Exhibit 10.17
RESTATED ASSET AND SHARE PURCHASE AGREEMENT
BETWEEN
MDC CORPORATION INC.
(SELLER)
AND
REGAL GREETINGS & GIFTS CORPORATION
(BUYER)
AND
MCGUGGAN LLC
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DATED AS OF DECEMBER 4, 2001
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RESTATED ASSET AND SHARE PURCHASE AGREEMENT
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THIS AGREEMENT made the 4th day of December, 0000,
XXXXX:
MDC CORPORATION INC.
a corporation existing under the laws of Ontario,
(hereinafter referred to as the "Seller"),
OF THE FIRST PART,
- and -
REGAL GREETINGS AND GIFTS CORPORATION a
corporation existing under the laws of
Canada, (hereinafter referred to as the
"Buyer"),
OF THE SECOND PART,
- and -
MCGUGGAN LLC
a limited liability company existing under the laws of
the State of New Jersey,
(hereinafter referred to as "McGuggan")
OF THE THIRD PART.
WHEREAS pursuant to an Agreement made the 12th day of October, 2001
(the "First Purchase Agreement"), Seller, Regal Greetings and Gifts Company
("First Regal") and McGuggan LLC entered into an agreement providing for the
sale to First Regal of the Purchased Business (as defined in the First Purchase
Agreement);
AND WHEREAS First Regal has assigned its rights and obligations to the
Buyer, and Seller hereby consents to such assignment;
AND WHEREAS the parties hereto wish to make certain amendments to the
First Purchase Agreement and have therefore determined to terminate the First
Purchase Agreement effective upon execution of this Agreement;
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THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants, agreements, representations, warranties and indemnities of the
parties herein contained and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each party), the parties
agree as follows:
1. INTERPRETATION
1.1 DEFINED TERMS. For the purposes of this Agreement, the following terms
shall have the respective meanings set out below:
"ACCOUNTING POLICIES" means the policies and procedures set out in
Schedule 3.3(2) hereto;
"AFFILIATE" of a Person means any Person which, directly or indirectly,
controls, is controlled by or is under common control with, such
Person;
"ANNUAL FINANCIAL STATEMENTS" means the audited financial statements of
the Purchased Business as at and for the financial years ended December
31, 2000 and December 31, 1999, including the notes thereto and a
report of auditors thereon, a copy of which is annexed hereto as
Schedule 1.1(1);
"ARM'S LENGTH" has the meaning given to that term in section 251 of the
INCOME TAX ACT (Canada);
"ASSUMED LIABILITIES" has the meaning set out in Section 4.1;
"ASSUMPTION AMOUNT" has the meaning set out in Section 3.1 hereof;
"BENEFIT PLANS" has the meaning set out in Section 7.10;
"BUSINESS DAY" means any day which is not a Saturday, a Sunday or a
statutory holiday in Toronto, Ontario;
"CLAIM" has the meaning set out in Section 11.3;
"CLOSING DATE" means the third business day following satisfaction of
the conditions contained in Sections 8.1, 8.3 and 8.5 hereof or such
other date as the Seller and the Buyer may mutually determine;
"CONTRACT" means any agreement, indenture, contract, lease, deed of
trust, licence, option, instrument or other commitment, whether written
or oral, in respect of the Purchased Business, including the Leases of
Real Property;
"DEPOSIT" means the non-refundable deposit amount of One Hundred
Thousand ($100,000) Dollars paid on behalf of the Buyer to be applied
in accordance with section 3.1 or, if this Agreement is terminated by
Seller or Buyer pursuant to Section 8.6, to be retained by the Seller;
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"DIRECT CLAIM" has the meaning set out in Section 11.3;
"EFFECTIVE TIME" means the close of business on October 15, 2001;
"EMPLOYEE PLANS" has the meaning set out in Section 5.27;
"ENCUMBRANCE" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, reservation, easement, restriction, right of
occupation, any matter capable of registration against title, option,
right of pre-emption, privilege or any Contract to create any of the
foregoing other than Permitted Encumbrances;
"ENVIRONMENTAL LAW" means any statute, code, by-law, regulation,
permit, consent, approval, license, judgment, order, writ, decree,
injunction, agreement or authorization or requirement having the force
of law, whether federal, provincial, territorial, municipal or local,
relating to:
(i) filings, registrations, emissions, discharges, spills,
releases or threatened releases of hazardous substances or
materials containing hazardous substances into the air,
surface or ground water, water courses, water or sewage
treatment works, drains, sewer systems, wetlands, septic
systems or onto land;
(ii) the import, export, use, distribution, treatment, storage,
disposal, discharge, packaging, handling, processing,
manufacturing, transportation, shipment, clean-up or other
remediation of hazardous substances, materials containing
hazardous substances or the equipment or apparatus containing
hazardous substances; and
(iii) pollution or the protection of human health or the
environment, including workplace health or safety;
"EQUITY INTEREST" has the meaning set out in Section 3.1;
"EQUITY SECURITY" means any security of the Buyer that carries a
residual right to participate in the earnings of the Buyer and, upon
the liquidation or winding up of the Buyer, in its assets;
"ETA" means Part IX of the EXCISE TAX ACT (Canada), as amended from
time to time;
"EXCLUDED ASSETS" has the meaning set out in Section 2.2;
"EXCLUDED LIABILITIES" has the meaning set out in Section 4.2;
"FINANCIAL STATEMENTS" means the Annual Financial Statements and the
Interim Financial Statements;
"FINANCIAL STATEMENT DATE" means December 31, 2000;
"FIRST PURCHASE AGREEMENT" has the meaning set out in the first recital
hereto.
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"GAAP" means at any time, accounting principles generally accepted in
Canada including those set out in the Handbook of the Canadian
Institute of Chartered Accountants, at the relevant time applied on a
consistent basis.
"GST" means all taxes payable under the ETA or under any provincial
legislation similar to the ETA, and any reference to a specific
provision of the ETA or any such provincial legislation shall refer to
any successor provision thereto of like or similar effect;
"INDEMNIFIED PARTY" has the meaning set out in Section 11.3;
"INDEMNIFYING PARTY" has the meaning set out in Section 11.3;
"INDEPENDENT AUDITOR" means the Toronto office of
PricewaterhouseCoopers LLP, or, if PricewaterhouseCoopers are at that
time the Buyer's auditor, the Toronto office of Ernst & Young LLP;
"INTELLECTUAL PROPERTY" has the meaning set out in Section 2.1(i);
"INTERIM FINANCIAL STATEMENTS" means the unaudited financial statements
of the Purchased Business as at and for the 34 week period ended August
24, 2001, a copy of which is annexed hereto as Schedule 1.1(2);
"LEASED PROPERTY" means the real property that is leased by the Seller
under Leases of Real Property;
"LEASES OF REAL PROPERTY" has the meaning set out in Section 2.1(a);
"LICENCES" has the meaning set out in Section 5.17;
"LOSSES", in respect of any matter, means all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlement) arising directly or indirectly as a consequence of
such matter;
"PERMITTED ENCUMBRANCES" means:
(i) liens for taxes, assessments or governmental charges or levies
not yet due or delinquent;
(ii) undetermined or inchoate liens, charges and privileges
incidental to current construction or current operations and
statutory liens, charges, adverse claims, security interests
or encumbrances of any nature whatsoever claimed or held by
any governmental authority which have not at the time been
filed or registered against the title to the Purchased Assets
or served upon the Seller pursuant to law or which relate to
obligations not due or delinquent;
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(iii) assignments of insurance provided to landlords (or their
mortgagees) pursuant to the terms of any lease, and liens or
rights reserved in any lease for rent or for compliance with
the terms of such lease;
(iv) security given in the ordinary course of business to any
public utility, municipality or government or to any statutory
or public authority in connection with the operations of the
Purchased Business, other than security for borrowed money;
(v) unregistered purchase money security interests arising under
Contracts for the supply of goods and materials entered into
in the ordinary course of business which secure the unpaid
balance of the purchase price for goods and/or materials
purchased thereunder which are due and payable (and have been
outstanding) for not more than 30 days after delivery of the
invoice therefor;
(vi) title defects, minor survey exceptions, liens, easements,
covenants, rights-of-way, zoning by-laws or other restrictions
as to the use of Leased Property (whether registered or
unregistered) which do not in the aggregate materially impair
or affect the continued use of the property to which they
relate on substantially the same basis as such property is
currently being used;
(vii) easements for the supply of utility services to the Leased
Property;
(viii) statutory privileges, liens and charges which relate to
obligations incurred in the ordinary course of business with
respect to water, gas, electricity and other utilities which
are not yet due and payable;
(ix) any registered municipal or similar agreements and registered
agreements with publicly regulated utilities;
(x) restrictions in the ordinary grant from the Crown; and
(xi) the Encumbrances described in Schedule 1.1(3);
"PERSON" means a natural person, partnership, limited liability
partnership, corporation, joint stock company, trust, unincorporated
association, joint venture or other entity or governmental entity, and
pronouns have a similarly extended meaning;
"PRIME RATE" means the annual variable rate of interest quoted or
published from time to time by Royal Bank of Canada at its main branch
in Toronto, Ontario as the "prime rate" of interest charged by it for
Canadian dollar loans made in Canada;
"PROCEEDINGS" means any court, administrative, statutory, regulatory or
similar proceeding (whether civil, quasi-criminal or criminal),
arbitration or other dispute resolution procedure, investigation or
inquiry by any governmental, administrative, regulatory or similar
body, or any similar matter or proceeding;
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"PROMISSORY NOTE" means the subordinated promissory note issued by the
Buyer to the Seller in the amount of Six Million ($6,000,000) Dollars,
such note to be in the form of Schedule 1.1(4) hereto;
"PURCHASE PRICE" has the meaning set out in Section 3.1;
"PURCHASED ASSETS" has the meaning set out in Section 2.1;
"PURCHASED BUSINESS" means the business carried on by the Seller and
the Subsidiaries and known as the Regal Division, consisting of the
direct marketing of merchandise to consumers and the related selling
organization but for greater certainty excluding the business carried
on by X.X. XxXxxxxx Co. Inc.;
"SECURITIES LAWS" means the prospectus and registration requirements of
applicable securities legislation, rules, regulations and policy
statements;
"SECURITY" has the meaning ascribed thereto under the SECURITIES ACT
(Ontario);
"SETTLEMENT DATE" has the meaning set out in Section 3.3(c);
"SHAREHOLDER AGREEMENT" means the shareholder agreement among the
Buyer, each holder of Equity Securities of the Buyer and the Seller, in
the form of the agreement annexed hereto as Exhibit I;
"SUBSIDIARIES" means MDC Regal Inc., a corporation incorporated under
the laws of Ontario and Primes de Luxe Inc., a corporation incorporated
under the laws of Canada, and "SUBSIDIARY" means either one of the
Subsidiaries;
"TAX" or "TAXES" shall mean all taxes fees, levies, duties, tariffs,
imposts, premiums and impositions or charges of any kind of
governmental entities in the nature of (or similar to) taxes, payable
to any federal, state, provincial, local or foreign taxing authority,
including, without limitation, (i) income, capital, business,
franchise, profits, payroll, withholding, employment, social security,
workers' compensation, employment insurance or compensation, utility,
severance, production, excise, stamp, occupation, premiums,
environmental, recapture, windfall profits and gains taxes, fees,
levies, duties, tariffs, imposts, premiums and impositions of
governmental entities and (ii) interest, penalties, additional taxes
and additions to tax imposed with respect thereto;
"TIME OF CLOSING" means 10:00 a.m. (Toronto time) on the Closing Date,
or such other time on the Closing Date as the Seller and the Buyer may
mutually determine;
"TRANSFERRED AGREEMENTS" has the meaning set out in Section 2.1(g); and
"TRANSFERRED EMPLOYEES" has the meaning set out in Section 7.9(a);
1.2 CURRENCY. Unless otherwise indicated, all dollar amounts in this
Agreement are expressed in Canadian funds.
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1.3 SECTIONS AND HEADINGS. The division of this Agreement into Articles and
Sections and the insertion of headings and a table of contents are for
convenience of reference only and shall not affect the interpretation of this
Agreement. Unless otherwise indicated, any reference in this Agreement to an
Article, Section or Schedule refers to the specified Article or Section of or
Schedule to this Agreement.
1.4 NUMBER, GENDER AND PERSONS. In this Agreement, words importing the
singular number only shall include the plural and VICE VERSA, words importing
gender shall include all genders and words importing persons shall include
individuals, corporations, partnerships, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entities of any
kind whatsoever.
1.5 SELLER'S KNOWLEDGE. For the purposes of any reference in this Agreement
to "knowledge of the Seller", the knowledge (actual or deemed) of the Seller
shall be deemed to be the knowledge of the Seller learned upon making due
inquiry of each of Xxxxxx Xxxxx (President and Chief Operating Officer of the
Purchased Business) and Xxxxx Xxxxxxxxx (Chief Financial Officer of the
Purchased Business).
1.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether written
or oral. There are no conditions, covenants, agreements, representations,
warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as herein provided.
1.7 APPLICABLE LAW. This Agreement shall be construed, interpreted and
enforced in accordance with, and the respective rights and obligations of the
parties shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and each of the parties hereto hereby
irrevocably attorns to the exclusive jurisdiction of the courts of the Province
of Ontario.
1.8 SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.
1.9 REASONABLE COMMERCIAL EFFORTS. The parties acknowledge and agree that,
for all purposes of this Agreement, an obligation on the part of any party to
use its reasonable commercial efforts to obtain any waiver, consent, approval,
permit, licence or other document shall not require such party to make any
payment to any Person for the purpose of procuring the same, other than payments
for amounts due and payable to such Person under the terms of any agreement as
it stood prior to the date of this Agreement, payments for incidental expenses
incurred by such Person and payments required by any applicable law or
regulation.
1.10 SCHEDULES. The following Schedules are attached to and form part of
this Agreement:
Schedule 1.1(1) - Annual Financial Statements
Schedule 1.1(2) - Interim Financial Statements
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Schedule 1.1(3) - Permitted Encumbrances
Schedule 1.1(4) - Promissory Note
Schedule 2.1(a) - Leases of Real Property
Schedule 2.1(b) - Machinery and Equipment
Schedule 2.1(i) - Intellectual Property
Schedule 2.1(j) - Software
Schedule 2.2(f) - Excluded Assets
Schedule 3.3(2) - Summary of Significant Accounting Policies
and Procedures
Schedule 4.2(g) - Certain Specific Excluded Liabilities
Schedule 5.1 - Jurisdictions in which Purchased Business
Located
Schedule 5.15 - Contracts
Schedule 5.17 - Licences
Schedule 5.18 - Consents and Approvals
Schedule 5.19 - Financial Statements - Exceptions to GAAP
Schedule 5.21 - Changes since Financial Statement Date
Schedule 5.23 - Litigation
Schedule 5.27 - Employee Plans
Schedule 6.4 - Buyer's Consents and Approvals
Schedule 7.10(a) - Transferred Benefit Plans
Exhibit I - Shareholder Agreement
Exhibit 2 - Management Agreement
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The parties hereto agree that the Schedules and Exhibits appended to
and forming a part of the First Purchase Agreement shall constitute the
Schedules and Exhibits to this Agreement, subject however to changes in the
information contained therein in the normal course of business between the date
of the First Purchase Agreement and this Agreement.
2. PURCHASE AND SALE OF PURCHASED ASSETS
2.1 PURCHASED ASSETS. Subject to the provisions of this Agreement, the
Seller agrees to sell, assign and transfer to the Buyer and the Buyer agrees to
purchase from the Seller, effective as of the Effective Time, all of the
property, assets and rights used primarily in connection with the Purchased
Business (other than the Excluded Assets), whether real or personal, tangible or
intangible, of every kind and description and wheresoever situated, as a going
concern (collectively, the "Purchased Assets"), including, without limitation:
(a) LEASES OF REAL PROPERTY All rights of the Seller under the
leases of real property, together with all leasehold
improvements relating thereto which are described in Schedule
2.1(a) (the "Leases of Real Property");
(b) MACHINERY, EQUIPMENT AND FURNITURE All of the assets of all
kind used primarily in relation to the Purchased Business,
whether or not affixed to the Leased Property, and other goods
and chattels of the Seller, including, without limitation, all
of the machinery, equipment, vehicles, computer hardware,
fixtures, furniture, furnishings, parts, tooling molds, dies,
jigs or patterns and other fixed assets described in Schedule
2.1(b);
(c) INVENTORIES All inventories owned in relation to the Purchased
Business, including, without limitation, raw materials, work-
in-process, finished goods, replacement parts and office
supplies;
(d) ACCOUNTS RECEIVABLE All accounts receivable, trade accounts,
notes receivable, book debts and other debts due or accruing
due to the Seller primarily in relation to the Purchased
Business and the benefit of all security for such accounts,
notes and debts;
(e) CASH All of the cash and cash equivalents (held by virtue of
the Purchased Business operating retail service centres) at
each of the premises held under Leases of Real Property and,
for greater certainty, all cash or cash equivalents on hand or
in banks or other depositories generated or collected by the
Purchased Business after the Effective Time;
(f) PREPAID EXPENSES All prepaid expenses of the Seller incurred
in relation to the Purchased Business;
(g) TRANSFERRED AGREEMENTS All Contracts to which the Seller is a
party or by which it is bound and all rights and obligations
of Seller thereunder and which are entered into primarily in
relation to the Purchased Business, including, without
limitation, all rights under leases of personal property,
orders or contracts for the provision of goods or services
(whether as buyer or seller), letters of credit,
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distribution and agency agreements, employment and collective
agreements, agreements and instruments relating to employee
pension or benefit plans, all of the foregoing which are
described in Schedules 5.15 and 5.27 (the "Transferred
Agreements");
(h) LICENCES AND PERMITS All licences, permits, approvals,
consents, registrations, certificates and other authorizations
issued to or held by the Seller primarily in relation to the
Purchased Business, including, without limitation, those
described in Schedule 5.17;
(i) INTELLECTUAL PROPERTY All registered or pending or common law
intellectual property issued to or owned or held by the Seller
primarily in relation to the Purchased Business including,
without limiting the generality of the foregoing, all trade or
brand names, business names, domain names, trade-marks
(including logos), trade-xxxx registrations and applications,
service marks, service xxxx registrations and applications,
copyrights, copyright registrations and applications, issued
patents and pending applications and other patent rights,
industrial design registrations, pending applications and
other industrial design rights, trade secrets, proprietary
information and know-how, equipment and parts lists and
descriptions, instruction manuals, inventions, inventors'
notes, research data, blueprints, drawings and designs,
formulae, processes, technology and other intellectual
property issued to or owned or held by the Seller primarily in
relation to the Purchased Business, together with all rights
under licences, registered user agreements, technology
transfer agreements and other agreements or instruments
relating to any of the foregoing (collectively, "Intellectual
Property"), including, without limitation, the trade-marks,
copyrights, patents, industrial designs, licences and
agreements described in Schedule 2.1(i);
(j) COMPUTER SOFTWARE All computer software relating primarily to
the Purchased Business and all rights under licences, and
other agreements and instruments relating thereto including,
without limitation, the software described in Schedule 2.1(j);
(k) BOOKS AND RECORDS All books and records held or maintained by
the Seller in relation to the Purchased Business (other than
those required by law to be retained by the Seller, copies of
which will be provided to the Buyer), including, without
limitation, customer lists, sales records, price lists and
catalogues, sales literature, advertising material,
manufacturing data, production records, employee manuals,
personnel records, supply records, inventory records and
correspondence files (together with, in the case of any such
information which is stored electronically, the media on which
the same is stored);
(l) SHARES OF SUBSIDIARIES All of the issued shares in the capital
of the Subsidiaries; and
(m) GOODWILL All goodwill of the Purchased Business, together with
the exclusive right for the Buyer to represent itself as
carrying on the Purchased Business in
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succession to the Seller and the Subsidiaries and the right to
use any words indicating that the Purchased Business is so
carried on, including the exclusive right to use the name
"Regal Greetings & Gifts" and "Primes de Luxe", or any
variations thereof, as part of the name or style under which
the Purchased Business or any part thereof is carried on by
the Buyer.
2.2 EXCLUDED ASSETS. The Purchased Assets shall not include any of the
following property and assets (collectively, the "Excluded Assets"):
(a) CASH All cash on hand or in banks or other depositories as of
the Effective Time other than the cash referred to in
subsection 2.1(e);
(b) INTER-COMPANY DEBT All indebtedness of the Seller, or any
Affiliate of the Seller to the Purchased Business;
(c) INCOME TAXES All income tax instalments paid by the Seller and
the right to receive any refund of income taxes paid by the
Seller;
(d) MDC NAME The use of the acronym "MDC" or any variations
thereof;
(e) X.X. XXXXXXXX The investment of the Purchased Business in or
advances to X.X. XxXxxxxx Co. Inc.; and
(f) EXCLUDED ASSETS The assets identified on Schedule 2.2(f)
hereto.
3. PURCHASE PRICE
3.1 PURCHASE PRICE. The purchase price payable to the Seller for the
Purchased Assets (the "Purchase Price") shall be:
(a) in consideration of all Purchased Assets other than the Assets
in subsection 2.1(b) and 2.1(j), the aggregate of:
(i) Thirty Nine Million ($39,000,000) Dollars; plus
(ii) an amount equal to the accounts payable and accrued
liabilities of the Purchased Business as of the
Effective Time (the "Assumption Amount"); plus
(b) in consideration of the Purchased Assets referred to in
subsection 2.1(b) and 2.1(j), such number of common shares in
the capital of the Buyer, with the result that the Seller (or,
at Seller's direction, an Affiliate of Seller) holds,
immediately following the Closing Date, a fifteen percent
(15%) interest in the issued and outstanding common stock of
the Company (the "Equity Interest").
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The Purchase Price shall be satisfied:
(c) as to an amount equal to the Assumption Amount, by the
assumption of the accounts payable and accrued liabilities of
the Purchased Business as of the Effective Time;
(d) as to the Equity Interest, by the issuance thereof on the
Closing Date to Seller or, at Seller's direction, an Affiliate
of Seller;
(e) as to One Hundred Thousand ($100,000) Dollars, by the
application of the Deposit;
(f) as to Thirty Two Million, Nine Hundred Thousand ($32,900,000)
Dollars by certified cheque or bank draft or, if the Seller so
directs at least two business days prior to the closing date,
by way of electronic transfer of immediately available funds
to such bank account in Toronto, Ontario as the Seller may
specify in such direction; and
(g) as to Six Million ($6,000,000) Dollars, by the issuance and
delivery to Seller (or, at Seller's direction, an Affiliate of
Seller) of the Promissory Note.
3.2 ALLOCATION OF PURCHASE PRICE. The Seller and the Buyer agree to
allocate the Purchase Price among the Purchased Assets as follows:
(i) as to the Purchased Assets in Section 2.1(a), (b), (c), (d),
(e), (f), (j) and (l), the book values thereof; and
(ii) as to the remainder of the Purchased Assets, the balance of
the Purchase Price,
and to more particularly allocate, as specific consideration for the Purchased
Assets referred to in section 2.1(b) and 2.1(j), the Equity Interest, and to
report the sale and purchase of the Purchased Assets for all federal, provincial
and local Tax purposes in a manner consistent with such allocation.
3.3 ETA ELECTION. The Buyer and the Seller shall, on the Closing Date,
elect jointly under subsection 167(1) of the ETA, and under any similar
provision of any applicable provincial legislation, in the form prescribed for
the purposes of that provision, in respect of the sale and transfer of the
Purchased Assets hereunder, and the Buyer shall file such election with the
Canada Customs and Revenue Agency on the Closing Date.
3.4 TRANSFER TAXES. The Buyer shall be liable for and shall pay all federal
and provincial sales Taxes (including any retail sales Taxes and land transfer
Taxes) and all other Taxes, duties, fees or other like charges of any
jurisdiction (except income Taxes) properly payable in connection with the
transfer of the Purchased Assets by the Seller to the Buyer. If the Buyer so
requests, the Seller and Buyer shall execute a joint election under subsection
20(24) of the INCOME TAX ACT (Canada).
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3.5 INCOME TAX ELECTION. The Buyer and the Seller agree to elect jointly in
the prescribed form under section 22 of the INCOME TAX ACT (Canada) as to the
sale of the accounts receivable and other assets which are referred to in
Section 2.1(d) and described in section 22 of the INCOME TAX ACT (Canada) and to
designate in such election an amount equal to the portion of the Purchase Price
allocated to such assets pursuant to Section 3.6 as the consideration paid by
the Buyer therefor.
3.6 REIMBURSEMENT OF LETTER OF CREDIT DRAWINGS. Buyer shall reimburse
Seller within three (3) business days with respect to any amounts drawn after
the Time of Closing upon letters of credit issued and outstanding in respect of
the Purchased Business at the Time of Closing (such letters of credit having
been posted prior to the Closing Date to support purchase orders of inventory of
the Purchased Business issued prior to the Closing Date). Any amounts not so
paid by Buyer shall bear interest at Prime Rate plus three (3%) percent.
3.7 EFFECTIVE TIME. The transfer of the Purchased Assets and Assumed
Liabilities shall be effective as at the Effective Time. During the period from
the Effective Time until the Time of Closing (the "Interim Period"), the
Purchased Assets and Assumed Liabilities shall be held and the Purchased
Business shall be operated for the account of the Buyer.
4. ASSUMPTION OF LIABILITIES
4.1 ASSUMPTION OF CERTAIN LIABILITIES BY THE BUYER. Subject to the
provisions of this Agreement, the Buyer agrees to assume, pay, satisfy,
discharge, perform and fulfil, from and after the Time of Closing, the
obligations and liabilities of the Seller primarily in connection with the
Purchased Business and existing at the Effective Time (the "Assumed
Liabilities") as follows:
(a) accounts payable and accrued liabilities which are included in
calculating the Assumption Amount;
(b) all liabilities and obligations relating to, or arising from
the conduct of the Purchased Business or use of the Purchased
Assets after the Effective Time;
(c) all liabilities and obligations of Seller accruing on or after
the Effective Time under the Transferred Agreements;
(d) all liabilities and obligations relating to the returns of
finished products or merchandise on or after the Effective
Time;
(e) all obligations relating to the Benefit Plans transferred or
assigned under section 7.10; and
(f) all other employee benefits, liabilities and obligations
associated with or incurred in connection with Transferred
Employees arising out of their employment by Buyer on or after
the Closing Date, (and, in the case of Employee Plans, arising
out of their employment with Seller prior to the Closing
Date), including
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employee benefits liabilities and obligations assumed or
undertaken by Buyer pursuant to Section 7.9 and 7.10 hereof.
Buyer's obligations under this Section 4.1 shall not be subject to
setoff or reduction by reason of any actual or alleged breach of any
representation, warranty or covenant contained in this Agreement or any
agreement or document delivered in connection therewith or any right or alleged
right to indemnification thereunder.
4.2 EXCLUDED LIABILITIES. Buyer shall not assume, or in any way be liable
or responsible for, whether arising by contract, tort, operation of law or
otherwise, any liabilities or obligations of Seller except as specifically
provided in Section 4.1 hereof. Without limiting the generality of the
foregoing, Buyer shall not assume, the Assumed Liabilities shall not include,
and Seller shall retain, the following liabilities and obligations of Seller
(collectively, the "Excluded Liabilities"):
(a) liabilities arising as a result of the use of the Purchased
Assets prior to the Effective Time (except as otherwise
specifically provided in Section 4.1);
(b) all liabilities and obligations for defaults, non-performances
or breaches by Seller occurring or accrued before the
Effective Time under the Transferred Agreements, whether or
not disclosed or assigned to Buyer hereunder;
(c) all liabilities and obligations for Taxes of Seller arising
out of or resulting from the operation of the Purchased
Business prior to the Effective Time or from the transactions
provided for in this Agreement;
(d) all financial obligations due to Seller or any Affiliates of
Seller other than trade obligations for product and product
service purchases made by the Purchased Business from
Affiliates of Seller in the ordinary course of business;
(e) all liabilities, costs and obligations relating to, or arising
from, recalls of products sold by, or on behalf of, Seller
prior to the Effective Time;
(f) except for the Transferred Benefit Plans, all employee
benefits, liabilities and obligations associated with or
incurred in connection with Transferred Employees arising out
of their employment by Seller before the Effective Time; and
(g) notwithstanding anything to the contrary in this Agreement,
but not in limitation of the provisions of this Section 4.2,
those liabilities or potential liabilities set out in Schedule
4.2(g).
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows and
acknowledges that the Buyer is relying on such representations and warranties in
connection with its purchase of the Purchased Assets:
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5.1 ORGANIZATION AND STATUS. The Seller is validly existing under the laws
of its jurisdiction of incorporation. The Seller is duly registered, licensed or
qualified to carry on business as an extra-provincial or foreign corporation
under the laws of the jurisdictions set out in Schedule 5.1, being the only
jurisdictions in which the nature of the Purchased Business or the Purchased
Assets or any of them makes such registration, licensing or qualification
necessary.
5.2 ORGANIZATION AND STATUS - SUBSIDIARIES. Each of the Subsidiaries is
validly existing under the laws of its jurisdiction of incorporation. Each of
the Subsidiaries is duly registered, licensed or qualified to carry on business
under the laws of each jurisdiction in which it carries on business.
5.3 CORPORATE POWER AND AUTHORIZATION. The Seller has the corporate power
and capacity to enter into this Agreement and to perform its obligations
hereunder, to own or lease its property and to carry on the Purchased Business
as now being conducted by it. This Agreement has been duly authorized by the
Seller. Each of the agreements, contracts and instruments required by this
Agreement to be delivered by the Seller at the Time of Closing has been duly
authorized by the Seller. This Agreement has been duly executed and delivered by
the Seller and is a legal, valid and binding obligation of the Seller,
enforceable against the Seller by the Buyer in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency and other laws affecting
the rights of creditors generally and except that equitable remedies may be
granted only in the discretion of a court of competent jurisdiction. At the Time
of Closing, each of the agreements, contracts and instruments required by this
Agreement to be delivered by the Seller will be duly executed and delivered by
the Seller and will be valid and binding obligations of the Seller, enforceable
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency and other laws affecting the rights of creditors
generally and except that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction.
5.4 CORPORATE POWER - SUBSIDIARIES. Each of the Subsidiaries has the
corporate power to own or lease its property and to carry on the business now
being conducted by it.
5.5 AUTHORIZED AND ISSUED CAPITAL - SUBSIDIARIES
(a) the authorized capital of MDC Regal Inc. consists of an
unlimited number of common shares, of which one common share
(and no more) has been duly issued and is outstanding as fully
paid and non-assessable. The one issued and outstanding share
is owned by the Seller as the beneficial owner of record
thereof, with good and marketable title thereto, free and
clear of all Encumbrances; and
(b) the authorized capital of Primes de Luxe Inc. consists of an
unlimited number of common shares and an unlimited number of
preference shares, issuable in series, of which 100 common
shares (and no more) and no preference shares have been duly
issued and are outstanding as fully paid and non-assessable.
All of such issued and outstanding shares are owned by the
Seller as the beneficial owner of record thereof, with good
and marketable title thereto, free and clear of all
Encumbrances.
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5.6 NO OTHER AGREEMENTS TO PURCHASE. No Person other than the Buyer has any
written or oral agreement or option or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option for the
purchase or acquisition from the Seller of the Purchased Business or any of the
Purchased Assets, other than pursuant to purchase orders accepted by the Seller
in the ordinary course of business.
5.7 NO OPTIONS - SUBSIDIARIES. No Person has any agreement or option or any
right of privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription, allotment or issuance
of any unissued shares or other securities of either of the Subsidiaries.
5.8 NO VIOLATION. The execution and delivery of this Agreement by the
Seller and the consummation of the transactions herein provided for will not
result in:
(a) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of the Seller under:
(i) any Contract to which the Seller is a party or by
which it is or its properties are bound;
(ii) any provision of the constating documents or by-laws
or resolutions of the board of directors (or any
committee thereof) or shareholders of the Seller;
(iii) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction
over the Seller;
(iv) any licence, permit, approval, consent or
authorization held by the Seller or necessary to the
operation of the Purchased Business; or
(v) any applicable law, statute, ordinance, regulation or
rule; nor
(b) the creation or imposition of any Encumbrance on any of the
Purchased Assets.
5.9 PURCHASED ASSETS.
(a) To the knowledge of the Seller, the Purchased Assets are
sufficient to carry on the Purchased Business, consistent with
past practice in all material respects. The Purchased Assets
are in reasonable operating condition and state of repair,
ordinary wear and tear excepted.
(b) The assets described in sections 2.1(b) and 2.1(j) have not
been transferred after December 31, 1993 on a tax-exempt basis
under section 13 of Ontario Regulation 1013 or any predecessor
thereof and all taxes imposed under the RETAIL SALES TAX ACT
(Ontario) on any purchaser who acquired the assets described
in sections 2.1(b) and 2.1(j) prior to the date hereof has
been paid.
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5.10 TITLE TO PERSONAL PROPERTY. The Seller is the beneficial owner of the
Purchased Assets, free and clear of all Encumbrances except for Permitted
Encumbrances. The Seller has the exclusive right to possess, use, occupy and
dispose of the Purchased Assets, subject only to the rights of the other parties
to the Contracts. At the Time of Closing, the Seller will have full legal right,
power and authority to sell, assign and transfer the Purchased Assets to the
Buyer free of all Encumbrances.
5.11 REAL PROPERTY AND REAL PROPERTY LEASES. Neither the Seller nor any
Subsidiary owns any real property in connection with the Purchased Business. In
respect of the Purchased Business, neither the Seller nor any Subsidiary is a
party to any lease or agreement to lease in respect of any real property,
whether as lessor or lessee, other than the Leases of Real Property described in
Schedule 2.1(a) relating to the Leased Property. Schedule 2.1(a) sets out the
parties to each of the Leases of Real Property and their dates of execution or
effective dates. The Seller has provided to the Buyer a true and complete copy
of each of the Leases of Real Property and all amendments thereto. Except as
described in Schedule 2.1(a):
(i) the Seller or a Subsidiary, as the case may be, occupies the
Leased Property and has the exclusive right to occupy and use
the Leased Property; and
(ii) each of the Leases of Real Property is in good standing and in
full force and effect, and neither the Seller nor, to the
knowledge of the Seller, any other party thereto is in breach
in any material respect of any covenants, conditions or
obligations contained therein or has received or given notice
alleging such breach.
5.12 INVENTORIES. The inventory in connection with the Purchased Business is
carried on the Financial Statements at a value determined in accordance with
GAAP (which includes an appropriate reserve therefor). The Seller or a
Subsidiary, as the case may be, has good title to all inventory free and clear
of all Encumbrances.
5.13 ACCOUNTS RECEIVABLE. All accounts receivable, book debts and other
debts due or accruing to the Seller and the Subsidiaries in connection with the
Purchased Business are BONA FIDE and collectible, subject to the allowance for
doubtful accounts which has been reflected on the Financial Statements or since
the date of the Financial Statements taken in accordance with past practice.
5.14 INTELLECTUAL PROPERTY. To the knowledge of the Seller, Schedule 2.1(i)
sets out all of the Intellectual Property (including particulars and status of
registration or application for registration) and all licences, registered user
agreements and other Contracts which comprise or relate to Intellectual
Property. To the knowledge of the Seller, the Intellectual Property comprises
all trade or brand names, business names, domain names, trade-marks, service
marks, copyrights, patents, industrial designs, trade secrets, know-how,
computer software, inventions, designs and other industrial or intellectual
property sufficient to conduct the Purchased Business as heretofore conducted.
The Seller is the legal and beneficial owner of the Intellectual Property, free
and clear of all Encumbrances (except for the Intellectual Property listed in
Schedule 2.1(i) which is identified as being licensed to the Seller). To the
knowledge of the Seller, the conduct of the Purchased Business does not infringe
upon the industrial or intellectual property rights, domestic or foreign, of any
other Person. To the knowledge of the Seller, except as disclosed in
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Schedule 5.23, there are no outstanding claims of any infringement or breach by
the Seller or the Purchased Business of any industrial or intellectual property
rights of any other Person, and the Seller has not received any notice that the
conduct of the Purchased Business, including the use of the Intellectual
Property, infringes upon or breaches any industrial or intellectual property
rights of any other Person, or the trade secrets, know-how or confidential or
proprietary information of any other Person, and to the knowledge of the Seller,
there has been no infringement or violation of any of the Seller's rights in the
Intellectual Property by any other Person.
5.15 AGREEMENTS AND COMMITMENTS. Except as disclosed in Schedule 5.15 or
Schedule 5.27 to this Agreement, neither the Seller nor any Subsidiary is a
party to or bound by any Contract in connection with the Purchased Business or
relating to the Purchased Assets. The Seller and the Subsidiaries have performed
all of the obligations required to be performed by each of them and each is
entitled to all benefits under, and is not in default or alleged to be in
default in respect of, any Contract in connection with the Purchased Business or
relating to the Purchased Assets to which it is a party or by which it is bound;
all such Contracts are in good standing and in full force and effect.
5.16 COMPLIANCE WITH LAWS. To the knowledge of the Seller, the Seller and
the Subsidiaries are conducting the Purchased Business in compliance in all
material respects with applicable laws, regulations, by-laws, ordinances,
regulations, rules, judgments, decrees and orders of each jurisdiction in which
the Purchased Business is carried on or any of the Purchased Assets are
situated.
5.17 LICENCES. Schedule 5.17 sets out a complete and accurate list of all
licences, permits, approvals, consents, certificates, registrations and
authorizations (whether governmental, regulatory or otherwise) (the "Licences")
held by or granted to the Seller or the Subsidiaries primarily in connection
with the Purchased Business, and there are no other licences, permits,
approvals, consents, certificates, registrations or authorizations necessary to
carry on the Purchased Business or to own or lease any of the Purchased Assets.
Each Licence is valid, subsisting and in good standing and neither the Seller
nor any Subsidiary is in default or breach of any Licence and no proceeding is
pending or, to the knowledge of the Seller, threatened to revoke or limit any
Licence.
5.18 CONSENTS AND APPROVALS. Except for the consents and approvals set out
in Schedule 5.18, no authorization, consent or approval of, or filing with or
notice to or under:
(a) any governmental agency, regulatory body or court;
(b) any law, statute, ordinance, regulation or rule; or
(c) any Contract,
is required in connection with the execution, delivery and performance of this
Agreement by the Seller.
5.19 FINANCIAL STATEMENTS. Except as set out in Schedule 5.19, the Financial
Statements have been prepared in accordance with GAAP applied on a basis
consistent with prior periods, and
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present fairly the assets, liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Purchased Business as at the
respective dates of the Financial Statements and the sales, earnings and results
of operations of the Purchased Business for the respective periods covered by
the Financial Statements.
5.20 BOOKS AND RECORDS. The books and records of the Seller and the
Subsidiaries in relation to the Purchased Business have been maintained in
accordance with good bookkeeping practice and fairly and correctly set out and
disclose, in accordance with GAAP, the financial position of the Seller as at
the date hereof.
5.21 ABSENCE OF CHANGES. Except as set out in Schedule 5.21, since the
Financial Statement Date the Purchased Business has been carried on only in the
ordinary course of business consistent with past practice and there has not
been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities, operations or earnings of the
Purchased Business;
(b) any damage, destruction or loss (whether or not covered by
insurance) in relation to the Purchased Assets; or
(c) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due)
incurred by the Seller or any Subsidiary in relation to the
Purchased Business, other than those incurred in the ordinary
course of business or as disclosed in any Contract listed in
any Schedule hereto.
5.22 TAXES. In relation to the Purchased Business, the Seller and each
Subsidiary has duly completed and filed all Tax returns required to be filed by
it and has paid all Taxes which are due and payable, and all assessments,
reassessments, governmental charges, penalties, interest and fines due and
payable by it. There are no Proceedings pending or, to the knowledge of the
Seller, threatened against the Seller or any Subsidiary in respect of Taxes. The
Seller and each Subsidiary have withheld from each payment made to any of the
past or present employees of the Purchased Business, and its officers and
directors, and to any non-resident of Canada, the amount of all Taxes required
to be withheld therefrom, and has paid the same to the proper Tax or other
receiving officers within the time required under any applicable legislation.
The Seller and each Subsidiary have remitted to the appropriate Tax authority,
when required by law to do so, all amounts collected by it on account of GST.
5.23 LITIGATION AND OTHER PROCEEDINGS. Except as described in Schedule 5.23,
there are no Proceedings against or involving the Seller or any Subsidiary in
relation to the Purchased Business or the Purchased Assets (whether in progress
or, to the knowledge of the Seller, threatened). There is no judgment, decree,
injunction, rule, award, settlement, or order of any court, government
department, board, commission, agency, arbitrator or similar body outstanding
against the Seller or any Subsidiary in relation to the Purchased Business or
the Purchased Assets.
5.24 RESIDENCY. The Seller is a resident of Canada for the purposes of the
INCOME TAX ACT (Canada).
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5.25 GST REGISTRATION. The Seller is a registrant for purposes of the ETA.
5.26 ENVIRONMENTAL. In connection with the operations of the Purchased
Business:
(a) to the knowledge of the Seller, the Seller and each Subsidiary
is in compliance in all material respects with all applicable
Environmental Laws as in effect on the date hereof;
(b) neither the Seller nor any Subsidiary has received any written
notices of violations or demand from any other Person arising
under any applicable Environmental Laws as in effect on the
date hereof and there are no governmental investigations
pending or, to the knowledge of the Seller, threatened under
such Environmental Laws;
(c) the Seller and each Subsidiary have obtained, or have made or
will make application for prior to the Closing, all permits,
licenses and authorizations required under Environmental Laws
for the operation of the Purchased Business; and
(d) to the knowledge of the Seller, there are no hazardous
substances, materials or wastes on the Leased Property which
require any remediation or cleanup under applicable
Environmental Laws.
5.27 EMPLOYEE PLANS
(a) Schedule 5.27 contains a complete and correct list of all
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
which is maintained, or otherwise contributed to or required
to be contributed to, by the Seller and the Subsidiaries
relating to the Purchased Business or the Purchased Assets for
the benefit of employees or former employees of the Seller and
the Subsidiaries (the "Employee Plans"). The Employee Plans
are the only benefit plans existing in respect of Transferred
Employees. Neither the Seller nor the Subsidiaries have any
formal plans or commitments whether legally binding or not, to
create any additional Employee Plan or modify or change any
existing Employee Plan that would affect any of their
employees or former employees.
(b) The Seller has furnished to the Buyer true, correct and
complete copies of all of the Employee Plans in effect at the
date hereof (where written documentation exists) as amended as
of the date hereof, together with all related documentation
including trust agreements, funding agreements, insurance
contracts, the most recent actuarial report, the most recent
financial statements, copies of material correspondence with
all pension authorities with respect to each Employee Plan, a
description of the terms of any Employee Plan which is not in
writing and all
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Employee Plan summaries, booklets or manuals prepared for or
circulated to employees or former employees.
(c) All of the Employee Plans have been established, registered
(where required), maintained, funded and administered in
compliance in all material respects with their terms and all
applicable laws.
(d) All employee data necessary to administer each Employee Plan
has been or will be provided to the Buyer and is true and
correct.
(e) Except as disclosed in Schedule 5.27, all required employer
and employee contributions relating to the Transferred
Employees under the Employee Plans have been made, the
respective fund or funds established under the Employee Plans
are funded in accordance with applicable laws and the rules of
the Employee Plans.
(f) The costs of administering the Employee Plans up to the
Closing Date, including fees for the trustee and other
services providers which are customarily paid by the Seller or
the Subsidiaries, have been accrued or paid or will be accrued
or paid prior to the Closing Date.
(g) None of the Seller, the Subsidiaries, the administrator or any
fiduciary of the Employee Plans (or agent of any of the
foregoing) have been in breach of any fiduciary obligation
with respect to the administration of the Employee Plans or
have engaged in any transaction or have failed to act in a
manner which would subject such person to any liability for a
breach of fiduciary duty under applicable laws.
(h) All material obligations of the Seller or the Subsidiaries
required to be performed in connection with the Employee Plans
and funding media established therefor up to the date hereof
have been performed. There have been no improper withdrawals,
applications or transfers of assets from any Employee Plan or
the trusts or other funding media relating thereto. Except for
an employer contribution holiday in 1996, which was taken in
accordance with the terms of the relevant Employee Plan, no
actuarial surplus has ever been removed from any Employee Plan
or has been used or applied by the Seller to fund employee
contributions obligations under the Employee Plans.
(i) No amendments or promises of benefit improvements under the
Employee Plans have been made, or will be made prior to the
Closing Date, by the Seller or the Subsidiaries to the
Transferred Employees, except as required by applicable laws
or any collective agreement. Except as provided in Schedule
5.27, none of the Employee Plans provides benefit increases
that are contingent upon or will become effective upon the
entering into of this Agreement or the completion of the
transactions contemplated hereby. The actuarial assumptions
used for purposes of the Benefit Plans have not changed since
the last valuation.
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(j) Except as disclosed in Schedule 5.27, there are no outstanding
actions, suits or claims pending or threatened concerning the
assets held in the funding media for the Employee Plans other
than routine claims for the payment of benefits and there are
no outstanding liabilities pending or threatened under the
Employee Plans for taxes, penalties or fees under any
applicable laws.
(k) None of the Employee Plans provide benefits beyond retirement
(other than the Regal Pension Plan) or other termination of
service (other than pursuant to severance arrangements
disclosed to Buyer in Schedules 5.21 or 5.27 hereof) to
employees or former employees or to the beneficiaries or
dependants of such employees.
(l) Except as provided in Schedule 5.27, with respect to each of
the Employee Plans which is funded fully or partially through
an insurance policy, there will be no liability of the Seller
or Subsidiaries as of the Closing Date under any such
insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events
occurring prior to the Closing Date. With respect to each
Employee Plan not funded through an insurance policy, Seller
has, except for the liability associated with persons on
short-term disability, either fully funded such Employee Plan
through a trust or has made appropriate provision for all of
Seller's liability thereunder in the Financial Statements.
(m) Except for the participation of Primes de Luxe Inc. under the
Regal Pension Plan, none of the Subsidiaries currently
sponsors, maintains, contributes to or has any liability to,
nor have any of the Subsidiaries ever sponsored, maintained,
contributed to, or incurred any liability to a "registered
pension plan" or a "deferred profit sharing plan" as defined
under the INCOME TAX ACT (Canada).
5.28 COLLECTIVE AGREEMENTS. Neither the Seller nor any Subsidiary, in
respect of the Purchased Business, has made any Contracts with any labour union
or employee association or made commitments to or conducted negotiations with
any labour union or employee association with respect to any future agreements.
The Seller is not aware of any current attempts to organize or establish any
labour union, employee association or other similar entity affecting the
Purchased Business. The Seller has not received notice of any application for
certification affecting the employees of the Seller.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows and
acknowledges and confirms that the Seller is relying on such representations and
warranties in connection with its sale of the Purchased Assets:
6.1 ORGANIZATION. The Buyer is validly existing in good standing under the
laws of its jurisdiction of incorporation.
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6.2 CORPORATE POWER AND AUTHORIZATION. The Buyer has the corporate power
and capacity to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the Buyer. Each of this
Agreement and the Shareholder Agreement has been or will be duly executed and
delivered by the Buyer and is or will at the time of execution be a legal, valid
and binding obligation of the Buyer, enforceable against the Buyer by the Seller
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other laws affecting the rights of creditors
generally and except that equitable remedies may only be granted in the
discretion of a court of competent jurisdiction.
6.3 NO VIOLATION. The execution and delivery of this Agreement and the
Shareholder Agreement by the Buyer and the consummation of the transactions
herein provided for will not result in the violation of, or constitute a default
under, or conflict with or cause the acceleration of any obligation of the Buyer
under:
(a) any provision of the constating documents or by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of the Buyer;
(b) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over the
Buyer; or
(c) any applicable law, statute, ordinance, regulation or rule.
6.4 CONSENTS AND APPROVALS. Except as set out in Schedule 6.4, there is no
requirement for the Buyer to make any filing with, give any notice to or obtain
any licence, permit, certificate, registration, authorization, consent or
approval of, any Person as a condition to the lawful consummation of the
transactions contemplated by this Agreement and the Shareholder Agreement.
6.5 GST REGISTRATION. The Buyer is or will at the Closing Date be a
registrant for purposes of the ETA.
7. COVENANTS
7.1 ACCESS TO PURCHASED BUSINESS AND PURCHASED ASSETS. The Seller shall
forthwith make available to the Buyer and its authorized representatives all
title documents, Contracts, financial statements, policies, plans, reports,
licences, orders, permits, books of account, accounting records and all other
documents, information and data relating to the Purchased Assets, Assumed
Liabilities and the Purchased Business. The Seller shall afford the Buyer and
its authorized representatives every reasonable opportunity to have free and
unrestricted access to the Purchased Assets, Assumed Liabilities and all other
property and assets utilized in the Purchased Business.
7.2 CONDUCT OF PURCHASED BUSINESS PRIOR TO CLOSING. Without in any way
limiting any other obligations of the Seller hereunder, during the period from
the date hereof to the Time of Closing:
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(a) CONDUCT BUSINESS IN THE ORDINARY COURSE Without limiting the
generality of any other obligation of the Seller hereunder,
the Seller shall conduct the Purchased Business only in the
ordinary course of business;
(b) NO UNUSUAL TRANSACTIONS The Seller shall not, without the
prior written consent of the Buyer, enter into any transaction
or refrain from doing any action that, if effected before the
date of this Agreement, would constitute a breach of any
representation, warranty, covenant or other obligation of the
Seller contained herein;
(c) CONTRACTUAL CONSENTS The Seller shall use its reasonable
commercial efforts to give or obtain, at or prior to the Time
of Closing, the notices, consents and approvals described in
Schedule 5.18; and
(d) BEST EFFORTS The Seller shall use its best efforts to satisfy
the conditions contained in Section 8.1.
7.3 DELIVERY OF CONVEYANCING DOCUMENTS. The Seller shall at the Time of
Closing deliver to the Buyer all necessary deeds, conveyances, bills of sale,
assurances, transfers, share certificates, assignments and any other
documentation necessary or reasonably required to transfer the Purchased Assets
to the Buyer with a good and marketable title, free and clear of all
Encumbrances and the Buyer shall at the Time of Closing deliver to the Seller
all necessary assurances, assignments and any other documentation necessary or
reasonably required to assume the Assumed Liabilities.
7.4 REGULATORY CONSENTS. The Seller shall use its reasonable commercial
efforts to obtain, at or prior to the Time of Closing, from all appropriate
federal, provincial, municipal or other governmental or regulatory bodies, the
licences, permits, consents, approvals, certificates, registrations and
authorizations described in Schedule 5.18. Each of the Seller and the Buyer
will, as promptly as practicable after the execution of this Agreement, fully
cooperate with one another in order to effect all such filings and provide all
such notices and information as may be required under the COMPETITION ACT
(Canada). If, notwithstanding such efforts, the Seller is unable to obtain any
of such consents and approvals, the Seller shall not be liable to the Buyer for
any breach of covenant, provided that nothing contained herein shall affect any
condition precedent to the Buyer's obligation to complete the transactions
contemplated hereby. If the Buyer completes the transactions contemplated hereby
on the Closing Date notwithstanding that any of the consents and approvals
referred to in Schedule 5.18 have not been obtained, the Seller shall continue
after the Closing Date to use its reasonable commercial efforts as requested by
the Buyer from time to time in order to attempt to obtain any such consent or
approval.
7.5 COMPETITION ACT. In lieu of or in addition to the obligation to file
notices and information under the COMPETITION ACT (Canada), the Seller and the
Buyer may, by mutual agreement, apply for an Advance Ruling Certificate pursuant
to section 102 of the COMPETITION ACT (Canada) that the Director under such Act
is satisfied that he would not have sufficient grounds on which to apply for an
order in respect of the transactions contemplated by this Agreement.
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7.6 DELIVERY OF SELLER'S CLOSING DOCUMENTATION. The Seller shall deliver to the
Buyer a certificate of status and a copy, certified by a senior officer of the
Seller as of the Closing Date, of its constating documents and by-laws and of
the resolution authorizing the execution, delivery and performance by the Seller
of this Agreement and any documents to be provided by it pursuant to the
provisions hereof. The Seller shall also execute and deliver or cause to be
executed and delivered to the Buyer two copies of such other documents relevant
to the closing of the transactions contemplated hereby as the Buyer, acting
reasonably, may request.
7.7 DELIVERY OF BUYER'S CLOSING DOCUMENTATION. The Buyer shall deliver to
the Seller a certificate of status and a copy, certified by a senior officer of
the Buyer as of the Closing Date, of its constating documents and by-laws and of
the resolution authorizing the execution, delivery and performance by the Buyer
of this Agreement and any documents to be provided by it pursuant to the
provisions hereof. The Buyer shall also execute and deliver or cause to be
executed and delivered two copies of such other documents relevant to the
closing of the transactions contemplated hereby as the Seller, acting
reasonably, may request.
7.8 NON-COMPETE COVENANT.
(a) Effective as of the Time of Closing, Seller shall not, and
Seller shall cause any Person controlled by it not to, for a
period of two years from and after the Closing Date, directly
or indirectly, engage within Canada in any business the
principal activity of which is the sale and distribution of
consumer merchandise that is the same or substantially the
same as those products of the Purchased Business which are
manufactured and sold by Seller on the date hereof (a
"Competing Business"); provided that Seller may, without
violating this covenant, own as an investment not in excess of
five percent (5%) of the voting power of any Person which
engages in a Competing Business if such securities are traded
on a national securities exchange or traded publicly in the
over-the-counter market.
(b) Seller acknowledges that in view of the nature of the
Purchased Business and the business objectives of Buyer in
acquiring it, and the consideration paid to Seller therefor,
the foregoing territorial and time limitations are reasonable
and properly required for the adequate protection of Buyer and
that in the event that any such territorial or time limitation
is deemed to be unreasonable and is then reduced by a court of
competent jurisdiction, then, as reduced, the territorial
and/or time limitation shall be enforced.
(c) Seller acknowledges that the remedy at law for any breach or
threatened breach by it of the covenants contained in this
Section 7.8 will be inadequate and agrees that Buyer in the
event of such breach or threatened breach, in addition to all
other remedies available for such breach or threatened breach
(including a recovery of damages), will be entitled to obtain
preliminary or permanent injunctive relief and, to the extent
permitted by applicable statutes and rules of procedure, a
temporary restraining order (or similar procedural device)
upon the commencement of such action. This Section 7.8
constitutes an independent and severable covenant and if any
or all of the provisions of this Section 7.8 are held to be
unenforceable for any reason whatsoever, it will not in any
way invalidate or
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affect the remainder of this Agreement which will remain in
full force and effect. The parties intend for the covenants of
this Section 7.8 to be enforceable to the maximum extent
permitted by law, and if any reviewing court deems any of such
covenants to be unenforceable or invalid, Buyer and Seller
authorize such court to reform (i) the unenforceable or
invalid provisions and to impose such restrictions as reformed
and (ii) the remaining provisions as it deems reasonable.
7.9 EMPLOYEES.
(a) Seller agrees to provide the Buyer with an up-to-date list of
the names, title, compensation and date of hire of all persons
who are employed primarily in connection with the Purchased
Business and indicating whether such employee is on short-term
disability, pregnancy or parental leave, temporary lay-off,
long-term disability or workers' compensation (the
"Transferred Employees") at least two business days and not
more than four business days prior to the Closing Date.
(b) Effective as of the Time of Closing, the Buyer agrees that it
shall offer employment to all Transferred Employees (including
any inactive employees) on substantially the same terms and
conditions of employment as are then applicable to the
Transferred Employees. Except as described in Schedule 5.21,
during the previous six (6) months, there have been no
material changes in the terms and conditions of employment of
the Transferred Employees other than those undertaken in the
normal course. No officer or senior employee (being an
employee at the "Director" level or above) employed by the
Seller has indicated his or her intention to resign. In the
event Buyer utilizes a written offer of employment for such
offer it shall first obtain Seller's consent to the form and
content thereof (not to be unreasonably withheld).
(c) The consummation of the transactions contemplated by this
Agreement will not entitle any current or former officer or
employee of the Seller to severance pay, pay in lieu of
notice, unemployment compensation, or any other similar
payment, nor accelerate the time of payment or date of
vesting, nor increase the amount of any compensation due to
any Transferred Employee. The employment of all other
employees employed by the Seller (other than Transferred
Employees) shall be the responsibility of the Seller without
recourse or liability to the Buyer, and Seller shall be
responsible for any employees who reject the Buyer's offer of
employment.
7.10 HEALTH, PENSION AND OTHER BENEFIT PLANS.
(a) Effective as of the Time of Closing, the Seller shall transfer
and assign to the Buyer the sponsorship of the Employee Plans
that are listed on Schedule 7.10(a) hereto providing employee
benefits to the Transferred Employees (the "Transferred
Benefit Plans") and, where applicable, all assets and
liabilities of such Transferred Benefit Plans and the Buyer
shall assume sponsorship of such Plans.
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(b) Effective as of the Time of Closing, each Transferred Employee
who has participated in the Benefit Plans according to the
terms thereof shall continue to participate in and accrue
benefits under the Benefit Plans in accordance with, and
subject to, the membership, eligibility and coverage
requirements thereof.
7.11 CHANGE OF NAME OF SUBSIDIARY. Immediately following the Closing Date,
Buyer agrees to change the name of MDC Regal Inc. to a name in which the acronym
"MDC" does not appear.
7.12 OPERATION OF BUSINESS TO DECEMBER 31, 2001. The Buyer covenants and
agrees that during the period from the Closing Date until December 31, 2001 it
will cause the Purchased Business to be operated in the normal course of
business consistent in all material respects with the manner in which the
Purchased Business has been heretofore carried on.
7.13 OWNERSHIP OF EQUITY INTEREST. The Seller shall own the Equity Interest
continuously for not less than six (6) months following the date of issuance
(provided that this covenant shall not apply if the Buyer causes the Seller to
sell its Equity Interest in accordance with the provisions of the Shareholder
Agreement).
8. CONDITIONS OF CLOSING
8.1 CONDITIONS OF CLOSING IN FAVOUR OF THE BUYER. The purchase and sale of
the Purchased Assets is subject to the following terms and conditions for the
exclusive benefit of the Buyer, to be performed or fulfilled at or prior to the
Time of Closing (except for the condition in Section (l) below, which is to be
satisfied at or prior to 5:00 p.m. on December 5, 2001):
(a) REPRESENTATIONS AND WARRANTIES The representations and
warranties of the Seller contained in this Agreement shall be
true and correct in all respects, (except any representation
and warranty which is qualified by the word "material" shall
be true and correct in all material respects) at the Time of
Closing with the same force and effect as if such
representations and warranties were made at and as of such
time, and a certificate of an officer of the Seller, dated the
Closing Date, to that effect shall have been delivered to the
Buyer, such certificate to be in form and substance
satisfactory to the Buyer, acting reasonably, and where such
changes have caused the representations and warranties to be
inaccurate in any respect, such certificate shall set out such
changes.
(b) COVENANTS All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Seller at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of an
officer of the Seller, dated the Closing Date, to that effect
shall have been delivered to the Buyer, such certificate to be
in form and substance satisfactory to the Buyer, acting
reasonably.
(c) CONTRACTUAL CONSENTS There shall have been obtained those
consents described in Schedule 5.18 (in each case in form and
substance satisfactory to the Buyer, acting reasonably).
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(d) NO ACTION OR PROCEEDING No legal or regulatory action or
proceeding shall be pending or threatened by any Person which
would, in the opinion of the Buyer, acting reasonably, enjoin,
restrict, prohibit or adversely affect the purchase and sale
of the Purchased Assets contemplated hereby.
(e) DISCHARGE OF ENCUMBRANCES The Seller shall have delivered to
the Buyer evidence in form and substance satisfactory to the
Buyer and its counsel that all Encumbrances affecting the
Purchased Assets which are denoted on Schedule 1.1(3) as "To
Be Discharged" have been or will be discharged in full.
(f) RESIGNATION OF DIRECTORS AND OFFICERS Such directors and
officers of the Subsidiaries as the Buyer may specify shall
have resigned in favour of nominees of the Buyer effective as
of the Time of Closing.
(g) EMPLOYMENT AGREEMENTS Xxxxxx Xxxxx and Xxxxx Xxxxxxxxx shall
have agreed to the terms of employment agreements with the
Buyer (which terms shall comply with section 7.9(b) hereof).
(h) SHAREHOLDER AGREEMENT The Seller shall have executed and
delivered to the Buyer a copy of the Shareholder Agreement.
(i) MANAGEMENT AGREEMENT The Seller shall have provided its
consent to the execution by the Buyer of the Management
Agreement annexed hereto as Exhibit 2.
(j) FINANCING Buyer shall have obtained debt financing of
approximately $13 million (senior debt), $7 million
(subordinated mezzanine debt) and $10 million (revolving debt)
in order to finance the transactions herein.
(k) DELIVERIES The deliveries of the Seller under Article 8 shall
have been completed in accordance with the terms hereof.
(l) BOARD APPROVAL . The board of directors of Dreamlife Inc.
shall have approved the transactions herein, provided that
this condition may only be relied upon by the Buyer if the
Buyer irrevocably instructs its financial institution to wire
the Deposit to the Seller on the date of execution of the
Agreement by all parties.
8.2 NON-PERFORMANCE BY THE SELLER. If any of the conditions contained in
Section 8.1 shall not be performed or fulfilled at or prior to the Time of
Closing in the opinion of the Buyer, acting reasonably, (except for the
Condition in Section 8.1(l), which is to be satisfied prior to 5:00 p.m. on
December 5, 2001) the Buyer may, by notice to the Seller, terminate this
Agreement and the obligations of the Buyer to complete the transactions
contemplated by this Agreement, shall be terminated, except that in the case of
a non-fulfillment of the condition contained in section 8.1(c), Seller shall be
entitled to require Buyer to waive such condition, in which event Seller shall
indemnify Buyer in accordance with section 11.1(e) hereof.
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8.3 CONDITIONS OF CLOSING IN FAVOUR OF THE SELLER. The purchase and sale of the
Purchased Assets is subject to the following terms and conditions for the
exclusive benefit of the Seller, to be performed or fulfilled at or prior to the
Time of Closing:
(a) REPRESENTATIONS AND WARRANTIES The representations and
warranties of the Buyer contained in this Agreement shall be
true and correct in all material respects at the Time of
Closing with the same force and effect as if such
representations and warranties were made at and as of such
time, and a certificate of an officer of the Buyer, dated the
Closing Date, to that effect shall have been delivered to the
Seller, such certificate to be in form and substance
satisfactory to the Seller, acting reasonably.
(b) COVENANTS All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Buyer at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of an
officer of the Buyer, dated the Closing Date, to that effect
shall have been delivered to the Seller, such certificate to
be in form and substance satisfactory to the Seller, acting
reasonably.
(c) SHAREHOLDER AGREEMENT The Buyer shall have executed and
delivered to the Seller a copy of the Shareholder Agreement.
(d) MEMORANDUM AND ARTICLES Such amendments shall have been made
to the Memorandum and Articles of Association of Buyer so as
to be in conformity in all material respects with the
Shareholders Agreement as are deemed appropriate by counsel
for Buyer and Seller acting reasonably.
8.4 NON-PERFORMANCE BY THE BUYER. If any of the conditions contained in
Section 8.3 shall not be performed or fulfilled at or prior to the Time of
Closing to the satisfaction of the Seller, acting reasonably, the Seller may, by
notice to the Buyer, terminate this Agreement and the obligations of the Seller
and the Buyer under this Agreement, shall be terminated, provided that the
Seller may also bring an action pursuant to Article 11 against the Buyer for
damages suffered by it where the non-performance or non-fulfilment of the
relevant condition is as a result of a breach of covenant, representation or
warranty by the Buyer. Any such condition may be waived in whole or in part by
the Seller.
8.5 MUTUAL CONDITION PRECEDENT. The purchase and sale of the Purchased
Assets and the assignment and assumption of the Assumed Liabilities is subject
to the following condition to be fulfilled at or prior to the Time of Closing,
which is a true condition precedent:
(a) COMPETITION ACT. The applicable waiting periods in respect of
notices filed under Part IX of the COMPETITION ACT (Canada)
shall have expired without the threat of restraint or
challenge, or the Seller and the Buyer shall have received an
Advance Ruling Certificate pursuant to section 102 of the
COMPETITION ACT (Canada) that the Director under such Act is
satisfied he would not have sufficient grounds on which to
apply for an order in respect of the transactions contemplated
hereby.
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8.6 RIGHT OF TERMINATION. In the event that the Closing Date does not occur
on December 14, 2001 because of the failure of any of the conditions contained
herein, then at any time on or after December 14, 2001 this Agreement may be
terminated by Seller or Buyer by providing written notice of termination to the
other parties hereto and, except as otherwise provided herein, the parties shall
be released from all obligations hereunder.
9. CLOSING DATE AND TRANSFER OF POSSESSION
9.1 TRANSFER. Upon the fulfilment of all the conditions set out in Sections
8.1 and 8.3 which have not been waived in writing by the Buyer or the Seller, as
the case may be, and the fulfillment of the condition set out in Section 8.5,
the transfer of possession of the Purchased Assets shall be deemed to take
effect as at the Effective Time. At the Time of Closing, the parties shall
deliver the documents referred to in this Agreement hereof whereupon the
Purchase Price shall be paid and satisfied in the manner provided in Article 2.
9.2 PLACE OF CLOSING. The closing shall take place at the Time of Closing
at the offices of Lang Xxxxxxxx, counsel to the Seller, Xxxxx 0000, 000 Xxx
Xxxxxx, Xxxxxxx, Xxxxxxx, X0X 0X0.
9.3 FURTHER ASSURANCES. From time to time subsequent to the Closing Date,
each party to this Agreement covenants and agrees that it will at all times
after the Closing Date, at the expense of the requesting party, promptly execute
and deliver all such documents, including, without limitation, all such
additional conveyances, transfers, consents and other assurances and do all such
other acts and things as the other party, acting reasonably, may from time to
time request be executed or done in order to better evidence or perfect or
effectuate any provision of this Agreement or of any agreement or other document
executed pursuant to this Agreement or any of the respective obligations
intended to be created hereby or thereby. Buyer agrees, at expense of Seller, to
render such assistance as Seller may reasonably request with respect to Seller's
resolution of the liabilities or potential liabilities set out in Schedule
4.2(f), including, if requested by Seller, instructing its officers and
responsible employees who have knowledge and information regarding such matters
to provide assistance and co-operation with Seller pertaining thereto.
9.4 CONSENTS. In the event that the Buyer completes the transaction
provided herein on the Closing Date without all of the consents and approvals
referred to in subsection 8.1(c) having been obtained, the Seller agrees to hold
any Contracts, licences, permits or authorizations in trust for the benefit of
the Buyer and agrees to take all such action and do or cause to be done all such
things as shall be reasonably required in order that the benefits of such
Contracts, licences, permits or authorizations are provided to the Buyer.
9.5 BULK SALES WAIVER. The Buyer hereby waives compliance by the Seller
under the BULK SALES ACT (Ontario) and any other applicable bulk sales or
similar legislation in connection with the sale by the Seller to the Buyer of
the Purchased Assets, and the Seller hereby covenants and agrees to indemnify
and save harmless the Buyer from and against any and all losses suffered or
incurred by the Buyer as a result of or arising from the failure of the Seller
or the Buyer to comply with the requirements of the BULK SALES ACT (Ontario) or
any other applicable bulk sales or similar legislation in respect of the
purchase and sale of the Purchased Assets.
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10. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties contained in this Agreement and in all
certificates and documents delivered pursuant to or contemplated by this
Agreement, and those covenants which by their terms are required to be wholly
performed at or prior to the Time of Closing shall survive the closing of the
transactions contemplated hereby and shall terminate at the expiration of 18
months following the Closing Date and, notwithstanding such closing nor any
investigation made by or on behalf of the party entitled to the benefit thereof,
shall continue in full force and effect for the benefit of the party entitled to
the benefit thereof, except that:
(a) the representations and warranties contained in Sections 5.1
to 5.7 inclusive, 5.26 and 5.27 (and the corresponding
representations and warranties set out in the certificates to
be delivered pursuant to Section 8.1(a)) shall survive and
continue in full force and effect without limitation of time;
(b) the representations and warranties contained in Section 5.22
(and the corresponding representations and warranties set out
in the certificates to be delivered pursuant to Section
8.1(a)) shall survive and continue in full force and effect
until, but not beyond, 120 days following the expiration of
the period, if any, during which an assessment, reassessment
or other form of recognized document assessing liability for
Tax, interest or penalties under applicable Tax legislation in
respect of any taxation year to which such representations and
warranties extend could be issued under such Tax legislation
to the Seller (or the final determination of any tax liability
once an assessment, reassessment or other form of recognized
document assessing such liability has been issued), provided
the Seller did not file any waiver or other document extending
such period;
(c) a claim for any breach of any of the representations and
warranties contained in this Agreement or in any agreement,
instrument, certificate or other document executed or
delivered pursuant hereto involving fraud or fraudulent
misrepresentation may be made at any time following the
Closing Date, subject only to applicable limitation periods
imposed by law; and
(d) no claim for breach of any other representation, warranty or
covenant shall be valid unless the party against whom such
claim is made has been given notice thereof before the expiry
of such two-year or other applicable period, as the case may
be.
11. INDEMNIFICATION
11.1 INDEMNIFICATION BY THE SELLER. Subject to Section 10.1 and Section 11.9
the Seller agrees to indemnify and save harmless the Buyer from all Losses
suffered or incurred by the Buyer as a result of or arising directly or
indirectly out of or in relation to:
(a) any breach by the Seller of, or any inaccuracy of any
representation or warranty of the Seller contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto;
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(b) any breach or non-performance by the Seller of any covenant to
be performed by it which is contained in this Agreement or in
any agreement, certificate or other document delivered
pursuant hereto;
(c) the operations of the Seller up to the Time of Closing, save
and except for the Assumed Liabilities; and
(d) the Excluded Liabilities;
(e) any and all direct, indirect or consequential damages or
losses sustained by the Buyer arising from or incidental to
the failure to obtain consents from the parties under any of
the Contracts (including the real property leases) referred to
in Schedule 5.18, including, without limitation, the loss of
operating revenues, retail and wholesale customers, business
opportunities or the retail value of a particular store
location.; and
(f) all claims, demands, costs and expenses, including legal fees,
in respect of the foregoing.
11.2 INDEMNIFICATION BY THE BUYER. The Buyer agrees to indemnify and save
harmless the Seller from all Losses suffered or incurred by the Seller as a
result of or arising directly or indirectly out of or in relation to:
(a) any breach by the Buyer of or any inaccuracy of any
representation or warranty contained in this Agreement or in
any agreement, instrument, certificate or other document
delivered pursuant hereto;
(b) any breach or non-performance by the Buyer of any covenant to
be performed by it which is contained in this Agreement or in
any agreement, certificate or other document delivered
pursuant hereto;
(c) the operations of the Purchased Business after the Time of
Closing including, without limitation, any failure by the
Buyer to pay, satisfy, discharge, perform or fulfil any of the
Assumed Liabilities; and
(d) all claims, demands, costs and expenses, including legal fees,
in respect of the foregoing.
11.3 NOTICE OF CLAIM. In the event that a party (the "Indemnified Party")
shall become aware of any claim, proceeding or other matter (a "Claim") in
respect of which another party (the "Indemnifying Party") agreed to indemnify
the Indemnified Party pursuant to this Agreement, the Indemnified Party shall
promptly give written notice thereof to the Indemnifying Party. Such notice
shall specify whether the Claim arises as a result of a claim by a Person
against the Indemnified Party (a "Third Party Claim") or whether the Claim does
not so arise (a "Direct Claim"), and shall also specify with reasonable
particularity (to the extent that the information is readily available to the
Indemnified Party), the factual basis for the Claim. If the Indemnified Party
becomes aware of the Claim in time to permit the Indemnifying Party to
effectively contest the determination of any liability susceptible of being
contested but does not give the
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Indemnifying Party timely notice of such Claim, the Indemnifying Party shall be
entitled to set off against the amount claimed by the Indemnified Party the
amount by which any Losses incurred by the Indemnified Party would have been
reduced had the Indemnified Party given such notice on a timely basis.
11.4 DIRECT CLAIMS. With respect to any Direct Claim, following receipt of
notice from the Indemnified Party of the Claim, the Indemnifying Party shall
have 60 days to make such investigation of the Claim as is considered necessary
or desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such 60-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed-upon amount of the Claim, failing which the matter shall be referred to
binding arbitration in such manner as the parties may agree or shall be
determined by a court of competent jurisdiction.
11.5 THIRD PARTY CLAIMS. With respect to any Third Party Claim, the
Indemnifying Party shall have the right, at its expense, to participate in or
assume control of the negotiation, settlement or defence of the Claim and, in
such event, the Indemnifying Party shall reimburse the Indemnified Party for all
the Indemnified Party's out-of-pocket expenses as a result of such participation
or assumption. If the Indemnifying Party elects to assume such control, the
Indemnified Party shall have the right to participate in the negotiation,
settlement or defence of such Third Party Claim and to retain counsel to act on
its behalf, provided that the fees and disbursements of such counsel shall be
paid by the Indemnified Party unless the Indemnifying Party consents to the
retention of such counsel or unless the named parties to any action or
proceeding include both the Indemnifying Party and the Indemnified Party and the
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would be inappropriate due to the actual or potential differing
interests between them (such as the availability of different defences). If the
Indemnifying Party, having elected to assume such control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party
shall be entitled to assume such control, and the Indemnifying Party shall be
bound by the results obtained by the Indemnified Party with respect to such
Third Party Claim.
11.6 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to
assume control of the defence of any Third Party Claim, the Indemnified Party
shall have the exclusive right to contest, settle or pay the amount claimed.
Whether or not the Indemnifying Party assumes control of the negotiation,
settlement or defence of any Third Party Claim, the Indemnifying Party shall not
settle any Third Party Claim without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that the liability of the Indemnifying Party shall be limited to the
proposed settlement amount if any such consent is not obtained for any reason.
11.7 CO-OPERATION. The Indemnified Party and the Indemnifying Party shall
co-operate fully with each other with respect to Third Party Claims, and shall
keep each other fully advised with respect thereto (including supplying copies
of all relevant documentation promptly as it becomes available).
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11.8 EXCLUSIVITY. The provisions of this Article 11 shall apply to any Claim
for breach of any covenant, representation, warranty or other provision of this
Agreement or any agreement, certificate or other document delivered pursuant to
this Agreement (other than a claim for specific performance or injunctive
relief) with the intent that all such Claims shall be subject to the limitations
and other provisions contained in this Article 11.
11.9 LIMITATIONS ON OBLIGATION TO INDEMNIFY.
(a) No liability of the Seller under this Agreement shall arise
until the aggregate of the Losses in respect of the claims for
indemnity made by the Buyer exceeds one percent (1%) of the
Purchase Price and, in such event, the liability of the Seller
shall be for the aggregate of all Losses of the Buyer without
regard to such threshold.
(b) In no event shall the liability of the Seller under this
Agreement exceed twenty-five percent (25%) of the Purchase
Price.
(c) The limitations contained in sections 11.9(a) and (b) hereof
shall not apply with respect to Claims arising with respect to
sections 5.1 to 5.5, 5.8, 5.10, 5.22, 5.26 5.27, 11.1(d) and
11.1(e) hereof.
11.10 GST. The Indemnifying Party will pay GST on any indemnity claims paid
in accordance with this Agreement to the extent applicable.
12. MISCELLANEOUS
12.1 NOTICES.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered in
person, transmitted by telecopier or sent by registered mail,
charges prepaid, addressed as follows:
if to the Seller:
MDC Corporation Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Attention: Chief Financial Officer
Telecopier No.: 000-000-0000
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if to the Buyer:
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
(b) Any such notice or other communication shall be deemed to have
been given and received on the day on which it was delivered
or transmitted (or, if such day is not a business day, on the
next following business day) or, if mailed, on the third
business day following the date of mailing; provided, however,
that if at the time of mailing or within three business days
thereafter there is or occurs a labour dispute or other event
which might reasonably be expected to disrupt the delivery of
documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by telecopier.
(c) Either party may at any time change its address for service
from time to time by giving notice to the other party in
accordance with this Section 13.1.
12.2 CONSULTATION. The parties shall consult with each other before issuing
any press release or making any other public announcement with respect to this
Agreement or the transactions contemplated hereby and, except as required by any
applicable law or regulatory requirement, none of them shall issue any such
press release or make any such public announcement without the prior written
consent of the others, which consent shall not be unreasonably withheld or
delayed.
12.3 DISCLOSURE. Prior to any public announcement of the transaction
contemplated hereby pursuant to Section 12.2, neither party shall disclose this
Agreement or any aspects of such transaction except to its board of directors,
its senior management, its legal, accounting, financial or other professional
advisors, any financial institution contacted by it with respect to any
financing required in connection with such transaction and counsel to such
institution, or as may be required by any applicable law or any regulatory
authority or stock exchange having jurisdiction.
12.4 MCGUGGAN GUARANTEE. In consideration of the transaction referred to
herein and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, McGuggan hereby irrevocably, absolutely and
unconditionally guarantees to the Seller the performance of the Buyer under this
Agreement. This guarantee is a direct absolute unconditional irrevocable present
continuing guarantee of performance and payment and is a direct and primary
obligation of McGuggan, and is in no way conditioned or contingent upon any
attempt to enforce performance upon, or collection from, the Buyer or upon any
other event, contingency or circumstances whatever. This shall be a continuing
guarantee. The Seller shall not be obligated to exhaust its recourse against the
Buyer before being entitled to performance or payment from McGuggan of all and
every of the obligations hereby guaranteed. The obligations of McGuggan set
forth above shall not be subject to any deduction, diminution, abatement, set
off, recoupment, suspension, deferment, reduction, or defence (other than full
and strict
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compliance by McGuggan of its obligations hereunder) and shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way affected by, any circumstance or condition whatsoever (whether or not
McGuggan or the Buyer shall have any knowledge or notice thereof), other than
full and strict compliance by McGuggan of its obligations hereunder.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of
and shall be binding on and enforceable by the parties and, where the context so
permits, their respective successors and permitted assigns. Neither party may
assign any of its rights or obligations hereunder without the prior written
consent of the other party.
12.6 AMENDMENT AND WAIVERS. No amendment or waiver of any provision of this
Agreement shall be binding on either party unless consented to in writing by
such party. No waiver of any provision of this Agreement shall constitute a
waiver of any other provision, nor shall any waiver constitute a continuing
waiver unless otherwise provided.
12.7 TERMINATION OF FIRST PURCHASE AGREEMENT. Upon the execution and
delivery of this Agreement, the First Purchase Agreement shall be terminated.
12.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties.
MDC CORPORATION INC.
Per:
--------------------------------
Authorized Signing Officer
REGAL GREETINGS & GIFTS CORPORATION
Per:
--------------------------------
Authorized Signing Officer
MCGUGGAN LLC (solely for the
purposes of section 12.4 hereof)
Per:
--------------------------------
Authorized Signing Officer
