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STOCK PURCHASE AGREEMENT
AMONG
MITY-LITE ACQUISITION CORP.
AND
XXXXXXX X. XXXXXXXXXXX,
XXXXX X. XXXXXXXXXXX,
XXX X. XXXXXXXXXXX,
XXXXXXXX X. XXXXXXXXXXX
AND
XXXXXX X. XXXXXXXXXXX
Dated November 18, 1998
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into on November 18, 1998, by
and among Mity-Lite Acquisition Corp., an Ontario, Canada corporation (the
"Buyer"), and each of the following individuals: Xxxxxxx X. Xxxxxxxxxxx, Xxxxx
X. Xxxxxxxxxxx, Xxx X. Xxxxxxxxxxx, Xxxxxxxx X. Xxxxxxxxxxx and Xxxxxx X.
Xxxxxxxxxxx (collectively the "Sellers"). The Buyer and the Sellers are
referred to collectively herein individually as a "Party" and collectively as
the "Parties."
The Sellers in the aggregate own all of the outstanding capital stock of
Xxxxx Enterprises, Inc., an Ontario, Canada corporation ("Xxxxx").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of Xxxxx in return for the consideration referred to
herein.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Canadian Taxes, U.S. Taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Business Corporations Act
(Ontario).
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Xxxxx" has the meaning set forth in the preface above.
"Xxxxx Share(s)" means all of the issued and outstanding shares of the
following classes of stock: Common Shares, Class A Common Shares, Class B
Common Shares, Class A Special Shares, Class B Special Shares, Class C Special
Shares and/or the Preferred Shares.
"Brothers" means the following individuals: Xxxxxxx X. Xxxxxxxxxxx,
Xxxxx X. Xxxxxxxxxxx and Xxx X. Xxxxxxxxxxx.
"Buyer" has the meaning set forth in the preface above.
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"Canadian Tax(es)" means any Canadian federal, provincial, local, or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, branch profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
goods and service, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any governmental charges or assessments,
interest, penalty, fines, or addition thereto, whether disputed or not.
"Canadian Tax Return(s)" means any return, declaration, election, report,
claim for refund, or information return or statement relating to Canadian
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
"Closing" has the meaning set forth in Section 2.5 below.
"Closing Balance Sheet" has the meaning set forth in Section 2.2.1 below.
"Closing Date" has the meaning set forth in Section 2.5 below.
"Code" means the United States Internal Revenue Code of 1986, as amended
and all regulations promulgated thereunder.
"Confidential Information" means any information concerning the
businesses and affairs of Xxxxx that is not, at the relevant time, already
generally available to the public.
"Deferred Purchase Price" has the meaning set forth below in Section
2.3.2 below.
"Disclosure Schedules" has the meaning set forth in Section 3.1 below.
"$C" means the legal tender of Canada.
"Employee Benefit Plan" means any retirement, pension, bonus, stock
purchase, profit sharing, stock option, deferred compensation, severance or
termination pay, insurance, medical, hospital, dental, vision care, drug, sick
leave, disability, salary continuation, legal benefits, unemployment benefits,
vacation, incentive or other compensation plan or arrangement or other
employee benefit that is maintained or otherwise contributed to, or required
to be contributed to, by Xxxxx for the benefit of employees or former
employees of Xxxxx.
"Environmental, Health, and Safety Requirements" shall mean all
applicable federal, provincial, state, municipal and local laws, statutes,
ordinances, by-laws and regulations and orders, directives and decisions
rendered by any ministry, department or administrative or regulatory agency
relating to the protection of the environment, occupational health and safety
or the manufacture, processing, distribution, use, treatment, storage,
disposal, discharge, transport or handling of Hazardous Substances.
"EBITDA" means earnings of Xxxxx before interest, taxes, depreciation and
amortization, calculated in accordance with GAAP, as defined below.
"Escrowed Funds" has the meaning set forth in Section 2.3.1 below.
"Financial Statements" has the meaning set forth in Section 4.8 below.
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"GAAP" means Canadian generally accepted accounting principles as in
effect from time to time.
"Hazardous Substances" means any pollutants, contaminants, chemicals or
industrial, toxic or hazardous wastes or substances.
"Indemnified Party" has the meaning set forth in Section 8.4.1 below.
"Indemnifying Party" has the meaning set forth in Section 8.4.1 below.
"Intellectual Property" means all of the following relating to or arising
out of the business of Xxxxx with respect to the health care and geriatric
seating and accessories markets: (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (iv) all mask works and all applications, registrations,
and renewals in connection therewith, (v) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans and
proposals), (vi) all computer software (including data and related
documentation), (vii) all other proprietary rights, and (viii) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation and
inquiry in the particular circumstances. For purposes of this definition, the
knowledge of the directors, officers and employees of Xxxxx is attributed to
the Brothers.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4.8
below.
"Net Assets" means the book value of the total assets of Xxxxx less the
book value of the total liabilities of Xxxxx, determined in accordance with
GAAP.
"Net Sales" means the gross sales of product by Xxxxx net of any
discounts or returns received in the period for which calculation is made,
calculated in accordance with GAAP.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"OSA" means the Securities Act (Ontario), as amended.
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"Part(ies)" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2.1 below.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"Seller(s)" has the meaning set forth in the preface above.
"Subsidiaries" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tax Act" means the Income Tax Act (Canada).
"Third Party Claim" has the meaning set forth in Section 8.4.1 below.
"U.S. Tax(es) means any United States federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, branch profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, goods and service,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any governmental charges or assessments, interest, penalty, fines,
or addition thereto, whether disputed or not.
"U.S. Tax Return(s)" means any return, declaration, election, report,
claim for refund, or information return or statement relating to U.S. Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2. Purchase And Sale of Xxxxx Shares.
2.1 Purchase Price. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each of the Sellers, and each of
the Sellers agrees to sell to the Buyer, all of his or her Xxxxx Shares for
the aggregate consideration (for all Xxxxx Shares) of $C 3,900,000, subject to
adjustment as provided in Section 2.2 below (the "Purchase Price") of which
$C600,000 will be payable on a deferred basis if certain financial conditions
are met as set forth in Section 2.3.2 below.
2.2 Adjustment to Purchase Price.
2.2.1 Subject to the completion of the audited balance sheet
for Xxxxx as at October 31, 1998 (the "Closing Balance Sheet"), the Purchase
Price will be adjusted as follows:
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2.2.1.1 if Xxxxx'x Net Assets reflected on the Closing
Balance Sheet are greater than $C1,350,000, the Purchase Price will be
increased dollar for dollar by an amount equal to such excess; or
2.2.1.2 if Xxxxx'x Net Assets reflected on the Closing
Balance Sheet is less than $C1,350,000, the Purchase Price will be decreased
dollar for dollar by an amount equal to such difference.
2.3 Payment of the Purchase Price. At the Closing (as defined below),
the Buyer will pay the Purchase Price as follows:
2.3.1 The Buyer will pay into an escrow account $C200,000 of
the Purchase Price (the "Escrowed Funds") with a bank or trust company
mutually approved by Buyer and Seller pursuant to an Escrow Agreement
substantially in the form attached hereto as Exhibit "A" (the "Escrow
Agreement"). The Escrowed Funds shall be held, offset and disbursed in
accordance with the terms of the Escrow Agreement.
2.3.2 The Buyer will pay on a deferred basis, if at all, up to
$C600,000 (the "Deferred Purchase Price") to the Brothers (according to their
respective proportionate share holdings in Xxxxx prior to the Closing) as
follows:
2.3.2.1 if the Net Sales of Xxxxx are equal to or greater
than $C5,300,000, and the EBITDA of Xxxxx for the year ending December 31,
1999 is equal to or greater than $C1,066,000, the Buyer will pay an aggregate
amount of $C300,000; or
2.3.2.2 if the Net Sales of Xxxxx are equal to or greater
than $C5,500,000, and the EBITDA of Xxxxx for the year ending December 31,
1999 is equal to or greater than $C1,105,000, the Buyer will pay an aggregate
amount of $C420,000; or
2.3.2.3 if the Net Sales of Xxxxx are equal to or greater
than $C5,720,000, and the EBITDA of Xxxxx for the year ending December 31,
1999 is equal to or greater than $C1,150,000, the Buyer will pay an aggregate
amount of $C600,000; and
2.3.2.4 the balance of the Purchase Price shall be paid to
the Sellers at the Closing as directed by each of the Sellers.
For purposes of calculating Xxxxx'x EBITDA and Net Sales for the calendar year
ending December 31, 1999 (i) the calculation will be made based on the audited
income statement of Xxxxx for the referenced period prepared in accordance
with GAAP, and, except as provided below, applied consistently with Xxxxx'x
present business practices (with GAAP being applied in the event of a conflict
between Xxxxx'x present business practices and GAAP) and audited in accordance
with generally accepted Canadian auditing standards; (ii) the calculation
shall give effect to the addition of two additional employees in the year
ending December 31, 1999: one additional employee in Xxxxx'x manufacturing
operations to assist Xxx X. Xxxxxxxxxxx and one additional employee to assume
the present position held by Xxxxx X. Xxxxxxxxxxx, provided the combined
salary of such additional employees does not exceed $C167,000 for the
referenced period; (iii) the calculation shall be made without giving effect
to any management fees paid to Buyer or its affiliates, interest charges or
administrative charges assessed by Buyer or its affiliates during the
referenced period; (iv) the calculation shall include sales made pursuant to
transfer pricing arrangements outside of Xxxxx'x historical channels as if
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such sales had been completed through Xxxxx'x historical sales channels; (v)
the calculation shall exclude any costs and expenses related to the
transactions contemplated herein including legal fees, accounting fees, and
acquisition-related severance charges, if any; and (vi) to the extent that a
claim for indemnification made by the Buyer pursuant to Section 8.2 hereof is
paid by the Sellers and the matter for which indemnification is claimed
resulted in a reduction of EBITDA and/or Net Sales for the year ended December
31, 1999, EBITDA and/or Net Sales for such period shall be calculated by
adding back to such EBITDA and/or Net Sales, as the case may be, the amount of
such indemnification payment (provided that the indemnification payment was
not otherwise included in the calculation of EBITDA and/or Net Sales in
accordance with GAAP).
The Deferred Purchase Price shall be paid, if at all, by the Buyer to the
Brothers within ten days of the release of the audited financial statements
for the fiscal year of Xxxxx ending December 31, 1999, but in no event later
than March 31, 2000. If the employment of any of the Brothers is terminated
by the Company without cause pursuant to Section 5.2 of his Employment
Agreement prior to the first to occur of: (i) the expiration of such Brother's
employment term, or (ii) December 31, 1999, the Buyer shall pay the Brothers
the full $C600,000 of the Deferred Purchase Price within 30 days of the first
to occur of the events described in clauses (i) and (ii) of this paragraph.
2.4 Allocation of Purchase Price. The Purchase Price shall be allocated
as follows:
2.4.1 the amount of $C156,551 for the purchase of the
Preference Shares;
2.4.2 the amount of $C549,180 for the purchase of the Class A
Special Shares;
2.4.3 the balance of the Purchase Price, as may be adjusted
pursuant to Section 2.3.2 above to the Common Shares.
2.5 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx, Xxxxxx
in Xxxxxx, Xxxxxxx, Xxxxxx, commencing at 10:00 a.m. local time on the third
business day following the issuance by Xxxxxx Xxxxxx of their audit report for
Xxxxx'x financial statements, including the balance sheet and statements of
income, changes in stockholders' equity, and cash flow, as of and for the
period ending October 31, 1998 provided the conditions to closing set forth in
Section 7 below have been satisfied, or such other date as the Buyer and the
Sellers may mutually determine (the "Closing Date").
2.6 Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7.1 below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section
7.2 below, (iii) each of the Sellers will deliver to the Buyer stock
certificates representing all of his or her Xxxxx Shares, endorsed in blank or
accompanied by duly executed assignment documents and (iv) the Buyer will
deliver to the Sellers, collectively, the portion of the Purchase Price due on
Closing.
3. Representations and Warranties Concerning The Transaction.
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3.1 Representations and Warranties of the Sellers. Each of the Sellers
severally represents and warrants to the Buyer that the statements contained
in this Section 3.1 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.1) with respect to himself, herself or itself,
except as set forth in the disclosure schedules accompanying this Agreement
(the "Disclosure Schedules"). The Disclosure Schedules will be arranged in
paragraphs corresponding to the numbered paragraphs of this Agreement.
3.1.1 Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform his or her
obligations hereunder. This Agreement constitutes a valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions subject to bankruptcy and insolvency laws and subject to the fact
that specific performance is available only in the discretion of a court of
competent jurisdiction. The Seller need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.1.2 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Seller is subject
or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the Seller
is a party or by which he or she is bound or to which any of his or her assets
is subject.
3.1.3 Brokers' Fees. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated, except for fees payable to KPMG Corporate Finance
Inc., which fees may be paid by the Seller or by Xxxxx provided Xxxxx books
such expenses before October 31, 1998.
3.1.4 Xxxxx Shares. The Seller holds of record, owns and will
convey to the Buyer good and marketable title to the number of Xxxxx Shares
set forth next to his or her name in Section 4.2 of the Disclosure Schedules,
free and clear of any restrictions on transfer (other than any restrictions
under the charter of Xxxxx, the OSA and other applicable securities laws),
rights, liens, encumbrances, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The Seller is
not a party to any option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or otherwise
dispose of any capital stock of Xxxxx (other than this Agreement). The Seller
is not a party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of Xxxxx.
3.1.5 Residency. Each Seller is a resident of Canada for the
purposes of the Tax Act.
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3.2 Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 3.2
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3.2), except as set forth in Section 3.2 of the Disclosure Schedules
attached hereto.
3.2.1 Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
Province of Ontario, Canada.
3.2.2 Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. The Buyer need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement except for
notification under the Investment Canada Act.
3.2.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Buyer is subject or
any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
3.2.4 Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
4. Representations and Warranties Concerning Xxxxx. The Brothers, jointly
and severally, represent and warrant to the Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the corresponding
section of the Disclosure Schedules.
4.1 Organization, Qualification, and Corporate Power. Xxxxx is a
corporation duly organized, validly existing, and in good standing under the
laws of the Province of Ontario, Canada. Xxxxx is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where
such qualification is required. Xxxxx has full corporate power and authority
and all licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it. Section 4.1 of the
Disclosure Schedules lists the directors and officers of Xxxxx. The Sellers
have delivered to the Buyer correct and complete copies of the charter and
bylaws of Xxxxx (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
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committees of the board of directors), the stock certificate books, and the
stock record books of Xxxxx are correct and complete. Xxxxx is not in default
under or in violation of any provision of its charter or bylaws.
4.2 Capitalization. The entire authorized capital stock of Xxxxx
consists of an unlimited number of Common Shares, Class A Common Shares, Class
B Common Shares, Class A Special Shares, Class B Special Shares, Class C
Special Shares and Preferred Shares. The total issued and outstanding capital
stock of Xxxxx consists of the following: 300 shares of Class A Common Shares;
339,000 shares of Class A Special Shares; and 156,551 of the Preferred Shares.
There are no issued and outstanding shares of Common Shares, Class B Common
Shares, Class B Special Shares or Class C Special Shares. All of the issued
and outstanding Xxxxx Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Sellers as set forth in Section 4.2 of the Disclosure Schedules. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Xxxxx to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with respect to Xxxxx. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock
of Xxxxx.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Xxxxx is subject or any provision of
the charter or bylaws of Xxxxx or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which Xxxxx is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). Xxxxx does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.4 Brokers' Fees. Xxxxx has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement, except for fees and costs payable
to KPMG Corporate Finance, Inc. if Xxxxx elects to pay and book such expenses
prior to October 31, 1998.
4.5 Title to Assets. Xxxxx has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it located on its
premises, or shown on the Closing Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Closing Balance Sheet.
4.6 Subsidiaries. Xxxxx has no Subsidiaries.
4.7 Affiliates. Xxxxx has no Affiliates.
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4.8 Financial Statements. Attached hereto as Exhibit "B" are the
following financial statements (collectively the "Financial Statements"): the
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1996
and December 31, 1997 (the "Most Recent Fiscal Year End"). The Financial
Statements, the Closing Balance Sheet and related audited statements of
income, changes in stockholders' equity and cash flow as of and for the
ten-month period ended October 31, 1998 (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly and accurately the financial
condition of Xxxxx as of such dates and the results of operations of Xxxxx for
such periods, are correct and complete in all material respects, and are
consistent with the books and records of Xxxxx (which books and records are
correct and complete).
4.9 Events Subsequent to Most Recent Fiscal Year End. Since December
31, 1997, there has not been any adverse change in the business, financial
condition, operations, results of operations, or future prospects of Xxxxx.
Without limiting the generality of the foregoing, since that date:
4.9.1 Xxxxx has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
4.9.2 Xxxxx has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $C10,000 or outside the Ordinary Course
of Business;
4.9.3 no party (including Xxxxx) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than
$C10,000 to which Xxxxx is a party or by which any of them is bound;
4.9.4 Xxxxx has not imposed any Security Interest upon any of
its assets, tangible or intangible;
4.9.5 Xxxxx has not made any capital expenditure (or series of
related capital expenditures) either involving more than $C10,000 or outside
the Ordinary Course of Business;
4.9.6 Xxxxx has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $C10,000 or outside the Ordinary Course of Business;
4.9.7 Xxxxx has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$C10,000 singly or $C10,000 in the aggregate;
4.9.8 Xxxxx has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
4.9.9 Xxxxx has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either involving
more than $C10,000 or outside the Ordinary Course of Business;
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4.9.10 Xxxxx has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
4.9.11 Xxxxx has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
4.9.12 Xxxxx has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
4.9.13 Xxxxx has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
4.9.14 Xxxxx has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
4.9.15 Xxxxx has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
4.9.16 Xxxxx has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
4.9.17 Xxxxx has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course
of Business;
4.9.18 Xxxxx has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
4.9.19 there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business
involving Xxxxx; and
4.9.20 Xxxxx has not committed to any of the foregoing.
4.10 Undisclosed Liabilities. Xxxxx does not have any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of
the Most Recent Fiscal Year End Balance Sheet and (ii) Liabilities which have
arisen after the Most Recent Fiscal Year End Balance Sheet in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law).
4.11 Legal Compliance. Xxxxx and its respective predecessors and
Affiliates has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
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4.12 Taxes.
4.12.1 Canadian Taxes. Xxxxx has duly filed on a timely basis
all Canadian Tax Returns required to be filed by it in Canada and any other
foreign taxing jurisdiction (whether local, state, provincial or federal) and
such Canadian Tax Returns are true complete and correct and has paid all
Canadian Taxes due and payable by it. Xxxxx has paid or has made adequate
provision for Canadian Taxes payable by it in all jurisdictions for the
current period and any previous period for which Canadian Tax Returns are not
yet required to be filed. There are no audits, actions, assessments, suits,
proceedings, investigations or claims pending or, to the Knowledge of Xxxxx
and the Sellers, or threatened against, Xxxxx in respect of Canadian Taxes,
nor are there any material matters under discussion with any governmental
authority relating to Canadian Taxes asserted by any such authority. Xxxxx is
not party to any agreement or undertaking with respect to Canadian Taxes
including undertakings with respect to deferrals of land transfer tax or with
respect to debt forgiveness under the Tax Act.
4.12.1.1 The Canadian federal income tax liability of Xxxxx
has been assessed by Revenue Canada for all fiscal years up to and including
the fiscal year ended December 31, 1997 and there are no agreements, waivers
or other arrangements providing for an extension of time with respect to the
filing of any Canadian Tax Return by, or payment of any Canadian Tax or
deficiency against, Xxxxx. The Sellers have provided to the Buyer a true copy
of all Canadian Tax Returns filed by Xxxxx in respect of the three last
completed fiscal years of Xxxxx. Xxxxx has not been and is not currently
required to file any, Canadian Tax Returns with any taxation authority located
in any jurisdiction outside Canada or outside the province of Ontario.
4.12.1.2 Xxxxx has withheld from each payment made to any of
its past or present employees, officers or directors, and to any non-resident
of Canada, the amount of all Canadian Taxes and other deductions required to
be withheld therefrom, including without limitation, all employee and employer
portions for Workers' Compensation, Canada Pension Plan and Unemployment
Insurance and has paid the same to the proper tax or other receiving officers
within the time required under any applicable legislation. Xxxxx has remitted
to the appropriate tax authority when required by law to do so all amounts
collected by it on account of sales taxes including goods and services tax.
4.12.1.3 Xxxxx has not acquired property from a non-arm's
length person as that term is defined in the Tax Act in circumstances which
would cause Xxxxx to become liable for any Canadian Taxes of the transferor.
4.12.1.4 Xxxxx is a registrant for purposes of the Excise Tax
Act (Canada) whose registration number is 10065-7840.
4.12.1.5 Section 4.12.1.5 of the Disclosure Schedules sets
forth the following information with respect to Xxxxx as of the most recent
practicable date: (i) the basis of Xxxxx in its assets; and (ii) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to
Xxxxx.
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4.12.1.6 Except as set forth in Section 4.12.1.6 of the
Disclosure Schedules, the unpaid Taxes of Xxxxx (i) did not, as of October 31,
1998, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Closing Balance Sheet (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of Xxxxx in filing its Canadian Tax Returns and U.S. Tax Returns.
4.12.2 United States Taxes. Xxxxx has filed all U.S. Tax
Returns that it was required to file with respect to U.S. Taxes. All such
U.S. Tax Returns were (i) timely filed and are (ii) true, correct and complete
in all respects. All U.S. Taxes owed by Xxxxx (whether or not shown on any
U.S. Tax Return) have been paid. Xxxxx currently is not the beneficiary of
any extension of time within which to file any U.S. Tax Return. No claim has
ever been made by an authority in a jurisdiction where Xxxxx does not file
U.S. Tax Returns that it is or may be subject to U.S. Taxes by that
jurisdiction. There are no Security Interests on any of the assets of Xxxxx
that arose in connection with any failure (or alleged failure) to pay any U.S.
Tax.
4.12.2.1 Xxxxx has withheld and paid all U.S. Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
4.12.2.2 No Seller or director or officer (or employee
responsible for U.S. Tax matters) of Xxxxx expects any authority to assess any
additional U.S. Taxes for any period for which U.S. Tax Returns have been
filed. There is no dispute or claim concerning any U.S. Tax Liability of
Xxxxx either (i) claimed or raised by any authority in writing or (ii) as to
which any of the Sellers and the directors and officers (and employees
responsible for U.S. Tax matters) of Xxxxx has Knowledge based upon personal
contact with any agent of such authority. Section 4.12.2.2 of the Disclosure
Schedules lists all federal, state, local, and foreign income U.S. Tax Returns
filed with respect to Xxxxx for taxable periods ended on or after December 31,
1995, indicates those U.S. Tax Returns that have been audited, and indicates
those U.S. Tax Returns that currently are the subject of audit. The Sellers
have delivered to the Buyer true, correct and complete copies of all U.S. Tax
Returns, examination reports, and statements of deficiencies assessed against
or agreed to by Xxxxx since 1995.
4.12.2.3 Xxxxx has not waived any statute of limitations in
respect of U.S. Taxes or agreed to any extension of time with respect to a
U.S. Tax assessment or deficiency.
4.12.2.4 Xxxxx has not filed a consent under Code Section
341(f) concerning collapsible corporations. Xxxxx has not made any payments,
is not obligated to make any payments, and is not a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G. Xxxxx has not been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). Xxxxx has disclosed on its United States federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of United States federal income Tax within the meaning of Code
Section 6662. Xxxxx is not a party to any U.S. Tax allocation or sharing
agreement. Xxxxx (i) has not been a member of an Affiliated Group filing a
15
consolidated United States federal income Tax Return (other than a group the
common parent of which was the Xxxxx) or (ii) has no Liability for the U.S.
Taxes of any Person (other than Xxxxx) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
4.12.2.5 Section 4.12.2.5 of the Disclosure Schedules sets
forth the following information with respect to Xxxxx as of the most recent
practicable date (as well as on an estimated pro forma basis as of the Closing
giving effect to the consummation of the transactions contemplated hereby):
(i) the basis of Xxxxx in its assets; and (ii) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign tax,
or excess charitable contribution allocable to Xxxxx.
4.12.2.6 The unpaid U.S. Taxes of Xxxxx (i) did not, as of
October 31, 1998, exceed the reserve for U.S. Tax Liability (other than any
reserve for deferred U.S. Taxes established to reflect timing differences
between book and U.S. Tax income) set forth on the face of the Closing Balance
Sheet (other than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of Xxxxx in filing its U.S. Tax Returns.
4.13 Real Property.
4.13.1 Xxxxx does not own and has not owned any real property at
any time during the past 12 months.
4.13.2 Section 4.13.2 of the Disclosure Schedules lists and
describes briefly all real property leased or subleased to Xxxxx. The Sellers
have delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 4.13.2 of the Disclosure Schedules. With respect
to each lease and sublease listed in Section 4.13.2 of the Disclosure
Schedules:
4.13.2.1 the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
4.13.2.2 the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
4.13.2.3 no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
4.13.2.4 no party to the lease or sublease has repudiated any
provision thereof;
4.13.2.5 there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
4.13.2.6 Xxxxx is not a party to any sublease;
4.13.2.7 Xxxxx has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
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4.13.2.8 all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations; and
4.13.2.9 all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities.
4.14 Intellectual Property.
4.14.1 Xxxxx owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for
the operation of the businesses of Xxxxx as presently conducted and is
diligently pursuing rights to Intellectual Property it deems reasonably
necessary for the business presently proposed to be conducted by Xxxxx. Each
item of Intellectual Property owned or used by Xxxxx immediately prior to the
Closing hereunder will be owned or available for use by Xxxxx on identical
terms and conditions immediately subsequent to the Closing hereunder. Xxxxx
has taken all necessary action it has deemed necessary to maintain and
protect each item of Intellectual Property that it owns or uses.
4.14.2 To the Knowledge of the Sellers, Xxxxx has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and none of the Sellers and
the directors and officers (and employees with responsibility for Intellectual
Property matters) of Xxxxx has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Xxxxx must license or
refrain from using any Intellectual Property rights of any third party). To
the Knowledge of any of the Sellers and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Xxxxx, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of Xxxxx.
4.14.3 Section 4.14.3 of the Disclosure Schedules identifies
each patent or registration which has been issued to Xxxxx with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which Xxxxx has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which Xxxxx has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and have made available to the Buyer correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Section 4.14.3 of the Disclosure Schedules
also identifies each trade name or unregistered trademark used by Xxxxx in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 4.14.3 of the
Disclosure Schedules:
4.14.3.1 Xxxxx possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license, or other
restriction;
4.14.3.2 the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
17
4.14.3.3 no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of any of
the Sellers and the directors and officers (and employees with responsibility
for Intellectual Property matters) of Xxxxx, is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
4.14.3.4 Xxxxx has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
4.14.4 Xxxxx does not use any Intellectual Property that any
third party owns and that Xxxxx uses pursuant to a license, sublicense,
agreement or permission except as set forth on Section 4.14.4 of the
Disclosure Schedules. The Sellers have delivered to the Buyer correct and
complete copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual Property
required to be identified in Section 4.14.4 of the Disclosure Schedules:
4.14.4.1 the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;
4.14.4.2 the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby;
4.14.4.3 no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
4.14.4.4 no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
4.14.4.5 no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of any of
the Sellers and the directors and officers (and employees with responsibility
for Intellectual Property matters) of Xxxxx, is threatened which challenges
the legality, validity, or enforceability of the underlying item of
Intellectual Property; and
4.14.4.6 Xxxxx has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
4.14.5 To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of Xxxxx, Xxxxx will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued operation of its
businesses as presently conducted and as presently proposed to be conducted.
4.14.6 None of the Sellers and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Xxxxx has
any Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete any
product or process of Xxxxx.
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4.15 Tangible Assets. Xxxxx owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its
businesses as presently conducted and as presently proposed to be conducted.
Each such tangible asset is free from known defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
4.16 Inventory. The inventory of Xxxxx as reflected on the Closing
Balance Sheet has been valued in accordance with GAAP consistent with the past
custom and practice of Xxxxx to the extent such custom and practice do not
conflict with GAAP, in which event, the inventory has been valued in
accordance with GAAP.
4.17 Contracts. Section 4.17 of the Disclosure Schedules lists the
following contracts and other agreements to which Xxxxx is a party:
4.17.1 any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments
in excess of $C10,000 per annum;
4.17.2 any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result
in a material loss to Xxxxx, or involve consideration in excess of $C10,000;
4.17.3 any agreement concerning a partnership or joint venture;
4.17.4 any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $C10,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
4.17.5 any agreement concerning confidentiality or
non-competition;
4.17.6 any agreement with any of the Sellers and their Affiliates
(other than with Xxxxx);
4.17.7 any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of its current or former directors, officers, and employees;
4.17.8 any collective bargaining agreement;
4.17.9 any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $C10,000 or providing severance benefits;
4.17.10 any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
4.17.11 any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of Xxxxx; or
19
4.17.12 any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $C10,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4.17 of the Disclosure Schedules (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 4.17 of the Disclosure
Schedules. With respect to each such agreement: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (iv) no party has repudiated any provision of the agreement.
4.18 Notes and Accounts Receivable. All notes and accounts receivable of
Xxxxx are reflected properly on their books and records, are valid receivables
subject to no set-offs or counterclaims, are current and collectible, and will
be collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Closing Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Xxxxx consistent with GAAP.
4.19 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Xxxxx.
4.20 Insurance. Section 4.20 of the Disclosure Schedules sets forth the
following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Xxxxx has been a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past five years:
4.20.1 the name, address, and telephone number of the agent;
4.20.2 the name of the insurer, the name of the policyholder, and
the name of each covered insured;
4.20.3 the policy number and the period of coverage; and
4.20.4 the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) neither Xxxxx nor any other party to the policy is
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the
policy has repudiated any provision thereof. Section 4.20 of the Disclosure
Schedules describes any self-insurance arrangements affecting Xxxxx.
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4.21 Litigation. Section 4.21 of the Disclosure Schedules sets forth
each instance in which Xxxxx (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None
of the actions, suits, proceedings, hearings, and investigations set forth in
Section 4.21 of the Disclosure Schedules could result in any adverse change in
the business, financial condition, operations, results of operations, or
future prospects of Xxxxx. None of the Sellers and the directors and officers
(and employees with responsibility for litigation matters) of Xxxxx has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against Xxxxx.
4.22 Product Warranty. Each product manufactured, sold, leased, or
delivered by Xxxxx has been in conformity with all applicable contractual
commitments and all express and implied warranties, and Xxxxx does not have
any Liability (and there is no current Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Closing Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Xxxxx. No
product manufactured, sold, leased, or delivered by Xxxxx is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. Section 4.22 of the Disclosure Schedules
includes copies of the standard terms and conditions of sale or lease for
Xxxxx (containing applicable guaranty, warranty, and indemnity provisions).
4.23 Product Liability. Xxxxx does not have any Liability (and there is
no current Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by Xxxxx.
4.24 Employees. To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for employment matters) of
Xxxxx, no executive, key employee, or group of employees has any plans to
terminate employment with Xxxxx. Xxxxx is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Xxxxx has not committed any unfair labor practice. None of the
Sellers and the directors and officers (and employees with responsibility for
employment matters) of Xxxxx has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Xxxxx. No notice has been received by Xxxxx of any
complaint filed by any of the employees against Xxxxx claiming that Xxxxx has
violated the Employment Standards Act (Ontario) or the Human Rights Code
(Ontario) (or any applicable employee or human rights or similar legislation
in the other jurisdictions in which the Business is conducted or Xxxxx
operates) or of any complaints or proceedings of any kind involving Xxxxx
before any labour relations board, except as disclosed in Section 4.24 of the
Disclosure Schedules. All levies, assessments and penalties made against
Xxxxx pursuant to the Workers' Compensation Act (Ontario) (and any applicable
workers' compensation legislation in the other jurisdictions in which the
21
Business is conducted) have been paid by Xxxxx and Xxxxx has not been
reassessed under any such legislation during the past six years. All accruals
for unpaid vacation pay, premiums for unemployment insurance, health premiums,
Canada Pension Plan premiums, accrued wages, salaries and commissions and
employee benefit plan payments have been reflected in the books and records of
Xxxxx.
4.25 Employee Benefits.
4.25.1 Section 4.25.1 of the Disclosure Schedules identifies each
Employee Benefit Plan and a true and complete copy of each Employee Benefit
Plan has been furnished to the Buyer.
4.25.2 Each Employee Benefit Plan has been maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such Employee
Benefit Plan. The Sellers have delivered to the Buyer the actuarial
valuations, if any, prepared for each Employee Benefit Plan during the past
three years.
4.25.3 Except as described in Section 4.25.3 of the Disclosure
Schedules:
4.25.3.1 all contributions to, and payments from, each
Employee Benefit Plan that may have been required to be made in accordance
with the terms of any such Employee Benefit Plan, or with the recommendation
of the actuary for such Employee Benefit Plan, and, where applicable, the laws
of the jurisdictions that govern such Employee Benefit Plan, have been made in
a timely manner;
4.25.3.2 all material reports, returns and similar
documents (including applications for approval of contributions) with respect
to any Employee Benefit Plan required to be filed with any governmental agency
or distributed to any Employee Benefit Plan participant have been duly filed
on a timely basis or distributed;
4.25.3.3 there are no pending investigations by any
governmental or regulatory agency or authority involving or relating to an
Employee Benefit Plan, no threatened or pending claims (except for claims for
benefits payable in the normal operation of the Employee Benefit Plans), suits
or proceedings against any Employee Benefit Plan or asserting any rights or
claims to benefits under any Employee Benefit Plan that could give rise to a
Liability nor, to the Knowledge of the Sellers and Xxxxx, are there any facts
that could give rise to any Liability in the event of such investigation,
claim, suit or proceeding; and
4.25.3.4 no notice has been received by Xxxxx of any
complaints or other proceedings of any kind involving Xxxxx or, to the
Sellers' or Xxxxx'x Knowledge, any of the employees of Xxxxx before any
pension board or committee relating to any Employee Benefit Plan or to Xxxxx.
4.26 Guaranties. Xxxxx is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person.
4.27 Environmental, Health and Safety Matters.
4.27.1 Except as described in Section 4.27.1 of the Disclosure
Schedules, Xxxxx has been and is in compliance with all Environmental, Health
and Safety Requirements;
22
4.27.2 Xxxxx has obtained all licenses, permits, approvals,
consents, certificates, registrations and other authorizations under
Environmental, Health and Safety Requirements (the "Environmental Permits")
required for the operation of its business, all of which are described in
Section 4.27.2 of the Disclosure Schedules. Each Environmental Permit is
valid, subsisting and in good standing and Xxxxx is not in default or breach
of any Environmental Permit and no proceeding is pending, or threatened, to
revoke or limit any Environmental Permit;
4.27.3 Xxxxx has not used or permitted to be used, except in
compliance with all Environmental, Health and Safety Requirements, any of its
property (including its leased property) or facilities or any property or
facility that it previously owned or leased, to generate, manufacture,
process, distribute, use, treat, store, dispose of, transport or handle any
Hazardous Substance;
4.27.4 Xxxxx has never received any notice of, nor been
prosecuted for an offence alleging, non-compliance with any Environmental,
Health and Safety Requirements, and neither the Sellers nor Xxxxx has settled
any allegation of noncompliance short of prosecution. There are no orders or
directions relating to environmental matters requiring any work, repairs,
construction or capital expenditures with respect to the business or any
property of Xxxxx, nor has Xxxxx received notice of any of the same;
4.27.5 Except as disclosed in Section 4.27.5 of the Disclosure
Schedules, there are no enacted or proclaimed or, to the Brothers' knowledge
pending or proposed changes to Environmental, Health and Safety Requirements
that would render illegal or restrict the manufacture or sale of any product
manufactured or sold or service provided by Xxxxx;
4.27.6 Xxxxx has not caused or permitted, nor does it have any
Knowledge of, the release, in any manner whatsoever, of any Hazardous
Substance on or from any of its properties (including any of its leased
property) or assets or any property or facility that it previously owned or
leased, or any such release on or from a facility owned or operated by third
parties but with respect to which Xxxxx is or may reasonably be alleged to
have Liability. All Hazardous Substances and all other wastes and other
materials and substances used in whole or in part by Xxxxx or resulting from
the Business have been disposed of, treated and stored in compliance with all
Environmental, Health and Safety Requirements. Section 4.27.6 of the
Disclosure Schedules identifies all of the locations where Hazardous
Substances used in whole or in part by Xxxxx have been or are being stored or
disposed of;
4.27.7 Xxxxx has not received any notice that it is potentially
responsible for a federal, provincial, municipal or local clean-up site or
corrective action under any Environmental, Health and Safety Requirements.
Xxxxx has not received any request for information in connection with any
federal, provincial, municipal or local inquiries as to disposal sites;
4.27.8 The Sellers have delivered to the Buyer true and complete
copies of all environmental audits, evaluations, assessments, studies or tests
relating to Xxxxx of which it is aware.
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4.28 Certain Business Relationships with Xxxxx. Except as set forth in
Section 4.28 of the Disclosure Schedules and for matters not involving more
than $C1,000 per year, none of the Sellers or their Affiliates has been
involved in any business arrangement or relationship with Xxxxx within the
past 12 months, and none of the Sellers or their Affiliates owns any asset,
tangible or intangible, which is used in the business of Xxxxx.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
5.1 General. Each of the Parties will use his or her best efforts to
take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 7.1 and Section 7.2 below).
5.2 Notices and Consents. The Sellers will cause Xxxxx to give any
notices to third parties, and will cause Xxxxx to use its best efforts to
obtain any third party consents, that the Buyer reasonably may request in
connection with the matters referred to herein. Each of the Parties will (and
the Sellers will cause Xxxxx to) give any notices to, make any filings with,
and use its best efforts to obtain any authorizations, consents, and approvals
of governments and governmental agencies in connection with the matters
referred to herein.
5.3 Operation of Business. The Sellers will not cause or permit Xxxxx
to engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of
the foregoing, the Sellers will not cause or permit Xxxxx to engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4.9 above.
5.4 Preservation of Business. The Sellers will cause Xxxxx to keep its
business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
5.5 Full Access. Each of the Sellers will permit, and the Sellers will
cause Xxxxx to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of Xxxxx, to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
Xxxxx, including, without limitation, the work papers and records of Xxxxx and
its auditors related to the preparation of the Closing Date Balance Sheet and
related Financial Statements.
5.6 Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of
the representations and warranties in Section 4 above. Each Party will give
prompt written notice to the others of any material adverse development
causing a breach of any of his or her own representations and warranties in
Section 3.1 above. No disclosure by any Party pursuant to this Section 5.6,
however, shall be deemed to amend or supplement Sellers' Disclosure Schedules
or to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant for purposes of Section 7.1.1. However, disclosures pursuant to this
Section 5.6 shall be deemed to amend and supplement Sellers' Disclosure
Schedules, if Buyer, in accordance with Section 7.1, waives the condition set
forth in Section 7.1.1 and closes the transactions contemplated herein.
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5.7 Exclusivity. Until the first to occur of (i) the Closing, or (ii)
November 30, 1998, none of the Sellers will (and the Sellers will not cause or
permit Xxxxx to) (x) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets, of
Xxxxx (including any acquisition structured as a merger, consolidation, or
share exchange) or (y) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. None of the Sellers will vote their Xxxxx Shares
in favor of any such acquisition structured as a merger, consolidation, or
share exchange. The Sellers will notify the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
6.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Sellers acknowledge and agree that from and after
the Closing the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to Xxxxx. Sellers shall use their best efforts to obtain the consent
of the Ontario Assistive Devices Program to a change of control of Xxxxx as
promptly as is reasonably practicable following the Closing.
6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving Xxxxx, each of the other Parties will
cooperate with him or her and his or her counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below). If requested by Buyer or Xxxxx, the Sellers
will cooperate with and assist Buyer and Xxxxx with pursuing any legal action
currently being brought by Xxxxx.
6.3 Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any employee, lessor,
licensor, customer, supplier, or other business associate of Xxxxx from
maintaining the same business relationships with Xxxxx or the Buyer after the
Closing as it maintained with Xxxxx prior to the Closing. Each of the Sellers
will refer all customer inquiries relating to the businesses of Xxxxx to Xxxxx
from and after the Closing.
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6.4 Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and, upon
termination of their respective terms of employment, shall deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his
or her possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions
of this Section 6.4. If, in the absence of a protective order or the receipt
of a waiver hereunder, any of the Sellers is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Seller may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Seller
shall use his or her best efforts to obtain, at the request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to
the time of disclosure.
7. Conditions to Obligation to Close.
7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
7.1.1 the representations and warranties set forth in Section 3.1
and Section 4 above shall be true and correct in all material respects at and
as of the date hereof and the Closing Date;
7.1.2 Sellers shall have: (i) performed and complied with all of
their covenants hereunder in all material respects through the Closing, (ii)
delivered or caused to be delivered to Buyer at least three business days
before the Closing the Closing Date Balance Sheet, and (iii) paid all costs
and expenses of such audit or in accordance with Section 11.12 below caused
Xxxxx to pay all cost and expenses of such audit and book such costs and
expenses prior to October 31, 1998.
7.1.3 Xxxxx shall have procured all of the third party consents
specified in Section 5.2 above, except the consent required from the Ontario
Assistive Devices Program;
7.1.4 no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (iii) affect adversely the right of
the Buyer to own the Xxxxx Shares and to control Xxxxx, or (iv) affect
adversely the right of Xxxxx to own its assets and to operate its businesses
(and no such injunction, judgment, order, decree, ruling, or charge shall be
in effect);
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7.1.5 since October 31, 1998, there shall have occurred no event
that has had or could have a material adverse effect on Xxxxx, its business,
operations, financial condition or prospects and Xxxxx shall have been
operated following October 31, 1998 until Closing only in the Ordinary Course
of Business;
7.1.6 the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Sections 7.1.1 -
7.1.5 is satisfied in all respects;
7.1.7 the Sellers shall have delivered to the Buyer stock
certificates representing all of the Xxxxx Shares properly endorsed in blank
or accompanied by duly executed assignment documents properly endorsed for
transfer;
7.1.8 the Parties, including Xxxxx, shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.1.2, Section 3.2.3, and Section 4.3 above;
7.1.9 the execution and delivery of the Escrow Agreement,
substantially in the form of Exhibit "A", the Employment Agreements with
Xxxxxxx X. Xxxxxxxxxxx and Xxx X. Xxxxxxxxxxx, substantially in the form of
Exhibit "C", the Non-Competition Agreement with each of the Sellers,
substantially in the form of Exhibit "D", and such other documents and
instruments as the Buyer may reasonably require;
7.1.10 the Buyer shall have received from counsel to the Sellers
an opinion in form and substance as set forth in Exhibit "E" attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
7.1.11 the Sellers shall have delivered to the Buyer the Waiver
and Agreement to Terminate the Shareholders Agreement dated December 18, 1993,
substantially in the form of Exhibit "F"; and
7.1.12 the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of Xxxxx other than those whom
the Buyer shall have specified in writing prior to the Closing;
7.1.13 all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 7.1 if it executes
a writing so stating at or prior to the Closing. If the Buyer elects to close
prior to satisfaction of the conditions listed above in Sections 7.1.1 -
7.1.13, it shall be deemed to have waived compliance of such conditions.
7.2 Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
7.2.1 the representations and warranties set forth in Section 3.2
above shall be true and correct in all material respects at and as of the
Closing Date;
7.2.2 the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
27
7.2.3 no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
7.2.4 the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in Section 7.2.1 -
7.2.3 is satisfied in all respects;
7.2.5 the Parties, including Xxxxx shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.1.2, Section 3.2.3, and Section 4.3 above;
7.2.6 the execution and delivery of the Escrow Agreement,
substantially in the form of Exhibit "A", the Employment Agreement
substantially in the form of Exhibit "C", the Non-Competition Agreement,
substantially in the form of Exhibit "D", and such other documents and
instruments as the Sellers may reasonably require; and
7.2.7 all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Sellers.
The Sellers may waive any condition specified in this Section 7.2 if they
execute a writing so stating at or prior to the Closing. If the Sellers elect
to close prior to the satisfaction of the conditions listed above in Sections
7.2.1 - 7.2.7, it shall be deemed to have waived compliance of such
conditions.
8. Remedies for Breaches of this Agreement.
8.1 Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder and continue in full force and effect for
a period of 24 months.
8.2 Indemnification Provisions for Benefit of the Buyer.
8.2.1 In the event any of the Sellers, either individually or
collectively, breaches (or in the event any third party alleges facts that, if
true, would mean any of the Sellers has breached) any of their
representations, warranties, and covenants contained herein, and, if there is
an applicable survival period pursuant to Section 8.1 above, provided that the
Buyer makes a written claim for indemnification against any of the Sellers
pursuant to Section 11.8 below within such survival period, then each of the
Brothers agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences (including any Adverse Consequences the Buyer may suffer
after the end of any applicable survival period) the Buyer may suffer through
and after the date of the claim for indemnification resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
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8.2.2 Each of the Sellers agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability of Xxxxx (i) for any Canadian or U.S. Taxes with respect to any
Canadian or U.S. Tax year or portion thereof ending on or before October 31,
1998 (or for any Canadian or U.S. Tax year beginning before and ending after
October 31, 1998 to the extent allocable (determined in a manner consistent
with Section 9.3 below) to the portion of such period beginning before and
ending on October 31, 1998), to the extent such Canadian or U.S. Taxes are not
reflected in the reserve for Canadian or U.S. Tax Liability (rather than any
reserve for deferred Canadian or U.S. Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Closing
Balance Sheet, and (ii) for the unpaid Canadian or U.S. Taxes of any Person
(other than Xxxxx) as a transferee or successor, by contract, or otherwise.
8.3 Indemnification Provisions for Benefit of the Sellers. In the event
the Buyer breaches (or in the event any third party alleges facts that, if
true, would mean the Buyer has breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 8.1 above, provided that any of the
Sellers makes a written claim for indemnification against the Buyer pursuant
to Section 11.8 below within such survival period, then the Buyer agrees to
indemnify each of the Sellers from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer
after the end of any applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach). Buyer further agrees to indemnify the Brothers from and against the
entirety of any Adverse Consequences they may suffer from and after the
Closing related to the personal guarantees entered in by the Brothers of
behalf of Xxxxx prior to Closing.
8.4 Matters Involving Third Parties.
8.4.1 If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8.4.1, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
8.4.2 Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (ii) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder, (iii)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (iv) settlement of, or an adverse
29
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
8.4.3 So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.4.2 above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
8.4.4 In the event any of the conditions in Section 8.4.2 above is
or becomes unsatisfied, however, (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Section
8.4.4.
8.5 Effect of and Limitation on Indemnification Obligations.
8.5.1 All indemnification payments under this Section 8 shall be
deemed adjustments to the Purchase Price.
8.5.2 Buyer may set off any amounts owing to Buyer or Xxxxx under
this Section 8 or Section 9 below against the Escrowed Funds in accordance
with the terms and conditions of the Escrow Agreement.
8.5.3 No Party shall be required to indemnify any other Party hereto
until the Canadian dollar amount of the Adverse Consequences for which
indemnification is claimed exceeds $C25,000; provided however, that once such
amount exceeds $C25,000, the entire amount of all Adverse Consequences (back
to the first dollar of Adverse Consequences, not the excess amount over
$C25,000) shall be paid.
8.5.4 Sellers' obligation to indemnify Buyer pursuant to Section
8.2, and Buyer's obligation to indemnify Sellers pursuant to Section 8.3,
shall be the sole remedy of Buyer and Sellers, respectively, for claims
arising out of this Agreement.
8.5.5 Any indemnification given under this Section 8 shall be net of
any recoveries of taxes or insurance proceeds recoverable in the event of a
claim. The Brothers shall have no obligation to indemnify Buyer under this
Section 8 for any matters that were fully insured prior to the Closing but
through the action or inaction of Buyer following the Closing are not fully
insured at the time the matter occurred.
30
8.5.6 Sellers shall not be obligated to indemnify Buyer under this
Section 8 for warranty claims brought against Xxxxx following the Closing in
excess of the warranty reserve reflected on the Closing Balance Sheet except
to the extent such claims exceed $C3,500.
8.5.7 Sellers shall not be obligated to indemnify Buyer under this
Section 8 for any matters existing and known by Buyer prior to Closing but not
included in the Disclosure Schedules.
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date to the extent Canadian or U.S. Tax Returns relating to any
pre-Closing period need to be prepared and filed after the Closing.
9.1 Tax Periods Ending on or Before the Closing Date. Buyer shall cause
Xxxxx to prepare or cause to be prepared and file or cause to be filed all
Canadian and U.S. Tax Returns for Xxxxx for all periods ending on or prior to
the Closing Date which are required to be filed to be after the Closing Date.
Sellers shall reimburse Buyer for Canadian and U.S. Taxes of Xxxxx with
respect to such periods within 15 days after payment by Buyer or Xxxxx of such
Canadian and U.S. Taxes to the extent such Canadian and U.S. Taxes are not
reflected in the reserve for Canadian and U.S. Tax Liability (other than any
reserve for deferred Canadian and U.S. Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Closing
Balance Sheet.
9.2 Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Canadian and U.S. Tax Returns of Xxxxx for Tax periods which begin before
October 31, 1998 and end after October 31, 1998. Sellers shall pay to Buyer
within 15 days after the date on which Canadian and U.S. Taxes are paid with
respect to such periods an amount equal to the portion of such Canadian and
U.S. Taxes relating to the portion of such taxable period ending on October
31, 1998 to the extent such Canadian and U.S. Taxes are not reflected in the
reserve for Canadian and U.S. Tax Liability (rather than any reserve for
deferred Canadian and U.S. Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing Balance Sheet.
The Sellers shall be responsible for all U. S. Taxes and Canadian Taxes
relating to periods prior to October 31, 1998 to the extent not reserved for
on the Closing Balance Sheet.
9.3 Cooperation on Canadian and U.S. Tax Matters.
9.3.1 Buyer, Xxxxx and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing
of Canadian and U. S. Tax Returns pursuant to this Section 9.3.1 and any
audit, litigation or other proceeding with respect to Canadian and U.S. Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Xxxxx and
Sellers agree (i) to retain all books and records with respect to Canadian and
U.S. Tax matters pertinent to Xxxxx relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by Buyer or Sellers, any extensions thereof) of
the respective taxable periods, and to abide by all record retention
31
agreements entered into with any taxing authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests,
Xxxxx or Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
9.3.2 Buyer and Sellers further agree, upon request, to use their
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Canadian and U.S. Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
9.4 Canadian and U.S. Tax Sharing Agreements. All Canadian and U.S. tax
sharing agreements or similar agreements entered into prior to the Closing
Date with respect to or involving Xxxxx shall be terminated as of the Closing
Date and, after the Closing Date, Xxxxx shall not be bound thereby or have any
Liability thereunder.
9.5 Canadian and U.S. Taxes. All transfer, documentary, sales, use,
stamp, capital gains, registration and other such Canadian and U.S. Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Canadian and U.S. Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Canadian and U.S. Taxes and fees.
10. Termination.
10.1 Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
10.1.1 the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
10.1.2 the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (i) in the event any of
the Sellers has breached any representation, warranty, or covenant contained
in this Agreement in any material respect or (ii) if the Closing shall not
have occurred on or before November 30, 1998, by reason of the failure of any
condition precedent under Section 7.1 above; and (unless the failure results
primarily from the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
10.1.3 the Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event the
Buyer has breached any representation, warranty, or covenant contained in this
Agreement in any material respect or (ii) if the Closing shall not have
occurred on or before December 15, 1998, by reason of the failure of any
condition precedent under Section 7.2 above (unless the failure results
primarily from any of the Sellers themselves breaching any representation,
warranty, or covenant contained in this Agreement).
10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach).
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10.3 Break-up Fee. In the event any of the Sellers breach or cause or
permit Xxxxx to breach the covenant or covenants set forth in Section 5.7
above regarding exclusivity, each of the Sellers and Xxxxx shall irrevocably
be liable for and shall pay Buyer or its designees an aggregate break-up fee
equal to $C100,000. Such break-up fee shall be payable in cash by wire
transfer to Buyer or its designees within five days following such breach.
The break-up fee provided for in this Section 10.3 shall constitute a joint
and several Liability of each of the Sellers and Xxxxx under this Agreement
including, without limitation, under Section 10.2 above. No Seller shall be
entitled to assert a defense against any action or claim brought by Buyer to
recover the break-up fee based upon the fact that Xxxxx is also liable for
such break-up fee.
11. Miscellaneous.
11.1 Nature of Certain Obligations.
11.1.1 The covenants of each of the Sellers in Section 2.1 above
concerning the sale of his or her Xxxxx Shares to the Buyer and the
representations and warranties of each of the Sellers in Section 3.1 above
concerning the transaction are several obligations. This means that the
particular Seller making the representation, warranty, or covenant will be
solely responsible to the extent provided in Section 8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach thereof.
11.1.2 The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This means
that each Seller will be responsible to the extent provided in Section 8
above for the entirety of any Adverse Consequences the Buyer may suffer as
a result of any breach thereof.
11.2 Press Releases and Public Announcements. Neither Sellers nor Xxxxx
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the Buyer and Xxxxx except for disclosures that may be
required by law.
11.3 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.4 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
11.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his or her rights, interests, or obligations hereunder without the
prior written approval of the Buyer and the Sellers; provided, however, that
the Buyer may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder). In the event of a merger of Xxxxx and Buyer following
the Closing, the surviving entity, if other than Buyer, shall be entitled to
all of the rights of the Buyer under this Agreement.
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11.6 Counterparts. This Agreement may be executed by facsimile in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by hand delivery, facsimile (with
electronic confirmation of receipt), recognized overnight express courier or
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Sellers: Copy to:
Xxxxx Enterprises, Inc. Xxxxxxxx, Xxxxxx
000 Xxxxxxx Xxxxxx 000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx London, Ontario
N2L 5R8 CANADA X0X 0X0 XXXXXX
Attention: Xxxxxxx X. Xxxxxxxxxxx Attention: J. Xxxxx Xxxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: ( ) ___-_____ Facsimile: (000) 000-0000
If to the Buyer: Copy to:
Mity-Lite, Inc. LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
0000 Xxxx 000 Xxxxx 0000 Xxxxxx Xxxxxxxx
Xxxx, Xxxx 00000 000 Xxxxx Xxxx Xxxxxx
Attention: Xxxxxxx X Xxxxxxx Xxxx Xxxx Xxxx, Xxxx 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Province of Ontario, Canada without
giving effect to any choice or conflict of law provision or rule (whether of
the Province of Ontario, Canada or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the Province of
Ontario, Canada.
11.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
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11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.12 Expenses. Each of the Parties will bear his or her own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Sellers agree
that Xxxxx has not borne or will bear any of the Sellers' costs and expenses
(including any of their respective legal fees and expenses or any amounts paid
or payable to KPMG Corporate Finance, Inc. or any amounts paid or payable to
Xxxxx'x auditors in connection with the preparation and audit of the Closing
Date Balance Sheet) in connection with this Agreement or any of the
transactions or agreements contemplated hereby. Notwithstanding the
foregoing, Xxxxx may pay any of the Sellers' costs and expenses identified in
this Section 11.12, provided Xxxxx books such expenses prior to October 31,
1998.
11.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any
reference to any federal, state,
provincial, local, or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. The
Parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
11.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
11.15 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11.16 below), in
addition to any other remedy to which they may be entitled, at law or in
equity.
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11.16 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of the courts in Xxxxxxx, Xxxxxxx, Xxxxxx, in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in
any such court. Each of the Parties waives any defense of inconvenient forum
to the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
MITY-LITE ACQUISITION CORP., a corporation
incorporated under the laws of the Province of Ontario
By: /s/ Xxxxxxx X. Xxxxxx
Title: President
/s/Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxxx, individually
/s/Xxxxx X. Xxxxxxxxxxx
Xxxxx X. Xxxxxxxxxxx, individually
/s/Xxx X. Xxxxxxxxxxx
Xxx X. Xxxxxxxxxxx, individually
/s/Xxxxxxxx X. Xxxxxxxxxxx
Xxxxxxxx X. Xxxxxxxxxxx, individually
/s/Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxxxxxx, individually
The undersigned hereby agrees to cause the Buyer, a wholly-owned subsidiary of
the undersigned, to perform all of the Buyer's obligations as described in
this Agreement and, to that end, the undersigned hereby guarantees the
obligations of the Buyer to the Sellers pursuant to this Agreement and
pursuant to any agreements contemplated by this Agreement, including, without
limitation, the obligations of the Buyer in regard to the payment of the
Purchase Price (including the Deferred Purchase Price and the Escrowed Funds).
MITY-LITE, INC., a Utah corporation
By: /s/ Xxxxxxx X. Xxxxxx
Title: President
