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SHARE PURCHASE AGREEMENT
BETWEEN
WOOD XXXXX INC., AS PURCHASER
AND
XXXX XXXXXXXX AND XXXXXXX XXXXXXXX,
AS VENDORS
RELATING TO THE PURCHASE OF
PURNEL DISTRIBUTORS LTD.
MADE AS OF
JUNE 30, 1998
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TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
ARTICLE 1 - INTERPRETATION 2
1.1 DEFINITIONS 2
1.2 HEADINGS 6
1.3 EXTENDED MEANINGS 6
1.4 ACCOUNTING PRINCIPLES 6
1.5 INCLUSIVE LANGUAGE 6
1.6 CURRENCY 6
1.7 SCHEDULES 7
ARTICLE 2 - PURCHASE AND SALE 8
2.1 PURCHASE AND SALE AND PURCHASE PRICE 8
2.2 ADJUSTMENT OF THE PURCHASE PRICE 9
2.3 CLOSING 10
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES 10
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS 10
3.2 SURVIVAL OF VENDOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS 22
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 22
3.4 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS 24
ARTICLE 4 - COVENANTS 24
4.1 TAXES 24
4.2 COVENANTS OF THE VENDORS 24
4.3 COVENANTS OF THE PURCHASER 26
4.4 ACKNOWLEDGMENT AND COVENANTS OF THE VENDORS 26
ARTICLE 5 - THIRD PARTY CLAIMS 27
ARTICLE 6 - RIGHTS OF SET-OFF 28
ARTICLE 7 - CONDITIONS 29
7.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER 29
7.2 CONDITIONS FOR THE BENEFIT OF THE VENDORS 31
ARTICLE 8 - GENERAL 33
8.1 FURTHER ASSURANCES 33
8.2 TIME OF THE ESSENCE 33
8.3 COMMISSIONS 33
8.4 LEGAL FEES 33
8.5 PUBLIC ANNOUNCEMENTS 34
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8.6 BENEFIT OF THE AGREEMENT 35
8.7 ENTIRE AGREEMENT 35
8.8 AMENDMENTS AND WAIVER 35
8.9 ASSIGNMENT 35
8.10 NOTICES 36
8.11 GOVERNING LAW 38
8.12 ATTORNMENT 38
8.13 INDEPENDENT LEGAL ADVICE 38
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SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of June 30, 1998;
BETWEEN: WOOD XXXXX INC., a corporation incorporated under the laws
of Canada;
(hereinafter referred to as the "Purchaser")
AND: XXXX XXXXXXXX, a business executive residing in the
Province of British Columbia;
(hereinafter referred to as "Xxxx")
AND: XXXXXXX XXXXXXXX, a business executive residing in the
Province of British Columbia;
(hereinafter referred to as "Xxxxxxx")
(Xxxx and Xxxxxxx are hereinafter sometimes collectively
referred to as the "Vendors")
WHEREAS the Corporation is engaged in the Business (as defined herein) in
the Province of British Columbia;
WHEREAS the Vendors are the beneficial and registered owners of all of the
issued and outstanding shares in the capital stock of the Corporation
(collectively the "Shares");
AND WHEREAS the Vendors desire to sell and the Purchaser desires to
purchase the Shares, upon and subject to the terms and conditions hereinafter
set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained the parties hereto
agree as follows:
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ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless something in the subject matter or context is
inconsistent therewith:
1.1.1 "Agreement" means this agreement and all amendments made hereto by
written agreement between the Vendors and the Purchaser;
1.1.2 "Ancillary Agreements" means the Employment Agreement, the Escrow
Agreement and the Non-Competition Agreements;
1.1.3 "Balance Sheet" means the balance sheet of the Corporation as at the
Balance Sheet Date;
1.1.4 "Balance Sheet Date" means February 28, 1998;
1.1.5 "Business" means the business of the Corporation consisting in the
sale and distribution of industrial and institutional sanitation and
janitorial products and services, including sanitary paper products,
janitorial and cleaning chemicals and equipment and general
sanitation supplies in British Columbia;
1.1.6 "Business Day" means a day other than a Saturday, Sunday or statutory
holiday in Vancouver, British Columbia;
1.1.7 "Class D Shares" has the meaning set out in Section 2.2.1;
1.1.8 "Class F Shares" has the meaning set out in Section 2.1.2;
1.1.9 "Closing Balance Sheet" means the balance sheet of the Corporation as
at the Closing Date and an accompanying review engagement report
prepared by the accountants of the Corporation at the cost of the
Vendors in accordance with GAAP applied on a basis consistent with
prior periods;
1.1.10 "Closing Date" means June 30, 1998;
1.1.11 "Contaminant" means any substance or material which does not occur
naturally in the environment or which falls within the definition of
"pollutants", "waste", "special waste", "hazardous chemicals",
"hazardous
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waste", "dangerous goods", "toxic substances", or any
variation of such terms or any terms of similar import in any
Environmental Law including, without limitation, urea
formaldehyde, asbestos, PCB transformers and poly-chlorinated
biphenyls.
1.1.12 "Control" (including the terms "Controlling" and "Controlled")
means the power to elect the majority of the board of directors or
the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise;
1.1.13 "Consents" means the consents, approvals and authorizations
required to be obtained pursuant to Schedule 3.1.7;
1.1.14 "Corporation" means Purnel Distributors Ltd.;
1.1.15 "Covenant Agreement" has the meaning set out in Section 7.2.1.6;
1.1.16 "Employment Agreement" has the meaning set out in Section 7.1.1.8;
1.1.17 "Environment" means all components of the Earth, including air,
all layers of the atmosphere, land, soil, water, organic and
inorganic matter, living species and organisms, any combination of
the above components, interacting natural systems that include the
above components and the ambient milieu with which living species
have dynamic relations;
1.1.18 "Environmental Laws" means all Laws relating in whole or in part
to the Environment or its protection, as the same would be applied
as of the date hereof, including any Laws relating to (i) the
natural or accidental release, emission, discharge, deposit,
issuance, spraying, injection, inoculation, abandonment, burial,
spilling, incineration, disposal, leaking, seeping, pouring,
emptying, throwing, dumping, placing or exhausting of any
Contaminant into the Environment and (ii) the storage, disposal,
destruction, incineration, burial, recycling, handling,
transportation or use of a Contaminant;
1.1.19 "Environmental Permits" has the meaning set out in Section 3.1.46.2;
1.1.20 "Escrow Agreement" has the meaning set out in Section 7.1.1.9;
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1.1.21 "Financial Statements" has the meaning set out in Section 3.1.8;
1.1.22 "GAAP" has the meaning specified in Section 1.4;
1.1.23 "Governmental Authority" means any federal, provincial, regional,
municipal or local or other governmental authority, domestic or
foreign, having jurisdiction over the Corporation or the Business
and includes any agency, department, commission, board, bureau,
instrumentality, court, tribunal or other Person exercising
executive, legislative, judicial, regulatory or administrative
functions constituted or appointed by any such authority;
1.1.24 "Interim Financial Statements" has the meaning specified in
Section 3.1.9;
1.1.25 "Law" means any law, statute, by-law, regulation or any legally
binding rule, directive, guideline, policy, notice, order or
ordinance of any Governmental Authority, including Environmental
Laws;
1.1.26 "Leased Premises" has the meaning set out in Section 3.1.14;
1.1.27 "Lien" in relation to any property or asset, means any encumbrance
or title defect of whatever kind or nature, regardless of form,
whether or not recorded or registered or consensual or statutory or
arising by law, including any lien, charge, mortgage, hypothecation,
pledge, security interest, assignment, lease, option, easement,
servitude, right of way, encroachment, restrictive covenant, right
of use or any other claim or right of any kind or nature whatsoever
which affects ownership or possession of, or title to, or any
interest in, or the right to use or occupy such property or asset;
1.1.28 "Material Contract" has the meaning set out in Section 3.1.24;
1.1.29 "Net Assets" means shareholders' equity as shown on the Combined
Closing Balance Sheet;
1.1.30 "Non-Canadian" has the meaning set out in Section 3.3.4;
1.1.31 "Non-Competition Agreements" has the meaning set out in Section
7.1.1.7;
1.1.32 "Parent Common Shares" means the common shares of Xxxxx
Corporation issuable to a holder of Class F Shares in accordance
with the exercise of the
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retraction rights relating to the Class F Shares as set out
in Section 8 of the Class F Share Conditions (as defined in the
Covenant Agreement);
1.1.33 "Permits" means all permits, licenses, certificates, approvals,
authorizations, consents, registrations, qualifications and the like
issued by any Governmental Authority which are held by the
Corporation in connection with the operation of the Business;
1.1.34 "Person" means an individual, corporation, joint venture,
partnership, trust, trustee, unincorporated organization, or any
other entity;
1.1.35 "Personal Property Leases" has the meaning set out in Section 3.1.15;
1.1.36 "Premises Leases" has the meaning set out in Section 3.1.14;
1.1.37 "Purchase Price" has the meaning set out in Section 2.1.1;
1.1.38 "Purchased Shares" has the meaning set out in Section 2.1.1;
1.1.39 "Related Person" means:
(a) with respect to any Person who is an individual, a child,
stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law of that
person, including adoptive relationships; and
(b) with respect to any Person, a Person that directly, or
indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with that person;
1.1.40 "Shares" has the meaning set forth in the preamble hereto;
1.1.41 "Taxes" means all federal, provincial, local, foreign and other
taxes, including income taxes, sales taxes, goods and services
taxes, use taxes, occupancy taxes, excise taxes, property taxes,
franchise taxes and employment and payroll related taxes;
1.1.42 "Time of Closing" means 10 a.m. (Vancouver Time) on the Closing
Date; and
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1.1.43 "Xxxxx" means Xxxxx Corporation.
1.2 HEADINGS
The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof
and include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 EXTENDED MEANINGS
In this Agreement words importing the singular number only shall include
the plural and vice versa, words importing the masculine gender shall include
the feminine and neuter genders and vice versa and words importing persons
shall include individuals, partnerships, associations, trusts, unincorporated
organizations and corporations.
1.4 ACCOUNTING PRINCIPLES
Wherever in this Agreement reference is made to a calculation to be made
in accordance with generally accepted accounting principles, such reference
shall be deemed to be to the generally accepted accounting principles from time
to time approved by the Canadian Institute of Chartered Accountants, or any
successor institute, applicable as at the date on which such calculation is
made or required to be made in accordance with generally accepted accounting
principles ("GAAP").
1.5 INCLUSIVE LANGUAGE
As used herein, the word "or" is not exclusive and the word "including" is
not limiting (whether or not non-limiting language such as "without limitation"
or "but not limited to" or words of similar import is used with reference
thereof).
1.6 CURRENCY
All references to currency herein are to lawful money of Canada.
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1.7 SCHEDULES
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 2.1.1: Shareholders of the Corporation; Allocation of Purchase Price
Schedule 2.1.2: Class F Share Conditions
Schedule 2.1.3: Promissory Note
Schedule 3.1.3: Share Conditions of the Corporation
Schedule 3.1.7: Third Party Consents
Schedule 3.1.8: Financial Statements
Schedule 3.1.9: Interim Financial Statements
Schedule 3.1.12: Liens
Schedule 3.1.14: Leased Premises and Premises Leases
Schedule 3.1.15: Personal Property Leases
Schedule 3.1.19: Capital Expenditures
Schedule 3.1.17: Inventory
Schedule 3.1.20: Dividends
Schedule 3.1.22: Tax Accounts
Schedule 3.1.23: Liabilities
Schedule 3.1.24: Material Contracts
Schedule 3.1.30: Employment Contracts
Schedule 3.1.31: Employee Benefit Plans
Schedule 3.1.35: Related Person Indebtedness
Schedule 3.1.37: Intellectual Property
Schedule 3.1.40: Insurance Policies
Schedule 3.1.42: Amounts payable to Related Persons
Schedule 3.1.43: Litigation
Schedule 3.1.46: Environmental Matters
Schedule 3.1.51: Bank Accounts
Schedule 3.3.7: Financial Statements of the Purchaser
Schedule 3.3.8: Memorandum on Rule 144 Resale of Restricted Securities
Schedule 0.0.0.0: Non-Competition Agreements
Schedule 0.0.0.0: Employment Agreement
Schedule 0.0.0.0: Escrow Agreement
Schedule 7.1.1.10:Lease
Schedule 7.1.1.11:Opinion of the Vendors' Counsel
Schedule 0.0.0.0: Covenant Agreement
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ARTICLE 2 - PURCHASE AND SALE
2.1 PURCHASE AND SALE AND PURCHASE PRICE
2.1.1 Subject to the terms and conditions hereof, on the Closing Date, each
of the Vendors shall sell to the Purchaser the number of Shares set
opposite the name of each Vendor on Schedule 2.1.1 hereto (the
aggregate number of such Shares is herein collectively called the
"Purchased Shares") and the Purchaser shall purchase the Purchased
Shares from the Vendors, free and clear of all Liens, for a total
purchase price of $548,000 (hereinafter referred to as the "Purchase
Price"), subject to adjustment in accordance with Section 2.2, to be
allocated amongst the Vendors in accordance with Schedule 2.1.1.
2.1.2 The Purchase Price shall be paid against delivery to the Purchaser of
share certificates evidencing the Purchased Shares duly endorsed for
transfer to the Purchaser and satisfied (i) as to an aggregate amount
of $388,000 payable to the Vendors in accordance with their
respective shareholdings set forth in Schedule 2.1.1 by certified
cheque or bank draft to the order of each of the Vendors, and
delivered by the Purchaser at the Time of Closing, (ii) as to
$25,000 payable by cheque to the order of XxXxxxxx Xxxxxxxx, as
escrow agent, and delivered by Xxxxx Xxxxxxx at the Time of Closing,
such amount having been deposited "in trust" with Xxxxx Xxxxxxx by
the Purchaser such amount and interest thereon to be held in escrow
pursuant to the Escrow Agreement in order to secure the payment of
any amounts due by the Vendors to the Purchaser pursuant to this
Agreement. The escrowed funds will be dealt with on the terms and
conditions set forth in the Escrow Agreement, and (iii) as to an
aggregate amount of $135,000, by the delivery to the Vendors as set
forth in Schedule 2.1.1 at the Time of Closing of a total of 12,000
class F exchangeable shares of the capital stock of the Purchaser
("Class F Shares"), to be issued from treasury and having the
attributes set out in Schedule 2.1.2.
2.1.3 The Purchaser shall also purchase all of John's right title and
interest in the promissory note attached hereto as Schedule 2.1.3,
for a total purchase price of $58,345, payable at the Time of Closing
by certified cheque or bank draft.
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2.2 ADJUSTMENT OF THE PURCHASE PRICE
2.2.1 The amount of the Purchase Price allocable to the Common Shares is
based on the assumption that the net asset value ("Net Assets") of
the Corporation on the Closing Balance Sheet shall be not less than
$300,000. In the event that Net Assets as shown on the Closing
Balance Sheet are greater or less than $300,000 on the Closing Date,
then the Vendors of the class D redeemable preferred shares of the
Corporation ("Class D Shares") will pay the Purchaser the amount of
the shortfall (in accordance with the percentages of their Class D
Shares set out on Schedule 2.1.1) or the Purchaser will pay the
Vendors of the Class D Shares the amount of the excess (in accordance
with the percentages of their Class D set out on Schedule 2.1.1), as
the case may be, together with interest on such amount at the rate of
6% per annum calculated from the Closing Date to the date of payment.
2.2.2 On or before August 31, 1998, the Vendors shall deliver the Closing
Balance Sheet to the Purchaser.
2.2.3 The Closing Balance Sheet shall be final, conclusive and binding
unless the Purchaser gives written notice of its disagreement with
any item or items thereon within 30 days following the receipt of the
Closing Balance Sheet, specifying in reasonable detail the nature and
extent of such disagreement.
2.2.4 If within 5 days following the receipt by the Vendors of a notice of
the type referred to in Section 2.2.3, the Vendors and the Purchaser
are unable to resolve any disagreement with respect to the Closing
Balance Sheet and the determination of Net Assets, the disagreement
shall be submitted to Price Waterhouse for arbitration. Price
Waterhouse shall act as an arbitrator to determine and resolve only
those issues in dispute. Price Waterhouse shall deliver a decision
within 30 days of the submission of the dispute, and such decision
shall be consistent with this Agreement, shall be set forth in a
written statement delivered to the Purchaser and the Vendors and
shall be final, conclusive and binding on the Purchaser and the
Vendors. The adjusting payments, if any, required by Section 2.2.1
shall be made forthwith after receipt of the final determination of
Net Assets by Price Waterhouse, together with all interest thereon at
the rate of 6% per annum from the Closing Date to the date of
payment. The fees and expenses of Price Waterhouse in connection with
any such determination shall be paid one half by the Vendors and one
half by the Purchaser. Otherwise, the Purchaser and the Vendors
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shall each pay their own costs incurred, including the fees
and expenses of their respective accountants or attorneys, if
any.
2.3 CLOSING
The sale and purchase of the Purchased Shares and the execution and
delivery of the Ancillary Agreements shall be completed at the Time of Closing
at the offices of XxXxxxxx Xxxxxxxx, Pacific Centre 000 Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS
The Vendors jointly and severally represent and warrant to the Purchaser
the following, and acknowledge that the Purchaser is entitled to rely on such
representations and warranties notwithstanding any due diligence investigation
done by the Purchaser prior to the closing:
3.1.1 the Corporation is a corporation duly incorporated, organized and
subsisting under the laws of British Columbia as a private issuer as
that term is defined in the Securities Act (British Columbia) with
the corporate power to own its assets and to carry on the Business
and has made all necessary filings under all applicable corporate,
securities and taxation Laws or any other Laws to which the
Corporation is subject and is qualified to own its properties and
assets and to carry on the Business as presently carried on by it;
3.1.2 Schedule 2.1.1 sets out (i) the authorized capital of the Corporation
and (ii) the number of Shares of the Corporation which are issued and
outstanding, which shares have been validly issued as fully paid and
non-assessable and registered in the names of the Vendors as set
forth on Schedule 2.1.1;
3.1.3 the rights, privileges, restrictions and conditions attached to the
Shares are as set out in Schedule 3.1.3 attached hereto;
3.1.4 the Purchased Shares constitute all of the issued and outstanding
Shares in the capital stock of the Corporation;
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3.1.5 each of the Vendors is the beneficial and registered owner of the
number of Purchased Shares set opposite the name of such Vendor on
Schedule 2.1.1, free and clear of all Liens, options and any other
rights of others;
3.1.6 there is no contract, option or any other right of another binding
upon or which at any time in the future may become binding upon:
(i) any of the Vendors to sell, transfer, assign, or grant any
Lien on or affecting, or in any other way dispose of or
encumber any of the Purchased Shares other than pursuant to
the provisions of this Agreement or any of its assets other
than in the ordinary course of business, or
(ii) the Corporation to allot or issue any of the unissued shares
or securities of the Corporation or to create any additional
class of shares or securities;
3.1.7 except as disclosed on Schedule 3.1.7, neither the entering into nor
the delivery of this Agreement and the Ancillary Agreements nor the
completion of the transactions contemplated hereby by each of the
Vendors will result in the violation of or require the Consent of any
third party pursuant to:
(i) any of the provisions of the Memorandum or Articles, as
amended, of the Corporation;
(ii) any agreement or other instrument to which the Corporation or
any of the Vendors is a party or by which the Corporation or
any of the Vendors is bound, or
(iii) any applicable Law;
3.1.8 the financial statements of the Corporation, consisting of the
Balance Sheet and statements of income, retained earnings and changes
in financial position for the period ended on the Balance Sheet Date,
together with the review engagement report of Yule & Associates,
chartered accountants, thereon and the notes thereto (hereinafter
collectively referred to as the "Financial Statements"), a copy of
which is attached hereto as Schedule 3.1.8:
(i) are in accordance with the books and accounts of the
Corporation as at the Balance Sheet Date,
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(ii) are true and correct and present fairly the financial
position of the Corporation as at the Balance Sheet Date,
(iii) have been prepared in accordance with GAAP consistently
applied, and
(iv) present fairly all of the assets and liabilities of the
Corporation as at the Balance Sheet Date including, without
limiting the generality of the foregoing, all contingent
liabilities of the Corporation as at the Balance Sheet Date;
3.1.9 the interim financial statements of the Corporation, consisting of a
balance sheet and statement of income, for the period ended on June
25, 1998 (hereinafter collectively referred to as the "Interim
Financial Statements"), a copy of which is attached hereto as
Schedule 3.1.9:
(i) are in accordance with the books and accounts of the
Corporation as at June 25, 1998,
(ii) are true and correct and present fairly the financial
position of the Corporation as at June 25, 1998, subject only
to usual and proper adjustments, which will not exceed, in
aggregate, $15,000 and without provision for income or
capital taxes, the disposition of a loan receivable from
Midway Purnel Sanitary Supply (PG) Ltd. in the amount of
$20,000,
(iii) present fairly all of the assets and liabilities of the
Corporation as at June 25, 1998, and
(iv) have been prepared in accordance with GAAP consistent with
the principles of GAAP used in the preparation of the Balance
Sheet;
3.1.10 since the Balance Sheet Date, the Business of the Corporation has
been carried on in its usual and ordinary course and in a manner
consistent with prior practices and, the Corporation has not, since
the Balance Sheet Date, entered into any transaction out of the usual
and ordinary course of business;
3.1.11 since the Balance Sheet Date, there has been no material change in
the affairs, business, prospects, operations or condition of the
Corporation, financial or otherwise, whether arising as a result of
any legislative or regulatory change, revocation of any Permit or
right to do business, fire, explosion, accident,
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casualty, labour dispute, flood, drought, riot, storm,
expropriation, condemnation, act of God, public force or
otherwise, except changes occurring in the usual and ordinary
course of business which have not adversely affected the affairs,
business, prospects, operations or condition of the Corporation,
financial or otherwise;
3.1.12 the Corporation is the owner with a good and marketable title,
free and clear of all Liens, options and any other rights of others,
except for the Liens described on Schedule 3.1.12 of all assets
shown or reflected on the Balance Sheet, except only such of the
assets of the Corporation as have been disposed of in the usual and
ordinary course of business since the Balance Sheet Date, and of all
assets acquired by the Corporation since the Balance Sheet Date;
3.1.13 all machinery, equipment and automotive equipment owned or used by
the Corporation has been properly maintained and is in good working
order for the purposes of ongoing operation, subject to ordinary
wear and tear for machinery and equipment of comparable age;
3.1.14 Schedule 3.1.14 sets forth a true and complete list of all
premises leased by the Corporation ("Leased Premises") and any lease
in respect thereof to which the Corporation is a party ("Premises
Leases") and: (i) each Premises Lease is in full force and effect,
unamended by oral or written agreement, and the Corporation is
entitled to the full benefit and advantage of such Premises Lease in
accordance with the terms thereof, (ii) each Premises Lease is in
good standing, all rental and other payments payable by the
Corporation under the leases have been duly paid, (iii) there is
currently no outstanding default by the Corporation under the
Premises Leases nor is there currently any outstanding default by
any landlord thereunder or dispute between the Corporation and any
landlord under any of the Premises Leases; (iv) the Corporation has
not sublet, assigned or transferred any of its interests in such
Premises Lease and (v) the Leased Premises are the only premises
used by the Corporation;
3.1.15 Schedule 3.1.15 sets forth a true and complete list of all lease
agreements concerning personal property leased by the Corporation
("Personal Property Leases") and: (i) each Personal Property Lease
is in full force and effect, unamended by oral or written agreement,
and the Corporation is entitled to the full benefit and advantage of
each Personal Property Lease in accordance with the terms thereof,
(ii) each Personal Property Lease is in good standing, all rental
and other payments payable by the Corporation under the Personal
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Property Leases have been duly paid, (iii) there is currently no
outstanding default by the Corporation thereunder nor of the other
parties thereunder nor dispute between the Corporation and any other
party thereunder, and (iv) the Corporation has treated all Personal
Property Leases as operating leases for Canadian income tax purposes;
3.1.16 except for the Premises Leases, the Corporation holds no ownership
or other interest in or right affecting any real estate or real
property;
3.1.17 the inventory of the Corporation consist of items saleable in the
ordinary course of business reasonably fit for their usual purpose,
except for obsolete and slow-moving items and materials below
standard quality which have been written down on the books of
account of the Business to net realizable value, or adequate
reserves having been provided therefor, all in accordance with GAAP.
Except as disclosed in Schedule 3.1.17, there is no recurring or
ongoing high incidence of product failure or warranty claims against
the Corporation related to the Business;
3.1.18 there are no outstanding orders, notices or similar requirements
relating to the Corporation issued by any Governmental Authority,
including building, environmental, fire, health, labour or police
authorities, and there are no matters under discussion with any such
Governmental Authority relating to orders, notices or similar
requirements;
3.1.19 except as disclosed on Schedule 3.1.19, no single capital
expenditure in excess of $25,000 or capital expenditures in the
aggregate in excess of $50,000 have been made or authorized by the
Corporation since the Balance Sheet Date;
3.1.20 except (i) as disclosed on Schedule 3.1.20 and (ii) a dividend in
the amount of $30,500 paid to Xxxxxxx on the date hereof, no
dividends have been declared or paid on or in respect of the Shares
and no other distribution on any of its securities or shares has
been made by the Corporation since the Balance Sheet Date and all
dividends which to the date hereof have been declared or paid by the
Corporation have been duly and validly declared and are fully paid;
3.1.21 the Corporation does not have any liability, obligation or
commitment for the payment of Taxes of whatever nature or kind, or
interest or penalties with respect thereto, except such as are
disclosed in the Financial Statements or
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such Taxes not yet due as have arisen since the Balance Sheet Date in
the usual and ordinary course of business and for which adequate
provision in the accounts of the Corporation has been made, and the
Corporation is not in arrears with respect to any required
withholdings or instalment payments or other payments of any Tax or
duty of any kind or any penalty or interest thereon and has not filed
any waiver for a taxation year of the Corporation under the Income
Tax Act (Canada) or any other legislation imposing Tax on the
Corporation; all obligations of the Corporation with respect to its
employees for withholding Taxes, Canada Pension Plan contributions,
unemployment insurance contributions and workers compensation
remittances or contributions of any kind which are due as of the
Closing Date will have been paid by the Corporation prior to the
Closing Date; there are no outstanding disputes with or assessments
from the Workmen's Compensation Board of British Columbia or the
Employment Standards Branch;
3.1.22 the tax accounts of the Corporation as disclosed in Schedule 3.1.22
attached hereto are true and complete in all material respects;
3.1.23 except as disclosed on Schedule 3.1.23, there are no outstanding
liabilities (whether absolute or contingent) against the Corporation
except trade debts incurred in the usual and ordinary course of
business;
3.1.24 set forth on Schedule 3.1.24 is a true and complete list of all
contracts or agreements (except for the Premises Leases, the Personal
Property Leases and the employment agreement with the Vendors listed
on Schedule 3.1.31) to which the Corporation is a party or is
otherwise bound which are (i) outside the ordinary course of
business, (ii) involve a financial commitment by the Corporation of
at least $25,000, (iii) have a term in excess of 60 days or (iv) to
which any Related Person of the Corporation is a party (collectively,
the "Material Contracts" and individually, a "Material Contract").
Subject only to the requirement to obtain the Consents, the
Corporation has not received notice of any default, and the
Corporation is not in default, under any Material Contract, nor has
there occurred any event which, with a lapse of time or giving of
notice, or both, would constitute such a default. Subject only to
the requirement to obtain the Consents, each Material Contract is in
full force and effect, unamended by written or oral agreement and the
Corporation is (i) entitled to the full benefit and advantage of each
Material Contract in accordance with the terms thereof, (ii) each
Material Contract is in good standing, and (iii) there is no
currently outstanding default by the
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Corporation nor by any other party thereunder nor is there a
dispute between the Corporation and any party thereunder;
3.1.25 the Corporation is not in default or breach of any contract or
commitment to which it is a party and there exists no condition,
event or act which, with the giving of notice or lapse of time or
both would constitute such a default or breach and all such
contracts and commitments are in good standing and in full force and
effect without amendment thereto and the Corporation is entitled to
all benefits thereunder;
3.1.26 the Corporation is not a party to or bound by any guarantee,
indemnification, surety or similar obligation;
3.1.27 the Corporation does not have any subsidiaries or agreements,
options or commitments to acquire any shares or securities of any
corporation or interests of or in any other entity or to acquire or
lease any business operations, real property or assets;
3.1.28 there is no agreement, option, understanding or commitment, or any
right or privilege capable of becoming an agreement, for the
purchase from the Corporation of the Business or any of its assets
other than in the usual and ordinary course of business;
3.1.29 the Corporation is not a party to or bound by any contract or
commitment to pay any royalty, licence fee or management fee or
which contains restrictive covenants or covenants not to compete in
any line of business with any other Person;
3.1.30 the Corporation does not have any employment contract, whether
written or oral, with any person whomsoever except contracts with
the employees as are listed in Schedule 3.1.30 attached hereto,
whether or not such contracts are in writing; Schedule 3.1.30 truly
and correctly sets out for each employee of the Corporation, the
annual salary, job function, the length of employment of each of the
employees with the Corporation and other remuneration (including any
bonus, deferred compensation, incentive profit sharing,
remuneration, medical insurance, pension, retirement, vacation and
such leave arrangements) as well as all accrued and unpaid vacation
pay and sick pay payable to each employee; no labour relations or
labour standards, discrimination in employment or employment
practices, harassment, occupational health and safety standards or
workers compensation issue or
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matter is pending or, to Vendors' knowledge, threatened with
respect to any employee of the Corporation; except as disclosed
in Schedule 3.1.30, to the best of the knowledge of the Vendors,
no employee has made or has any basis for making any claim
(whether under Law, any employment contract, or otherwise) on
account of or for (i) overtime pay, other than overtime for the
current payroll period, (ii) wages or salary for any period other
than the current payroll period, (iii) vacation time off, sick
time or pay in lieu of any of the foregoing, other than that
earned in respect of the current payroll period or (iv) any
violation of any Law;
3.1.31 the Corporation is not bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any benefit plan including, without limiting the generality
of the foregoing, any pension plan maintained by or on behalf
of the Corporation for any of its employees,
except such agreements and plans as are listed in Schedule 3.1.31
attached hereto;
3.1.32 all benefit plans listed in Schedule 3.1.31 attached hereto have
been duly registered where required by, and are in good standing
under, all applicable Laws including, without limiting the
generality of the foregoing, the Income Tax Act (Canada) and the
Pension Benefits Standards Act (British Columbia) and all required
employer contributions under any such plans have been made and the
applicable funds have been funded in accordance with the terms
thereof of the plans and no past service funding liabilities exist
thereunder;
3.1.33 no trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent:
(i) holds bargaining rights with respect to any of the
Corporation's employees by way of certification, interim
certification, voluntary recognition, designation or
successor rights,
(ii) has applied to be certified as the bargaining agent of any of
the Corporation's employees;
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3.1.34 except for (i) remuneration paid to employees in the usual and
ordinary course of business and made at current rates of
remuneration, and (ii) dividends described in Section 3.1.20 no
payments have been made or authorized since the Balance Sheet Date by
the Corporation to officers, directors or employees of the
Corporation;
3.1.35 except as disclosed on Schedule 3.1.35, no Vendor, director, former
director, officer, shareholder or employee of the Corporation or any
Person who is a Related Person with any such Person is indebted to
the Corporation;
3.1.36 the Corporation is not conducting its business in any jurisdiction
other than the Province of British Columbia;
3.1.37 attached hereto as Schedule 3.1.37 is a list of all registered trade
marks, trade names, patents and copyrights, of all unregistered trade
marks, trade names and copyrights and of all patent applications,
trade xxxx registration applications and copyright registration
applications, both domestic and foreign, owned or made by the
Corporation;
3.1.38 all trade marks, trade names, patents and copyrights, both domestic
and foreign, used in or required for the proper carrying on of the
Corporation's Business are validly and beneficially owned by the
Corporation with the sole and exclusive right to use the same and are
in good standing and duly registered in all appropriate offices to
preserve the right thereof and thereto;
3.1.39 the conduct of the Business by the Corporation does not infringe upon
the trade marks, trade names, patents or copyrights, domestic or
foreign, of any other Person;
3.1.40 attached hereto as Schedule 3.1.40 is a true and complete list of all
insurance policies maintained by the Corporation that also specifies
the insurer, the amount of the coverage, the type of insurance, the
policy number and any pending claims thereunder and any previous
insurance claims that have been made by the Corporation; the
Corporation maintain third party liability and property damage
automobile insurance in an amount of not less than $1,000,000 per
occurrence for all vehicles owned or leased by the Corporation; all
such insurance policies are in full force and effect and the premiums
have been fully paid to date;
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3.1.41 none of the Vendors is a non-resident person within the meaning of
Section 116 of the Income Tax Act (Canada); and
3.1.42 the Corporation is not indebted to any Related Person, except for
salary and other similar compensation accrued to the Closing Date
and payable to the Vendors, or except as set out in Schedule 3.1.42;
3.1.43 except as disclosed on Schedule 3.1.43 hereto, there is no action,
suit, proceeding, claim, grievance or investigation in any court or
before any arbitrator or before of by any Governmental Authority
existing, pending or threatened, related to the Business or the
transactions contemplated by this Agreement; and there is no factual
or legal basis which could give rise in the future to the pendency
or threat of any such action, suit, proceeding, claim or
investigation which could, if determined adversely, have a material
adverse effect on the Corporation or the ability of the Corporation
to carry on the Business following Closing;
3.1.44 the Corporation and the Leased Premises (being all premises from
which it conducts the operations of the Business) are in compliance
with all applicable Laws of all Governmental Authorities having
jurisdiction, are not in breach of any such Laws and there is no
requirement to conduct a corrective or remedial action with respect
to such premises in order to carry on the Business as presently
conducted, and the Corporation is duly licensed, registered or
qualified, and duly possesses and is in compliance with all Permits
and quotas, in the Province of British Columbia and all
municipalities thereof in which the Corporation carries on its
business to enable the Business to be carried on as now conducted
and its assets to be owned, leased and operated, and all such
Permits are valid and subsisting and in good standing and none of
the same contains or is subject to any term, provision, condition or
limitation which has or may have an adverse effect on the operation
of the Business or which may adversely change or terminate such
Permit by virtue of the completion of the transactions contemplated
hereby;
3.1.45 the operation of the Corporation on the Leased Premises is not
subject to any restriction or limitation and is not in contravention
of any Law or of any decree or order of any Governmental Authority
having jurisdiction;
3.1.46 except as specifically disclosed in Schedule 3.1.46 and without
limiting the scope of any other representation and warranty herein:
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3.1.46.1 The Business, the Leased Premises and the Corporation
have been and are in compliance with applicable Laws,
including, without limitation, Environmental Laws;
3.1.46.2 The Corporation holds all Permits required under
applicable Environmental Laws for the operation of the
Business (the "Environmental Permits"); each Environmental
Permit is valid and in force and the operations of the
Corporation are in compliance with the conditions set out in
the Environmental Permits; there are no grounds for
revocation, expiry or annulment of any Environmental
Permits;
3.1.46.3 The Vendors, the Corporation, its employees, agents,
shareholders, directors and officers have never been
declared guilty of committing an offence for a violation of
Environmental Laws and have never had a fine imposed against
them and have never otherwise settled such a prosecution in
relation to the Business or the premises used in the
Business;
3.1.46.4 There are no Contaminants, waste or pollutants of any
kind whatsoever in, on or under the Leased Premises or in,
on or under the assets of the Business or the Corporation,
the presence of which constitutes a violation of applicable
Environmental Laws;
3.1.46.5 The waste, effluents and air emissions generated by the
operation of the Business by the Corporation have been and
are treated, transported and eliminated in accordance with
applicable Environmental Laws;
3.1.46.6 The Corporation has not received any written or verbal
notice or request for information in the context of any
environmental federal, provincial, regional or municipal
investigation or inspection;
3.1.46.7 The Corporation does not own or use any underground or
aboveground storage tank in connection with the Business;
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3.1.46.8 There are no PCBs, asbestos, urea formaldehyde or
radioactive substances in, on or under the premises used by
the Corporation in connection with the Business; and
3.1.46.9 there is no present requirement of any applicable
Environmental Law which is due to be imposed which will
materially increase the Corporation's cost of complying with
the Environmental Laws.
3.1.47 the Closing Balance Sheet and statements of income, retained
earnings and changes in financial position for the period ended on
the Closing Date, together with the review engagement report of Yule
& Associates, chartered accountants, thereon and the notes thereto:
(i) will be in accordance with the books and
accounts of the Corporation as at the Closing Date;
(ii) will be true and correct and present fairly
the financial position of the Corporation as at the Closing
Date;
(iii) will have been prepared in accordance with
GAAP consistent with the principles of GAAP used in the
preparation of the Financial Statements; and
(iv) will present fairly all of the assets and
liabilities of the Corporation as at the Closing Date
including, without limiting the generality of the foregoing,
all contingent liabilities of the Corporation as at the
Closing Date;
3.1.48 the accounts receivable of the Corporation which will be shown on
the Closing Balance Sheet will be collectible in the ordinary and
usual course of business and the Closing Balance Sheet will include
an appropriate allowance for uncollectible accounts;
3.1.49 the Closing Balance Sheet will include an appropriate allowance
for earned but unused vacation;
3.1.50 the minute books of the Corporation contain a complete record of
all material decisions taken by the directors and of the
shareholders of the Corporation;
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the Corporation's financial and other books and records
accurately reflect the financial transactions and the operations
related to the Business; and
3.1.51 Schedule 3.1.51 hereto sets forth a complete list of all bank
accounts and similar accounts held or operated by the Corporation,
stating the name of the financial institution, the account number
and the persons having authority to sign in respect of each such
account.
3.2 SURVIVAL OF VENDOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.2.1 The representations and warranties of the Vendors set forth
in Section 3.1 shall survive the completion of the sale and purchase
of the Purchased Shares herein provided for and, notwithstanding
such completion, the representations and warranties set forth in
Section 3.1 shall continue in full force and effect for the benefit
of the Purchaser for a period of three years from the Closing Date,
except for the representations and warranties of the Vendors set
forth in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.1.7
and 3.1.12 and any representation and warranty fraudulently made,
all of which shall survive in perpetuity and the representations and
warranties in relation to Taxes, all of which shall survive until
the expiry of the longest limitation period under applicable Law
relating thereto.
3.2.2 The covenants of the Vendors set forth in this Agreement
shall survive the completion of the sale and purchase of the Shares
herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Purchaser
in accordance with the terms thereof.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendors that:
3.3.1 the Purchaser is a corporation duly incorporated, organized
and subsisting under the laws of Canada;
3.3.2 the Purchaser has good and sufficient power, authority and
right to enter into and deliver this Agreement and the Ancillary
Agreements and to complete the transactions to be completed by the
Purchaser contemplated hereby;
3.3.3 the Class F Shares will, at closing, be validly issued to
the Vendors in accordance with Schedule 2.1.1 as fully paid and
non-assessable;
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3.3.4 Purchaser is not a "non-Canadian" for the purposes of and
within the meaning of the Investment Canada Act, R.S.C. 1985, c. 28
(1st Supp.);
3.3.5 Purchaser is not a non-resident of Canada for the purposes
of the Income Tax Act, S.C. 1970-72-72 c. 63 (Canada);
3.3.6 Purchaser is a taxable Canadian corporation as defined in
subsection 89(1) of the Income Tax Act (Canada);
3.3.7 the audited financial statements of the Purchaser for the
period ended December 31, 1997, together with the report thereon of
Ernst & Young, dated February 13, 1998 annexed hereto as Schedule
3.3.7:
(i) are in accordance with the books and accounts
of the Purchaser as at December 31, 1997,
(ii) are true and correct and present fairly the
financial position of the Purchaser as at December 31, 1997,
(iii) have been prepared in accordance with GAAP
consistently applied, and
(iv) present fairly all of the assets and liabilities of the
Purchaser as at December 31, 1997 including, without limiting
the generality of the foregoing, all contingent liabilities
of the Purchaser as at December 31, 1997; and
3.3.8 based on advice received from Winthrop, Stimson, Xxxxxx &
Xxxxxxx, Purchaser's U.S. securities law counsel, as set forth in
the memorandum attached as Schedule 3.3.8, and subject to the
qualifications set forth in the memorandum, the Class F Shares and
the Parent Common Shares
(i) under Rule 144 of the United States Securities Act of 1933,
as amended, ("Rule 144"), are not tradeable by the Vendors
within the first twelve months following the Closing Date,
(ii) under Rule 144, are tradeable by the Vendors
in the second twelve month period following the Closing
Date, subject to the volume of sale and manner of sale
restrictions set out in the memorandum, and
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(iii) under Rule 144, are tradeable by the Vendors
without restrictions other than the manner of sale
restrictions referred to in the memorandum commencing the
third year following the Closing Date.
3.4 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
3.4.1 The representations and warranties of the Purchaser set
forth in Section 3.3 shall survive the completion of the sale and
purchase of the Shares herein provided for and, notwithstanding such
completion, the representations and warranties set forth in Section
3.3 shall continue in full force and effect for the benefit of the
Vendors for a period of three years from the Closing Date, except
for the representations and warranties of the Purchaser set forth in
Sections 3.3.1, 3.3.2 and 3.3.3 any representation and warranty
fraudulently made, all of which shall survive in perpetuity and the
representations and warranties in relation to Taxes, all of which
shall survive until the expiry of the longest limitation period
under applicable Law relating thereto.
3.4.2 The covenants of the Purchaser set forth in this Agreement
shall survive the completion of the sale and purchase of the Shares
herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Vendors in
accordance with the terms thereof.
ARTICLE 4 - COVENANTS
4.1 TAXES
The Purchaser does not assume and shall not be liable for any taxes under
the Income Tax Act (Canada) or any other taxes whatsoever which may be or
become payable by the Vendors including, without limiting the generality of the
foregoing, any taxes resulting from or arising as a consequence of the sale by
the Vendors to the Purchaser of the Purchased Shares herein contemplated, and
the Vendors shall indemnify and save harmless the Purchaser from and against
all such taxes.
4.2 COVENANTS OF THE VENDORS
4.2.1 Each of the Vendors shall jointly and severally indemnify
and save harmless the Purchaser and the officers and directors of
the Purchaser from and against all claims, actions, demands, suits,
proceedings, losses, damages, fines, liabilities (whether accrued,
actual, contingent or otherwise), costs and
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expenses, including reasonable environmental characterization and
remediation costs, reasonable lawyers fees and other reasonable
consultants fees, directly or indirectly suffered by the Purchaser
and the officers and directors of the Purchaser from any breach of
any covenant of the Vendors contained in this Agreement or from
any inaccuracy or misrepresentation in any representation or
warranty set forth in Section 3.1 notwithstanding any information
obtained by the Purchaser at or before the Closing Date as to such
inaccuracy or misrepresentation.
4.2.2 The Vendors shall ensure that the representations and
warranties of the Vendors set out in Section 3.1 are true and
correct at the Time of Closing and that the conditions of closing
for the benefit of the Purchaser set out in Section 7.1.1 over which
the Vendors have reasonable control have been performed or complied
with by the Time of Closing.
4.2.3 The Vendors shall permit the Purchaser, through its agents
and representatives, to make such reasonable investigation prior to
and at the Time of Closing of the assets of the Corporation and of
its financial and legal condition as the Purchaser considers
necessary or advisable to familiarize itself with such assets and
other matters and the Vendors shall supply any and all documents and
records of the Corporation to the Purchaser and its agents and
representatives as they may reasonably require. The Vendors shall
also permit the inspection of the assets of the Corporation by the
Purchaser prior to and at the Time of Closing by such federal,
provincial or municipal authorities as the Purchaser may require.
Such investigations and inspections shall not, however, affect or
mitigate the Vendors' covenants, representations and warranties
hereunder which shall continue in full force and effect.
4.2.4 The Vendors shall use their best efforts as employees of the
Corporation to ensure that the Corporation's relationships with
suppliers continue on substantially the same terms and conditions
following the Closing Date.
4.2.5 Each of the Vendors shall indemnify and save harmless the
Purchaser and the officers and directors of the Purchaser from and
against all liabilities (whether actual, contingent, accrued or
otherwise), claims and demands of or in connection with any matter
relating to any contracts between the Corporation and any Related
Person entered into prior to the date of this Agreement and which
are not disclosed in the Schedules hereto.
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4.3 COVENANTS OF THE PURCHASER
4.3.1 The Purchaser shall ensure that the representations and
warranties of the Purchaser set out in Section 3.3 are true and
correct at the Time of Closing and that the conditions of closing
for the benefit of the Vendors set out in Section 7.2.1 over which
the Purchaser has reasonable control have been performed or complied
with by the Time of Closing.
4.3.2 The Purchaser shall indemnify and save harmless the Vendors
from and against all losses, damages or expenses directly or
indirectly suffered by the Vendors resulting from any breach of any
covenant of the Purchaser contained in this Agreement or from any
inaccuracy or misrepresentation in any representation or warranty
set forth in Section 3.3.
4.4 ACKNOWLEDGMENT AND COVENANTS OF THE VENDORS
The Vendors acknowledge and agree that:
4.4.1 the Class F Shares have not been, and the Parent Common
Shares will not be, registered under the United States Securities
Act of 1933, as amended (the "Securities Act"), or any other
securities laws of the United States or Canada (the "Securities
Laws") because Purchaser is issuing the Class F Shares, and Xxxxx
Corporation will be issuing the Parent Common Shares, in reliance
upon exemptions from the registration and prospectus requirements of
the Securities Laws which they believe are available in connection
with the transactions contemplated by this Agreement;
4.4.2 Purchaser has relied upon the fact that the Class F Shares
and the Parent Common Shares are to be held by the Vendors for
investment; and
4.4.3 exemption from registration under the Securities Laws would
not be available if the Class F Shares and the Parent Common Shares
were acquired by the Vendors with a view to distribution.
Accordingly, the Vendors hereby confirm to Purchaser and Xxxxx Corporation
that the Vendors are acquiring the Class F Shares, and will acquire the Parent
Common Shares, for the account of the Vendors, for investment and not with a
view to the resale or distribution thereof under the Securities Laws. The
Vendors agree not to transfer, sell or offer for sale all or any portion of the
Class F Shares and the Parent Common Shares, unless there is an effective
registration or other qualification or exemption relating thereto
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under the Securities Laws. The Vendors understand that neither Purchaser nor
Xxxxx Corporation is under any obligation to register the Class F Shares and
the Parent Common Shares or to assist the Vendors in complying with any
exemption from registration under the Securities Laws. Prior to acquiring the
Class F Shares and, upon exchange, the Parent Common Shares, the Vendors have
made such investigation of Purchaser and Xxxxx Corporation and their respective
businesses as the Vendors have deemed advisable and has had made available to
the Vendors all information with respect thereto that the Vendors have
requested to make an informed decision to acquire the Class F Shares and the
Parent Common Shares. The Vendors consider themselves to be persons possessing
experience and sophistication as an investor that is adequate for the
evaluation of the merits and risk of the Vendors' investment in the Class F
Shares and, upon exchange, the Parent Common Shares. The Vendors acknowledge
that each certificate for the Class F Shares and the Parent Common Shares will
be imprinted with a legend in substantially the following form: "The
securities represented by this certificate were originally issued on June 30,
1998, and have not been registered under the Securities Act of 1933, as
amended, or any other securities laws of the United States or Canada. The
transfer of the securities represented by this certificate is subject to the
conditions specified in Section 4.4 of the Share Purchase Agreement dated as of
June 30, 1998 among the parties thereto, and The Purchaser reserves the right
to refuse the transfer of such securities until such conditions have been
fulfilled with respect to such transfer. A copy of such conditions will be
furnished by the Purchaser to the holder hereof upon written request and
without charge."
ARTICLE 5 - THIRD PARTY CLAIMS
In the event of a third party claim against Purchaser or the Corporation
for which the Vendors are or may be liable hereunder:
5.1 Purchaser shall tender in writing defence of the claim to the
Vendors, within 15 working days after the Purchaser knows of the
claim. The Vendors shall have the right, by notice to the Purchaser
within 30 days following the receipt of the notice by the Purchaser
of the third party claim, to assume the defence of such third party
claim, with counsel reasonably satisfactory to the Purchaser and at
no cost to the Purchaser. If the Purchaser so chooses, the
Purchaser may participate in the defence of such third party claim
at its sole cost and expense; provided, however, that such
participation may not in any way interfere with or contradict the
defence of such claim. The Vendors shall cooperate fully to make
available to the Purchaser, at the Purchaser's expense, all
pertinent information and witnesses under the Vendors' control,
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make such assignments and take such other steps as may be
reasonably requested by counsel for the Purchaser to conduct such
defence.
5.2 In the event that the Vendors assume the defence of such
third party claim, the Vendors, at their expense, shall diligently
proceed with the defence of said third party claim and, in
connection therewith, the Purchaser, at the Vendors' expense, shall
cooperate fully to make available to the Vendors, all pertinent
information and witnesses under the Purchaser's control, make such
assignments and take such other steps as may be reasonably requested
by counsel for the Vendors to conduct such defence.
5.3 The Vendors shall not make any settlement or compromise of
any third party claim without the written consent of the Purchaser,
which consent shall not be unreasonably withheld or delayed.
5.4 Subject to the provisions of Section 5.3, the final
resolution or determination of any such third party claim, including
all related costs and expenses, will be binding and conclusive upon
the parties hereto.
5.5 Should the Vendors fail to assume the defence of any third
party claim or fail to diligently and reasonably defend such third
party claim, the Vendors' right to defend the claim shall terminate
and the Purchaser shall be solely entitled to defend, settle and
compromise such third party claim as in its reasonable discretion
may appear advisable, and the resolution or final determination of
such defence, settlement or compromise, including all related costs
and expenses, will be binding and conclusive upon the Vendors, and
the Vendors shall indemnify the Purchaser in respect to such
resolution or final determination and all such costs and expenses.
5.6 The provisions of this Article 5 shall apply mutatis mutandis
for the benefit of the Vendors in the event of any third party claim
against the Vendors for which the Purchaser is or may be liable
hereunder.
ARTICLE 6 - RIGHTS OF SET-OFF
6.1 The Vendors agree that the Purchaser shall have rights to set-off or
compensate any claim the Purchaser may have against the Vendors under this
Agreement or any Ancillary Agreements entered into by the Vendors in connection
with the transaction contemplated hereby or under the terms and conditions of
the Class F Shares against the payments due by
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the Purchaser hereunder or under the Ancillary Agreements or under the terms
and conditions of the Class F Shares; provided that Purchaser will have no
right of set-off against amounts payable to any Vendor under his or her
Employment Agreement.
6.2 If the Purchaser exercises the right of set-off, the Purchaser shall give a
prior written notice to the Vendors, that the Purchaser has elected to exercise
such right of set-off.
6.3 The Purchaser and the Vendors agree that nothing in this Article 6 shall
derogate from any of the provisions of this Agreement or the Ancillary
Agreements in favour of the Purchaser or any rights of Purchaser under the law
in respect of any claim of the Purchaser.
ARTICLE 7 - CONDITIONS
7.1 CONDITIONS FOR THE BENEFIT OF THE PURCHASER
7.1.1 The sale by the Vendors and the purchase by the Purchaser of
the Purchased Shares is subject to the following conditions which
are for the exclusive benefit of the Purchaser to be performed or
complied with at or prior to the Time of Closing:
7.1.1.1 the representations and warranties of the Vendors set
forth in Section 3.1 shall be true and correct at the Time
of Closing with the same force and effect as if made at and
as of such time;
7.1.1.2 the Vendors shall have performed or complied with all of
the terms, covenants and conditions of this Agreement to be
performed or complied with by the Vendors at or prior to the
Time of Closing;
7.1.1.3 the Purchaser shall be furnished with such certificates,
affidavits or statutory declarations of the Corporation and
of the Vendors or of officers of the Corporation and of the
Vendor as the Purchaser or the Purchaser's counsel may
reasonably think necessary in order to establish that the
terms, covenants and conditions contained in this Agreement
to have been performed or complied with by the Vendors or by
the Corporation, as the case may be, at or prior to the Time
of Closing have been performed and complied with and that
the representations and warranties of the Vendors herein
given are true and correct at the Time of Closing;
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7.1.1.4 no material damage by fire or other hazard to the assets
of the Corporation shall have occurred from the date hereof
to the Time of Closing;
7.1.1.5 all directors and officers of the Corporation specified
by the Purchaser shall resign;
7.1.1.6 the Vendors and all directors and officers of the
Corporation shall release the Corporation from any and all
possible claims against the Corporation arising from any
act, matter or thing arising at or prior to the Time of
Closing; for greater certainty, such release will not affect
the obligations of the Corporation under any of the
Ancillary Agreements;
7.1.1.7 there shall be a non-competition agreement entered into
between the Purchaser, the Corporation and each of the
Vendors substantially in the form attached hereto as
Schedule 7.1.1.7 (the "Non-Competition Agreements");
7.1.1.8 there shall be an employment agreement entered into
between the Corporation and Xxxx Xxxxxxxx substantially in
the form attached hereto as Schedule 7.1.1.8 (the
"Employment Agreement");
7.1.1.9 there shall be an escrow agreement entered, into between
the Purchaser, the Vendors and XxXxxxxx Xxxxxxxx, as escrow
agent, in substantially the form attached hereto as Schedule
7.1.1.9 (the "Escrow Agreement");
7.1.1.10 the Purchaser and Xxxx Xxxxxxxx shall have executed a
lease in respect of the premises located at 0000 Xxxxx Xxxx
in substantially the form attached hereto as Schedule
7.1.1.10;
7.1.1.11 the Vendors shall have delivered to the Purchaser a
favourable opinion of the Vendors' counsel substantially in
the form attached hereto as Schedule 7.1.1.11;
7.1.1.12 the form and legality of all matters incidental to the
sale by the Vendors and the purchase by the Purchaser of the
Shares shall be subject to the approval of the
Purchaser's counsel, acting reasonably.
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7.1.2 In case any term or covenant of the Vendors or condition to
be performed or complied with for the benefit of the Purchaser at or
prior to the Time of Closing shall not have been performed or
complied with at or prior to the Time of Closing, the Purchaser may,
without limiting any other right that the Purchaser may have, at its
sole option, either:
7.1.2.1 rescind this Agreement by notice to the Vendors, and in
such event the Purchaser shall be released from all
obligations hereunder; or
7.1.2.2 waive compliance with any such term, covenant or
condition in whole or in part on such terms as may be agreed
upon without prejudice to any of its rights of rescission in
the event of non-performance of any other term, covenant or
condition in whole or in part;
and, if the Purchaser rescinds this Agreement pursuant to Section 7.1.2
and the term, covenant or condition for which the Purchaser has rescinded
this Agreement was one that the Vendors had covenanted, pursuant to
Section 4.2.2, to ensure had been performed or complied with, the Vendors
shall be liable to the Purchaser for any losses, damages or expenses
incurred by the Purchaser as a result of such breach.
7.2 CONDITIONS FOR THE BENEFIT OF THE VENDORS
7.2.1 The sale by the Vendors and the purchase by the Purchaser of
the Purchased Shares is subject to the following conditions which
are for the exclusive benefit of the Vendors to be performed or
complied with at or prior to the Time of Closing:
7.2.1.1 the representations and warranties of the Purchaser set
forth in Section 3.3 shall be true and correct at the Time
of Closing with the same force and effect as if made at and
as of such time;
7.2.1.2 the Purchaser shall have performed or complied with all
of the terms, covenants and conditions of this Agreement to
be performed or complied with by the Purchaser at or prior
to the Time of Closing;
7.2.1.3 the Vendors shall be furnished with such certificates,
affidavits or statutory declarations of the Purchaser or of
officers of the
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Purchaser as the Vendors or the Vendors' counsel
may reasonably think necessary in order to establish
that the terms, covenants and conditions contained in
this Agreement to have been performed or complied with
by the Purchaser at or prior to the Time of Closing have
been performed and complied with and that the
representations and warranties of the Purchaser herein
given are true and correct at the Time of Closing;
7.2.1.4 the Purchaser and Xxxx Xxxxxxxx shall have executed a
lease in respect of the premises located at 0000 Xxxxx Xxxx
in substantially the form attached hereto as Schedule
7.1.1.10;
7.2.1.5 the Corporation shall have executed the Employment
Agreement; and
7.2.1.6 Xxxxx Corporation shall have executed a Covenant
Agreement in favour of the Vendors substantially in the form
of Schedule 7.2.1.6 (the "Covenant Agreement).
7.2.2 In case any term or covenant of the Purchaser or condition
to be performed or complied with for the benefit of the Vendors at
or prior to the Time of Closing shall not have been performed or
complied with at or prior to the Time of Closing, the Vendors may,
without limiting any other right that the Vendors may have, at its
sole option, either:
7.2.2.1 rescind this Agreement by notice to the Purchaser, and in
such event the Vendors shall be released from all
obligations hereunder; or
7.2.2.2 waive compliance with any such term, covenant or
condition in whole or in part on such terms as may be agreed
upon without prejudice to any of its rights of rescission in
the event of non-performance of any other term, covenant or
condition in whole or in part;
and, if the Vendors rescind this Agreement pursuant to Section 7.2.2.1
and the term, covenant or condition for which the Vendors have rescinded
this Agreement was one that the Purchaser had covenanted, pursuant to
Section 4.3.1, to ensure had been performed or complied with, the
Purchaser shall be liable to the Vendors for any losses, damages or
expenses incurred by the Vendors as a result of such breach.
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ARTICLE 8 - GENERAL
8.1 FURTHER ASSURANCES
Each of the Vendors and the Purchaser shall from time to time execute and
deliver all such further documents and instruments and do all acts and things
as the other party may, either before or after the Closing Date, reasonably
require to effectively carry out or better evidence or perfect the full intent
and meaning of this Agreement.
8.2 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
8.3 COMMISSIONS
8.3.1 The Vendors shall jointly and severally indemnify and save
harmless the Purchaser from and against any claims whatsoever for
any commission or other remuneration payable or alleged to be
payable to any person in respect of the sale and purchase of the
Purchased Shares, to the extent such person purports to act or have
acted for the Vendors in connection with the sale of the Purchased
Shares.
8.3.2 The Purchaser shall indemnify and save harmless the Vendors
from and against any claims whatsoever for any commission or other
remuneration payable or alleged to be payable to any person in
respect of the sale and purchase of the Purchased Shares, to the
extent such person purports to act or have acted for the Purchaser
in connection with the sale of the Purchased Shares.
8.4 LEGAL FEES
Each of the parties hereto shall pay their respective legal and accounting
costs and expenses incurred in connection with the preparation, execution and
delivery of this Agreement and all documents and instruments executed pursuant
hereto and any other costs and expenses whatsoever and howsoever incurred.
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8.5 PUBLIC ANNOUNCEMENTS
Prior to closing, no public announcement or press release concerning the
sale and purchase of the Shares shall be made by the Vendors or the Purchaser
without the prior consent and joint approval of the Vendors and the Purchaser,
save as may be required by applicable Law.
8.6 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns
of the parties hereto.
8.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
There are no representations, warranties, terms, conditions, undertakings or
collateral agreements, express, implied or statutory, between the parties other
than as expressly set forth in this Agreement.
8.8 AMENDMENTS AND WAIVER
No modification of or amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by both of the parties
hereto and no waiver of any breach of any term or provision of this Agreement
shall be effective or binding unless made in writing and signed by the party
purporting to give the same and, unless otherwise provided, shall be limited to
the specific breach waived.
8.9 ASSIGNMENT
This Agreement may not be assigned by any party hereto without the written
consent of the other parties, but the rights and obligations of the Purchaser
hereunder may be assigned by the Purchaser without the consent of the other
parties hereto to an affiliate of the Purchaser, as determined by the
provisions of the Canada Business Corporations Act, provided that such
affiliate enters into a written agreement with the Vendors to be bound by the
provisions of this Agreement in all respects and to the same extent as the
Purchaser is bound and provided that the Purchaser shall continue to be bound
by all the obligations hereunder as if such assignment had not occurred and
perform such obligations to the extent that such affiliate fails to do so.
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8.10 NOTICES
Any demand, notice or other communication to be given in connection with
this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
To the Vendors:
XXXX XXXXXXXX
c/o Yule & Associates
4 - 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxxxx Xxxx
Telecopier:(000) 000-0000
With copy to:
Cinnamon Xxxx Xxxxxxxxxx & Company
000 - 0000 Xxxxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxx Xxxxxxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
XXXXXXX XXXXXXXX
c/o Yule & Associates
4 - 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxxxx Xxxx
Telecopier:(000) 000-0000
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With copy to:
Cinnamon Xxxx Xxxxxxxxxx & Company
000 - 0000 Xxxxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxx Xxxxxxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
To the Purchaser:
WOOD XXXXX INC.
0000 - 00xx Xxxxxx
Xxxxxxx, Xxxxxx
X0X 0X0
Fax No.:(000) 000-0000
Attention: Xx. Xxxxxx X. XxxXxxxxx
With a copy to:
XxXxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Fax No.:(000) 000-0000
Attention: Xx. Xxxxxx X.X. Xxxxx
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery shall be conclusively deemed
to have been given on the day of actual delivery thereof and, if given by
registered mail, on the third Business Day following the deposit thereof in the
mail and, if given by electronic communication, on the day of transmittal
thereof if given during the normal business hours of the recipient and on the
Business Day during which such normal business hours next occur if not given
during such hours on any day. If the party giving
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any demand, notice or other communication knows or ought reasonably to know of
any difficulties with the postal system which might affect the delivery of
mail, any such demand, notice or other communication shall not be mailed but
shall be given by personal delivery or by electronic communication.
8.11 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein.
8.12 ATTORNMENT
For the purpose of all legal proceedings, this Agreement shall be deemed
to have been performed in the Province of British Columbia and the courts of
the Province of British Columbia shall have jurisdiction to entertain any
action arising under this Agreement. Each of the parties to this Agreement
accepts the jurisdiction of such courts and irrevocably express to be bound by
any judgment rendered thereby in connection with this Agreement.
8.13 INDEPENDENT LEGAL ADVICE
Each of the Vendors acknowledges, represents and agrees that: (i) he has
had the opportunity to consult with independent legal counsel with respect to
the provisions of this Agreement; (ii) the nature, scope and effect of the
provisions of this Agreement have been adequately explained to him; and (iii)
he understands and accepts the provisions of this Agreement.
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IN WITNESS WHEREOF the parties have executed this Agreement.
WOOD XXXXX INC.
Per:
-----------------------------
---------------------------------
XXXX XXXXXXXX
---------------------------------
XXXXXXX XXXXXXXX
