EXHIBIT 2.4
AIR MILES INTERNATIONAL GROUP B.V.
- AND -
EACH OF THE OTHER SHAREHOLDERS AND OPTIONHOLDERS
LISTED ON EXHIBIT A-1
- AND -
ALLIANCE DATA SYSTEMS CORPORATION
AGREEMENT FOR THE PURCHASE OF ALL THE SHARES
OF
LOYALTY MANAGEMENT GROUP CANADA INC.
JUNE 26, 1998
EX2_5LOYALTY.DOC
iv
TABLE OF CONTENTS
ARTICLE 1INTERPRETATION
1.1 Definitions.......................................................2
1.2 Headings and Table of Contents....................................8
1.3 Number and Gender.................................................9
1.4 Business Days.....................................................9
1.5 Currency and Payment Obligations..................................9
1.6 Knowledge of the Vendors..........................................9
1.7 Statute References................................................9
1.8 Section and Schedule References...................................9
ARTICLE 2PURCHASE OF SHARES
2.1 Agreement to Purchase and Sell...................................10
2.2 Purchase Price...................................................10
2.3 Sale and Transfer of Shares......................................10
2.4 Payment of Purchase Price........................................10
2.5 Section 116 of the Tax Act.......................................11
2.6 Escrow...........................................................12
ARTICLE 3REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties Relating to the Vendors...........12
(1) Incorporation and Power........................12
(2) Ownership of Loyalty Shares....................12
(3) Enforceability of Obligations..................13
(4) Other Agreements...............................13
(5) Regulatory Approvals...........................13
(6) Residency......................................14
(7) Independent Legal Advice.......................14
(8) No Claims Against Company......................14
3.2 Representations and Warranties Relating to the Company...........14
(1) Status of the Company and LMGTS................14
(2) Qualification..................................14
(3) Authorized and Issued Capital..................15
(4) Ownership of LMGTS.............................15
(5) No Other Subsidiaries..........................15
(6) No Agreement to Sell Shares and No Options.....15
(7) Constating Documents and By-Laws...............16
(8) Bankruptcy.....................................16
(9) No Breach of Instruments or Laws...............16
(10) General Compliance with Laws...................16
(11) Financial Statements...........................16
(12) No Guarantee, Etc..............................19
(13) Title to Assets................................19
(14) Sufficiency of Assets..........................19
(15) Leases.........................................20
(16) Environmental Compliance.......................20
(17) Material Contracts.............................20
(18) Intellectual Property..........................21
(19) Litigation.....................................23
(20) Insurance......................................23
(21) Employees and Employment Contracts.............23
(22) Employee Plans.................................24
(23) Sponsors.......................................26
(24) Taxes Paid.....................................26
(25) Tax Filings....................................26
(26) Withholdings and Remittances...................28
(27) Regulatory Approvals...........................28
(28) Licences and Permits...........................28
(29) Safety Deposit Box/Powers of Attorney..........28
(30) Consents and Approvals.........................28
(31) Non-Arm's Length Contracts.....................29
(32) Minute Books and Stock Record Books............29
(33) Broker's or Finders' Fees......................29
3.3 Representations and Warranties of the Purchaser..................29
(1) Incorporation and Power........................29
(2) Due Authorization..............................29
(3) No Breach of Instruments or Laws...............30
(4) Regulatory Approvals...........................30
(5) Financing......................................30
(6) Enforceability of Obligations..................30
(7) Litigation.....................................30
3.4 Survival of Representations and Warranties.......................31
(1) Vendors' Representations and Warranties........31
(2) Purchaser's Representations and Warranties.....31
(3) Interpretation.................................31
ARTICLE 4INDEMNIFICATION
4.1 Indemnification by the Vendors...................................32
4.2 Limitations on Indemnification by Vendors........................33
4.3 Indemnification by the Purchaser.................................34
4.4 Limitations on Indemnification by the Purchaser..................35
4.5 Exclusive Remedy.................................................35
4.6 Adjustment for Tax Effect........................................35
4.7 Indemnification Procedure........................................35
(1) Third Party Claims.............................35
(2) Control of Claim...............................36
(3) Negotiations...................................36
(4) Consent........................................36
(5) Procedure......................................37
4.8 Adjustment.......................................................37
ARTICLE 5COVENANTS
5.1 Investigation....................................................37
5.2 Authorizations...................................................38
5.3 Confidentiality..................................................38
5.4 Risk of Loss.....................................................38
5.5 Action During Interim Period.....................................38
5.6 Investment Canada Notifications..................................39
5.7 Consents to Assignment of Contracts and Permits..................39
5.8 Cooperation......................................................39
5.9 Actions to Satisfy Closing Conditions............................40
5.10 Vendor's Several Liability.......................................40
5.11 ECB and VCB Arrangements.........................................40
5.12 Drag Along.......................................................40
5.13 Tax Returns......................................................40
ARTICLE 6CONDITIONS OF CLOSING
6.1 Purchaser's Conditions...........................................41
(1) Representations and Warranties.................41
(2) Vendors'Compliance.............................41
(3) No Litigation..................................41
(4) Consents and Authorizations....................41
(5) Approvals of the Vendors and the Company.......41
(6) Resignations...................................42
(7) Discharge of Lien..............................42
(8) License Agreements.............................42
(9) Non-Competition Agreement......................43
(10) Optionholders Share Sale Agreement.............43
(11) Termination of Shareholders Agreement..........43
(12) Legal Opinions.................................43
6.2 Condition Not Fulfilled..........................................43
6.3 Vendors'Conditions...............................................43
(1) Representations and Warranties.................44
(2) Purchaser's Compliance.........................44
(3) Consents and Authorizations....................44
(4) Approvals of the Purchaser.....................44
(5) License Agreements.............................44
6.4 Condition Not Fulfilled..........................................44
ARTICLE 7CLOSING ARRANGEMENTS
7.1 Closing..........................................................45
7.2 Vendor's Closing Deliveries......................................45
7.3 Purchaser's Closing Deliveries...................................45
ARTICLE 8GENERAL
8.1 Expenses.........................................................46
8.2 Payment of Taxes.................................................46
8.3 Public Announcements.............................................47
8.4 Notices..........................................................47
8.5 Time of Essence..................................................48
8.6 Entire Agreement.................................................49
8.7 Waiver...........................................................49
8.8 Severability.....................................................49
8.9 Further Assurances...............................................49
8.10 Attornment.......................................................49
8.11 Governing Law....................................................49
8.12 Successors and Assigns...........................................50
8.13 Counterparts.....................................................50
EXHIBITS
X-0 Xxxxxxx
X-0 Current Shareholder Structure of the Company
A-3 Expected Shareholder Structure at Closing
A-4 Optionholders
B Non-Competition Agreement
C Optionholder Share Sale Agreement
D Opinion of Company's Counsel
E Opinion of Purchaser's Counsel
F Escrow Agreement
G Amended and Restated License Agreements
SCHEDULES
3.1(4) Options to Purchase Shares from Vendors
3.1(6) Residency of Vendors and Optionholders
3.2(5) Equity or Participating Interests
3.2(6) Options from the Company
3.2(11) Financial Statements
3.2(13) Liens on Assets
3.2(15)(a) Real Property Leases
3.2(15)(b) Personal Property Leases
3.2(17) Material Contracts
3.2(18) Intellectual Property
3.2(19) Litigation
3.2(20) Insurance
3.2(21) Employees and Employment Contracts
3.2(22) Employee Plans
3.2(23) Major Sponsors
3.2(28) Licences and Permits
3.2(29) Bank Accounts, Etc.
3.2(30) Change of Control Provisions
3.2(31) Intercompany Agreements
3.3(4) Governmental Authorizations - Purchaser
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 26th day of June, 1998,
among AIR MILES INTERNATIONAL GROUP B.V., a company incorporated under the
laws of The Netherlands ("AMIG"), each of the other shareholders and
optionholders listed on Exhibit A-1 (collectively with AMIG, the "VENDORS")
and ALLIANCE DATA SYSTEMS CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "PURCHASER").
RECITALS
1. Loyalty Management Group Canada Inc., a corporation organized under the
laws of Ontario (the "COMPANY"), has authorized capital consisting of
1,434,464 common shares, of which 1,189,542 common shares are currently
issued and outstanding as fully paid and non-assessable shares of the Company.
2. As of the date hereof the issued and outstanding Loyalty Shares are owned as
described on Exhibit A-2 hereto.
3. The Optionholders and certain of the Vendors have options to acquire Loyalty
Shares, and accordingly, as of Closing the ownership of the Loyalty Shares is
expected to be as described in Exhibit A-3 hereto.
4. As of the Closing, the Vendors and the Optionholders (collectively, the
"Selling Shareholders") will own 100% of the issued and outstanding capital
stock of the Company.
5. Each of the Selling Shareholders is willing or required to sell to the
Purchaser the Loyalty Shares owned by such Selling Shareholder as of the Closing
Date, which Loyalty Shares in the aggregate will constitute 100% of the issued
and outstanding capital stock of the Company, and the Purchaser is willing to
purchase from the Selling Shareholders all of the Loyalty Shares, upon and
subject to the terms and conditions contained in this Agreement.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
- 2 -
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the meanings
set out below unless the context requires otherwise:
"AFFILIATE" means, with respect to any Person, any other Person who
directly or indirectly controls, is controlled by, or is under direct
or indirect common control with, such Person, and includes any Person
in like relation to an Affiliate. A Person shall be deemed to "control"
another person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the term "CONTROLLED" shall have a similar
meaning.
"AGREEMENT" means this Agreement, including the Exhibits and the
Schedules to this Agreement, as it or they may be amended or
supplemented from time to time, and the expressions "HEREOF", "HEREIN",
"HERETO", "HEREUNDER", "HEREBY" and similar expressions refer to this
Agreement and not to any particular Section or other portion of this
Agreement.
"AMTM" means AIR MILES(R) travel miles.
"AIR MILES(R) PROGRAm" means the AIR MILES(R) Reward Program, a rewards
program managed and operated by the Company within Canada under which
Persons enrolled therein are eligible to earn AMTM which may be
redeemed for airline tickets and other goods and services.
"APPLICABLE LAW" means, with respect to any Person, property,
transaction, event or other matter, any law, rule, statute, regulation,
order, judgment, decree, treaty or other requirement having the force
of law relating or applicable to such Person, property, transaction,
event or other matter.
"ASSETS" means all the properties, assets, interests and rights of the
Company or LMGTS Relating to the Business, including the following:
(a) all rights and interests of the Company to and in the Leased
Premises and under the Real Property Leases, including prepaid
rents, security deposits and options to renew or purchase,
rights of first refusal under the Real Property Leases and all
leasehold improvements owned by the Company and forming part
of the Leased Premises;
(b) all receivables;
(c) all rights and interests under or pursuant to all warranties,
representations and guarantees, express, implied or otherwise,
of or made by suppliers or others in connection with the
Assets;
(d) the Intellectual Property;
(e) the Contracts;
(f) the Licences and Permits;
(g) the Books and Records;
(h) all prepaid charges, deposits, sums and fees paid by the
Company or LMGTS before the Closing Time; and
(i) all goodwill of the Company and LMGTS including the present
telephone numbers, internet domain addresses and other
communications numbers and addresses of the Company and LMGTS.
"BMO" means Bank of Montreal.
"BOOKS AND RECORDS" means all books, records, files and papers of the
Company including computer programs (including source code), software
programs, manuals and data, sales and advertising materials, sales and
purchases correspondence, research and development records, lists of
present and former Sponsors, Collectors and Suppliers, personnel,
employment and other records, and the minute and share certificate
books of the Company and LMGTS, and all copies and recordings of the
foregoing in the possession or under the control of the Company.
"BUSINESS" means the business carried on by the Company, which
primarily involves the operation of the AIR MILES-Registered Trademark-
Program and the business carried on by LMGTS.
"BUSINESS DAY" means any day except Saturday, Sunday or any day on
which banks are generally not open for business in the City of Toronto.
"CANADIAN DOLLARS" means the lawful currency of Canada.
"CLAIMS" has the meaning given in Section 4.1.
"CLOSING" means the completion of the purchase and sale of the Loyalty
Shares in accordance with the provisions of this Agreement.
"CLOSING DATE" means July 17, 1998 or such earlier or later date as may
be agreed upon in writing by the Parties provided however that any one
of AMIG, BMO, EUK Limited and the Purchaser shall have the right to
extend the Closing to July 24, 1998 upon notice to the other Parties
given on or prior to July 15, 1998, whereupon the "CLOSING DATE" shall
be July 24, 1998.
"CLOSING TIME" means the time of Closing on the Closing Date provided
for in Section 7.1.
"COLLECTOR" means a Person registered with the Company as a collector
of AMTM.
"COMPANY" means Loyalty Management Group Canada Inc., a corporation
organized under the laws of Ontario, doing business as "The Loyalty
Group".
"COMPANY'S COUNSEL" means the firm of Blake, Xxxxxxx & Xxxxxxx.
"CONTRACTS" means all pending and/or executory contracts, agreements,
leases and arrangements to which the Company or LMGTS is a party or by
which the Company or LMGTS or any of the Assets or the Business is
bound, including the Material Contracts, the Real Property Leases and
the Personal Property Leases.
"DIRECTOR" means a director of the Company.
"ECB" means the Company's Executive Committee Bonus Plan.
"ELECTRA" means Electra Investment Trust plc or an affiliate thereof.
"ELECTRA PLEDGE" means the pledge by AMIG of its Loyalty Shares to
Electra Xxxxxxx plc.
"EMPLOYEE" means an individual who is employed by the Company or LMGTS.
"EMPLOYEE PLANS" has the meaning given in Section 3.2(22).
"FINANCIAL STATEMENTS" means the audited comparative consolidated
financial statements of the Company for the fiscal years ended April
30, 1998 and April 30, 1997.
"GAAP" means those accounting principles that are recognized as being
generally accepted in Canada from time to time including those set out
in the handbook published by the Canadian Institute of Chartered
Accountants, consistently applied and without material revision from
prior periods in management estimates and assumptions affecting the
Financial Statements.
"GOVERNMENTAL AUTHORIZATION" means any approval, authorization,
certificate, consent, grant, licence, permit, quota or registration
which may be issued or granted by any Governmental Body.
"GOVERNMENTAL BODY" means any government, parliament, legislature,
regulatory authority, governmental department, agency, commission,
board, tribunal, or court or other law, rule or regulation-making
entity of any nation, state or province or other subdivision thereof or
any municipality, district or other subdivision thereof.
"INCLUDING" means "including without limitation", and "INCLUDES" means
"includes without limitation."
"INTELLECTUAL PROPERTY" means all of the rights and interests of the
Company and LMGTS in and to:
(a) all Trade-Marks;
(b) all inventions, patents, patent rights, patent applications
(including all reissues, divisions, continuations,
continuations-in-part and extensions of any patent or patent
application), industrial designs and applications for
registration of industrial designs Related to the Business;
(c) all copyrights, registrations and applications for
registration of copyrights Related to the Business;
(d) processes, data, data bases, trade secrets, designs, know-how,
product information, manuals, technology, research and
development reports, technical information, technical
assistance, design specifications, and similar materials
recording or evidencing expertise or information Related to
the Business;
(e) all computer software programs and applications (in both
source code and object code form as the Company may possess)
used in connection with the Business, whether owned by the
Company or LMGTS (the "Owned Software") or licensed by the
Company or LMGTS from third parties (the "Licensed Software");
(f) all other intellectual and industrial property rights of the
Company, whether in Canada or elsewhere, Related to the
Business; and
(g) all licences from third parties of intellectual property
listed in items (a) to (f) above.
"INTERIM PERIOD" means the period from the date of this Agreement to
the Closing.
"LMGTS" means LMG Travel Services Limited, a corporation organized
under the laws of Ontario.
"LEASED PREMISES" means all real property that is leased or occupied by
the Company or LMGTS under the Real Property Leases.
"LICENCES AND PERMITS" means all licences, permits, filings,
authorizations or approvals issued to the Company or LMGTS by any
Governmental Body.
"LICENSE AGREEMENTS" means the License to Use and Exploit the Air Miles
Scheme in Canada dated December 17, 1992 between Air Miles
International Trading B.V. and the Company, as amended, (the "Scheme
License") and the License to Use the Air Miles Trade-Marks in Canada
dated December 17, 1992 between Air Miles International Holdings N.V.
and the Company, as amended (the "Trade-Xxxx License").
"LIEN" means any lien, mortgage, charge, hypothec, pledge, security
interest, option, warrant, lease, sublease or other encumbrance of any
nature whatsoever.
"LOYALTY SHARES" means shares in the capital of the Company, including
shares received upon exercise of outstanding options.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business or financial position of the Company and LMGTS taken as a
whole.
"MATERIAL CONTRACT" means any of the agreements listed on Schedule
3.2(17).
"NON-RESIDENT VENDORS" means those Selling Shareholders listed on
Schedule 3.1(6) as being non-residents of Canada for the purposes of
the Tax Act.
"OFFICER" means an officer of the Company.
"OPTIONHOLDERS" means the Persons listed on Exhibit A-4.
"PARTY" means a Party to this Agreement and any reference to a Party
includes its successors and permitted assigns.
"PERSON" is to be broadly interpreted and includes an individual, a
corporation, a partnership, a trust, an unincorporated organization,
the government of a country or any political subdivision thereof or any
agency or department of any such government, and the executors,
administrators or other legal representatives of an individual in such
capacity.
"PERSONAL PROPERTY LEASES" means all chattel leases, equipment leases,
rental agreements, conditional sales contracts and other similar
agreements to which the Company or LMGTS is a party or by which it is
bound.
"PURCHASE PRICE" has the meaning given in Section 2.2.
"PURCHASER'S COUNSEL" means Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol as to United States law and Fasken Xxxxxxxx Xxxxxxx as to
Canadian law.
"REAL PROPERTY LEASES" means all the leases, agreements to lease,
subleases, licences, concessions or occupancy agreements and use or
occupancy rights with respect to real property to which the Company or
LMGTS is a party or by which it is bound.
"RELATED TO THE BUSINESS" means used in or reasonably necessary to the
conduct of the Business prior to the Closing Time and the phrases
"RELATING TO THE BUSINESS" or "RELATE TO THE BUSINESS" shall be
similarly interpreted.
"RESERVE AGREEMENT" means the agreement dated as of December 1, 1992,
between the Company and Sun Life Trust Company, as amended.
"RESERVE FUND" has the meaning set out in the Reserve Agreement.
"SECTION 116 CERTIFICATE" has the meaning attributed thereto in
Section 2.5.
"SELLING SHAREHOLDERS" has the meaning set out in the Recitals hereto
provided that in the event an Optionholder does not exercise any of its
options to acquire Loyalty Shares, that Optionholder shall be deemed
not to be a Selling Shareholder.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated
December 16, 1996 between the Company, BMO, Electra, AMIG and EUK
Limited.
"SPONSOR" means a Person granted a license or otherwise permitted by
the Company to issue AMTM.
"SUPPLIER" means a Person who provides goods or services to the Company
which are available to Collectors on redemption of their AMTM.
"TAX ACT" means the INCOME TAX ACT (Canada), as amended.
"TAXES" means all taxes, duties, excise, fees, imposts, assessments,
deductions, charges or withholding taxes including federal and
provincial sales, use, ad valorem and franchise taxes, payroll,
employment, goods and services taxes, harmonized sales taxes, transfer
taxes, property purchase taxes, income taxes, business taxes, capital
taxes, and other provincial and federal taxes, municipal taxes, local
taxes, environmental or windfall profits taxes, custom duties and
Canada Pension Plan contributions and employment insurance premiums or
other like assessments or charges and all liabilities with respect
thereto, including any penalty and interest payable with respect
thereto and the term "Tax Returns" means all reports, returns and other
documents filed or required to be filed by the Company and/or LMGTS in
respect of Taxes.
"TRADE-MARKS" means all registered or unregistered trade-marks, trade
names, business names, brand names, brands, designs, logos, identifying
indicia and service marks of the Company Relating to the Business
including any goodwill attaching to any such trade-marks and all
registrations and applications relating thereto.
"VCB" means the Company's Value Creation Bonus Plan.
"VENDOR'S LOYALTY SHARES" means, as to each Vendor at any time, the
Loyalty Shares owned by the Vendor at such time.
"VENDOR'S PROPORTIONATE SHARE" means, as to each Vendor, the percentage
obtained by dividing the number of Loyalty Shares sold by such Vendor
to the Purchaser by the aggregate number of Loyalty Shares sold by all
the Vendors to the Purchaser.
1.2 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into Articles
and Sections, the insertion of headings and the provision of any table of
contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
1.4 BUSINESS DAYS. If any payment or other action is required to be made or
taken pursuant to this Agreement on a day which is not a Business Day, then such
payment shall be made or such other action shall be taken on the next Business
Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. Except as otherwise expressly provided in
this Agreement:
(1) all dollar amounts referred to in this Agreement are stated in
Canadian Dollars;
(2) any payment contemplated by this Agreement shall be made by
cash, certified cheque or any other method that provides
immediately available funds; and
(3) except in the case of any payment due on the Closing Date, any
payment due on a particular day must be received and available
not later than 2:00 p.m. (Eastern Standard Time) on the due
date and any payment made after that time shall be deemed to
have been made and received on the next Business Day.
1.6 KNOWLEDGE OF THE VENDORS. Reference herein to "KNOWLEDGE OF THE VENDORS"
shall mean the actual knowledge of any of the Vendors after consultation with
the current Officers.
1.7 STATUTE REFERENCES. Any reference in this Agreement to any statute or any
section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.8 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections, Exhibits or Schedules are to Sections,
Exhibits or Schedules of this Agreement.
ARTICLE 2
PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE AND SELL. At the Closing Time, subject to the terms
and conditions of this Agreement (1) the Purchaser shall purchase from each
Vendor and each Vendor shall sell, transfer and assign to the Purchaser the
Loyalty Shares owned by such Vendor as of Closing; and (2) the Purchaser agrees
to purchase from each Optionholder the Loyalty Shares owned by such Optionholder
as of Closing.
2.2 PURCHASE PRICE. The purchase price payable by the Purchaser for all Loyalty
Shares (the "PURCHASE Price") shall be Two Hundred and Eighty Three Million
Canadian Dollars ($283,000,000).
2.3 SALE AND TRANSFER OF SHARES. At the Closing Time, each Vendor shall transfer
and deliver to the Purchaser certificates representing the Loyalty Shares being
sold by such Vendor under this Agreement, in each case duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed in blank. Subject
to the fulfilment of the conditions set forth in Section 6.3, each Vendor who
holds options to acquire Loyalty Shares, shall exercise each of such options at
or prior to the Closing Time and shall sell the Loyalty Shares received upon
such exercise to the Purchaser as provided herein.
2.4 PAYMENT OF PURCHASE PRICE. As payment in full of the Purchase Price for the
Loyalty Shares, and against delivery of certificates for the Loyalty Shares as
aforesaid, at the Closing Time (a) the Purchaser shall pay to each Selling
Shareholder, by certified cheque or bankers draft payable to or at the direction
of such Selling Shareholder, an amount equal to the portion of Two Hundred and
Sixty Eight Million Canadian Dollars ($268,000,000) (the "Base Amount") payable
to such Selling Shareholder as described in Exhibit A-3, subject to the
provisions of Section 2.5, and (b) the Purchaser shall deposit in escrow an
amount equal to $15,000,000 (the "Escrow Amount") as contemplated by Section
2.6. For greater certainty but without limiting Section 2.3, (i) in the event
that a Vendor or an Optionholder does not exercise all of its options to acquire
Loyalty Shares, then the portion of the Base Amount and any Escrow Amount
payable to each Selling Shareholder as described in Exhibit A-3 shall be
adjusted accordingly, and (ii) the Purchaser shall have no obligation to
purchase any Loyalty Shares hereunder if, upon closing of such purchase and
sale, the Purchaser will not own 100% of the issued and outstanding capital
stock of the Company, or any Person will retain a right to acquire any capital
stock of the Company, in each case other than by reason of any action taken by
or on behalf of the Purchaser.
2.5 SECTION 116 OF THE TAX ACT.
(1) Each Non-Resident Vendor shall, on or before the Closing Time, make
best efforts to deliver to the Purchaser a certificate issued by the Minister of
National Revenue of Canada pursuant to subsection 116(2) of the Tax Act (a
"SECTION 116 CERTIFICATE") in respect of the proposed disposition by the
Non-Resident Vendor of the Vendor's Loyalty Shares. Each Section 116 Certificate
shall specify a "certificate limit" in an amount no less than the proportion of
the Purchase Price payable to such Vendor in accordance with Section 2.4.
(2) In the event that a Section 116 Certificate required under
subsection 2.5(1) has not been delivered by a Non-Resident Vendor to the
Purchaser on or before the Closing Time, or in the event that a Section 116
Certificate that is delivered by a Non-Resident Vendor to the Purchaser on or
before the Closing Time specifies a "certificate limit" that is less than the
proportion of the Purchase Price payable to such Vendor, the Purchaser shall be
entitled to withhold from such amount an amount equal to (i) 33 1/3% of such
amount if no Section 116 Certificate is delivered, or (ii) 33 1/3% of the
difference between such amount and the "certificate limit" if a Section 116
Certificate is delivered (in either case, the "WITHHELD AMOUNT"). Subject to
Section 2.5(5), the Withheld Amount shall be deposited by the Purchaser in an
interest bearing account at a bank located in Ontario and the Purchaser shall
provide notice to the Vendors of such account particulars. The Withheld Amount
shall be remitted to the Receiver General of Canada on the day that the Withheld
Amount is required to be so remitted pursuant to subsection 116(5) of the Tax
Act (the "REMITTANCE DATE"). All interest received by the Purchaser on the
Withheld Amount shall be for the account of the Non-Resident Vendor, and the
full amount of such interest less any taxes required to be deducted or withheld
from such interest shall be paid to the Non-Resident Vendor on the Remittance
Date.
(3) Notwithstanding the foregoing, if a Non-Resident Vendor delivers a
Section 116 Certificate or a replacement Section 116 Certificate to the
Purchaser at any time after the Closing Time and prior to the Remittance Date,
the Purchaser shall pay to the Non-Resident Vendor on account of the Withheld
Amount an amount equal to the Withheld Amount less 33 1/3% of the amount, if
any, by which the proportion of the Purchase Price payable to such Vendor
exceeds the "certificate limit" specified in such Section 116 Certificate. This
amount, together with all interest received by the Purchaser on this amount less
any taxes required to be deducted or withheld from such interest, shall be paid
by the Purchaser to the Non-Resident Vendor by the day after the day the Section
116 Certificate or replacement Section 116 Certificate is delivered to the
Purchaser.
(4) In any case where the Purchaser withholds and remits to the
appropriate taxing authority any amount pursuant to this section, the Purchaser
shall be deemed to have paid such amount to the Non-Resident Vendor on account
of the proportion of the Purchase Price payable to such Vendor.
(5) In any case where the Purchaser withholds any amount pursuant to
this section, such amount shall be invested by the Purchaser as directed by the
Non-Resident Vendor (for the account of and at the risk of such Non-Resident
Vendor) in respect of whom such amount is withheld.
2.6 ESCROW. At the Closing Time, (i) the Vendors and the Purchaser shall enter
into an escrow agreement substantially in the form of Exhibit F hereto (the
"Escrow Agreement", and (ii) the Purchaser shall deposit in escrow the Escrow
Amount (as defined in Section 2.4) pursuant to the Escrow Agreement. The Escrow
Amount shall be held in escrow and otherwise dealt with in accordance with the
Escrow Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES RELATING TO THE VENDORS. Each Vendor hereby
represents and warrants to the Purchaser as follows in respect of itself or
himself and acknowledges that the Purchaser is relying upon these
representations and warranties in connection with its execution and delivery of
this Agreement and the purchase of the Loyalty Shares:
(1) Incorporation and Power. In the event the Vendor is a corporation,
such Vendor is a corporation duly organized and validly subsisting under the
laws of its governing jurisdiction and has all requisite right, power and
authority to enter into, execute and deliver this Agreement and all other
agreements required to be delivered by it hereunder and to perform its
obligations hereunder and thereunder. The entering into, execution and delivery
of this Agreement and all other agreements to be delivered by it hereunder, and
the performance of its obligations hereunder and thereunder have been duly and
validly authorized and approved by all necessary corporate action on its part.
(2) Ownership of Loyalty Shares. Such Vendor is or will be at Closing
the sole and beneficial owner, and the holder of record, of the number of
Loyalty Shares shown opposite such Vendor's name in Exhibit A-3 hereto and has,
or will have at Closing, good and marketable title thereto, free and clear of
any and all Liens except for the Electra Pledge with respect to AMIG, and has or
will have at Closing the exclusive right to sell, transfer and assign such
shares. Such shares constitute all of the Loyalty Shares owned by such Vendor.
(3) Enforceability of Obligations. This Agreement has been validly
executed and delivered by such Vendor and is a valid and legally binding
obligation enforceable against such Vendor in accordance with its terms and all
other agreements required to be delivered under this Agreement when executed and
delivered will have been validly authorized, executed and delivered by such
Vendor and will thereupon be legal, valid and binding obligations enforceable
against such Vendor in accordance with their respective terms, subject however,
to the limitations with respect to enforcement imposed by law in connection with
bankruptcy, insolvency, re-organization or other laws affecting creditors'
rights generally, including the availability of equitable remedies such as
specific performance and injunction which are only available in the discretion
of the court from which they are sought and general equitable principles.
(4) Other Agreements. Except as set forth in Schedule 3.1(4), no
Person, other than the Purchaser pursuant to this Agreement has any contract, or
any right or privilege capable of becoming a contract, for the purchase,
transfer or sale of any of the shares in the capital of the Company owned by
such Vendor; at Closing, no Person, other than the Purchaser pursuant to this
Agreement, will have any contract, or any right or privilege capable of becoming
a contract, for the purchase, transfer or sale of any of the shares in the
capital of the Company owned by such Vendor. Except as set out in the
Shareholders Agreement and Schedule 3.1(4), such Vendor is not a party to or
bound by any contract, or any other obligation whatsoever which limits or
impairs such Vendor's ability to sell, transfer, assign or convey, or otherwise
similarly affects the shares in the capital of the Company owned by such Vendor;
at Closing, such Vendor will not be a party to or bound by any such contract or
obligation. The execution and delivery of this Agreement or such other documents
and agreements delivered or to be delivered by such Vendor under this Agreement
and the transactions contemplated hereby and thereby will not result in the
creation of any Liens on any Loyalty Shares owned by such Vendor, except as set
forth in the Shareholders Agreement and in Schedule 3.1(4). Except as set out in
the Shareholders Agreement and Schedule 3.1(4), none of such Vendor's Loyalty
Shares are or will be, as of the Closing Time, subject to, nor were any of such
Loyalty Shares issued (nor will any of such Loyalty Shares, as of the Closing
Time, be issued) in violation of, any preemptive rights of stockholders of the
Company or any right of first refusal or other similar right in favour of any
Person. The delivery by such Vendor of the certificates representing its Loyalty
Shares to the Purchaser at the Closing Time pursuant to Section 2.3 above,
against payment therefor at the Closing Time pursuant to Section 2.4 above, will
transfer valid title to such Loyalty Shares to the Purchaser, free and clear of
any and all Liens. At the Closing Time such Vendor shall not be a party to any
voting trust, voting agreement, proxy or similar agreement relating to any of
such Vendor's Loyalty Shares.
(5) Regulatory Approvals. No Governmental Authorization, approval,
order, consent or, except as contemplated by Section 2.5, filing is required on
the part of such Vendor in connection with the execution, delivery and
performance of this Agreement or such other documents and agreements to be
delivered hereunder or the performance of such Vendor's obligations hereunder or
thereunder.
(6) Residency. Such Vendor (other than any Non-Resident Vendor) is not
a non-resident of Canada for purposes of Section 116 of the TAX ACT.
(7) Independent Legal Advice. Such Vendor, if an individual, has (i)
been given the opportunity to conduct such investigation of the Company, its
Assets, Business and books and records, and to consult with senior management of
the Company, as such Vendor may have considered necessary in connection with the
transactions contemplated herein and such Vendor's obligations hereunder, (ii)
been given the opportunity to obtain independent legal advice with respect to
this Agreement, the transactions contemplated hereby and the implications
thereof, and (iii) has taken such action, if any, in this regard as such Vendor
has considered appropriate.
(8) No Claims Against Company. At the Closing Time, such Vendor shall
not, in its capacity as a shareholder of the Company, have any claims against
the Company.
3.2 REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. Each of the Vendors
represents and warrants to the Purchaser as follows and acknowledges that the
Purchaser is relying upon these representations and warranties in connection
with the entering into of this Agreement and the purchase of the Loyalty Shares:
(1) Status of the Company and LMGTS. Each of the Company and LMGTS is a
corporation duly incorporated and validly existing under the laws of Ontario and
is a private company for the purposes of the SECURITIES ACT (Ontario).
(2) Qualification. Each of the Company and LMGTS is licensed or
qualified to do business in each jurisdiction in which the location of its
property and assets or the nature of the Business requires such licence or
qualification, except to the extent that a failure to do so would not have a
Material Adverse Effect, and no revocation of any such licence or qualification
has been undertaken or, to the knowledge of the Vendors, been threatened. LMGTS
is not as of the date of this Agreement registered under British Columbia travel
industry legislation but is in the process of applying to become registered
thereunder and such failure to be so registered will not result in a material
fine or penalty being imposed upon the Company or LMGTS or any material
limitation or disruption in the conduct of the Business. Each of the Company and
LMGTS has full corporate power to carry on the Business and to own and operate
its Assets as now carried on and owned and operated by it. The head office of
the Company is not in the Province of Quebec.
(3) Authorized and Issued Capital. The authorized capital of the
Company consists of 1,434,464 common shares, without nominal or par value of
which 1,189,542 common shares are currently issued and outstanding as validly
issued, fully paid and non-assessable common shares of the Company. At the
Closing Time, assuming that all options set forth or reflected on Exhibit A-3
are exercised, there will be 1,434,464 validly issued and outstanding fully paid
and non-assessable common shares of the Company.
(4) Ownership of LMGTS. The Company is, and at the Closing Time will
be, the sole registered and beneficial owner of all of the issued and
outstanding shares of LMGTS, with good and valid title thereto, free and clear
of all Liens. No subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of any class
of capital stock of LMGTS (whether from the Company or LMGTS or otherwise) is
authorized or outstanding, there is not any commitment of LMGTS to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidences of indebtedness or assets and LMGTS
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or to make any other distribution in respect thereof. Neither LMGTS nor
the Company is a party to any voting trust, voting agreement, proxy or similar
agreement relating to the shares of LMGTS except for the unanimous shareholder
agreement regarding LMGTS dated March 31, 1992.
(5) No Other Subsidiaries. Except as referred to in Schedule 3.2(5) and
except for portfolio investments of amounts in the Reserve Fund, neither the
Company nor LMGTS has (i) any interest in the shares, equity securities or other
securities convertible into equity securities of any Person or (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise.
(6) No Agreement to Sell Shares and No Options. Except as disclosed or
reflected in Schedule 3.2(6) and the Shareholders Agreement (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire from the Company any shares of any class of capital stock
of the Company is authorized or outstanding, (ii) there is not any commitment of
the Company to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or to make any other
distribution in respect thereof. Except as set forth in the Shareholders
Agreement or as otherwise provided in this Agreement, the Company is not a party
to any voting trust, voting agreement, proxy or similar agreement relating to
any of the Loyalty Shares.
(7) Constating Documents and By-Laws. The Purchaser has been provided
with access to true and complete copies of all the constating documents and
by-laws and any and all amendments relating thereto of the Company and LMGTS,
and such constating documents and by-laws as so amended are in full force and
effect and no amendments are being made to same.
(8) Bankruptcy. Neither the Company nor LMGTS (i) is an insolvent
person within the meaning of the BANKRUPTCY AND INSOLVENCY ACT (Canada), (ii)
has made an assignment in favour of its creditors or a proposal in bankruptcy to
its creditors or any class thereof, (iii) had any petition for a receiving order
presented in respect of it, or (iv) has initiated proceedings with respect to a
compromise or arrangement with its creditors or for its winding up, liquidation
or dissolution. No receiver has been appointed in respect of the Company or
LMGTS or any of the Assets and no execution or distress has been levied upon any
of the Assets.
(9) No Breach of Instruments or Laws. Neither the entering into nor the
delivery of this Agreement nor the completion of the transactions contemplated
hereby by the Vendors will result in a violation of:
(a) any of the provisions of the constating documents or by-laws
of the Company or LMGTS;
(b) any contract or other agreement or instrument to which the
Company is a party or by which it is bound except to the
extent that any such contract or other agreement or instrument
requires consent or other action in connection with the change
of control of the Company as herein contemplated, and the only
such contracts or other agreements or instruments which
require such consent or other action are either (i) listed in
Schedule 3.2(30), or (ii) of a nature that the failure to
obtain any such consent will not result in a Material Adverse
Effect; or
(c) any Applicable Laws of any jurisdiction to which the Company
or LMGTS is subject.
(10) General Compliance with Laws. Each of the Company and LMGTS is
conducting the Business in compliance with all Applicable Laws, the breach of
which individually or in the aggregate would have a Material Adverse Effect.
(11) Financial Statements. The Financial Statements, true and complete
copies of which are annexed as Schedule 3.2(11), have been prepared in
accordance with GAAP, and fairly present the results of operations and financial
position of the Company as at the date thereof and for the fiscal year then
ended. Except as and to the extent (i) reflected on the audited consolidated
balance sheet of the Company and its consolidated subsidiaries as of Xxxxx 00,
0000, (xx) incurred since April 30, 1998 in the ordinary course of business
consistent with past practice, (iii) set forth on Schedule 3.2(11) or (iv) that
any such liabilities or obligations are not material to the operations of the
Business, neither the Company nor LMGTS has any liabilities or obligations of
any kind or nature, whether known or unknown, secured or unsecured, absolute,
accrued, contingent or otherwise, and whether due or to become due, of a nature
customarily accrued, reserved against or disclosed (including in the notes
thereto) in a corporate balance sheet prepared in conformity with GAAP. Except
as set forth in Schedule 3.2(11) or as otherwise specifically contemplated by
this Agreement, since April 30, 1998, neither the Company nor LMGTS has:
(a) changed or amended its Articles of Incorporation or By-laws
(or similar governing documents);
(b) incurred any obligation or liability (fixed or contingent),
except normal trade or business obligations incurred in the
ordinary course of business and consistent with past practice,
none of which individually or in the aggregate is materially
adverse;
(c) discharged or satisfied any material Lien or paid any material
obligation or liability (fixed or contingent), other than in
the ordinary course of business and consistent with past
practice and other than the cancellation by the Company of its
loan facility with BMO and the resulting release by BMO of the
security it held for such loan facility;
(d) mortgaged, pledged or subjected to any Lien any of its assets
or properties (other than as referred to in Section 3.2(13)
below and other than in the ordinary course of business and
consistent with past practice);
(e) transferred, leased or otherwise disposed of any of its
material assets or properties except for a fair consideration
in the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and
consistent with past practice, acquired any material assets or
properties;
(f) declared, set aside or paid any dividend or other
distribution (whether in cash, stock or property or any
combination thereof but not including any deemed dividend
arising by virtue of the Company paying expenses in
connection with the transactions contemplated hereby in an
aggregate amount not exceeding $160,000, which expenses
shall be reimbursed by the Selling Shareholders to the
Company at Closing) in respect of its capital stock or
redeemed or otherwise acquired any of its capital stock or
split, combined or otherwise similarly changed its capital
stock or, except as contemplated in Exhibit A-3, authorized
the creation or issuance of or issued or sold any shares of
its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any Person
any right to acquire from the Company or LMGTS, any shares
of its capital stock, or agreed to take any such action;
(g) except for investments of the Reserve Fund in the ordinary
course of business, made any investment of a capital nature
either by purchase of stock or securities, contributions to
capital, property transfers or otherwise, or by the purchase
of any material property or assets of any other individual,
firm or corporation (except for purchases made in the ordinary
course of business);
(h) cancelled or compromised any debt or claim other than in the
ordinary course of business consistent with past practice;
(i) waived or released any rights of material value;
(j) other than under Sponsor agreements entered into in the
ordinary course of business and consistent with past practice,
transferred or granted any rights under or with respect to any
Intellectual Property or permitted any license, permit or
other form of authorization relating to any Intellectual
Property to lapse;
(k) other than in the ordinary course of business and consistent
with past practice, made or granted any wage or salary
increase applicable to any group or classification of
employees generally, entered into any employment contract
with, or made any loan to, or entered into any material
transaction of any other nature with, any officer or other
employee of the Company or LMGTS it being acknowledged that
the Company may during the Interim Period enter into any such
employment contract subject to and in accordance with the
provisions of Section 5.5 hereof;
(l) except for the execution of agreements with Sponsors in the
ordinary course of business and the execution of a Supplier
agreement with Northwest Airlines, entered into any
transaction, contract or commitment that, individually or in
the aggregate, are material, except (i) contracts listed, or
which pursuant to the terms hereof are not required to be
listed, on Schedule 3.2(15)(a) or (b), 3.2(17) or 3.2(18) and
(ii) this Agreement and the transactions contemplated hereby;
(m) suffered any casualty loss or damage (whether or not such loss
or damage shall have been covered by insurance) which affects
in any material respect its ability to conduct its business;
or
(n) suffered any material adverse change in its business,
operations or condition (financial or otherwise).
(12) No Guarantee, Etc. Neither the Company nor LMGTS is a party to or
bound by any contract of guarantee, indemnification, assumption or endorsement
of the obligations (contingent or otherwise) or indebtedness of any other Person
other than any such contract entered into in the ordinary course of business not
exceeding $100,000 in the aggregate and except for any guarantees or other like
obligations given by the Company in respect of the obligations of LMGTS none of
which exceed $100,000 in the aggregate.
(13) Title to Assets. The Company or LMGTS is the owner of or entitled
to use its Assets (other than the Intellectual Property which is addressed in
Section 3.2 (18)), with good and valid title thereto, free and clear of any and
all Liens, other than: (a) Liens arising by operation of law in the ordinary
course of business; (b) the contractual rights of the lessor under any Real
Property Lease or Personal Property Lease; (c) Liens on Assets securing (i)
indebtedness assumed or incurred to lease such Assets or to provide or satisfy
all or part of the purchase price of such Assets, or (ii) any extension, renewal
or refinancing of the balance of such indebtedness from time to time; (d) Liens
disclosed on Schedule 3.2(13). There is no agreement, option or other right or
privilege outstanding in favour of any Person for the purchase from the Company
or LMGTS of the Business, or of any of the Assets out of the ordinary course of
business.
(14) Sufficiency of Assets. To the knowledge of the Vendors, no asset
material to the Business has been disposed of since April 30, 1998 except in the
ordinary course of business and the Assets constitute all of the assets and
property used by the Company and LMGTS to operate the Business. The tangible
personal property, fixtures and equipment included in the Assets are (i) in all
material respects in a good state of repair (ordinary wear and tear excepted)
and operating condition, and (ii) sufficient and adequate in all material
respects to conduct the Business as conducted on the date of this Agreement.
(15) Leases.
(a) Schedule 3.2(15)(a) contains a complete and accurate list of
all Real Property Leases. The current use of the Leased
Premises is in compliance with, and is not in violation of,
any material covenants, conditions, restrictions or easements
affecting the Leased Premises or with respect to the use or
occupancy of the Leased Premises.
(b) Schedule 3.2(15)(b) attached hereto contains a complete and
accurate list of all material Personal Property Leases and
certain other non-material Personal Property Leases.
(c) Neither the Company nor LMGTS is in default or breach of, nor
has it received any notice of default or termination under,
any Real Property Lease or Personal Property Lease and there
exists no state of facts which after notice of lapse of time
or both would constitute such a default or breach except in
each case where any such default or breach would not result in
a Material Adverse Effect.
(16) Environmental Compliance. Each of the Company and LMGTS is in
material compliance with all environmental laws which are applicable in relation
to the operation of the Business (collectively, the "ENVIRONMENTAL LAWS")
including any such environmental laws relating to a discharge, spill or other
release, whether actual or potential, of any contaminant (as defined in the
ENVIRONMENTAL PROTECTION ACT (Ontario) and any other applicable legislation
existing as of the date hereof). The Business and the Assets are not the subject
of any governmental or regulatory remedial or control action or order or, to the
knowledge of the Vendors, any investigation or evaluation concerning an
environmental matter. Since the date of lease by the Company or LMGTS, the
Leased Premises have not been and are not now used as a landfill or waste
disposal site, nor to the knowledge of the Vendors, has any hazardous substance
or contaminant ever been deposited in or disposed of on, the Leased Premises,
nor, to the knowledge of the Vendors, has there ever been any release, spill or
discharge of any contaminant which would give rise to any action or claim
relating to violation of any such Environmental Laws or other requirements.
(17) Material Contracts. Neither the Company nor LMGTS is in default or
breach of any material provision of any Material Contract nor has it received
any notice of any such breach or default or termination under, any Material
Contract and, to the knowledge of the Vendors, there exists no state of facts
which after notice or lapse of time or both would constitute such a default or
breach. Except for the Material Contracts, neither the Company nor LMGTS is a
party to any (i) Contract which involves the payment to or by the Company or
LMGTS of more than $10,000,000 over the term of the Contract or more than
$3,000,000 during any year of the Contract, (ii) any loan agreement, trust
indenture or guarantee relating to the Company or LMGTS, (iii) warranties by the
Company of LMGTS in excess of those customary in the Business or (iv) except for
restrictions entered into with Sponsors in the normal course of business and
except for the License Agreements which only extend rights to the Company with
respect to Canada, material restrictions on the ability of the Company and/or
LMGTS to conduct the Business in any geographic location. All material
provisions of each Material Contract are valid and enforceable obligations of
the Company and/or LMGTS, as the case may be, and, to the knowledge of the
Vendors, of the other parties thereto, subject however to the limitations with
respect to enforcement imposed by law in connection with bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, including
the availability of equitable remedies such as specific performance and
injunction which are only available in the discretion of the court from which
they are sought and general equitable principles. The statements set out in
Schedule 3.2(17) respecting certain undisclosed Material Contracts are true and
correct in all material respects.
(18) Intellectual Property.
(a) Schedule 3.2(18) contains a complete and accurate listing of
all (i) registrations, applications and licenses (other than
licenses to or from Sponsors) forming part of the
Intellectual Property and that are material to the carrying
on of the Business and the registered owner thereof (in the
case of Trade-Marks) or the parties thereto in the case of
licenses, and (ii) Owned Software and Licensed Software that
is material to the carrying on of the Business. All of the
registered Trade-Marks Relating to the Business are duly and
validly registered in Canada. The Intellectual Property is
not subject to lien, mortgage, charge, hypothec, pledge or
security interest and all royalties due and payable by the
Company with respect to any Intellectual Property licensed
by it have been paid in full or accrued in the Financial
Statements.
(b) Except as disclosed on Schedule 3.2(18):
(i) the Company and LMGTS own, or are licensed to use, or
to the Vendors knowledge otherwise possess legally
enforceable rights to use or, in the case of
Intellectual Property under development, obtain the
right to use, all Intellectual Property that is (A)
material to the conduct of the Business currently
conducted by the Company and LMGTS or (B) to the
knowledge of the Vendors, under development for and
material to the Business;
(ii) to the knowledge of the Vendors, the Intellectual
Property and the conduct of the Company or LMGTS in
connection with the Intellectual Property do not
infringe upon or breach the intellectual property
rights of any other Person;
(iii) to the knowledge of the Vendors, there has been no
unauthorized or improper use by the Company of the
Trade-Marks which has affected or will affect the
distinctiveness thereof or rights therein;
(iv) to the knowledge of the Vendors, no Person is
infringing or breaching any of the Trade-Marks; and
(v) neither the Company nor LMGTS has received any
written notice challenging the Company or LMGTS
respecting the validity of, use of or ownership of
the Intellectual Property, and to the knowledge of
the Vendors, there are no facts upon which such a
challenge could be made.
(c) Except as set forth in Schedule 3.2(18), the Company and
LMGTS possess or have access to the source and object code
for all Owned Software which is material to the conduct of
the Business. Upon consummation of the transactions
contemplated by this Agreement, the Company and LMGTS will
continue to own all of such Owned Software, free and clear
of all Liens. None of the agreements for the license to the
Company of Licensed Software which is material to the
conduct of the Business require consents or other actions as
a result of the consummation of the transactions
contemplated by this Agreement in order for the Company and
LMGTS to continue to be entitled to use and operate such
Licensed Software after the Closing Date.
(d) Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of authorship
included in the Owned Software that were created by employees
of the Company or LMGTS were made in the regular course of
such employees' employment with the Company and LMGTS using
the Company's and LMGTS' facilities and resources.
(e) The Company and/or LMGTS has conducted an inventory of the
Owned and Licensed Software, as well as the hardware and
embedded microcontrollers in non-computer equipment used by
the Company and LMGTS in connection with and material to the
operation of the Business (collectively, the "Computer
Systems") in order to determine which parts of the Computer
Systems are not Year 2000 Compatible (as defined below) and
to estimate the cost of rendering such Computer Systems Year
2000 Compatible prior to January 1, 2000. Based on the
above-referenced inventory, the Vendors represent and
warrant that the Computer Systems are either Year 2000
Compatible or that it is the reasonable expectation of the
Vendors that they will be Year 2000 Compatible prior to July
1, 1999; the estimated cost of rendering the Computer
Systems Year 2000 Compatible is $520,000, of which
approximately $400,000 has been or will be incurred by the
Company through allocation of resources otherwise available
from Xxxx Xxxxxxx Worldwide Limited Partnership and
approximately $120,000 has been or will be incurred directly
by the Company and/or LMGTS. "Year 2000 Compatible" means
that the Computer Systems to the extent required for their
particular use (i) correctly perform date data century
recognition, and calculations that accommodate same century
and multi-century formulas and date values; (ii) operate or
are expected to operate on a basis comparable to their
current operation during and after the calendar year 2000
A.D., including, but not limited to, leap years; and (iii)
shall not end abnormally or provide invalid or incorrect
results as a result of date data which represents or
references different centuries or more than one century.
(19) Litigation. Except as set out on Schedule 3.2(19), there are no
material outstanding claims, actions, suits, litigation, arbitrations,
investigations or proceedings at law or equity or before any Governmental Body
existing or, to the knowledge of the Vendors, threatened:
(i) against or relating to the Company, LMGTS, the Business or
any of the Assets or the right to use and enjoy the same; or
(ii) which would enjoin, restrict or prohibit the consummation of
the transactions contemplated by this Agreement.
(20) Insurance. Particulars of the policies of insurance maintained by
the Company and LMGTS at the date of this Agreement are set out in Schedule
3.2(20). All such policies are in full force and effect and neither the Company
nor LMGTS is in default, whether as to the payment of premiums or otherwise,
under the terms of such policies so as to entitle the relevant insurer to
terminate any such policy of insurance or deny coverage thereunder. Except as
set forth in Schedule 3.2(20) all such policies will remain in full force and
effect and will not in any way be affected by, or terminate or lapse by reason
of, any of the transactions contemplated by this Agreement.
(21) Employees and Employment Contracts. Schedule 3.2(21) lists: (i)
the senior management Employees as of the date of this Agreement and the birth
date, position, date of hire and compensation of each of them, respectively, and
(ii) a category description of all other Employees together with the approximate
number of Employees, the salary range and the average salary within each such
category. Except as set out in Schedule 3.2(21), and other than oral contracts
for indefinite hire terminable on notice or by pay in lieu thereof in accordance
with the requirements of Applicable Laws, neither the Company nor LMGTS is a
party to or bound by:
(a) any contracts for the employment or statutorily required
re-employment of any Employee; or
(b) any collective bargaining agreement, contract or legally
binding commitment to any trade union or employee organization
or group in respect of or affecting the Employees.
(22) Employee Plans.
(a) Schedule 3.2(22) lists all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, pension,
profit sharing, deferred compensation, stock compensation,
stock purchase, retirement, hospitalization insurance,
medical, dental, legal, disability and similar plans or
arrangements or practices applicable to the Employees or
former Employees which are currently maintained or
participated in by the Company or LMGTS (the "EMPLOYEE
PLANS"). None of the Employee Plans is a "registered pension
plan" within the meaning of subsection 248(1) of the TAX ACT.
(b) Except as disclosed on Schedule 3.2(22) and except that the
Company is planning to introduce a new drug card, neither the
Company nor LMGTS has any formal plan or commitment whether
legally binding or not, to create any additional Employee Plan
or to modify or change in any material respect any existing
Employee Plan that would affect any Employee or former
Employee except such modification or amendment as may be
required to be made to secure the continued registration of
any existing Employee Plan with each applicable Governmental
Body.
(c) All of the Employee Plans are registered where required by,
and are in good standing under, all Applicable Laws or other
legislative, administrative or judicial promulgations
applicable to the Employee Plans.
(d) No amendments to any Employee Plan have been promised and no
amendments to any Employee Plan will be made or promised prior
to Closing which affect or pertain to the Employees, except as
contemplated in the ECB and VCB.
(e) Copies of all the Employee Plans as amended as of the date
hereof and, if available, current plan summaries and employee
booklets in respect thereof as are applicable to the Employees
have been made available to the Purchaser.
(f) Except as disclosed on Schedule 3.2(22), no Employee Plan
provides benefits, including death or medical benefits
(whether or not insured), with respect to Employees or former
Employees beyond retirement or other termination of service,
other than:
(i) coverage required by Applicable Law, or
(ii) benefits the full cost of which is borne by the
Employee or Former Employee (or his beneficiary).
(g) Except as disclosed on Schedule 3.2(22), to the knowledge of
the Company and LMGTS, there are no material pending,
threatened or anticipated claims, proceedings, reviews or
investigations relating to any of the Employee Plans (other
than routine claims for benefits).
(h) With respect to each Employee Plan that is funded wholly or
partially through an insurance policy, there will be no
liability of the Company or LMGTS as of the Closing Date,
under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date
other than the obligation to pay premiums thereunder. With
respect to each Employee Plan not funded through an
insurance policy other than with respect to the ECB and the
VBC, the Company or LMGTS has either fully funded such
Employee Plan through a trust or, where required by
generally accepted accounting principles, has made
appropriate provision for all liability thereunder as at
April 30, 1998 in the Financial Statements. All employee
contributions to the Employee Plans to the date hereof in
all material respects have been properly withheld by the
Company or LMGTS, as appropriate, and have been fully paid
into the funding arrangements for the respective Employee
Plan.
(i) Each Employee Plan and fund established thereunder has been
administered and invested in accordance with the terms of the
Employee Plan and funding agreement. Each Employee Plan
(including all amendments thereto) is duly registered where
required by, and is in good standing under, and has been
administered and invested in compliance in all material
respects with all Applicable Laws.
(j) Except in connection with the ECB and the VBC and except for
the acceleration of outstanding options to acquire Loyalty
Shares, the consummation of the transactions contemplated by
this Agreement will not accelerate the time of payment or
vesting under any Employee Plan, require the funding or
securing of any benefits under any Employee Plan, or increase
the amount of compensation due any Employee.
(k) No participant in the ECB or the VCB will be entitled to any
future entitlements under either the ECB or the VCB by virtue
of a change of a control of the Company other than the change
of control of the Company to be effected pursuant hereto.
(23) Sponsors. Schedule 3.2(23) lists the 12 largest Sponsors of the
Company, based on projected annual revenue for the fiscal year of the Company
ending April 30, 1999. The Company has not received written notice of any
intention on the part of any such Sponsor to cease doing business with the
Company or to terminate its Sponsor agreement with the Company.
(24) Taxes Paid. Each of the Company and LMGTS has paid in full all
Taxes required to be paid on or prior to the date hereof and has made adequate
provision in the Financial Statements in accordance with GAAP for the payment of
all Taxes in respect of all fiscal periods ending on or before the date thereof.
Each of the Company and LMGTS will, after the date hereof to and including the
Closing Date, pay all Taxes becoming due and payable during such period. For the
purposes of this Section 3.2(24), Taxes includes all such Taxes as may arise by
reason of an assessment or reassessment received after the date hereof. Each of
the Company and LMGTS is a private corporation and a taxable Canadian
corporation for the purposes of the TAX ACT. Each of the Company and LMGTS is a
registrant for the purposes of the goods and services tax provided for under the
EXCISE TAX ACT.
(25) Tax Filings.
(a) Each of the Company and LMGTS has prepared and filed on time with
all appropriate Governmental Bodies all Tax Returns, declarations, remittances,
information returns and reports required to be filed by or on behalf of the
Company and LMGTS in respect of any Taxes for all fiscal periods ending prior to
the date hereof and will continue do so in respect of any fiscal period ending
on or before the Closing Date. All such returns, declarations, remittances,
information returns and reports are correct and complete in all material
respects, and no material fact has been omitted therefrom. No extension of time
in which to file any such returns, declarations, remittances, information
returns or reports is in effect. There are no reassessments of the Company's
Taxes or LMGTS' Taxes that have been issued and are outstanding and which have
not been paid.
(b) (i) No federal, provincial, state, local or foreign Tax Return of
the Company or LMGTS is currently the subject of an audit or examination by any
taxing authority, (ii) no administrative or court proceedings are currently in
progress or, to the knowledge of the Vendors, pending against the Company or
LMGTS with respect to any Taxes and (iii) no deficiency or adjustment for any
Taxes has been proposed, asserted or assessed against the Company or LMGTS which
has not been paid or satisfied; provided however that with respect to the
foregoing clauses (b)(i) and (b)(ii), the Company was advised by a phone call
received from Revenue Canada on June 23, 1998 that Revenue Canada proposes to
conduct an audit in respect of the Company's 1996 and 1997 tax years which audit
is expected to commence in the fall of 1998. The statute of limitations or
reassessment period for the assessment of income Taxes with respect to the
Company has expired in accordance with applicable law.
(c) Neither the Company nor LMGTS has ever requested or received a Tax
ruling (other than a determination with respect to a qualified employee benefit
plan) or entered into a legally binding agreement (such as a closing agreement)
with a taxing authority, which ruling or agreement could have an effect on the
Taxes of the Company or LMGTS after the Closing.
(d) No extensions of time have been granted to the Company to file any
Tax Return which has not yet been filed and no waiver or consent extending any
statute of limitations for the assessment or collection of any Taxes, which
waiver or consent remains in effect, has been executed by or on behalf of the
Company, nor are any requests for such waivers or consents pending.
(e) Neither the Company nor LMGTS has incurred any Tax liabilities
other than Tax liabilities arising in the ordinary course of carrying on its
Business since the date of the Financial Statements and from that date to and
including the Closing Date will not incur any Tax liabilities other than in the
ordinary course of carrying on its Business.
(f) All Taxes owed by each Selling Shareholder if such Selling
Shareholder's failure to pay any such Taxes could result in liability to the
Company have been paid to the appropriate taxing authorities.
(g) The Company has never (i) been a member of any consolidated,
combined or unitary group for United States federal, state, local or foreign Tax
law purposes or (ii) been a party to any Tax-sharing or allocation agreement.
(26) Withholdings and Remittances. Each of the Company and LMGTS has
withheld from each payment made to any of its present or former Employees,
Officers and Directors, all amounts, including applicable Taxes, required to be
withheld by Applicable Law or any interpretation or administration thereof, and
furthermore, has remitted such withheld amounts within the prescribed periods to
the appropriate Governmental Body. Each of the Company and LMGTS has charged,
collected and remitted on a timely basis all Taxes as required under Applicable
Law on any sale, supply or delivery whatsoever, made by the Company and LMGTS.
(27) Regulatory Approvals. Except as set forth in Schedule 3.2(30), no
Governmental Authorization is required to be obtained on the part of the Company
or LMGTS in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered hereunder, or is
necessary in order that the Business can be conducted immediately following the
Closing Date substantially in the same manner as heretofore conducted.
(28) Licences and Permits. Schedule 3.2(28) lists the material Licences
and Permits. All material Licences and Permits are in full force and effect,
neither the Company nor LMGTS is in violation of any material term or provision
or requirement of any such Licences and Permits, and to the knowledge of the
Vendors, no Person has threatened to revoke, amend or impose any condition in
respect of, or commence proceedings to revoke, amend or impose conditions in
respect of, any such Licence or Permit. Except as set forth in Schedule 3.2(28),
all such Licences and Permits will remain in full force and effect and will not
in any way be affected by, or terminate or lapse by reason of, any of the
transactions contemplated by this Agreement.
(29) Safety Deposit Box/Powers of Attorney. Schedule 3.2(29) lists:
(a) the name of each bank, trust company and other financial
institution in which the Company or LMGTS holds accounts or a
safety deposit box and the names of every Person authorized to
draw thereon or to have access thereto; and
(b) the name of each Person holding a general or special power of
attorney from the Company or LMGTS and a summary of the terms
thereof.
(30) Consents and Approvals. Except as disclosed on Schedule 3.2(30),
no consent or approval is required to be obtained by the Company (i) from any
Governmental Body in connection with the execution and delivery of this
Agreement and the completion of the transactions contemplated by this Agreement,
or (ii) under the terms of any Material Contract as a result of a change of
control of the Company.
(31) Non-Arm's Length Contracts. Neither the Company nor LMGTS is a
party to any Contract with any Person with whom it does not deal at arm's length
nor is it indebted to any such Person, except for Contracts (i) entered into in
the ordinary course of business on normal commercial terms, or (ii) Contracts
disclosed on Schedule 3.2(31).
(32) Minute Books and Stock Record Books. The corporate minute books
and stock record books of the Company and LMGTS (i) are in all material respects
complete and correct and accurately reflect in all material respects action
taken at all meetings of the stockholders and Board of Directors of the Company
and LMGTS and each committee (if any) of such Boards of Directors, and (ii)
properly and accurately record the issuance and transfer of all shares of
capital stock of the Company and LMGTS.
(33) Broker's or Finders' Fees. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried out by the
Vendors with the Purchaser without the intervention of any Person on behalf of
the Vendors or the Company in such manner as to give rise to any claim by any
Person against the Company or the Purchaser for a finder's fee, brokerage
commission or similar payment, other than Xxxxxxx Xxxxx Xxxxxx Inc. and Xxxxxxx
Xxxxx Inc., whose fees, compensation and expenses shall be solely for the
account of, and paid directly by, Selling Shareholders.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents
and warrants to the Vendors as follows and acknowledges that the Vendors are
relying upon these representations and warranties in connection with the
entering into of this Agreement and the sale of the Loyalty Shares:
(1) Incorporation and Power. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
(2) Due Authorization. The Purchaser has all necessary corporate power,
authority and capacity to enter into this Agreement and all other agreements and
instruments to be executed by it as contemplated by this Agreement and to
perform its obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Purchaser.
(3) No Breach of Instruments or Laws. Neither the entering into nor the
delivery of this Agreement nor the completion of the transactions contemplated
hereby by the Purchaser will result in a material violation of:
(a) any of the provisions of the constating documents or by-laws
of the Purchaser;
(b) any contract or other agreement or instrument to which the
Purchaser is a party or by which the Purchaser is bound; or
(c) any Applicable Laws of any jurisdiction to which the Purchaser
is subject.
(4) Regulatory Approvals. Except as disclosed on Schedule 3.3(4), no
Governmental Authorization is required to be obtained on the part of the
Purchaser in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be delivered hereunder or the
performance of the obligations of the Purchaser hereunder or thereunder.
(5 Financing. The Purchaser has access to all funds necessary for the
consummation of the purchase contemplated by this Agreement and will upon
request provide evidence thereof satisfactory to the Vendors, acting reasonably.
(6 Enforceability of Obligations. This Agreement has been validly
executed and delivered by the Purchaser and is a valid and legally binding
obligation enforceable against the Purchaser in accordance with its terms and
all other agreements required to be delivered under this Agreement when executed
and delivered will have been validly authorized, executed and delivered by the
Purchaser and will thereupon be legal, valid and binding obligations enforceable
against the Purchaser in accordance with their respective terms, subject
however, to the limitations with respect to enforcement imposed by law in
connection with bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, including the availability of equitable remedies
such as specific performance and injunctions which are only available in the
discretion of the court from which they are sought and general equitable
principles.
(7 Litigation. There are no outstanding claims, actions, suits,
litigation, arbitrations, investigations or proceedings at law or equity or
before any Governmental Body existing or, to the knowledge of the Purchaser,
pending which would enjoin, restrict or prohibit the purchase of the Loyalty
Shares or any portion thereof by the Purchaser as contemplated hereunder.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(1 Vendors' Representations and Warranties. The representations and
warranties of the Vendors contained in Sections 3.1 and 3.2, or any other
agreement, certificate or instrument delivered pursuant to this Agreement shall
survive the Closing and, notwithstanding the Closing and any inspection or
inquiries made by or on behalf of the Purchaser, shall continue in full force
and effect for the benefit of the Purchaser, for a period of 15 months from the
Closing Date after which time the Vendors shall be released from all obligations
in respect of such representations and warranties provided, however, that
notwithstanding the foregoing provisions of this Section 3.4(1), (i) the
representations and warranties made by the Vendors in Section 3.1 and clauses
(3), (4) and (6) of Section 3.2 shall survive indefinitely, (ii) the
representations and warranties made by the Vendors in clauses (24), (25) and
(26) of Section 3.2 shall survive until the date 6 months following the
expiration of the applicable statute of limitations or reassessment period
relating thereto after which time the Vendors shall be released from all
obligations in respect of such representations and warranties, (iii) the
representations and warranties made by the Vendors in clause (18) of Section 3.2
shall survive for a period of 24 months from the Closing Date after which time
the Vendors shall be released from all obligations in respect of such
representations and warranties; and (iv) any claim for indemnification based on
any breach of a representation and/or warranty made in writing (setting out in
reasonable detail the nature of the claim and the appropriate amount of such
claim) prior to the expiration of such representation and warranty shall be
permitted to continue until finally resolved (by means of a final non-appealable
judgment of a court of competent jurisdiction or a settlement approved by the
parties involved) even if such resolution occurs after the expiration of such
representation and warranty.
(2 Purchaser's Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 3.3 or any other agreement,
certificate or instrument delivered pursuant to this Agreement shall survive the
Closing and, notwithstanding the Closing, shall continue in full force and
effect for the benefit of the Vendors, indefinitely.
(3 Interpretation. Any disclosure made in this Agreement or any
Schedule or Exhibit hereto shall be deemed to have been made to apply to all
representations and warranties set forth in this Agreement and any document
delivered at or subsequent to the Closing Time as provided in or pursuant to
this Agreement as long as all required information is so disclosed.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE VENDORS.
(1) Each Vendor shall indemnify and save harmless the Purchaser from and against
all claims, actions, suits, losses, costs, damages, expenses and liabilities,
including reasonable legal fees (collectively "CLAIMS"), suffered by the
Purchaser as a result of or in connection with:
(a) any breach of or non-fulfilment of any covenant or agreement
of such Vendor contained in this Agreement or under any other
agreement or instrument executed or delivered by such Vendor
pursuant to this Agreement; and
(b) any breach of or inaccuracy or misrepresentation in any
representation or warranty of such Vendor set forth in Section
3.1 of this Agreement.
(2) Each Vendor shall severally and separately indemnify and save harmless the
Purchaser from and against all Claims suffered by the Purchaser as a result of
or in connection with any breach of or inaccuracy or misrepresentation in any
representation or warranty of the Vendors set forth in Section 3.2 of this
Agreement; provided that each Vendor shall only be responsible for that portion
of any Claim equal to the amount of such Claim multiplied by such Vendor's
Proportionate Share, and without limiting the generality of the foregoing, if
either the Company or LMGTS suffers an assessment or a reassessment of Taxes for
and in respect of a taxation year ended prior to the date hereof, which
assessment or reassessment ultimately results in an increase in Taxes for and in
respect of such taxation year in excess of any provision relating thereto
contained in the Financial Statements, such increase in Taxes (to the extent in
excess of any such provision) shall be deemed to be a Claim for the purposes of
this Section 4.1(2) and the amount of such Claim shall be equal to such increase
in Taxes (to such extent) subject to reduction by the value of any directly
related deduction, tax credit, refund or similar directly related benefit
enjoyed or to be enjoyed by the Company or LMGTS or their respective successors;
provided, however, if the Claim derives from the disallowance by Revenue Canada
of all or any portion of a reserve taken as a deduction in computing income for
tax purposes, the amount of the Claim is hereby agreed to be the total of any
interest or penalties assessed by the applicable tax authorities in respect
thereof, plus an amount equal to:
disallowed reserve deduction x .446 x (1.065(4) -1)
as at April 30, 1998
In addition, if either the Company or LMGTS suffers an assessment or
reassessment of Taxes for and in respect of its taxation year ending by reason
of the acquisition of the shares of the Company by the Purchaser as herein
contemplated, which assessment or reassessment ultimately results in Taxes for
such taxation year in excess of the Taxes payable for such year computed on a
basis consistent with previous taxation years of the Company or LMGTS, as the
case may be, such increase in Taxes, to the extent in excess of any provision
relating thereto in the Financial Statements, shall be deemed to be a Claim for
the purposes of this Section 4.1(2) and the amount of such Claim shall be equal
to such excess (to such extent) subject to reduction by the value of any
directly related deduction, tax credit, refund or similar directly related
benefit enjoyed or to be enjoyed by the Company or LMGTS or their respective
successors); provided, however, if the Claim derives from the disallowance by
Revenue Canada of all or any portion of a reserve taken as a deduction in
computing income for tax purposes, the amount of the Claim is hereby agreed to
be the total of any interest or penalties assessed by the applicable tax
authorities in respect thereof, plus an amount equal to:
disallowed reserve deduction x .446 x (1.065(4) - 1)
in respect of such year
Notwithstanding anything else contained herein, none of the Vendors shall have
any liability with respect to any increase in Taxes which arises as a result of
any change in the accounting policies of the Company or basis for computation of
Taxes, (other than any such change which is required by Revenue Canada and other
than any such change which is required by the auditors of the Company acting
reasonably and in accordance with GAAP), including any decision by the Company
to lower the rate at which it reserves for its redemption liability, and any
resulting reassessment by Revenue Canada of Taxes payable for previous years.
Notwithstanding any other provision of this Agreement, the Vendors shall have no
obligation or liability under the indemnities in this Agreement for any
assessment or reassessment resulting from the amendment of any Tax Returns filed
by the Company or any successor thereto for any taxation year or other taxable
period (or portion thereof) ending on or before the Closing Date, unless such
amendment is consented to in writing by the Vendors.
4.2 LIMITATIONS ON INDEMNIFICATION BY VENDORS. Notwithstanding the foregoing or
any other provision in this Agreement, the obligation of the Vendors to
indemnify the Purchaser pursuant to Sections 4.1(1)(b) and 4.1(2) above shall be
subject to and limited by each of the following qualifications:
(1 except with respect to any claim(s) for indemnification for
breach of any representation or warranty made by any Vendor
pursuant to clauses (24), (25) and (26) of Section 3.2 no
claim(s) for indemnification shall be made until the aggregate
of all such claim(s) exceeds an amount equal to $1,000,000, at
which time the Purchaser shall be entitled to claim the full
amount of the claim or claims;
(2 the maximum aggregate liability of each Vendor (i) with
respect to any claim(s) for indemnification for breach of any
representation or warranty made by such Vendor pursuant to
Section 3.1(2) or made by the Vendors pursuant to clauses (3),
(4), (6), (18), (24), (25) and (26) of Section 3.2 shall be
limited to an amount equal to 100% of the portion of the
Purchase Price payable to such Vendor, and (ii) otherwise
shall be limited to an amount equal to 15% of the amount
obtained by multiplying such Vendor's Proportionate Share by
the Purchase Price; provided that in any event, the maximum
aggregate liability of each Vendor for all indemnity
obligations at any time or times under either or both of
Sections 4.1(1)(b) and 4.1(2), shall not exceed an amount
equal to the portion of the Purchase Price payable to such
Vendor and for the purpose of this Section 4.2(2), a Vendor's
Proportionate Share of any part of the Escrow Amount paid to
the Purchaser pursuant to the Escrow Agreement shall be
considered a liability incurred by such Vendor and shall be
allocated to either clauses (i) or (ii) of this Section
4.2(2), as applicable depending upon the nature of the Claim
which gave rise to such liability;
(3 the Vendors shall be given a reasonable opportunity to remedy
any breach of representation, warranty or covenant capable of
being remedied before any indemnity obligation will arise;
(4 the Vendors' obligations to compensate the Purchaser for any
claim for indemnification shall be reduced to the extent of
the amount of any reserve accrued in the Financial Statements,
provided and to the extent that such reserve relates
specifically to the subject matter of such claim.
4.3 INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify and save
harmless each Vendor from and against all Claims suffered by such Vendor as a
result of or in connection with:
(1 any breach of or non-fulfilment of any covenant or agreement
of the Purchaser contained in this Agreement or under any
other agreement or instrument executed or delivered by the
Purchaser pursuant to this Agreement; and
(2 any breach of or inaccuracy or misrepresentation in any
representation or warranty set forth in Section 3.3 of this
Agreement.
4.4 LIMITATIONS ON INDEMNIFICATION BY THE PURCHASER. Notwithstanding the
foregoing or any other provision in this Agreement, the obligation of the
Purchaser to indemnify the Vendors pursuant to Section 4.3(2) above shall be
subject to and limited by each of the following qualifications:
(1 no claim(s) for indemnification shall be made until the
aggregate of all such claim(s) exceeds an amount equal to
$1,000,000 at which time the Vendors shall be entitled to
claim the full amount of the claim or claims;
(2 the maximum aggregate liability of the Purchaser to a Vendor
shall be limited to an amount equal to 100% of the amount
obtained by multiplying such Vendor's Proportionate Share by
the Purchase Price; and
(3 the Purchaser shall be given a reasonable opportunity to
remedy any breach of representation, warranty or covenant
capable of being remedied before any indemnity obligation will
arise.
4.5 EXCLUSIVE REMEDY. Each Party hereby acknowledges and agrees that its sole
remedy with respect to any and all claims under or in connection with this
Agreement or the transactions contemplated hereby, including any claims relating
to the Company, LMGTS, the Business, the Assets, the Loyalty Shares or the
subject matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in this Agreement, except in the case of fraud. In
furtherance of the foregoing, each Party hereby waives, to the fullest extent
permitted by law, any and all other rights and causes of action it may have
against the other Parties or its officers, directors, employees, agents,
representatives and Affiliates under or in connection with this Agreement or
relating to the transactions contemplated hereby (whether in contract, tort or
otherwise), including any claims relating to the Company, LMGTS, the Business,
the Assets, the Loyalty Shares or the subject matter of this Agreement.
4.6 ADJUSTMENT FOR TAX EFFECT. To the extent that a Party (in this Section 4.6,
the "INDEMNIFYING PARTY") becomes liable to pay any amount for which any other
Person (in this Section 4.6, the "INDEMNIFIED PARTY") can claim indemnification
hereunder, and such amount is deductible by the Indemnified Party for income tax
purposes, the Indemnifying Party shall, notwithstanding any other provision
hereof, be obligated to pay the Indemnified Party only the loss which the
Indemnified Party actually suffered after having regard to the effect of such
deductions.
4.7 INDEMNIFICATION PROCEDURE.
(1 Third Party Claims. In the case of claims or demands made by a third
party with respect to which indemnification is sought hereunder, the Party
seeking indemnification shall give prompt written notice to the Party from whom
indemnification is sought of any such claims or demands made upon it (and in any
event shall notify such Party within 10 days of first learning of such claims or
demands), provided that in the event of a failure to give such notice, such
failure shall not preclude the Party seeking indemnification to obtain such
indemnification but its right to indemnification shall be reduced to the extent
that such delay prejudiced the defence of the claim or demand or increased the
amount of liability or cost of defence and provided that, notwithstanding
anything else herein contained, no claim for indemnity in respect of the breach
of any representation or warranty contained herein may be made unless such claim
has been made prior to the expiry of the survival period applicable to such
representation and warranty pursuant to Sections 3.4(1) or (2), as the case may
be.
(2 Control of Claim. A Party (in this Article 4, the "INDEMNIFYING
PARTY") who is given notice from another Party (in this Article 4, the
"INDEMNIFIED PARTY") of a claim or demand in respect of which indemnification is
sought, shall have the right, by notice to the Indemnified Party given not later
than 30 days after receipt of the notice, to assume the control of the
negotiation, settlement, defence or compromise of the claim or demand.
(3 Negotiations. Upon the assumption of control of any claim or demand
by the Indemnifying Party, the Indemnifying Party shall diligently proceed with
the negotiation, settlement, defence or compromise of the claim or demand at its
sole expense and, in connection therewith, the Indemnified Party shall cooperate
fully, but at the expense of the Indemnifying Party with respect to any
out-of-pocket expenses incurred, to make available to the Indemnifying Party all
pertinent information and witnesses under the Indemnified Party's control, make
such assignments and take such other steps as in the opinion of counsel for the
Indemnifying Party are reasonably necessary to enable the Indemnifying Party to
conduct such defence. Except as provided in Section 4.7(4), the Indemnified
Party shall also have the right to participate in the negotiation, settlement,
defence or compromise of any claim or demand at its own expense. For greater
certainty, in the event that with respect to any claim or demand, the Purchaser
is the Indemnified Party, then the Purchaser shall cause the Company and LMGTS
to make available to the Indemnifying Party all pertinent information and
witnesses under the Company's or LMGTS' control.
(4 Consent. The Indemnifying Party shall not be liable hereunder for
any settlement or compromise of any claim or demand effected without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. If any Claim based upon a breach of any of the
representations and warranties made herein by the Vendors can, in the judgment
of the Vendors, acting reasonably, be settled and the Vendors wish to settle
such Claim, the Vendors shall provide written notice to the Purchaser of the
proposed settlement. Within five Business Days from the receipt of such notice
(or such shorter period as the Vendors may specify in any such notice, in the
event that such settlement opportunity must be accepted within a shorter time
period), the Purchaser shall provide written notice to the Vendors advising the
Vendors as to whether or not the Purchaser agrees with the proposed settlement.
If the Purchaser agrees with the proposed settlement, then the Claim may be
settled on such basis. If the Purchaser does not wish the Claim to be settled on
such basis, the Purchaser may, within such time period, give notice to the
Vendors that the Purchaser will assume, at its cost and expense, control of the
negotiation, settlement, defence or compromise of the Claim and, notwithstanding
any other provision of this Agreement, the Vendors' maximum aggregate liability
in respect of such Claim shall be limited to the amount set out in the notice
from the Vendors to the Purchaser setting out the proposed settlement. If the
Purchaser does not give notice to the Vendors within such time period, it shall
be deemed to have agreed with the proposed settlement.
(5 Procedure. For the purposes of Sections 4.7(2), (3) and (4), the
Vendors may by unanimous agreement appoint any one or more of the Vendors to
represent the Vendors collectively and absent such agreement each of the
Vendors, other than BMO and EUK Limited (and Electra in the event that it
becomes a vendor of Loyalty Shares to the Purchaser as contemplated by Section
8.12), hereby authorize AMIG and Xxxxx Xxxxxxxxx acting jointly to represent the
Vendors for the purposes of Sections 4.7(2), (3) and (4); in either case, the
Purchaser shall be entitled to rely upon determinations relating to matters
contemplated by Sections 4.7(2), (3) and (4) made by such representatives of the
Vendors.
4.8 ADJUSTMENT. Any payment made under the indemnities herein provided for shall
be treated by the Purchaser and the Vendors for all purposes as an adjustment to
the Purchase Price.
ARTICLE 5
COVENANTS
5.1 INVESTIGATION. Until the Closing, but subject to any confidentiality
restrictions to which the Company may be subject: (a) the Purchaser and its
representatives and advisers shall, at their own expense, be permitted to make
such investigations, inspections, surveys or tests of the properties and assets
of the Company, LMGTS and their respective financial and legal condition as the
Purchaser, acting reasonably, deems necessary to familiarize itself with such
properties and assets, and (b) the Purchaser shall, during normal business
hours, be permitted complete access to all documents relating to information
scheduled or required to be disclosed under this Agreement. Notwithstanding the
foregoing provisions, to the extent that any of the Sponsors or Affiliates
thereof are, in the reasonable opinion of the Vendors, competitors of the
Purchaser, whether within Canada or elsewhere, the Vendors may withhold from any
such review by the Purchaser information regarding such Sponsors or Affiliates
which, in the Vendors' judgment, is of a competitive nature.
5.2 AUTHORIZATIONS. Each Vendor shall take all reasonable actions as are within
such Vendor's control to cause the Company to execute and deliver any
authorizations required to permit the investigations, inspections, surveys or
tests described in Section 5.1.
5.3 CONFIDENTIALITY. The Purchaser acknowledges that it remains bound by the
Confidentiality Agreement dated June 4, 1998.
5.4 RISK OF LOSS. Until the Closing, the Vendors shall cause the Company to
maintain in force all the policies of property damage insurance under which any
of the Assets is insured. Notwithstanding anything in this Section 5.4 to the
contrary, if at any time during the Interim Period there is any loss, damage or
destruction of a tangible Asset (whether or not covered by insurance) which has
or is likely to have a Material Adverse Effect, the Vendors shall promptly
notify the Purchaser thereof. The Purchaser may, at any time prior to 5:00 P.M.
on the tenth Business Day following its receipt of any such notice from any one
or more Vendors, elect by notice in writing to each of the Vendors, to either
complete the purchase of the Loyalty Shares hereunder notwithstanding such event
or terminate its obligation to complete such purchase. If the Purchaser does not
respond in writing within such period, it shall be conclusively deemed to have
elected to complete such purchase notwithstanding such event. If the Purchaser
elects within such time period to terminate its obligation to compete such
purchase, each Party shall thereafter be released from any obligations or
liability hereunder, except for the obligations of the Purchaser under Section
5.3 which shall survive any termination hereof.
5.5 ACTION DURING INTERIM PERIOD. During the Interim Period, AMIG shall cause
the Company and LMGTS:
(1 except as herein contemplated, not to make or agree to make
any material change in the compensation of any Director,
Officer or Employee or of any director, officer or employee of
LMGTS and not to pay or agree to pay or set aside any bonus,
profit sharing, retirement, insurance, death, severance or
fringe benefit or other extra-ordinary or indirect
compensation to, for or on behalf of any Director, Officer or
Employee or of any director, officer or employee of LMGTS,
other than in the normal course of business;
(2 not to sell, assign, transfer, mortgage, pledge or otherwise
encumber any of the Assets, except for sales in the normal
course of business;
(3 not to enter into any contract, agreement, commitment or
transaction outside the normal course of business;
(4 not to issue any shares or other securities of the Company
or LMGTS, except as contemplated by Exhibit A-3;
(5 not to declare or cause to be paid any dividend or make any
other form of distribution or payment on the Loyalty Shares
or any other securities of the Company;
(6 not to cancel or amend any policy of insurance which relates
to the Company, LMGTS or any of the Assets, except in the
ordinary course consistent with past practice or with the
prior written consent of the Purchaser; and
(7 generally, to carry on the Business in the normal course.
Notwithstanding the foregoing, the Purchaser acknowledges that during the
Interim Period the Company shall be permitted to hire, and determine the
compensation payable to, such new employees which, in the Company's judgment,
are necessary or desirable; provided that the Company shall not, except for the
hiring of a Vice-President, Legal Affairs, hire any Person for a senior
management position (vice-president or higher) without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
5.6 INVESTMENT CANADA NOTIFICATIONS. Prior to the Closing Time, the Purchaser
shall have made all filings and notifications, including notification under the
INVESTMENT CANADA ACT, if applicable, to all appropriate Governmental Bodies as
are required by the Purchaser to permit the transactions contemplated herein.
5.7 CONSENTS TO ASSIGNMENT OF CONTRACTS AND PERMITS. Where consents are required
under any Material Contracts as a result of the change of control of the Company
or any of the transactions contemplated by this Agreement, the Vendors shall use
their reasonable best efforts to obtain all such required consents provided that
nothing herein shall require the Vendors to make any payments to any other party
to any of the Material Contracts.
5.8 COOPERATION. Each Vendor shall, and shall use reasonable efforts to ensure
that the Company, and the Company's employees, agents and representatives are
available to, take all action and do all things necessary, and assist the
Purchaser in taking all action and doing all things necessary, to obtain all
consents, approvals and authorizations of third parties, including the making
and prosecution of all notifications and filings with all Governmental Bodies,
required by the Purchaser as a condition to the completion of the transactions
contemplated hereunder. Such assistance by the Vendors, the Company and the
Company's employees, agents and representatives shall include assisting the
Purchaser in developing all necessary submissions for any applicable
Governmental Body and promptly providing all information necessary or desirable
for any submissions, notifications or filings in connection with the
transactions contemplated pursuant to this Agreement.
5.9 ACTIONS TO SATISFY CLOSING CONDITIONS. Each of the Parties shall take all
such reasonable actions as are within its power to control, and use its
reasonable 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 6 hereof which are for the benefit of any other Party hereto.
5.10 VENDOR'S SEVERAL LIABILITY. No Vendor shall be responsible or liable for
any failure on the part of any other Vendor to perform, discharge or satisfy any
obligation, covenant or agreement of such other Vendor contained in this
Agreement.
5.11 ECB AND VCB ARRANGEMENTS. Subject to satisfaction of the conditions set out
in Section 6.1, the Purchaser shall concurrently with or promptly following
Closing ensure that not less than $7 million (the "Bonus Funds") is directly or
indirectly paid to, invested in or contributed to the Company. The Purchaser
acknowledges the obligations of the Company under the ECB and VCB and agrees to
cause the Company to comply with such obligations following the Closing.
5.12 DRAG ALONG. If required to ensure that the Purchaser acquires pursuant
hereto 100% of the issued and outstanding Loyalty Shares, AMIG shall exercise
any drag along rights it may have with respect to any Optionholder and such
Optionholder's Loyalty Shares.
5.13 TAX RETURNS. The Purchaser shall cause the Company to prepare its Tax
Returns for its taxation year ended April 30, 1998 and for its taxation year
ending as a result of the change of control of the Company herein contemplated.
The Purchaser shall ensure that all Tax computations reflected in such returns
are made on the same basis that Tax has been computed in prior years and that a
copy of such returns is provided to AMIG for its review at least five Business
Days prior to their filing.
ARTICLE 6
CONDITIONS OF CLOSING
6.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to complete the
transactions contemplated by this Agreement unless, at or before the Closing
Time, each of the following conditions has been satisfied, it being understood
that the following conditions are included for the exclusive benefit of the
Purchaser and may be waived, in whole or in part, in writing by the Purchaser at
any time; and each of the Vendors shall take all such actions, steps and
proceedings as are reasonably within its control and as may be necessary to
ensure that the following conditions are fulfilled at or before the Closing
Time:
(1 Representations and Warranties. The representations and warranties
of the Vendors in Sections 3.1 and 3.2 shall be true and correct in all material
respects as at the Closing as if made at such time.
(2 Vendors' Compliance. Each of the Vendors shall have performed and
complied with all of the terms and conditions in this Agreement on the part of
such Vendor to be performed or complied with at or before Closing and shall have
executed and delivered or caused to have been executed and delivered to the
Purchaser at the Closing all the documents contemplated in Section 7.2 or
elsewhere in this Agreement to be executed and delivered by such Vendor.
(3 No Litigation. There shall be no litigation or proceedings pending
against any Party or any of its Affiliates, directors or officers, (i) for the
purpose of enjoining, preventing or restraining the completion of the
transactions contemplated by this Agreement or (ii) which in the result, could
adversely affect the right of the Purchaser to acquire or retain the Loyalty
Shares.
(4 Consents and Authorizations. There shall have been obtained all
Government Authorizations (exclusive of the Governmental Authorizations noted in
Schedule 3.2(30)), exemptions and certificates from all appropriate Governmental
Bodies as are required to be obtained by the Vendors or the Company to permit
the transactions contemplated herein.
(5 Approvals of the Vendors and the Company. At or before Closing, the
Vendors and the Company shall have taken or caused to be taken all necessary or
desirable actions, steps and proceedings, as appropriate, to (i) approve or
authorize the sale and transfer of the Loyalty Shares to the Purchaser and the
execution, delivery and performance of this Agreement and all other agreements
and instruments contemplated herein and therein, and (ii) permit the Loyalty
Shares to be validly transferred to and registered in the name of the Purchaser.
(6 Resignations. There shall have been delivered to the Purchaser
resignations and releases of: (i) each of the Officers who are not paid
employees of the Company, and (ii) each Director required by the Purchaser to
resign at or prior to Closing.
(7 Discharge of Lien. At Closing, AMIG shall deliver to the Purchaser
a full release or discharge of the Electra Pledge.
(8 License Agreements. The Trade-Xxxx License shall have been amended
and restated as provided in Exhibit G and shall have been executed and delivered
by each of the parties thereto. In addition, there shall have been delivered to
the Company by Air Miles International Trading B.V. ("AMIT") an amended and
restated Scheme License substantially in the form of Exhibit G, except that (i)
it shall deal with the license of the scheme as referred to in the Scheme
License, and not trade-marks; (ii) Articles 3, 4, 5, 6, 9, 11 and 13 of Exhibit
G shall not apply; (iii) the corresponding version in such amended and restated
Scheme License of Section 7.1 of Exhibit G shall deal with any assignment or
transfer by AMIT of such scheme; (iv) the applicable percentage for purposes of
the royalty (in the corresponding version of Section 8.1(ii)) shall be 0.90%,
rather than 0.10%; (v) AMIT shall provide representations and warranties to the
effect of those contained in clauses (i), (ii), (iii), (iv), (v), (vii) and
(viii) of Section 10.1 of Exhibit G , but not the other clauses thereof; (vi)
Section 14.3 of Exhibit G shall not apply; and (vii) the provisions of Section
14.4(2) of Exhibit G shall not apply and a provision shall be added to the
Scheme License stating that if either party terminates the Trade-Xxxx License,
it may, at its option, terminate the Scheme License. In addition, there shall
have been delivered by AMIG to the Purchaser or any Affiliate thereof that may
be designated by the Purchaser prior to the Closing Time scheme and trade-xxxx
license agreements executed by AMIT and Air Miles International Holdings N.V.
("AMIH"), as applicable, for the use of the Air Miles(R) scheme and trade-marks
by the Company or such Affiliate in the United States on terms and conditions
consistent with the corresponding such amended and restated License Agreements,
except that such licences shall be royalty free and shall not include any
warranties other than a warranty that the trade marks listed below have been
registered in the U.S. Patent and Trade Xxxx Office under the registration
numbers shown below, that the registered owner of such trade marks is AMIH and
that, to the knowledge of AMIH, (i) there are no opposition proceedings
currently pending in the U.S. Patent and Trade Xxxx Office in respect of such
trade marks, (ii) there have been no court proceedings successfully challenging
the validity of such trade marks and (iii) no court proceedings challenging the
validity of such trade marks are currently outstanding:
AIR MILES - (1150603)
AIR MILES TRAVEL THE WORLD (1819474)
AIR MILES TRAVEL THE WORLD (1771774)
(9 Non-Competition Agreement. There shall have been delivered to the
Purchaser non-competition agreements in substantially the form attached as
Exhibit B executed by each of LM Loyalty Management Holdings N.V. (the parent
company of AMIG), Xxxxx Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxx,
Xxxx Xxxxxxx, Xxxxx Xxxx, Xxxxx Xxxxx and Xxxx Xxxxxxx.
(10 Optionholders Share Sale Agreement. The Purchaser shall have
received a Share Sale Agreement from each of the Optionholders who on or before
the Closing Time exercise all or any part of their options to acquire Loyalty
Shares in substantially the form set out in Exhibit C and each such Share Sale
Agreement shall be in full force and effect. Each Optionholder shall have,
concurrently with the closing of the sale of the Loyalty Shares by the Vendors
hereunder, completed the sale to the Purchaser under the Share Sale Agreements
of the Loyalty Shares he or she receives upon exercise of his or her options to
acquire Loyalty Shares.
(11 Termination of Shareholders Agreement. The Shareholders Agreement
shall, effective at the Closing Time, have been terminated.
(12 Legal Opinions. The Purchaser shall have received legal opinions
(which may be from Company's Counsel or in-house counsel to a Vendor) respecting
the existence and due authorization of this Agreement by each Vendor who is a
Person other than an individual, and respecting the due execution, delivery and,
considering strictly the provisions of this Agreement, the enforceability of
this Agreement with respect to each Vendor; such opinions may be based upon
reasonable assumptions and may be subject to customary qualifications.
6.2 CONDITION NOT FULFILLED. If any condition in Section 6.1 has not been
fulfilled by the Closing Time, the Purchaser, in its sole discretion may,
without limiting any rights or remedies available to the Purchaser at law or in
equity, either:
(a terminate this Agreement by notice to the Vendors, in which event
the Purchaser shall be released from its obligations under this
Agreement to complete the purchase of the Loyalty Shares; or
(b waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other
condition.
6.3 VENDORS' CONDITIONS. The Vendors shall not be obliged to complete the
transactions contemplated by this Agreement unless, at or before the Closing
Time, each of the following conditions has been satisfied, it being understood
that the following conditions are included for the exclusive benefit of the
Vendors, and may be waived, in whole or in part, in writing by the Vendors at
any time; and the Purchaser agrees with the Vendors to take all such actions,
steps and proceedings as are reasonably within the Purchaser's control and as
may be necessary to ensure that the following conditions are fulfilled at or
before the Closing Time:
(1 Representations and Warranties. The representations and warranties
of the Purchaser in Section 3.3 shall be true and correct in all material
respects as at the Closing as if made at such time.
(2 Purchaser's Compliance. The Purchaser shall have performed and
complied with all of the terms and conditions in this Agreement on its part to
be performed or complied with at or before the Closing Time and shall have
executed and delivered or caused to have been executed and delivered to the
Vendors at the Closing Time all the documents contemplated in Section 7.3 or
elsewhere in this Agreement.
(3 Consents and Authorizations. There shall have been obtained all
Governmental Authorizations, exemptions and certificates from all appropriate
Governmental Bodies as are required to be obtained by the Purchaser to permit
the transactions contemplated herein.
(4 Approvals of the Purchaser. At or before Closing, the Purchaser
shall take or cause to be taken all necessary desirable actions, steps and
corporate proceedings, as appropriate, to approve or authorize the purchase of
the Loyalty Shares from the Vendors and the execution, delivery and performance
of this Agreement and all other agreements contemplated hereby and the
transactions contemplated herein and therein.
(5 License Agreements. The Company or the Purchaser's designated
Affiliate shall have executed in favour of Air Miles International Trading B.V.
and AMIH, as applicable, the scheme and trade-xxxx license agreements referred
to in Section 6.1(8).
6.4 CONDITION NOT FULFILLED. If any condition in Section 6.3 shall not have been
fulfilled by the Closing Time, the Vendors in their sole discretion may, without
limiting any rights or remedies available to them at law or in equity, either:
(a terminate this Agreement by notice to the Purchaser in which event
each of the Vendors shall be released from all obligations under this Agreement;
or
(b waive compliance with any such condition without prejudice to its
right of termination in the event of non-fulfilment of any other condition.
ARTICLE 7
CLOSING ARRANGEMENTS
7.1 CLOSING. The Closing shall take place at 10:00 a.m. on the Closing Date at
the offices of Blake, Xxxxxxx & Xxxxxxx, 23rd Floor, Commerce Court West, 000
Xxx Xxxxxx, Xxxxxxx, Xxxxxxx, or at such other time on the Closing Date or such
other place as may be agreed orally or in writing by the Vendors and the
Purchaser.
7.2 VENDOR'S CLOSING DELIVERIES. At the Closing, each Vendor shall deliver or
cause to be delivered to the Purchaser the following documents:
(1 the certificate or certificates representing the Loyalty
Shares owned by such Vendor duly endorsed in blank for
transfer;
(2 a certificate of such Vendor to the effect that its
representations and warranties contained in this Agreement are
true and correct at and as of the Closing in all material
respects with the same force and effect as if such
representations and warranties were made at and as of such
time;
(3 in the case of AMIG, certified copies of the resolutions of
the board of directors of AMIG authorizing or approving the
transactions contemplated by this Agreement;
(4 evidence that the consents and authorizations to be obtained
in accordance with Section 6.1(4) and by such Vendor in
accordance with Section 6.1(5) have been obtained;
(5 an opinion or opinions of legal counsel addressed to the
Purchaser and the Purchaser's Counsel substantially in the
form of Exhibit D;
(6 all such other agreements, documents, instruments and
certificates or evidence required or contemplated by this
Agreement to be delivered by such Vendor or as the Purchaser's
Counsel, acting reasonably, considers necessary to validly and
effectively complete the transfer of the Loyalty Shares to the
Purchaser in accordance with this Agreement.
7.3 PURCHASER'S CLOSING DELIVERIES. At the Closing, the Purchaser shall deliver
or cause to be delivered to the Vendors the following documents and payments:
(1 payment of the Base Amount required pursuant to Section 2.4;
(2 a certificate of the Purchaser to the effect that each of its
representations and warranties contained in this Agreement are
true and correct at and as of the Closing in all material
respects with the same force and effect as if such
representations and warranties were made at and as of such
time;
(3 a certified copy of the resolution of the board of directors
of the Purchaser authorizing and approving the transactions
contemplated by this Agreement;
(4 evidence that the consents and authorizations referred to in
Section 6.3(3) have been obtained;
(5 an opinion of Purchaser's Counsel addressed to the Vendors
and their counsel substantially in the form of Exhibit E; and
(6 all such other agreements, documents, instruments and
certificates or evidence required or contemplated by this
Agreement or as counsel to the Vendors, acting reasonably,
considers necessary to complete the transfer of the Loyalty
Shares to the Purchaser in accordance with this Agreement.
ARTICLE 8
GENERAL
8.1 EXPENSES. Each Party shall be responsible for its own legal and other
expenses (including any Taxes imposed on such expenses) incurred in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement and for the
payment of any broker's commission, finder's fee or like payment payable by it
in respect of the purchase and sale of the Assets pursuant to this Agreement.
For greater certainty, the Selling Shareholders shall be responsible for the
payment of any fees payable by the Company to Xxxxxxx Xxxxx Inc. and Xxxxxxx
Xxxxx Barney Inc. in connection with the completion of the transaction
contemplated by this Agreement.
8.2 PAYMENT OF TAXES. Subject to the following proviso, all transfer Taxes, if
any, incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by Selling Shareholders, and Selling
Shareholders shall, at their own expense, file all necessary returns and other
documentation with respect to all such transfer Taxes; provided that the
Purchaser shall be responsible for, and shall prepare and file all returns with
respect to, any transfer Taxes imposed under the laws of the United States or
any political subdivision thereof.
8.3 PUBLIC ANNOUNCEMENTS. Except as required by Applicable Laws, including in
the by-laws and rules of any applicable stock exchange (in which case each Party
hereto shall use its reasonable efforts to deliver to the other Parties a copy
of same before such announcement is made), no disclosure, including disclosure
to Employees generally, or public announcement with respect to this Agreement or
any of the transactions contemplated hereby shall be made by any Party without
the prior written consent of the other Parties hereto provided that the Company
may disclose the general subject matter of this Agreement to any of its
Employees, Sponsors or Suppliers and for greater certainty, any Party may
disclose this Agreement to any of its direct or indirect shareholders, to the
extent required to obtain any necessary approvals in connection herewith.
8.4 NOTICES.
(1 Any notice, certificate, consent, determination or other
communication required or permitted to be given or made under this Agreement
shall be in writing and shall be effectively given and made if (a) delivered
personally, (b) sent by prepaid courier service or mail, or (c) sent prepaid by
fax or other similar means of electronic communication, in each case to the
applicable address set out below:
(i if to AMIG, to:
Air Miles International Group X.X.
Xxxxxxxxxxx 00
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Attention: Managing Director
Fax: 000 00 00 000 0000
with a copy to:
Blake, Xxxxxxx & Xxxxxxx
Xxxxxxxx Xxxxx Xxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
(ii if to the other Vendors, to the addresses set out on
Exhibit A-1,
(iii if to the Purchaser, to:
Alliance Data Systems Corporation
0000 Xxxxxx Xxxx
Xxxxx 000, Xxxx Xxxxx
Xxxxxx, Xxxxx
00000-0000 U.S.A.
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx
00000 X.X.X.
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No. (000) 000-0000
(2 Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if delivered, or
on the day of faxing or sending by other means of recorded electronic
communication, provided that such day in either event is a Business Day and the
communication is so delivered, faxed or sent before 4:30 p.m. local time at the
place of receipt on such day. Otherwise, such communication shall be deemed to
have been given and made and to have been received on the next following
Business Day. Any such communication sent by mail shall be deemed to have been
given and made and to have been received on the fifth Business Day following the
mailing thereof; provided however that no such communication shall be mailed
during any actual or apprehended disruption of postal services. Any such
communication given or made in any other manner shall be deemed to have been
given or made and to have been received only upon actual receipt.
(3 Any Party may from time to time change its address under this
Section by notice to the other Parties given in the manner provided by this
Section.
8.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
8.6 ENTIRE AGREEMENT. This Agreement, the Exhibits and the Schedules hereto
(together with the Confidentiality Agreement dated June 4, 1998 and the
documents and instruments executed at the Closing Time in connection herewith),
constitute the entire agreement between the Parties pertaining to the subject
matter of this Agreement and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written. There are no conditions,
warranties, representations or other agreements between the Parties in
connection with the subject matter of this Agreement (whether oral or written,
express or implied, statutory or otherwise) except as specifically set out in
this Agreement, the Exhibits and Schedules hereto, the Confidentiality Agreement
or such other documents and instruments executed at the Closing Time in
connection herewith.
8.7 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the Party to be bound
by the waiver. No waiver shall be inferred from or implied by any failure to act
or delay in acting by a Party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other Party or
Parties. The waiver by a Party of any default, breach or non-compliance under
this Agreement shall not operate as a waiver of that Party's rights under this
Agreement in respect of any continuing or subsequent default, breach or
non-observance (whether of the same or any other nature).
8.8 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
8.9 FURTHER ASSURANCES. Each Party shall promptly do, execute, deliver or cause
to be done, executed and delivered all further acts, documents and things in
connection with this Agreement that any other Party may reasonably require for
the purposes of giving effect to this Agreement.
8.10 ATTORNMENT. For the purpose of all legal proceedings this Agreement shall
be deemed to have been performed in the Province of Ontario and the courts of
the Province of Ontario shall have jurisdiction to entertain any action arising
under the Agreement. Each of the Vendors and the Purchaser hereby attorn and
submit to the jurisdiction of the courts of the Province of Ontario.
8.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable in that Province and shall be treated, in all respects, as an Ontario
contract.
8.12 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of, and
be binding on, the Parties and their respective successors and permitted
assigns. No Party may assign or transfer, whether absolutely, by way of security
or otherwise, all or any part of its respective rights or obligations under this
Agreement without the prior written consent of the other Parties; provided,
however, that (A) Purchaser may assign without the consent (written or
otherwise) of any of the other Parties, this Agreement (i) by way of security
and/or grant a collateral security interest in the Purchaser's rights under this
Agreement to one or more banks or financial institutions or other lenders to
secure repayment to such lenders of amounts loaned by such lenders to Purchaser,
and/or (ii) to any direct or indirect wholly-owned subsidiary of the Purchaser,
provided however that such subsidiary executes an assumption agreement in favour
of each of the other Parties agreeing to be bound by the obligations of the
Purchaser hereunder and provided further that any such assignment shall not
relieve the Purchaser of its obligations hereunder, and (B) each of the Parties
consents to Electra becoming the registered and beneficial holder of the Loyalty
Shares held by EUK Limited subject to Electra executing an assumption agreement
in favour of each of the other Parties agreeing to be bound by all of the
obligations of EUK Limited hereunder.
8.13 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which taken together
shall be deemed to constitute one and the same instrument. Counterparts may be
executed either in original or faxed form and the Parties adopt any signatures
received by a receiving fax machine as original signatures of the Parties;
provided, however, that any
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Party providing its signature in such manner shall promptly forward to the other
Parties an original of the signed copy of this Agreement which was so faxed.
IN WITNESS WHEREOF the Parties have executed this Agreement.
ALLIANCE DATA SYSTEMS CORPORATION
Per:
Name:
Title:
AIR MILES INTERNATIONAL GROUP B.V.
Per:
Name:
Title:
EUK LIMITED
Per:
Name:
Title:
BANK OF MONTREAL
Per:
Name:
Title:
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