereby and the taking of all
corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and
otherwise) and substance satisfactory to the Purchaser and
Purchaser's Counsel;
(d) Opinion of Counsel for the Vendors and the Company - The
Purchaser shall have received from Vendors' Counsel an opinion
dated the Closing Date, in form and substance satisfactory to
Purchaser's Counsel, confirming such matters in regard to the
Vendors, the Company, the Subsidiaries and the Business as are
customary in transactions of this nature;
(e) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of any Persons or
governmental authorities in Canada or elsewhere (or
registrations, declarations, filings or recordings with any
such authorities) required in connection with the completion
of any of the transactions contemplated by this Agreement, the
execution of this Agreement, the Closing or the performance of
any of the terms and conditions hereof, shall have been
obtained on or before the Closing Time;
The Vendors shall have obtained and delivered to the Purchaser
written consents, in form and substance satisfactory to the
Purchaser, to the transactions contemplated herein which are
23
required pursuant to the personal property leases and
agreements referred to in Schedule "F", the real property
leases referred to in Schedule "G", the employment contracts
referred to in Schedule "J" and the contracts and agreements
listed in Schedule "K", including, without limiting the
generality of the foregoing, such acknowledgements and
confirmations of good standing from the lessors in respect of
the real property leases referred to in Schedule "G" hereto as
may be reasonably requested by the Purchaser;
(f) Directors and Officers of the Company and Subsidiaries - The
board of directors of the Company and each Subsidiary at the
Closing Time shall consist of persons nominated by the
Purchaser and there shall have been delivered to the Purchaser
on or before the Closing Time the resignations of such persons
as the Purchaser shall direct who are presently directors
and/or officers of the Company and each Subsidiary from such
positions and duly executed comprehensive releases from each
such person and from the Vendor of all their claims
respectively, against the Company and each Subsidiary, except
for any claims for current unpaid remuneration;
(g) Management Agreement - Xxxxxxxx-Xxx shall have entered into a
management agreement with the Company upon terms satisfactory
to the Purchaser, under which Xxxxxxxx-Xxx shall provide the
services of the Connollys to the Company for a period of 11
months following Closing;
(h) Indemnity - Xxxxxxxx-Xxx and each of the Connollys shall have
entered into an indemnity agreement in favour of the Company
upon terms and conditions satisfactory to the Purchaser, in
respect of the management agreement referred to in Subsection
4.1(g) hereof;
(i) Employment Agreements - Each of the Connollys shall have
entered into an employment agreement with the Company upon
terms satisfactory to the Purchaser, under which the Connollys
shall be employed by the Company for a period of two years
commencing on September 1, 1997;
(j) Option Agreements - Each of the Vendors shall have entered
into an option agreement with the Purchaser and NTN Canada,
Inc. upon terms satisfactory to the Purchaser and NTN Canada,
Inc., relating to the common shares in the capital of NTN
Canada, Inc. referred to in the promissory notes annexed as
Schedules "R" and "S" hereto respectively;
24
(k) Non-Competition, etc. - There shall have been delivered to the
Purchaser from the Connollys an executed non-competition,
non-solicitation and confidentiality agreement, which
agreement shall provide that, for a period of 35 months
(subject to an increase to 47 months in the case of Xxxxxxx
Xxxxxxxx in the event of certain specified circumstances) from
the Closing, the Connollys shall not, either alone or in
conjunction with any individual, firm, corporation,
association or other entity (except for the Company, the
Subsidiaries, the Purchaser or their affiliates), whether as
principal, agent, shareholder or in any other capacity
whatsoever;
(i) carry on, be engaged in, concerned with or interested
in, or give financial assistance to, directly or
indirectly, any undertaking which is in whole or in
part competitive with any of the businesses carried
on by the Company and its Subsidiaries, or any of
them, within the respective territories in which such
businesses are then carried on (except for any equity
share investment in a public company whose shares are
listed on a recognized stock exchange where such
share investment does not in the aggregate exceed
five per cent (5%) of the issued equity shares of
such company);
(ii) attempt to solicit any suppliers, employees or
customers away from the Company or any Subsidiary;
(iii) take any act as a result of which the relations
between the Company or its Subsidiaries and its or
their customers, employees or others may be impaired
or which may otherwise be detrimental to the
Business;
(iv) divulge to any Person any name, address or
requirement of any customer of the Company or its
Subsidiaries; or
(v) divulge to any Person any process, method or device
of the Business or any other confidential or
financial information in respect of the Company or
its Subsidiaries.
(l) No Fire Damage - No substantial damage by fire or other hazard
to the assets of the Company shall have occurred from the date
hereof to the Closing Date; and
25
(m) Litigation - On the Closing Date, there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper.
4.2 Vendors' Conditions - The obligations of the Vendors to complete the sale of
the Purchased Shares hereunder shall be subject to the satisfaction of or
compliance with, at or before the Closing Time, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of the Vendors and may be waived by them in whole or in part):
(a) Truth and Accuracy of Representations of Purchaser at Closing
Time - All of the representations and warranties of the
Purchaser made in or pursuant to this Agreement, including,
without limitation, the representations and warranties made by
the Purchaser and set forth in Sections 3.2 and 3.3 hereof,
shall be true and correct as at the Closing Time and with the
same effect as if made at and as of the Closing Time and the
Vendors shall have received a certificate from a duly
authorized senior officer of the Purchaser confirming the
truth and correctness of the representations and warranties of
the Purchaser contained herein;
(b) Performance of Obligations - The Purchaser shall have
performed or complied with, in all respects, all of its
obligations, covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Purchaser of its obligations under
this Agreement shall be satisfactory to the Vendors and
Vendors' Counsel and the Vendors shall have received copies of
all such documentation or other evidence as they may
reasonably request in order to establish the consummation of
the transactions contemplated hereby and the taking of all
corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and
otherwise) and substance satisfactory to the Vendors and
Vendors' Counsel;
(d) Management Agreement - The Company shall have entered into a
management agreement with Xxxxxxxx-Xxx upon terms satisfactory
to Xxxxxxxx-Xxx, under which Xxxxxxxx-Xxx shall provide the
services of the Connollys to the Company for a period of 11
months following Closing;
26
(e) Indemnity - The Purchaser shall have entered into an indemnity
agreement in favour of Xxxxxxxx-Xxx upon terms and conditions
satisfactory to Xxxxxxxx-Xxx, in respect of the management
agreement referred to in Subsection 4.2(d) hereof;
(f) Employment Agreements - The Company shall have entered into an
employment agreement with each of the Connollys upon terms
satisfactory to the Connollys, under which the Connollys shall
be employed by the Company for a period of two years
commencing on September 1, 1997;
(g) Indemnities - The Purchaser shall have entered into a separate
indemnity agreement in favour of each of the Connollys upon
terms and conditions satisfactory to the Connollys, in respect
of the employment agreements referred to in Subsection 4.2(f)
hereof;
(h) Option Agreements - The Purchaser and NTN Canada, Inc. shall
have entered into an option agreement with each of the
Vendors, upon terms satisfactory to the Vendors, relating to
the common shares in the capital of NTN Canada, Inc. referred
to in the promissory notes annexed as Schedules "R" and "S"
hereto respectively;
(i) Undertakings - NTN Canada, Inc. shall have executed and
delivered an undertaking in favour of each of the Vendors upon
terms and conditions satisfactory to the Vendors, in respect
of the common shares in the capital of NTN Canada, Inc.
referred to in the promissory notes annexed as Schedules "R"
and "S" hereto respectively;
(j) Loans - The Purchaser shall have loaned to the Company the sum
of $400,000.00 upon terms and bearing such rate of interest as
shall be satisfactory to the Company, approximately
$200,000.00 of which funds shall be used by the Company to
retire its indebtedness with Cornpepper Productions Ltd., with
the balance being applied by the Company against its
outstanding indebtedness with the Royal Bank of Canada; and
27
(k) Litigation - On the Closing Date, there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper.
ARTICLE 5
OTHER COVENANTS OF THE PARTIES
5.1 Conduct of Business Prior to Closing - During the period from the date of
this Agreement to the Closing Time, the Vendors will cause the Company and its
Subsidiaries to do the following:
(a) Conduct Business in Ordinary Course - Except as otherwise
contemplated or permitted by this Agreement, to conduct their
respective businesses in the ordinary and normal course
thereof and not, without the prior written consent of the
Purchaser, to enter into any transaction which if effected
before the date of this Agreement would constitute a material
breach of the representations, warranties or agreements
contained herein;
(b) Continue Insurance - To continue in force all existing
policies of insurance presently maintained by the Company and
its Subsidiaries as set forth on Schedule "M" hereto;
(c) Perform Obligations - To comply with all laws affecting the
operation of the Business and to pay all required taxes and
tax installments; and
(d) Prevent Certain Changes - Not, without the prior written
consent of the Purchaser, to take any of the actions, do any
of the things or perform any of the acts described in
paragraphs (i) to (x) inclusive of Subsection 3.1(m).
5.2 Access for Investigation - The Vendors shall cause the Company and its
Subsidiaries to permit the Purchaser and its employees, agents, counsels and
accountants or other representatives, between the date hereof and the Closing
Time, without interference to the ordinary conduct of the Business of the
Company and the Subsidiaries and at the Purchaser's sole cost and expense, to
have free and unrestricted access during normal business hours to the premises
and to all books, accounts, records and other data of the Company and the
Subsidiaries (including, without limitation, all corporate, accounting and tax
records of the Company and the Subsidiaries) and to the properties and assets of
the Company and the Subsidiaries and to furnish with respect to the business,
28
properties and assets of the Company and the Subsidiaries as the Purchaser shall
from time to time reasonably request to enable confirmation of the matters
warranted in Section 3.1 hereof. Without limiting the generality of the
foregoing, it is agreed that the accounting representatives of the Purchaser
shall be afforded ample opportunity to make a full investigation of all aspects
of the financial affairs of the Company and its Subsidiaries. Until the Closing
Time, and in the event of the termination of this Agreement without consummation
of the transactions contemplated hereby, the Purchaser will use its best efforts
to keep confidential any information (unless readily available from public or
published information or sources) obtained from the Company, any Subsidiary or
the Vendors. If this Agreement is so terminated, promptly after such
termination, all documents, work papers and other written material obtained from
any Person in connection with this Agreement and not theretofore made public
(including all copies thereof), shall be returned to the Person which provided
such material.
5.3 Actions to Satisfy Closing Conditions - Each of the Parties hereby agrees to
take all such actions as are within its power to control, and to use its best
efforts to cause other actions to be taken which are not within its power to
control, so as to ensure compliance with any conditions set forth in Article 4
hereof which are for the benefit of any other Party.
ARTICLE 6
INDEMNIFICATION
6.1 Mutual Indemnifications for Breaches of Warranty, etc. - The Vendors and the
Connollys hereby jointly and severally covenant and agree with the Purchaser,
and the Purchaser hereby covenants and agrees with the Vendors (the Party or
Parties so covenanting and agreeing to indemnify another Party being hereinafter
in this Section 6.1 referred to as the "Indemnifying Party" and the party so to
be indemnified being hereinafter referred to as the "Indemnified Party") to
indemnify and save harmless the Indemnified Party, effective as and from the
Closing Time, from and against any claims, demands, actions, causes of action,
damage, loss, costs, liability or expense (hereinafter in this Article 6 called
"Claims") which may be brought against the Indemnified Party and/or which it may
suffer or incur as a result of, in respect of, or arising out of any material
non-fulfillment of any covenant or agreement on the part of the Indemnifying
Party under this Agreement or any incorrectness in or breach of any
representation or warranty of the Indemnifying Party contained herein or in any
certificate or other document furnished by the Indemnifying Party pursuant
hereto. The foregoing obligation of indemnification in respect of such Claims
shall be
29
(i) subject to the limitation mentioned in Section 3.5
hereof respecting the survival of the representations
and warranties of the Parties;
(ii) subject to the requirement that the Indemnifying
Party shall, in respect of any Claim made by any
third party, be notified in a timely manner by the
Indemnified Party of all material particulars thereof
and be afforded an opportunity at its sole cost and
expense, to resist, defend and compromise the same;
and
(iii) applicable only to the extent that such Claims, in
the aggregate, exceed $10,000.00.
6.2 Carriage of Action -
(a) In the event that within 10 days after receipt of the notice
referred to in clause (ii) of Section 6.1 hereof, the
Indemnifying Party gives notice to the Indemnified Party that
the Indemnifying Party wishes to dispute the matter in
question, the Indemnifying Party shall have the right to
litigate such matter in the name of the Indemnified Party
using counsel chosen by the Indemnifying Party and the
Indemnifying Party shall also have the right to settle or
compromise such matter in the name of the Indemnified Party;
provided, however, that contemporaneously with such compromise
or settlement the Indemnifying Party shall pay or cause to be
paid to the Indemnified Party, the amount owing under this
indemnity with respect to such matter and provided further
that:
(i) the Indemnifying Party shall furnish security to the
Indemnified Party in respect of any costs or damages
arising in connection with any litigation;
(ii) the Indemnifying Party shall agree to reimburse the
Indemnified Party promptly in respect of all
out-of-pocket expenses of the Indemnified Party in
connection with such litigation or pending
litigation; and
(iii) the Indemnifying Party shall not be entitled to take
any steps which would have the effect of forfeiting
or otherwise terminating any contract, lease or other
agreement, the benefit of which the Indemnified Party
would otherwise be entitled to enjoy.
30
(b) In the event that the Indemnifying Party does not provide the
notice referred to in Subsection 6.2(a) assuming the defence
of the Claim, the Indemnified Party may defend against such
Claim in such manner as it deems appropriate and may take such
action as may be reasonably prudent in the circumstances to
settle any such Claim.
ARTICLE 7
GENERAL
7.1 Public Notices - Except for disclosures required by law, all public notices
to third parties and all other publicity concerning the transactions
contemplated by this Agreement shall be jointly planned and co-ordinated by the
Vendors and the Purchaser and no Party shall act unilaterally in this regard
without the prior approval of the other of them, such approval not to be
unreasonably withheld.
7.2 Expenses - All costs and expenses (including, without limitation, the fees
and disbursements of legal counsel) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Party incurring
such expenses.
7.3 Time - Time shall be of the essence hereof.
7.4 Notices - Any notice, direction or other document required or permitted to
be given hereunder or for the purposes hereof (hereinafter in this Section 7.4
called a "notice") to any Party shall be in writing and shall be sufficiently
given if delivered personally, or if sent by prepaid registered mail or if
transmitted by facsimile to such Party:
(a) in the case of a notice to Xxxxxxxx-Xxx at:
Xxxx 00
000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: President
with a copy to Vendors' Counsel at:
Xxxxxxx X. Xxxxxxxxx, Q. C.
Barristers & Solicitors
31
000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx, Q.C.
(b) in the case of a notice to 1199846 at:
Xxxx 00
000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: President
with a copy to Vendors' Counsel at:
Xxxxxxx X. Xxxxxxxxx, Q. C.
Barristers & Solicitors
000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx, Q.C.
(c) in the case of a notice to the Connollys at:
Xxxx 00
000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxx X. Xxxxxxxxx, Q. C.
Barristers & Solicitors
000 Xxxxxx Xxxx
00
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx, Q.C.
(d) in the case of a notice to the Purchaser at:
00 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No.: 000-000-0000
Attention: President
with a copy to Purchaser's Counsel at
Xxxxxx, Head
Barristers & Solicitors
Suite 200, 0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Facsimile No. 000-000-0000
Attention: Xx. Xxxxxx X. Xxxx
or at such other address as the Party to whom such writing is to be given shall
have last notified the Party giving the same in the manner provided in this
section. Any notice delivered to the Party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on the day
it is so delivered at such address, provided that if such day is not a Business
Day then the notice shall be deemed to have been given and received on the first
Business Day next following such day. Any notice mailed as aforesaid shall be
deemed to have been given and received on the third Business Day following the
date of its mailing. Any notice transmitted by facsimile shall be deemed given
and received on the first Business Day after its transmission. Failure to
transmit timely or adequate notice to Vendor's Counsel or to Purchaser's
Counsel, as the case may be, shall not invalidate, nullify or otherwise
detrimentally affect the provision of same to a Party.
7.5 Assignment - Neither this Agreement nor any rights or obligations hereunder
shall be assignable by any Party without the prior written consent of the other
Parties hereto. Subject thereto, this Agreement shall enure to the benefit of
33
and be binding upon the Parties and their respective heirs, executors,
administrators and successors (including any successor by reason of amalgamation
of the Purchaser or the Vendors) and permitted assigns.
7.6 Further Assurances - The Parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each Party shall provide
such further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closing.
7.7 Severability - If any covenant or provision of this Agreement is prohibited
in whole or in part in any jurisdiction, such covenant or provision shall, as to
such jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining covenants and provisions hereof and shall, as to such
jurisdiction, be deemed to be severed from this Agreement to the extent of such
prohibition.
7.8 Counterparts - This Agreement may be executed by the Parties in separate
counterparts each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF the Parties have hereunto duly executed this
Agreement.
XXXXXXXX-XXX HOLDINGS
INC.
Per: /s/ Xxxxx Xxxxxxxx
---------------------------------
President - Xxxxx Xxxxxxxx
Per: /s/ Xxxxxxx Xxxxxxxx
---------------------------------
Secretary - Xxxxxxx Xxxxxxxx
1199846 ONTARIO LTD.
Per: /s/ Xxxxxxx Xxxxxxxx
---------------------------------
President - Xxxxxxx Xxxxxxxx
Per: /s/ Xxxxx Xxxxxxxx
---------------------------------
Secretary-Treasurer -
Xxxxx Xxxxxxxx
SIGNED, SEALED AND DELIVERED )
- in the presence of - )
) /s/ Xxxxxxx Xxxxxxxx
------------------------------ ) ----------------------------
WITNESS ) XXXXXXX XXXXXXXX
)
) /s/ Xxxxx Xxxxxxxx
------------------------------ ) ----------------------------
WITNESS ) XXXXX XXXXXXXX
NTN INTERACTIVE NETWORK INC.
Per: /s/ Xxxxx Xxxx
---------------------------------
President - Xxxxx Xxxx
